Arch Capital Group Ltd.
2025 ANNUAL REPORT
FINANCIAL HIGHLIGHTS
©2026 Arch Capital Group Ltd. All rights reserved.
Growth in Book Value per Common Share + Accumulated Common Dividends
* We use non-GAAP financial measures in this report. The first mention of each non-GAAP financial measure is referenced by an asterisk (*).
See Additional Information for a reconciliation to the most comparable GAAP financial measures.
† Annualized growth rate from Dec. 31, 2001, to Dec. 31, 2025, including all accumulated special cash dividends paid to common shareholders.
Excludes the effects of stock options, restricted and performance share units outstanding.
(Amounts in U.S. $ million, except percentages and per share data)
2025
2024
Change
Book value per common share at year end
$65.11
$53.11
22.6%
Net income available to common shareholders
$4,359
$4,272
2.0%
Per share
$11.60
$11.19
3.7%
Annualized net income return on average common equity
20.1%
22.8%
Gross premiums written
$22,878
$21,511
6.4%
Underwriting income*
$2,933
$2,661
10.2%
After-tax operating income*
$3,700
$3,542
4.5%
Per share*
$9.84
$9.28
6.0%
Annualized operating return on average common equity*
17.1%
18.9%
GROSS PREMIUMS WRITTEN
$22.9B
NET LOSS RESERVES
$24.5B
TOTAL CAPITALIZATION
$26.9B
TOTAL ASSETS
$79.2B
Arch Capital Group Ltd. 2025 Annual Report | 1
To Our Shareholders,
2025 was another record year for Arch.
The strength of our global enterprise and adaptability of our teams
enabled us to deliver outstanding full‑year results, including $3.7 billion
of after‑tax operating income — the highest in our history — and a
22.6% increase in book value per share. This performance was especially
noteworthy given the significant adverse impact of the California wildfires
at the beginning of 2025.
Our ability to apply disciplined cycle management and adapt quickly to
changing market conditions across our diversified platform produced
outstanding results. Our Property and Casualty (P&C) Insurance and
Reinsurance segments wrote a record $15.4 billion of net premiums and
generated more than $1.9 billion in underwriting income. Our Mortgage
segment — unique among our peer group — delivered an additional
$1.0 billion of underwriting income. Investments contributed $1.6 billion
of net investment income, further strengthening our overall performance.
Our 2025 results stand on their own and, viewed over the long term,
reinforce the consistency of our strategy and the value disciplined
execution across market cycles provides for our shareholders. As
competition intensifies and artificial intelligence (AI) reshapes the industry,
our deep bench of talent, performance-driven culture and enduring
operating principles provide the foundation for continued
strong performance.
NICOLAS PAPADOPOULO
CEO, ARCH CAPITAL GROUP LTD.
2 | Arch Capital Group Ltd. 2025 Annual Report
CHANGE
27%
CHANGE
-9%
CHANGE
9%
CHANGE
-2%
CHANGE
13%
Underwriting Segments
Arch writes specialty P&C (re)insurance and mortgage insurance
on a worldwide basis through its wholly owned subsidiaries. We
pride ourselves on our nimbleness and creativity, and we seek out
opportunities where we can use our capital to serve our clients and
achieve superior results.
Insurance
The Insurance segment delivered solid performance in 2025, writing
$7.8 billion of net premiums, a 13% increase from 2024, while
delivering $375 million of underwriting income.
The integration of the U.S. Middle Market Commercial and
Entertainment business, acquired in 2024, progressed as planned.
The expansion of our middle market business is core to our growth
strategy and should generate long-term benefits for our shareholders.
Throughout the year, our underwriters prioritized insuring lines
where pricing kept pace with loss trends and exercised restraint
in more competitive areas. This selective approach is designed to
preserve healthy margins and reflects the disciplined execution that
defines how our underwriting teams approach the market.
Reinsurance
2025 was another record year for our Reinsurance segment with
$1.6 billion of underwriting income and $7.6 billion of net premiums
written. The team continued to manage exposures carefully while
capturing attractive opportunities, a cycle-aware approach that
resulted in an 80.8% combined ratio, an improvement of 240 basis
points from 2024.
Arch Re is well-established as a leading global reinsurer, and
the diversity of our reinsurance portfolio allows us to act on
opportunities as they emerge. Strong relationships with brokers
and cedants, combined with our reputation for providing creative
solutions to challenging problems, further enhance our ability to
operate effectively across market cycles.
Mortgage
Our Mortgage segment produced $1.0 billion of underwriting income,
reinforcing its role as a reliable contributor to Arch’s results. Growing
new insurance written remains challenging because of limited new
housing supply and elevated mortgage interest rates, but stable
persistency — and the exceptionally strong credit profile of our
in‑force book — continued to generate steady returns.
Investments
Supported by robust operating cash flows, our investment portfolio
reached more than $47 billion at year-end, an increase of $6.0
billion from 2024.
Our investments team effectively managed market volatility,
balancing risk and return while maintaining liquidity and capital
strength. We expect our growing investment base to continue
supporting strong earnings and long‑term value creation.
Capital Management
Prudent capital stewardship remains central to our strategy. In 2025,
we deployed capital organically through our underwriting operations
while repurchasing $1.9 billion of common shares (representing 5.6%
of common shares outstanding at the start of 2025), reflecting our
confidence in the long‑term value of Arch stock.
Our capital management philosophy remains unchanged:
deploy capital into opportunities that meet our return thresholds,
maintain a strong balance sheet, and return capital when organic
opportunities do not meet our standards.
UNDERWRITING INCOME ($M)
NET PREMIUMS WRITTEN ($M)
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
Insurance
Reinsurance
Mortgage
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
Insurance
Reinsurance
Mortgage
2024
2025
CHANGE
-5%
Arch Capital Group Ltd. 2025 Annual Report | 3
Strategic Priorities
We are operating in a time of rapid change. Competition is robust and AI
is transforming both the insurance industry and the global economy. We
recognize the scale of this change, and we are focused on ensuring Arch
is positioned to meet the opportunities ahead.
Our 2030 Strategic Vision — to be the first‑choice global specialty
(re)insurer by providing our customers the valuable insights and
innovative solutions that enable their unique ambitions — is our North
Star. The work we accomplished in 2025 is foundational to achieving our
ambitions and Vision and, combined with our enterprise-wide strategic
priorities, ensures we remain focused on building a stronger and more
agile Arch.
Our People
Our achievements reflect the expertise and commitment of our
employees. Their ability to adapt, collaborate and execute is
fundamental to how we serve our customers, partners and shareholders.
Our 2025 employee survey showed high engagement and strong
alignment with our Values. Arch remains an employer of choice for
motivated individuals looking to make meaningful contributions and
build their careers.
Investing in leadership development and acquiring top talent are
essential to helping our employees grow and our company succeed.
Outlook
From the beginning, Arch’s commitment to maximize long-term
shareholder value has been unwavering. Since our recapitalization in
2001, book value per share has grown at a compound annual growth
rate in excess of 15%, placing us at the top of our peer group and
establishing Arch as one of the best investment opportunities in the
P&C sector.
As we enter our 25th year, we do so with measured confidence. Market
conditions are evolving, but our diversified specialty platform, strong
balance sheet and disciplined approach have us well-positioned
to continue creating long-term value. We will invest in attractive
opportunities, remain selective where conditions are competitive and
continue advancing the capabilities — from underwriting insight to
data, analytics and AI — that strengthen our advantage.
Thank you to our employees for their dedication, to our distributors
and clients for their trust, and to you, our shareholders, for your
continued confidence and support.
Nicolas Papadopoulo
Chief Executive Officer
Arch Capital Group Ltd.
3 Includes U.S. government-sponsored agency MBS and agency CMBS.
1 CMBS = Commercial mortgage-backed securities.
2 MBS = Mortgage-backed securities.
INVESTMENTS BY TYPE
FIXED MATURITIES BY RATING
MBS
2
5.7%
U.S. Gov’t
15.7%
Corporates
32.0%
Asset Backed
Securities
7.5%
CMBS
1
2.6%
Municipal
0.3%
Equity
Securities
3.9%
Equity Method
Funds and Other
17.6%
Cash and
Short-Term
7.8%
Non-U.S. Gov’t
6.9%
U.S. Gov’t and
Gov’t Agencies3
28.5%
BBB
19.5%
AA
7.6%
A
19.2%
AAA
16.9%
Not Rated
2.0%
BB
4.0%
B
2.2%
Under B
0.1%
4 | Arch Capital Group Ltd. 2025 Annual Report
2025 HIGHLIGHTS
INSURANCE NET PREMIUMS WRITTEN
Wrote $10.4 billion of gross premiums, a 15.3% increase
from 2024.
Furthered the integration and optimization of the U.S.
Middle Market Commercial and Entertainment businesses
acquired in August 2024.
Broadened international expansion through key hires in
Spain, France and Australia.
Developed additional specialties on its North American
and International platforms, including new initiatives in
Construction and Marine.
Continued to embed AI-powered automation into end-to-
end processes, including data extraction, to assist with
faster submission clearance.
Arch Insurance North America and Arch Insurance
International both recognized as 5-Star Claims award
winners by Insurance Business.
$7.8B
2025 TOTAL
In 2025, the Insurance segment leaned into its diverse product mix and specialty insurance expertise to write $7.8 billion of net premiums, a 13%
increase from 2024. Despite significant losses in the first quarter, primarily attributed to the California wildfires, the Insurance segment finished
the year with a 95.2% combined ratio and a 91.0% combined ratio excluding catastrophic activity and prior-year development*. Net premium
growth in Arch Insurance North America was primarily driven by our enhanced U.S. Middle Market Commercial and Entertainment platform. Arch
Insurance International furthered its lead placement role at Lloyd’s and expanded its presence in continental Europe and Australia.
CALENDAR YEAR NET PREMIUMS WRITTEN BY LINE ($M)
INTERNATIONAL
Property and Short-Tail Specialty
Casualty and Other
NORTH AMERICA
Property and Short-Tail Specialty
Other Liability – Occurrence
Other Liability – Claims Made
Commercial Multi-Peril
Commercial Automobile
Workers Compensation
Other
* We use non-GAAP financial measures in this report. The first
mention of each non-GAAP financial measure is referenced by
an asterisk (*). See Additional Information for a reconciliation
to the most comparable GAAP financial measures.
KEY RATIOS
2025
2024
Loss Ratio
61.3%
61.4%
Underwriting Expense Ratio
33.9%
33.4%
Combined Ratio
95.2%
94.8%
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
Property
and
Short-Tail
Specialty
17.0%
Other Liability -
Occurrence
16.7%
Other Liability -
Claims Made
10.2%
Commercial
Multi-Peril
10.0%
Commercial
Automobile
7.7%
Workers
Compensation
7.4%
Other
4.4%
Casualty and Other
12.5%
2023
2024
2025
Property and
Short-Tail Specialty
14.1%
Arch Capital Group Ltd. 2025 Annual Report | 5
Arch Re generated $1.6 billion of underwriting income in 2025, representing the third consecutive year of record results for the segment. In a
transitioning reinsurance market, Arch Re leveraged the depth and diversity of its platform to write more than $7.6 billion of net premiums. The
consistent approach to risk-taking and reliable delivery of solutions to clients and brokers has earned Arch Re an enhanced position as a market
leader. The ability to navigate evolving market conditions by consistently and creatively providing superior insights and solutions to its clients is
how Arch Re has established itself as a reliable and collaborative business partner.
KEY RATIOS
2025
2024
Loss Ratio
56.8%
59.7%
Underwriting Expense Ratio
24.0%
23.5%
Combined Ratio
80.8%
83.2%
2025 HIGHLIGHTS
Wrote $11.1 billion of gross premiums and $7.6 billion of
net premiums for 2025.
Generated a record $1.6 billion of underwriting income,
a 27% increase from 2024.
Delivered an 80.8% combined ratio, a 2.4%
improvement from 2024, and a 76.7% combined
ratio excluding catastrophic activity and prior-year
development.
Continued to expand its insurance-linked securities (ILS)
platform, which has become a manager of choice for
discerning, strategic ILS investors.
Welcomed 61 new colleagues to the global Reinsurance
team, establishing itself as a highly attractive destination
for top talent.
REINSURANCE NET PREMIUMS WRITTEN
CALENDAR YEAR NET PREMIUMS WRITTEN BY LINE ($M)
Specialty
Property excluding Property Catastrophe
Casualty
Property Catastrophe
Marine and Aviation
Other
2023
2024
2025
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
Specialty
33.4%
Other
2.0%
Property excluding
Property Catastrophe
26.8%
Marine and Aviation
4.0%
Property
Catastrophe
14.1%
Casualty
19.8%
$7.6B
2025 TOTAL
6 | Arch Capital Group Ltd. 2025 Annual Report
Arch MI delivered $1.0 billion of underwriting income in 2025, marking the fourth consecutive year of contributing at least $1.0 billion of
underwriting income to the enterprise. Although mortgage originations remain suppressed because of elevated mortgage rates and housing
affordability challenges, Arch MI leveraged its diversified operations in the U.S., Australia, Europe and Bermuda to write nearly $1.1 billion of net
premiums in 2025. Arch MI is one of the world’s leading insurers of mortgage credit risk and possesses a deep, experienced team and substantial
data and analytical capabilities that allow it to thrive under a variety of market conditions.
KEY RATIOS
2025
2024
Loss Ratio
-0.4%
-4.4%
Underwriting Expense Ratio
15.0%
17.0%
Combined Ratio
14.6%
12.6%
2025 HIGHLIGHTS
Finished 2025 with $1.0 billion in underwriting income at a 14.6%
combined ratio.
Achieved strong mortgage premium diversification with 68% of the
$1.2 billion of net premiums earned from U.S. Primary Mortgage
Insurance, 18% from U.S. Credit Risk Transfer (CRT) and Other, and
14% from International Mortgage Insurance/Reinsurance.
Helped nearly 131,000 U.S. borrowers purchase or refinance a home.
Ended 2025 with a U.S. delinquency rate of 2.2%, near all-time lows for
Arch MI.
Successfully integrated the RMIC Companies, Inc. portfolio into Arch
systems without any enduring overhead from the legacy company.
Increased and further diversified the risk in force related to Significant
Risk Transfer transactions in Europe.
Enhanced our market-leading position in Government Sponsored
Enterprise CRT transactions on behalf of Arch and our services clients.
1 International mortgage insurance and reinsurance with risk
primarily located in Australia and, to a lesser extent, Europe.
2 Includes all CRT transactions, which are predominantly with
the government-sponsored enterprises and other U.S.
reinsurance transactions.
International Mortgage Insurance/Reinsurance1
U.S. Credit Risk Transfer and Other2
U.S. Primary Mortgage Insurance
CALENDAR YEAR NET PREMIUMS WRITTEN BY LINE ($M)
2023
2024
2025
$1,200
$1,000
$800
$600
$400
$200
$0
Before reinsurance and risk-sharing operations. As of Dec. 31, 2025.
Risk in Force
$87.9
BILLION
Insurance in Force
$484.6
BILLION
ARCH GLOBAL MORTGAGE GROUP
Arch Capital Group Ltd. 2025 Annual Report | 7
Arch’s culture is one of its greatest strengths, consistently
reflected in exceptional employee‑engagement results and the everyday
actions of our people. Employees describe Arch as a place where they
feel valued, supported and connected — an environment defined by
open communication, strong collaboration and a shared commitment to
meaningful work. Our people’s generosity toward colleagues, customers
and communities sets Arch apart. Arch employees take pride in their work
and willingly recommend the company to friends and family. Our culture
unites us. It reinforces our strategy and fuels our long‑term success.
Arch Capital Group Ltd. 2025 Annual Report | 7
8 | Arch Capital Group Ltd. 2025 Annual Report
Year Ended Dec. 31,
(Amounts in U.S. $ million, except percentages and per share data)
2025
2024
Net income available to Arch common shareholders (a)
$4,359
$4,272
Net realized (gains) losses
(464)
(197)
Equity in net (income) loss of investment funds accounted for using the equity method
(504)
(580)
Net foreign exchange (gains) losses
128
(75)
Transaction costs and other
75
81
Income tax expense (benefit)
106
41
After-tax operating income available to Arch common shareholders (b)
$3,700
$3,542
Beginning common shareholders' equity
$19,990
$17,523
Ending common shareholders' equity
23,376
19,990
Average common shareholders' equity (c)
$21,683
$18,757
Annualized net income return on average common equity (a)/(c)
20.1%
22.8%
Annualized operating return on average common equity (b)/(c)
17.1%
18.9%
Weighted average common shares and common share equivalents outstanding - diluted (d)
375.9
381.8
Net income available to Arch common shareholders - per share (a)/(d)
$11.60
$11.19
After-tax operating income available to Arch common shareholders - per share (b)/(d)
$9.84
$9.28
Underwriting income represents the pre-tax profitability of our underwriting operations and includes net premiums earned plus other underwriting income, less losses and
loss adjustment expenses, acquisition expenses and other operating expenses. Other operating expenses include those operating expenses that are incremental and/or directly
attributable to our individual underwriting operations. Underwriting income or loss does not incorporate certain income and expense items which are included in corporate. While
these measures are presented in note 4, “Segment Information,” on pages 121-125 to the consolidated financial statements in our 2025 Annual Report, they are considered non-
GAAP financial measures when presented elsewhere on a consolidated basis.
Combined ratio excluding catastrophic activity and prior year development for the insurance and reinsurance segments are non-GAAP financial measures as defined in
Regulation G. The reconciliation of such measures to the combined ratio (the most directly comparable GAAP financial measure) in accordance with Regulation G are shown in the
table below. The Company’s management utilizes the adjusted combined ratios excluding current accident year catastrophic events and favorable or adverse development in prior
year loss reserves in its analysis of the underwriting performance of each of its underwriting segments.
2025
2025
Insurance
Reinsurance
Underwriting ratios:
Loss ratio
61.3%
56.8%
Acquisition expense ratio
19.3%
20.2%
Other operating expense ratio
14.6%
3.8%
Combined ratio
95.2%
80.8%
Catastrophic activity and prior year development:
Current accident year catastrophic events, net of reinsurance and reinstatement premiums
4.4%
7.3%
Net (favorable) adverse development in prior year loss reserves, net of related adjustments
(0.2)%
(3.2)%
Combined ratio excluding catastrophic activity and prior year development
91.0%
76.7%
Additional Information
This document includes the use of certain non-GAAP financial measures as defined in Regulation G. See “Management’s Discussion and Analysis of Financial Condition and Results
of Operations — Comment on Non-GAAP Financial Measures” on pages 73–75 of the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission
on Feb. 26, 2026 (the “2025 Annual Report”), which accompanies this letter. Throughout this document, we present our operations in the way we believe will be the most
meaningful and useful to investors, analysts, rating agencies and others who use our financial information in evaluating the performance of our company. We believe that these
non-GAAP financial measures, which may be defined differently by other companies, are important for an understanding of our overall results of operations and financial condition.
However, they should not be viewed as a substitute for measures determined in accordance with GAAP.
After-tax operating income available to Arch common shareholders is defined as net income available to Arch common shareholders, excluding net realized gains or
losses (which includes, but is not limited to, realized and unrealized changes in the fair value of equity securities and assets accounted for using the fair value option, realized and
unrealized gains or losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains or losses realized from the acquisition or disposition
of subsidiaries), equity in net income or loss of investments accounted for using the equity method, net foreign exchange gains or losses, transaction costs and other, and net of
income taxes.
Annualized operating return on average common equity represents after-tax operating income available to Arch common shareholders divided by average common
shareholders’ equity during the period. Management uses annualized operating return on average common equity as a key measure of the return generated to our common
shareholders. The following table summarizes the Company’s consolidated financial data, including a reconciliation of net income (loss) available to Arch common shareholders to
after-tax operating income (loss) available to Arch common shareholders.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______to _______
Commission File No. 001-16209
ARCH CAPITAL GROUP LTD.
(Exact name of registrant as specified in its charter)
Bermuda
98-0374481
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
Waterloo House, Ground Floor
100 Pitts Bay Road,
Pembroke
HM 08,
Bermuda
(441)
278-9250
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
Trading Symbol (s)
Name of each exchange on
which registered
Common Shares, $0.0011 par value per share
ACGL
Nasdaq
Stock Market
Depositary shares, each representing a 1/1,000th interest in a 5.45% Series F preferred share
ACGLO
Nasdaq
Stock Market
Depositary shares, each representing a 1/1,000th interest in a 4.55% Series G preferred share
ACGLN
Nasdaq
Stock Market
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes ☐
No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated Filer ☑ Accelerated Filer ☐ Non-accelerated Filer ☐ Smaller reporting company ☐ Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the voting and non-voting common equity held by non-affiliates, computed by reference to the closing
price as reported by the Nasdaq Stock Market as of the last business day of the Registrant’s most recently completed second fiscal
quarter, was approximately $33.0 billion.
As of February 23, 2026, there were 355,803,320 of the registrant’s common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Part III incorporate by reference our definitive proxy statement for the 2026 annual meeting of shareholders to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A within 120 days after December 31, 2025.
ARCH CAPITAL GROUP LTD.
TABLE OF CONTENTS
Item
Page
PART I
ITEM 1.
BUSINESS
3
ITEM 1A.
RISK FACTORS
46
ITEM 1B.
UNRESOLVED STAFF COMMENTS
65
ITEM 1C.
CYBERSECURITY
65
ITEM 2.
PROPERTIES
67
ITEM 3.
LEGAL PROCEEDINGS
67
ITEM 4.
MINE SAFETY DISCLOSURES
67
PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
68
ITEM 6.
[RESERVED]
69
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
70
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
102
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
103
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
177
ITEM 9A.
CONTROLS AND PROCEDURES
177
ITEM 9B.
OTHER INFORMATION
177
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
177
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
178
ITEM 11.
EXECUTIVE COMPENSATION
178
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
179
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
179
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
179
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
180
ITEM 16.
FORM 10-K SUMMARY
189
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (“PSLRA”) provides a “safe harbor” for forward-looking statements. This
report or any other written or oral statements made by or on behalf of us may include forward-looking statements, which
reflect our current views with respect to future events and financial performance, and other information that is not historical
information. All statements other than statements of historical fact included in or incorporated by reference into this report
are forward-looking statements. Forward-looking statements, for purposes of the PSLRA or otherwise, can generally be
identified by the use of forward-looking terminology such as “should”, “could”, “plans”, “projects”, “may,” “will,” “expect,”
“intend,” “estimate,” “anticipate,” “believe” or “continue” and other words or statements of similar meaning or their negative
version.
Forward-looking statements involve our current assessment of risks and uncertainties beyond management’s control. Actual
events and results may differ materially from those expressed or implied in these statements. Important factors that could
cause actual events or results to differ materially from those indicated in such statements are discussed below and elsewhere
in this report and in our periodic reports filed with the Securities and Exchange Commission (“SEC”), and include:
•
our ability to successfully implement our business strategy during “soft” as well as “hard” markets;
•
acceptance of our business strategy, security and financial condition by rating agencies and regulators, as well as by
brokers and our insureds and reinsureds;
•
our ability to consummate acquisitions and integrate the business we have acquired or may acquire into our existing
operations;
•
our ability to maintain or improve our ratings, which may be affected by our ability to raise additional equity or debt
financings, by ratings agencies’ existing or new policies and practices, as well as other factors described herein;
•
general economic and market conditions (including inflation, interest rates, unemployment, housing prices, foreign
currency exchange rates, prevailing credit terms, tariffs, geopolitical instability and conflict and the depth and duration of a
recession) and conditions specific to the reinsurance and insurance markets in which we operate;
•
competition, including increased competition, on the basis of pricing, capacity (including alternative sources of capital),
coverage terms, or other factors;
•
developments in the world’s financial and capital markets and our access to such markets;
•
our ability to successfully enhance, integrate and maintain operating procedures (including information technology) to
effectively support our current and new business;
•
the loss and addition of key personnel;
•
material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements;
•
accuracy of those estimates and judgments utilized in the preparation of our financial statements, including those related
to revenue recognition, insurance and other reserves, reinsurance recoverables, investment valuations, intangible assets,
bad debts, income taxes, deferred income tax assets, contingencies and litigation, and any determination to use the
deposit method of accounting;
•
greater than expected loss ratios on business written by us and adverse development on claim and/or claim expense
liabilities related to business written by our insurance, reinsurance and mortgage subsidiaries;
•
the adequacy of the Company’s loss reserves;
•
severity and/or frequency of losses;
•
greater frequency or severity of unpredictable natural and man-made catastrophic events;
•
claims for natural catastrophic events or severe economic events in our insurance, reinsurance and mortgage businesses
could cause large losses and substantial volatility in our results of operations;
•
availability to us of reinsurance to manage our net exposure and the cost of such reinsurance;
•
the failure of reinsurers, managing general agents, third party administrators or others to meet their obligations to us;
•
the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by us;
ARCH CAPITAL
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2025 FORM 10-K
•
our investment performance, including legislative or regulatory developments that may adversely affect the fair value of
our investments;
•
changes in general economic conditions, resulting in downgrades of U.S. securities or sovereign debt by credit rating
agencies, which could affect our business, financial condition and results of operations;
•
an incident, disruption in operations or other cyber event caused by a cyber attack, inadvertent error, the use of artificial
intelligence technologies or other technology on our systems or those of our business partners and service providers,
which could negatively impact our business and/or expose us to litigation;
•
the effect of climate change on our business;
•
the effect of contagious diseases or a pandemic on our business;
•
acts of terrorism, political unrest and other hostilities or other unforecasted and unpredictable events caused by humans;
•
the volatility of our shareholders’ equity from foreign currency fluctuations, which could increase due to us not matching
portions of our projected liabilities in foreign currencies with investments in the same currencies;
•
changes in accounting principles or policies or in our application of such accounting principles or policies;
•
changes in the political environment of certain countries in which we operate or underwrite business;
•
statutory or regulatory developments, including as to tax matters and insurance and other regulatory matters such as the
adoption of legislation that affects Bermuda-headquartered companies and/or Bermuda-based insurers or reinsurers and/
or changes in regulations or tax laws applicable to us, our subsidiaries, brokers or customers, including the implementation
of the Organization for Economic Cooperation and Development (“OECD”) Pillar I and Pillar II initiatives and the enactment
of Bermuda corporate income tax; and
•
the other matters set forth under Item 1A “Risk Factors,” Item 7 “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and other sections of this Annual Report on Form 10-K, as well as the other factors
set forth in Arch Capital Group Ltd.’s other documents on file with the SEC, and management’s response to any of the
aforementioned factors.
All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly
qualified in their entirety by these cautionary statements. The foregoing review of important factors should not be construed
as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. The
Company’s forward-looking statements speak only as of the date of this report or as of the date they are made, and we
undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information,
future events or otherwise.
ARCH CAPITAL
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2025 FORM 10-K
PART I
ITEM 1. BUSINESS
As used in this report, references to “we,” “us,” “our,”
“Arch” or the “Company” refer to the consolidated
operations of Arch Capital Group Ltd. (“Arch Capital”) and its
subsidiaries. All amounts are in millions, except per share
amounts, unless otherwise noted. We refer you to Item 1A
“Risk Factors” for a discussion of risk factors relating to our
business.
OUR COMPANY
General
Arch Capital is a publicly listed Bermuda exempted company
with approximately $26.9 billion in capital at December 31,
2025 and is part of the S&P 500 index. Arch provides
insurance, reinsurance and mortgage insurance on a
worldwide basis through its wholly owned subsidiaries.
While we are positioned to provide a full range of property,
casualty and mortgage insurance and reinsurance lines, we
focus on writing specialty lines of insurance and reinsurance.
For 2025, we wrote $16.5 billion of net premiums and
reported net income available to Arch common shareholders
of $4.4 billion. Book value per share was $65.11 at
December 31, 2025, compared to $53.11 per share at
December 31, 2024.
Arch Capital’s registered office is located at Clarendon
House, 2 Church Street, Hamilton HM 11, Bermuda
(telephone number: (441) 295-1422), and its principal
executive offices are located at Waterloo House, Ground
Floor, 100 Pitts Bay Road, Pembroke HM 08, Bermuda
(telephone number: (441) 278-9250). Arch Capital makes
available free of charge through its website, located at
www.archgroup.com, its annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-
K, and all amendments to those reports as soon as
reasonably practicable after such material is electronically
filed with, or furnished to, the U.S. Securities and Exchange
Commission (“SEC”). The SEC maintains an Internet site that
contains reports, proxy and information statements, and
other information regarding issuers that file electronically
with the SEC (such as Arch Capital) and the address of that
site is www.sec.gov.
Arch Capital may use its website as a distribution channel of
material information. Financial and other important
information regarding Arch Capital is routinely posted on
and accessible through its website. Accordingly, investors
should monitor this channel, in addition to following Arch
Capital’s press releases, SEC filings and public conference
calls and webcasts.
Our History
Arch Capital was formed in September 2000 and became the
sole shareholder of Arch Capital Group (U.S.) Inc. (“Arch-
U.S.”) pursuant to an internal reorganization transaction
completed in November 2000. In October 2001, Arch Capital
launched an underwriting initiative to meet current and
future demand in the global insurance and reinsurance
markets that included the recruitment of new management
teams and an equity capital infusion of $763.2 million, which
created a strong capital base that was unencumbered by
significant pre-2002 risks. Since then, we have attracted a
proven
management
team
with
extensive
industry
experience and continued to build our global underwriting
platform for our insurance, reinsurance and mortgage
insurance businesses.
Our insurance underwriting platform initially consisted of
our Bermuda and U.S. operations, followed by the
establishment of our United Kingdom-based carrier, Arch
Insurance (UK) Limited (“Arch Insurance (U.K.)”) in 2004 and
Canadian operations in 2005. In 2009, we established a
managing agency and syndicate at Lloyd’s of London
(“Lloyd’s”) and significantly expanded our U.K. presence in
2019 through the acquisition of Barbican Group Holdings
Limited
(“Barbican
Holdings”)
and
its
subsidiaries
(collectively, “Barbican”). Our Ireland-based carrier, Arch
Insurance (EU) Designated Activity Company (“Arch
Insurance (EU)”) writes primarily European Union (“EU”)
business with branches in Italy, Spain, France, the
Netherlands and the U.K.
On August 1, 2024 we expanded our U.S. middle market
presence with the acquisition of Allianz’s U.S. Middle Market
Property and Casualty insurance business and U.S.
Entertainment business, representing an important part of
our growth strategy in the U.S. See “Operations—Insurance
Operations” for further details on our insurance operations.
Our reinsurance underwriting platform initially consisted of
Arch Reinsurance Ltd. in Bermuda (“Arch Re Bermuda”) and
Arch Reinsurance Company (“Arch Re U.S.”), our U.S.-
licensed reinsurer. In 2008, we commenced our European
reinsurance operations with Arch Reinsurance Europe
Underwriting Designated Activity Company (“Arch Re
Europe”), our Ireland-headquartered reinsurance company
with branches in Switzerland, the U.K. and France. Our
ARCH CAPITAL
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2025 FORM 10-K
Danish underwriting agency was formed in 2007 with a focus
on Accident & Health business. The acquisition of Barbican
in 2019 also contributed to our reinsurance operations in
the London market. Our property facultative reinsurance
underwriting operations write business in the U.S., Canada
and Europe.
In 2021, Arch Re Bermuda completed the acquisition of
Somerset Bridge Group Limited, Southern Rock Holdings
Limited and affiliates (“Somerset Group”). The acquisition
included Somerset Group’s motor insurance managing
general agent, distribution capabilities through direct and
aggregator channels, affiliated insurer and fully integrated
claims
operation.
See
“Operations—Reinsurance
Operations” for further details on our reinsurance
operations.
Our mortgage operations include U.S. and international
mortgage insurance and reinsurance operations, as well as
participation in government sponsored enterprise (“GSE”)
credit risk-sharing transactions. The U.S. mortgage platform
was established in 2014 and expanded greatly in 2016
through the acquisition of United Guaranty Corporation
(“UGC”). Our U.S. primary mortgage operations provide
mortgage insurance products and services to the U.S.
market. These operations include providers which are
approved as eligible mortgage insurers by Federal National
Mortgage Association (“Fannie Mae”) and Federal Home
Loan Mortgage Corporation (“Freddie Mac”), each a GSE.
The mortgage operations also include participation in GSE
credit risk-sharing transactions and direct mortgage
insurance to U.S. mortgage lenders with respect to
mortgages that lenders intend to retain in portfolio or
include in non-agency securitizations along with mortgage
insurance and reinsurance on a global basis. The majority of
our European business is written through our Ireland-based
carrier, Arch Insurance (EU), which was authorized in 2011
to provide mortgage insurance products and services to the
European and U.K. markets. In 2019, Arch LMI Pty Ltd.
(“Arch LMI”) was authorized by the Australian Prudential
Regulation Authority (“APRA”) to write lenders’ mortgage
insurance (“LMI”) on a direct basis in Australia. We
expanded our presence in Australia in 2021 by acquiring
Westpac Lenders Mortgage Insurance Limited, another
APRA-approved writer of lenders mortgage insurance, which
has since been renamed Arch Lenders Mortgage Indemnity
Ltd. (“Arch Indemnity”). In 2022, we converted Arch LMI into
a services company for our Australian LMI operations and
the company relinquished its APRA authorization. See
“Operations—Mortgage Operations” for further details on
our mortgage operations.
It is our belief that our underwriting platform, our
experienced management team and our strong capital base
have enabled us to create a diversified, specialty-focused
company targeting areas where we can best apply our
specialized
underwriting
expertise,
distribution
and
customer capabilities.
In 2014, we acquired approximately 11% of Somers Holdings
Ltd. (formerly Watford Holdings Ltd.). Somers Holdings Ltd.
is the parent of Somers Re Ltd. (formerly Watford Re Ltd.), a
multi-line Bermuda (re)insurance company (together with
Somers Holdings Ltd., “Somers”). In 2021, Somers became a
wholly owned subsidiary of Greysbridge Holdings Ltd.
(“Greysbridge”). Arch Capital currently owns 30% of
Greysbridge, with the remaining common shares held by a
number of third party investors. Pursuant to the terms of
the Greysbridge shareholder agreement, as amended,
following the expiration of a specified period, Arch Capital
has a call right (but not the obligation) and certain third
party investors have put rights (but not the obligation) to
purchase or sell, as applicable, a specified amount of each
such investor’s initial common shares on an annual basis at
Greysbridge’s year-end book value per share.
In
2017,
Arch
and
certain
co-investors
acquired
approximately 25% of Premia Holdings Ltd. Premia Holdings
Ltd. is the parent of Premia Reinsurance Ltd., a multi-line
Bermuda reinsurance company (together with Premia
Holdings Ltd., “Premia”). In 2021, the Company completed
the share purchase agreement with Natixis, a French
financial services firm, to purchase 29.5% of the common
equity of Coface SA (“Coface”), a France-based leader in the
global trade credit insurance market. See “Operations—
Other Operations” for further details on Somers, Premia and
Coface.
The Board of Directors of Arch Capital (the “Board”) has
approved common share repurchase authorizations under
our share repurchase program. Repurchases under the share
repurchase program may be effected from time to time in
open market or privately negotiated transactions. Since the
inception of the share repurchase program in 2007 through
December 31, 2025, Arch Capital has repurchased 455
million common shares for an aggregate purchase price of
$7.8 billion. At December 31, 2025, the total remaining
authorization under the share repurchase program was $1.1
billion. The timing and amount of the repurchase
transactions under this program will depend on a variety of
factors, including results of operations, market conditions
and the development of the economy, as well as other
factors. We will consider share repurchases on an
opportunistic basis. In 2025, we repurchased approximately
$1.9 billion worth of ACGL common shares.
ARCH CAPITAL
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2025 FORM 10-K
OPERATIONS
We classify our businesses into three underwriting
segments: insurance, reinsurance and mortgage. For an
analysis of our underwriting results by segment, see note 4,
“Segment Information,” to our consolidated financial
statements in Item 8 and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—
Results of Operations.”
Insurance Operations
Our insurance operations are conducted in Bermuda, the
U.S., the U.K., Europe, Canada, and Australia. Our insurance
operations in Bermuda are conducted through Arch
Insurance (Bermuda), a division of Arch Re Bermuda, and
Alternative Re Limited.
In the U.S., we focus on various specialty lines on both an
admitted and non-admitted basis. Our insurance group’s
insurance subsidiaries are Arch Insurance Company (“Arch
Insurance”), Arch Specialty Insurance Company (“Arch
Specialty”), Arch Indemnity Insurance Company (“Arch
Indemnity Insurance”), Arch Property Casualty Insurance
Company (“Arch PC”) and Arch Wilsure Insurance Company
(“Arch Wilsure”). Arch Insurance is an admitted insurer in 50
states, the District of Columbia, Puerto Rico, the U.S. Virgin
Islands and Guam. Arch Specialty is an approved excess and
surplus lines insurer in 50 states, the District of Columbia,
Puerto Rico and the U.S. Virgin Islands and an authorized
insurer in one state. Arch Indemnity Insurance is an
admitted insurer in 50 states and the District of Columbia.
Arch PC, which is not currently writing business, is an
admitted insurer in 46 states and the District of Columbia
and is filing applications for admission in all remaining states
where it is not yet admitted. Arch Wilsure is an admitted
insurer in all 50 states and the District of Columbia. Our
insurance group also operates McNeil & Company, Inc., a
specialized risk manager and a program administrator we
acquired in 2018 based in Cortland, New York. The
headquarters for our insurance group’s U.S. support
operations (excluding underwriting units) are in Jersey City,
New Jersey. The insurance group has offices throughout the
U.S., including five regional offices located in Alpharetta,
Georgia; Chicago, Illinois; New York, New York; San
Francisco, California; Dallas, Texas and additional branch
offices.
On August 1, 2024, the Company completed the acquisition
of Allianz’s U.S Middle Market Property & Casualty Insurance
and U.S. Entertainment Property and Casualty Insurance
Business (“MCE Acquisition”). This business is written by
Fireman’s Fund Insurance Company, an affiliate of Allianz,
and its subsidiaries (collectively, the “Business Entities”), in
each case, relating to relevant policies with accident years
2016 and onwards (collectively, the “Business”), as well as
certain assets of Allianz and its affiliates related to the
Business. In connection with the acquisition of the Business,
the Company also entered into certain reinsurance
agreements relating to the Business and the Business
Entities and other agreements providing for administration
and other services for the Business Entities by the Company
for the applicable policies being reinsured following the
closing. The acquisition of the Business is an important part
of the Company’s growth strategy, and provides a ballast to
our existing insurance business. It further enhances the
Company’s capabilities in the U.S. middle markets and
represents an attractive way to enter the entertainment
insurance market, a new niche for us.
Our insurance operations in Canada are conducted through
Arch Insurance Canada Ltd. (“Arch Insurance Canada”), a
Canada domestic company which is authorized in all
Canadian provinces and territories. Arch Insurance Canada is
headquartered in Toronto, Ontario.
Arch Insurance (EU), headquartered in Dublin, Ireland,
received authorization from the Central Bank of Ireland
(“CBI”) to expand its authorized classes of business as part of
our plan to address the U.K.’s departure from the EU
(“Brexit”). At the end of 2020, Arch Insurance (U.K.) received
court approval in the U.K. to transfer its legacy book of
business written in the European Economic Area (“EEA”) to
Arch Insurance (EU) under Part VII of the U.K. Financial
Services and Markets Act 2000. Starting in 2021, all of the
insurance business in the EU previously written by Arch
Insurance (U.K.) is now written through Arch Insurance (EU).
We conduct insurance operations on several platforms in
the U.K., including Arch Insurance (U.K.) and our Lloyd’s
syndicates: Arch Syndicate 2012 (“Arch Syndicate 2012”) and
Arch Syndicate 1955 (“Arch Syndicate 1955” and, together
with Arch Syndicate 2012, our “Lloyd’s Syndicates”). Arch
Managing Agency Limited (“AMAL”) is the managing agent
of our Lloyd’s Syndicates. These operations provide us
access to Lloyd’s extensive distribution network and
worldwide licenses. AMAL also acts as managing agent for
third party members of Arch Syndicate 1955. Arch
Underwriting at Lloyd’s (Australia) Pty Ltd, based in Sydney,
Australia, is a Lloyd’s services company which underwrites
exclusively for our Lloyd’s Syndicates. Collectively, the U.K.
insurance operations are referred to as “Arch U.K.” Arch U.K.
conducts its operations from London and other locations in
the U.K. In May 2024, we completed the sale of Castel
Underwriting Agencies Limited, a managing general agency
in the U.K. that we acquired as part of the Barbican
acquisition.
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2025 FORM 10-K
Strategy. Our insurance group’s strategy is to operate in
lines of business in which underwriting expertise can make a
meaningful difference in operating results. The insurance
group focuses on talent-intensive rather than labor-intensive
business and seeks to operate profitably (on both a gross
and net basis) across all of its product lines. To achieve these
objectives, our insurance group’s operating principles are to:
•
Capitalize on profitable underwriting opportunities. Our
insurance
group
believes
that
its
experienced
management and underwriting teams are positioned to
locate and identify business with attractive risk/reward
characteristics. As profitable underwriting opportunities
are identified, our insurance group will continue to grow
its product portfolio in order to take advantage of
market trends. This includes adding underwriting and
other professionals with specific expertise in specialty
lines of insurance.
•
Centralize responsibility for underwriting. Our insurance
group consists of a range of product lines. The
underwriting executive in charge of each product line
oversees all aspects of the underwriting product
development process within such product line. Our
insurance group believes that centralizing control of
such product line with the respective underwriting
executive allows for tight management of underwriting
and creates clear accountability for results. Our U.S.
insurance group has five regional offices, and the
executive in charge of each region is primarily
responsible for all aspects of the marketing and
distribution of our insurance group’s products, including
the management of broker and other producer
relationships, in the executive’s respective region. In our
non-U.S. offices, a similar philosophy is observed, with
responsibility for the management of each product line
residing with the senior underwriting executive in
charge of the relevant product line.
•
Maintain disciplined underwriting standards using our
experience and strategic analytics to drive decisions. Our
insurance group’s underwriting philosophy is to
generate an underwriting profit through prudent risk
selection and proper pricing. Our insurance group
believes that the key to this approach is adherence to
uniform underwriting standards across all types of
business. Our insurance group’s senior management
closely monitors the underwriting process. This strategy
is underpinned by our belief in using data and strategic
analytics to assess business through hard and soft
underwriting conditions.
•
Focus on providing superior claims management. Our
insurance group believes that claims handling is an
integral component of credibility in the market for
insurance products. We believe our ability to handle
claims expeditiously and satisfactorily is a key to our
success. Our insurance group employs experienced
claims professionals and also utilizes experienced
external claims managers (third party administrators)
where appropriate.
•
Promote and utilize an efficient distribution system. Our
insurance group believes that promoting and utilizing a
multi-channel distribution system provides efficient
access to its broad customer base. We work with select
international, national and regional retail and wholesale
brokers and leading managing general agencies and
program administrators, to distribute our insurance
products.
•
Grow strategic partnerships, acquire or build strategic
businesses in niche areas or lines of business. Our
insurance group aims to build more integrated long-
term alignment with strategic partners offering superior
access
to
niche
opportunities,
quality
scalable
businesses, or lines with reliable defensive qualities. We
may grow existing partnerships or look to acquire
businesses which further this strategy, such as our MCE
Acquisition.
•
Create or acquire scalable and diversified underwriting
platforms which can flex depending on the underwriting
cycle.
Our
experience
as
cycle
managers
is
complemented by scalable underwriting platforms
enabling us to increase or decrease our business as
market conditions demand. The MCE platform enhances
our U.S. focus on middle market companies using our
strategic analytics capabilities and continued focus on
customer solutions. We continue to focus on specialty
risks as we build out a diversified platform across the
insurance segment. Outside of the U.S., we are focused
on continued expansion in continental Europe and
optimizing opportunities in the London market.
•
Artificial Intelligence. We employ artificial intelligence
(“AI”) technology and analytics to drive data-driven
decisions, streamline processes or help serve our
customers and partners. The use of AI technology is
vetted through our AI governance framework.
Underwriting Philosophy. We seek to generate an
underwriting profit based on our careful analysis across each
product line that focuses on the following:
•
risk selection;
•
desired attachment point;
•
limits and retention management;
•
due diligence, including financial condition, claims
history, management, and product, class and territorial
exposure;
ARCH CAPITAL
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2025 FORM 10-K
•
underwriting authority and appropriate approvals; and
•
collaborative decision making.
We employ analytic capabilities to support this philosophy.
Marketing. Our insurance group’s products are marketed
principally through a group of licensed independent retail
and wholesale brokers. Clients (insureds) are referred to our
insurance group through a large number of international,
national and regional brokers and captive managers who
receive from the insured or insurer a set fee or brokerage
commission usually equal to a percentage of gross
premiums. Our insurance group may enter into contingent
commission arrangements with some brokers that provide
for the payment of additional commissions based on volume
or profitability of business. It is the practice for the brokers
and producers to make the client aware of any contingent
commission arrangements that may be in place with us. We
have also entered into service agreements with select
international brokers that provide access to their proprietary
industry analytics. In general, our insurance group has no
implied or explicit commitments to accept business from any
particular broker and neither brokers nor any other third
parties have the authority to bind our insurance group,
except in the case where underwriting authority may be
delegated contractually to select program administrators.
Such administrators are subject to a financial and
operational due diligence review prior to any such
delegation of authority and ongoing reviews and audits are
carried out as deemed necessary by our insurance group to
assure the continuing integrity of underwriting and related
business operations. See “Risk Factors—Risks Relating to
Our Industry, Business and Operations—We 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.” For information
on major brokers, see note 18, “Commitments and
Contingencies—Concentrations of Credit Risk,” to our
consolidated financial statements in Item 8.
Risk Management and Reinsurance. In the normal course of
business, our insurance group may cede a portion of its
premium on a quota share or excess of loss basis through
treaty or facultative reinsurance agreements. Reinsurance
arrangements do not relieve our insurance group from its
primary obligations to insureds. Reinsurance recoverables
are recorded as assets, predicated on the reinsurers’ ability
to meet their obligations under the reinsurance agreements.
If the reinsurers are unable to satisfy their obligations under
the agreements, our insurance subsidiaries would be liable
for such defaulted amounts. Our principal insurance
subsidiaries, with oversight by a group-wide reinsurance
steering committee (“RSC”), are selective with regard to
reinsurers, seeking to place reinsurance with only those
reinsurers which meet and maintain specific standards of
established criteria for financial strength. The RSC evaluates
the financial viability of its reinsurers through financial
analysis, research and review of rating agencies’ reports and
also monitors reinsurance recoverables and collateral with
unauthorized reinsurers. The financial analysis includes
ongoing qualitative and quantitative assessments of
reinsurers, including a review of the financial stability,
appropriate licensing, reputation, claims paying ability and
underwriting philosophy of each reinsurer. See note 8,
“Reinsurance,” to our consolidated financial statements in
Item 8.
For catastrophe-exposed insurance business, our insurance
group seeks to limit the amount of exposure to catastrophic
losses it assumes through a combination of managing
aggregate limits, underwriting guidelines and reinsurance.
For a discussion of our risk management policies, see
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Summary of Critical
Accounting Estimates—Ceded Reinsurance” and “Risk
Factors—Risks Relating to Our Industry, Business and
Operations—The failure of any of the loss limitation
methods we employ could have a material adverse effect on
our financial condition or results of operations.”
Claims
Management.
Our
insurance
group’s
claims
management function is performed by claims professionals,
as well as experienced external claims managers (third party
administrators),
where
appropriate.
In
addition
to
investigating, evaluating and resolving claims, members of
our insurance group’s claims departments work with
underwriting professionals to develop products and services
desired by the group’s clients.
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2025 FORM 10-K
Reinsurance Operations
Our reinsurance operations are conducted on a worldwide
basis through our reinsurance subsidiaries, Arch Re
Bermuda, Arch Re U.S., our Lloyd’s Syndicates, and Arch Re
Europe. Arch Re Bermuda is dual-licensed as a Class 4
general business insurer and Class C long-term insurer and is
headquartered in Hamilton, Bermuda. Arch Re Bermuda has
been approved as a “certified reinsurer,” which allows
reduced collateral for reinsurance ceded to such reinsurers.
Arch Re Bermuda has also been approved as a “reciprocal
jurisdiction reinsurer,” which allows ceding companies to
eliminate regulatory collateral requirements for reinsurance
ceded to such reinsurers and still take credit for that
reinsurance. In October 2024, the U.S. Department of the
Treasury, Bureau of Fiscal Services (“BFS”) recognized Arch
Re Bermuda as an “Alien Reinsurer” (except on excess risks
running to the U.S.), which allows T-Listed ceding companies
to eliminate regulatory collateral requirements under the
U.S. Treasury rules. Arch Re U.S. is licensed or is an
accredited or otherwise approved reinsurer in 50 states, the
District of Columbia and Puerto Rico, and the provinces of
Ontario and Quebec in Canada with its principal U.S. offices
in Morristown, New Jersey. Treaty and facultative
operations in Canada are conducted through the Canadian
branch of Arch Re U.S. (“Arch Re Canada”). Arch Re U.S. is
also an authorized insurer in Guam. Our property facultative
reinsurance operations are conducted primarily through
Arch Re U.S. The property facultative reinsurance operations
have offices throughout the U.S., Canada, Europe and the
U.K. Arch Re Europe, licensed and authorized as a non-life
reinsurer and a life reinsurer, is headquartered in Dublin,
Ireland. AMAL is the managing agent for the reinsurance
operations of our Lloyd’s Syndicates.
Arch Group Reinsurance Ltd. (“AGRL”), formed in December
2022, is a registered Class 3A general business insurer
carrying on affiliated reinsurance business pursuant to the
Insurance Act of 1978 of Bermuda. AGRL, a wholly owned
subsidiary of Arch-U.S., was established to provide internal
reinsurance covering certain U.S. lines of business. AGRL is a
U.S. taxpayer through a section 953(d) voluntary election
under the Internal Revenue Code of 1986, as amended.
Strategy. Our reinsurance group’s strategy is to capitalize on
our financial capacity, experienced management and
operational flexibility to offer multiple products through our
operations. The reinsurance group’s operating principles are
to:
•
Actively select and manage risks. Our reinsurance group
only
underwrites
business
that
meets
certain
profitability criteria, and it emphasizes disciplined
underwriting over premium growth. To this end, our
reinsurance group maintains centralized control over
reinsurance underwriting guidelines and authorities.
•
Maintain flexibility and respond to changing market
conditions. Our reinsurance group’s organizational
structure and philosophy allows it to take advantage of
increases or changes in demand or favorable pricing
trends. Our reinsurance group believes that its existing
platforms, broad underwriting expertise and substantial
capital facilitate adjustments to its mix of business
geographically and by line and type of coverage. Our
reinsurance group believes that this flexibility allows it
to participate in those market opportunities that
provide the greatest potential for underwriting
profitability.
•
Maintain a low cost structure. Our reinsurance group
believes that maintaining tight control over its staffing
level and operating primarily as a broker market
reinsurer permits it to maintain low operating costs
relative to its capital and premiums.
•
Artificial Intelligence. We employ AI technology and
analytics to drive data-driven decisions, streamline
processes or help serve our customers and partners.
The use of AI technology is vetted through our AI
governance framework.
Our reinsurance group writes business on both a
proportional and non-proportional basis and writes both
treaty and facultative business. In a proportional reinsurance
arrangement (also known as pro rata reinsurance, quota
share reinsurance or participating reinsurance), the
reinsurer shares a proportional part of the original
premiums and losses of the reinsured. The reinsurer pays
the cedent a commission which is generally based on the
cedent’s cost of acquiring the business being reinsured
(including commissions, premium taxes, assessments and
miscellaneous administrative expenses) and may also
include a profit factor. Non-proportional (or excess of loss)
reinsurance indemnifies the reinsured against all or a
specified portion of losses on underlying insurance policies
in excess of a specified amount, which is called a
“retention.” Non-proportional business is written in layers
and a reinsurer or group of reinsurers accepts a band of
coverage up to a specified amount. The total coverage
purchased by the cedent is referred to as a “program.” Any
liability exceeding the upper limit of the program reverts to
the cedent.
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The reinsurance group’s treaty operations generally seek to
write significant lines on less commoditized classes of
coverage, such as specialty, property and casualty
reinsurance treaties. However, with respect to other classes
of coverage, such as property catastrophe and casualty
clash, the reinsurance group’s treaty operations participate
in a relatively large number of treaties where they believe
that they can underwrite and process the business
efficiently. The reinsurance group’s casualty facultative and
property facultative underwriters write reinsurance on a
facultative basis whereby they assume part of the risk under
primarily single insurance contracts. Facultative reinsurance
is typically purchased by ceding companies for individual
risks not covered by their reinsurance treaties, for unusual
risks or for amounts in excess of the limits on their
reinsurance treaties.
For additional information regarding the business written by
the reinsurance group, please refer to note 4, “Segment
Information,” to our consolidated financial statements in
Item 8.
Underwriting Philosophy. Our reinsurance group employs a
disciplined, analytical approach to underwriting reinsurance
risks that is designed to specify an adequate premium for a
given exposure commensurate with the amount of capital it
anticipates placing at risk. A number of our reinsurance
group’s underwriters are also actuaries. It is our reinsurance
group’s belief that employing actuaries on the front-end of
the underwriting process gives it an advantage in evaluating
risks and constructing a high quality book of business.
As part of the underwriting process, our reinsurance group
typically assesses a variety of factors, including:
•
adequacy of underlying rates for a specific class of
business and territory;
•
the reputation of the proposed cedent and the
likelihood of establishing a long-term relationship with
the cedent, the geographic area in which the cedent
does business, together with its catastrophe exposures,
and our aggregate exposures in that area;
•
historical loss data for the cedent and, where available,
for the industry as a whole in the relevant regions, in
order to compare the cedent’s historical loss experience
to industry averages;
•
projections of future loss frequency and severity; and
•
the perceived financial strength of the cedent.
Marketing. Our reinsurance group generally markets its
reinsurance products through brokers, except our property
and casualty facultative reinsurance groups, which deal
directly with ceding companies along with brokers. Brokers
do not have the authority to bind our reinsurance group
with respect to reinsurance agreements, nor does our
reinsurance group commit in advance to accept any portion
of the business that brokers submit to them. Our
reinsurance group generally pays brokerage fees to brokers
based on negotiated percentages of the premiums written
through such brokers. For information on major brokers, see
note 18, “Commitments and Contingencies—Concentrations
of Credit Risk,” to our consolidated financial statements in
Item 8.
Risk Management and Retrocession. Our reinsurance group
currently purchases a combination of per event excess of
loss, per risk excess of loss, proportional retrocessional
agreements and other structures that are available in the
market. Such arrangements reduce the effect of individual
or aggregate losses on, and in certain cases may also
increase the underwriting capacity of, our reinsurance
group. Our reinsurance group will continue to evaluate its
retrocessional requirements based on its net appetite for
risk. See note 8, “Reinsurance,” to our consolidated financial
statements in Item 8.
For
catastrophe
exposed
reinsurance
business,
our
reinsurance group seeks to limit the amount of exposure it
assumes from any one reinsured and the amount of the
aggregate exposure to catastrophe losses from a single
event in any one geographic zone. For a discussion of our
risk management policies, see “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations—Summary of Critical Accounting Estimates—
Ceded Reinsurance” and “Risk Factors—Risks Relating to Our
Industry, Business and Operations—The failure of any of the
loss limitation methods we employ could have a material
adverse effect on our financial condition or results of
operations.”
Claims Management. Claims management includes the
receipt of initial loss reports, creation of claim files,
determination of whether further investigation is required,
establishment and adjustment of case reserves and payment
of claims. Additionally, audits are conducted for both
specific claims and overall claims procedures at the offices of
selected ceding companies. Our reinsurance group makes
use of outside consultants for claims work from time to
time.
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Mortgage Operations
Our mortgage operations include mortgage insurance and
reinsurance in the U.S. and internationally, as well as
participation in GSE credit risk-sharing transactions. Our
mortgage group includes direct mortgage insurance in the
U.S. primarily through Arch Mortgage Insurance Company
(“AMIC”), United Guaranty Residential Insurance Company
(“UGRIC”), and Arch Mortgage Guaranty Company (“AMG”
and together with AMIC and UGRIC, “Arch MI U.S.”);
mortgage reinsurance primarily through Arch Re Bermuda
on both a proportional and non-proportional basis globally;
mortgage insurance and reinsurance in the EEA and U.K.
primarily through Arch Insurance (EU), and in Australia
through Arch Indemnity; and participation in various GSE
credit risk-sharing products primarily through Arch Re
Bermuda.
In 2014, we entered the U.S. mortgage insurance
marketplace, underwriting on the AMIC platform. AMIC is
licensed and operates in all 50 states, the District of
Columbia, Puerto Rico and Guam. In December 2016, we
completed the acquisition of UGC and its primary operating
subsidiary, UGRIC, which is licensed and operates in all 50
states, the District of Columbia and the U.S. Virgin Islands.
AMIC and UGRIC have each been approved as an eligible
mortgage insurer by Fannie Mae and Freddie Mac, subject to
maintaining
certain
ongoing
requirements
(“eligible
mortgage insurer”). AMG offers direct mortgage insurance
to U.S. mortgage lenders with respect to mortgages that
lenders intend to retain in portfolio or include in non-agency
securitizations. AMG, which is licensed in all 50 states and
the District of Columbia, insures mortgages that are not
intended to be sold to the GSEs, and it is therefore not
approved by either GSE as an eligible mortgage insurer.
In 2011, Arch Insurance (EU) was authorized by the CBI to
provide mortgage insurance products and services to the
European and U.K. markets.
In 2019, Arch LMI was authorized by APRA to write lenders’
mortgage insurance. In August 2021, we acquired Arch
Indemnity, which is also authorized by APRA to write
lenders’ mortgage insurance. In 2022, we converted Arch
LMI to a services company for our Australian lenders
mortgage
insurance
operations
and
the
company
relinquished its APRA authorization. Arch LMI and Arch
Indemnity are headquartered in Sydney, Australia. Following
the conversion of Arch LMI, Arch Indemnity is the primary
provider of direct lenders’ mortgage insurance and
reinsurance to the Australian market.
Strategy. The mortgage insurance market operates on a
distinct underwriting cycle, with demand driven mainly by
the housing market and general economic conditions. As a
result, the creation of the mortgage group provides us with a
more diverse revenue stream. Our mortgage group’s
strategy is to capitalize on its financial capacity, mortgage
insurance technology platform, operational flexibility and
experienced management to offer mortgage insurance,
reinsurance and other risk-sharing products in the U.S.,
Europe, the U.K. and Australia. We employ AI technology
and analytics to drive data-driven decisions, streamline
processes or help serve our customers and partners. The use
of AI technology is vetted through our AI governance
framework.
Our mortgage group’s operating principles and goals are to:
•
Capitalize on profitable underwriting opportunities. Our
mortgage
group
believes
that
its
experienced
management, analytics and underwriting teams are
positioned to identify and evaluate business with
attractive risk/reward characteristics.
•
Maintain a disciplined credit risk philosophy. Our
mortgage group’s credit risk philosophy is to generate
underwriting profit through disciplined credit risk
analysis and proper pricing. Our mortgage group
believes that the key to this approach is maintaining
discipline across all phases of the applicable housing
and mortgage lending cycles.
•
Provide superior and innovative mortgage products and
services. Our mortgage group believes that it can
leverage its financial capacity, experience across
insurance product lines and the mortgage finance
industry, and its analytics and technology to provide
innovative products and superior service. The mortgage
group believes that its delivery of tailored products that
meet the specific, evolving needs of its customers will
be a key to the group’s success.
•
Maintain our position as a leading provider of U.S.
mortgage insurance business. We have been a leading
provider of mortgage insurance products and services to
national and regional banks and mortgage originators
for most of the last decade, and this position has helped
us generate significant business opportunities for Arch.
•
Diversify revenues by capitalizing on international
opportunities. With the acquisition of Arch Indemnity in
Australia in 2021, and continued growth insuring and
reinsuring European banks, we believe diversifying
revenues on a global basis is a key operating principle.
ARCH CAPITAL
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2025 FORM 10-K
Our mortgage group focuses on the following areas:
•
Direct mortgage insurance in the United States. Under
their monoline insurance licenses, each of Arch’s eligible
mortgage insurers may only offer private mortgage
insurance covering first lien, one-to-four family
residential mortgages. Nearly all of our mortgage
insurance written provides first loss protection on loans
originated by mortgage lenders and sold to the GSEs.
Each GSE’s Congressional charter generally prohibits it
from purchasing a mortgage where the principal
balance of the mortgage is in excess of 80% of the value
of the property securing the mortgage unless the excess
portion of the mortgage is protected against default by
lender recourse, participation or by a qualified insurer.
As a result, such “high loan-to-value mortgages”
purchased by Fannie Mae or Freddie Mac generally are
insured with private mortgage insurance.
Mortgage insurance protects the insured lender,
investor or GSE against loss in the event of a borrower’s
default. If a borrower defaults on mortgage payments,
private mortgage insurance reduces, and may eliminate,
losses to the insured. Private mortgage insurance may
also facilitate the sale of mortgage loans in the
secondary mortgage market because of the credit
enhancement it provides. Our primary U.S. mortgage
insurance policies predominantly cover individual loans
and are effective at the time the loan is originated. We
also may enter into insurance transactions with lenders
and investors, under which we insure a portfolio of
loans at or after origination. Although not currently a
significant product, we may offer mortgage insurance
on a “pool” basis in the future. Under pool insurance,
the mortgage insurer provides coverage on a group of
specified loans, typically for 100% of all contractual or
policy-defined losses on every loan in the portfolio,
subject to an agreed aggregate loss limit. Pool insurance
may be in a first loss position with respect to loans that
do not have primary mortgage insurance policies, or it
may be in a second loss position, covering losses in
excess of those covered by the primary mortgage
insurance policy.
•
Mortgage insurance and reinsurance in Europe and
other
countries
where
we
identify
profitable
underwriting opportunities. Since 2011, Arch Insurance
(EU) has offered mortgage insurance to European
mortgage lenders in order to reduce lenders’ credit risk
and regulatory capital requirements associated with the
insured mortgages. In certain European countries,
lenders purchase mortgage insurance to facilitate
regulatory compliance with respect to high loan-to-
value residential lending. Arch Insurance (EU) offers
mortgage insurance on both a “flow” basis to cover new
originations and through structured transactions to
cover one or more portfolios of previously originated
residential loans. Increasingly, Arch Insurance (EU) and
Arch Re Bermuda are providing protection to European
banks on significant risk transfer (“SRT”) transactions. In
Australia, Arch Indemnity provides lenders’ mortgage
insurance on a flow basis to cover new originations and
offers coverage through structured transactions to
cover one or more portfolios of previously originated
residential loans.
•
Reinsurance. Arch Re Bermuda provides quota share
and excess of loss reinsurance covering U.S. and
international mortgages.
•
Other credit risk-sharing products. In addition to
providing
traditional
mortgage
insurance
and
reinsurance, we offer various credit risk-sharing
products to government agencies and mortgage
lenders. The GSEs have reduced their exposure to
mortgage risk by shifting a portion of it to the private
sector, creating opportunities for insurers to assume
additional mortgage risk. Arch Re Bermuda and its
affiliates have regularly participated in both Fannie Mae
and Freddie Mac single family and multifamily risk
sharing programs since their inception over 10 years
ago.
In 2019, we established Arch Credit Risk Services (Bermuda)
Ltd. (“Arch CRS”). Arch CRS is licensed by the Bermuda
Monetary Authority (“BMA”) as an insurance agent in
Bermuda. Arch CRS offers mortgage credit assessment and
underwriting advisory services with respect to participation
in GSE credit risk transfer transactions.
ARCH CAPITAL
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2025 FORM 10-K
Underwriting Philosophy. Our mortgage group believes in a
disciplined, analytical approach to underwriting mortgage
risks, including forecasting delinquency and future home
price movements with the goal of ensuring that premiums
are adequate for the risk being insured. Experienced
actuaries and statistical modelers are engaged in analytics to
inform the underwriting process. As part of the underwriting
process, our mortgage group typically assesses a variety of
factors, including the:
•
ability and willingness of the mortgage borrower to pay
its obligations under the mortgage loan being insured;
•
characteristics of the mortgage loan being insured and
the value of the collateral securing the mortgage loan;
•
financial strength, quality of operations and reputation
of the lender originating the mortgage loan;
•
home price trends and expected future home price
movements which vary by geography;
•
projections of future loss frequency and severity; and
•
adequacy of premium rates.
Sales and Distribution. In the U.S., we employ a sales force to
directly sell mortgage insurance products and services to our
customers, which include mortgage originators such as
mortgage bankers, mortgage brokers, commercial banks,
savings institutions, credit unions and community banks. Our
largest single mortgage insurance customer in the U.S.
(including branches and affiliates) accounted for 5.3% and
6.2% of our gross premiums written for the years ending
December 31, 2025 and 2024, respectively. No other
customer accounted for greater than 3.4% and 3.2% of the
gross premiums written for the years ending December 31,
2025 and 2024, respectively. The percentage of gross
premiums written on our top 10 customers was 25.8% and
25.2% as of December 31, 2025 and 2024, respectively. In
Europe, Bermuda and Australia, our products and services
are distributed on a direct basis and through brokers. Each
country represents a unique set of opportunities and
challenges that require knowledge of market conditions and
client needs to develop effective solutions.
Risk Management. Exposure to mortgage risk is monitored
globally and managed through underwriting guidelines,
pricing, reinsurance, utilization of proprietary risk models,
concentration limits and limits on net probable loss resulting
from a severe economic downturn in the housing market.
Exposure to climate risk has also been incorporated into the
risk management framework of our mortgage group to
monitor and manage our exposure to potential (i) losses
related to the direct physical impact of extreme weather
conditions or events in certain transactions; and/or (ii)
adverse economic or housing market conditions caused by
the physical impact of extreme weather conditions or events
on a region or the financial impact of transitioning to a zero
or low carbon economy on a region. Generally, mortgage
insurance policies exclude direct physical losses resulting
from physical damages, such as damage caused by extreme
weather events, though we do have some exposure to
physical damage in certain GSE credit risk transfer (“CRT”)
and European SRT transactions. Additionally, we actively
monitor developments in the housing market, financial
regulation and public policy in the geographies where our
mortgage group operates to facilitate implementation of
laws, regulations and policies which support sustainable
environmental behavior and mitigate the effects of climate
change. For a discussion of our risk management policies,
see “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Summary of Critical
Accounting Estimates—Ceded Reinsurance” and “Risk
Factors—Risks Relating to Our Industry, Business and
Operations—The failure of any of the loss limitation
methods we employ could have a material adverse effect on
our financial condition or results of operations.”
Our mortgage group has ceded a portion of its premium
through quota share and aggregate excess of loss
reinsurance agreements which provide reinsurance coverage
for delinquencies on portfolios of in-force policies issued
between certain periods. See note 8, “Reinsurance,” to our
consolidated financial statements in Item 8 for further
details.
Reinsurance arrangements do not relieve our mortgage
group from its primary obligations to insured parties.
Reinsurance recoverables are recorded as assets, predicated
on the reinsurers’ ability to meet their obligations under the
reinsurance agreements. If the reinsurers are unable to
satisfy their obligations under the agreements, our mortgage
subsidiaries would be liable for such defaulted amounts. For
our U.S. and Australian mortgage insurance businesses, in
addition to utilizing reinsurance, we have developed
proprietary risk models that simulate the maximum loss
resulting from severe economic events impacting the
housing market. See “Management’s Discussion and Analysis
of Financial Condition and Results of Operations—
Catastrophic Events and Severe Economic Events.”
Claims Management. With respect to our direct mortgage
insurance business, the claims process generally begins with
notification by the insured or servicer to us of a default on
an insured loan. The insured is generally required to notify
us of a default after the borrower misses two consecutive
monthly payments. Borrowers default for a variety of
reasons, including a reduction of income, unemployment,
divorce, illness, inability to manage credit, rising interest rate
levels and declining home prices. Upon notice of a default, in
certain cases we may coordinate with loan servicers to
facilitate and enhance retention workouts on insured loans.
ARCH CAPITAL
12
2025 FORM 10-K
Retention
workouts
include
payment
deferral
or
forbearance, loan modifications and other loan repayment
options, which may enable borrowers to cure mortgage
defaults and retain ownership of their homes. If a retention
workout is not viable for a borrower, our loss on a loan may
be mitigated through a liquidation workout option, including
a pre-foreclosure sale or a deed-in-lieu of foreclosure.
In the U.S., our master policies generally provide that within
60 days of the perfection of a primary insurance claim, we
have the option of:
•
paying the insurance coverage percentage specified in
the certificate of insurance multiplied by the loss
amount;
•
in the event the property is sold pursuant to an
approved prearranged sale, paying the lesser of (i) 100%
of the loss amount less the proceeds of sale of the
property, or (ii) the specified coverage percentage
multiplied by the loss amount; or
•
paying 100% of the loss amount in exchange for the
insured’s conveyance to us of good and marketable title
to the property, with us then selling the property for our
own account.
While we select the claim settlement option that best
mitigates the amount of our claim payment, in the U.S. we
generally pay the coverage percentage multiplied by the loss
amount.
Other Operations
In 2014, we and third party investors sponsored the
formation of Somers. Somers is wholly owned by
Greysbridge, which is currently 30% owned by Arch Capital,
with the remaining balance of Greysbridge common shares
held by third party investors. See note 16, “Transactions
with Related Parties,” to our consolidated financial
statements in Item 8 for further details. Somers’ strategy is
to combine a diversified reinsurance and insurance business
with a disciplined investment strategy. Somers’ own
management and board of directors are responsible for its
results and profitability. Arch Re Bermuda has appointed
three directors to serve on the ten person board of directors
of Somers.
In 2017, we and Kelso sponsored the formation of Premia.
Premia’s strategy is to reinsure or acquire companies or
reserve portfolios in the non-life property and casualty
insurance and reinsurance run-off market. Arch Re Bermuda
and certain Arch co-investors invested $100 million and
acquired approximately 25% of Premia as well as warrants
to purchase additional common equity. Arch Re Bermuda is
providing a quota share reinsurance treaty on certain
business written by Premia, and subsidiaries of Arch Capital
are providing certain administrative and support services to
Premia, in each case pursuant to separate multi-year
agreements. Arch has appointed two directors to serve on
the seven person board of directors of Premia.
In 2021, the Company completed the share purchase
agreement with Natixis to purchase 29.5% of the common
equity of Coface. This is a long-term, strategic investment in
Coface, and fits with Arch’s efforts to develop uncorrelated
sources of underwriting income. Our companies share a
focus on specialty underwriting where knowledge and
expertise create value for our clients, and trade credit
contributes to Arch’s specialty-driven business model. Arch
has appointed four directors to serve on the ten person
board of directors of Coface.
Climate Change Considerations
We are taking steps to mitigate the effects of climate change
in our underwriting segments. We seek to identify business
opportunities associated with environmentally friendly
trends and support responsible environmental behaviors.
We have adopted a thermal coal policy in our global
insurance
operations
and
provide
environmentally
sustainable insurance solutions in certain product lines.
ARCH CAPITAL
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2025 FORM 10-K
HUMAN CAPITAL
We are driven by our common purpose of “Enabling
Possibility” for our customers, our communities and our
employees. This purpose is supported by our collaborative,
results-driven culture which relies on our dedicated,
engaged and talented people. By continuously working to
offer a meaningful and engaging employee experience, we
not only seek to help people perform at their best among
colleagues who care, but also aim to support our strategy of
delivering specialty products and innovative solutions to our
customers in each of our business segments. As of February
19, 2026, we had approximately 8,000 employees globally,
compared to around 7,200 last year, which directly speaks to
our ability to sustain our strong and unique culture as we
grow, which is a key enabler to top talent retention. We
have approximately 4,300 employees in North America (U.S.,
Canada and Bermuda), 1,700 employees in Europe and the
U.K. and 2,000 employees in the Philippines, India, Australia
and the rest of the world.
Our People and Culture. An important aspect of our culture
is sustaining a highly engaged and talented workforce. We
strive to leverage the best contributions and ideas of our
employees across our Company. In 2025, our multiple
employee networks provided a forum for over 1,500
employees to share ideas, build community, provide
leadership opportunities for members and contribute
meaningfully to business outcomes. These networks are
open to all our employees, fostering deeper connections
with colleagues.
Talent Acquisition, Development, Rewards and Retention.
Our employees are integral to the Company, and we
maintain a sharp focus on enhancing the ways we attract,
develop and retain our high-performing talent. Our talent
acquisition approach aims to maximize our ability to find and
hire top talent across multiple talent pools and proactively
source pipelines of key talent.
We provide career growth opportunities through a
combination of on-the-job training and experience, exposure
to top-notch colleagues who coach, provide feedback and
mentor, and education and training programs designed to
accelerate learning and applying new skills and behaviors.
We offer competitive compensation and comprehensive
benefits packages, including an employee share purchase
plan, parental leave, contributions to retirement savings
plans and programs to support employee mental and
physical well-being. We recognize the financial burden of
educational loans in the U.S. and have supported our
employees with a student debt assistance program. We also
match
eligible
contributions
to
qualified
charitable
organizations and employees are offered two paid volunteer
time-off days per calendar year with an eligible non-profit
organization. Our Arch Achieve program has recognized over
500 employees for excellence since its inception in 2009,
and each recipient is awarded a cash bonus to recognize
their accomplishments.
We also encourage employees to continue their educational
and
professional
development
through
tuition
reimbursement plans. To attract the best talent to our
industry, we offer internship programs and an Early Career
Program with an Underwriting Track which provides
participants with a robust introduction and real technical
skills to build a successful career at Arch. Experienced
professionals at Arch may participate in manager and
leadership development programs and, for our mortgage
insurance segment employees, we offer the opportunity to
seek a Mortgage Bankers Association Certified Banker
designation.
RESERVES
Reserves for losses and loss adjustment expenses (“Loss
Reserves”) represent estimates of what the insurer or
reinsurer ultimately expects to pay on claims at a given time,
based on the facts and circumstances then known, and it is
probable that the ultimate liability may exceed or be less
than such estimates. Even actuarially sound methods can
lead to subsequent adjustments to reserves that are both
significant and irregular due to the nature of the risks
written. Loss Reserves are inherently subject to uncertainty.
For more detail on our loss reserving process, please refer to
the Loss Reserves section of “Summary of Critical Accounting
Estimates” in Item 7, and the “Reserve for Losses and Loss
Adjustment Expenses“ and “Short Duration Contracts“
sections in Item 8.
Unpaid and paid losses and loss adjustment expenses
recoverable
were
approximately
$9.5
billion
at
December 31, 2025. For more detail, refer to “Financial
Condition, Reinsurance Recoverables” section in Item 7.
ARCH CAPITAL
14
2025 FORM 10-K
INVESTMENTS
At December 31, 2025, total investable assets held by Arch
were $47.4 billion. Our current investment guidelines and
approach stress preservation of capital, market liquidity and
diversification of risk. Our investments are subject to
market-wide risks and fluctuations, as well as to risks
inherent in particular securities. While maintaining our
emphasis on preservation of capital and liquidity, some
investments are not readily tradable. We expect our
portfolio to grow and, in the future, may expand into areas
that are not part of our current investment strategy. For
detail on our investments, see the Investable Assets Held by
Arch section of “Financial Condition” in Item 7 and note 9,
“Investment Information,” to our consolidated financial
statements in Item 8.
RATINGS
Our ability to underwrite business is affected by the quality
of our claims paying ability and financial strength ratings as
evaluated by independent agencies. Such ratings from third
party
internationally
recognized
statistical
rating
organizations or agencies are instrumental in establishing
the financial security of companies in our industry. The
primary users of such ratings include commercial and
investment banks, policyholders, brokers, ceding companies
and investors. Insurance ratings are also used by insurance
and reinsurance intermediaries as important means of
assessing the financial strength and quality of insurers and
reinsurers, and are often an important factor in the decision
by an insured or intermediary of whether to place business
with a particular insurance or reinsurance provider.
The financial strength ratings of our operating insurance and
reinsurance subsidiaries are subject to periodic review as
rating agencies evaluate us to confirm that we continue to
meet their criteria for ratings they have assigned to us. Such
ratings may be revised or revoked at the discretion of such
agencies in response to a variety of factors, including capital
adequacy, management, earnings, forms of capitalization
and risk profile. A.M. Best Company (“A.M. Best”), Fitch
Ratings (“Fitch”), Moody’s Investors Service (“Moody’s”) and
Standard & Poor’s (“S&P”) are rating agencies that have
assigned financial strength and/or issuer credit ratings to
Arch Capital and certain of its subsidiaries.
The ratings issued on our companies by these agencies are
announced publicly and are available on our website and
directly from the agencies.
COMPETITION
The worldwide insurance markets are highly competitive.
We compete with major U.S. and non-U.S. insurers and
reinsurers, some of which have greater financial, marketing
and management resources and longer-term relationships
with insureds and brokers than us. We compete primarily on
the basis of overall financial strength, ratings assigned by
independent rating agencies, geographic scope of business,
strength of client relationships, premiums charged, contract
terms and conditions, products and services offered, speed
of claims payment, reputation, employee experience and
qualifications, and local presence. See “Risk Factors—Risks
Relating to Our Industry, Business and Operations—“We
operate in a highly competitive environment, and we may
not be able to compete successfully in our industry.”
In our property casualty insurance and reinsurance
businesses, we compete with insurers and reinsurers that
provide specialty, property, and casualty lines of insurance,
including, but not limited to Allianz, American Financial
Group, Inc., American International Group, Inc., Aviva plc,
AXA XL, AXIS Capital Holdings Limited, Berkshire Hathaway,
Inc., Chubb Limited, CNA Financial Corp., Convex Group
Limited, Everest Group Ltd., Fairfax Financial Holdings
Limited, Hannover Rück SE, The Hartford Financial Services
Group, Inc., Liberty Mutual Group, Lloyd’s, Markel Group
Inc., Munich Re Group, PartnerRe Ltd., RenaissanceRe
Holdings Ltd., RLI Corp., SCOR SE, Sompo International, Swiss
Reinsurance Company Ltd., Tokio Marine Holdings Inc., The
Travelers Companies, Inc., W.R. Berkley Corp. and Zurich
Insurance Group.
In our mortgage business, we compete with insurers and
reinsurers that provide mortgage insurance, including the
U.S mortgage insurance subsidiaries of Essent Group Ltd.,
Enact Holdings Inc., MGIC Investment Corp., NMI Holdings
Inc. and Radian Group Inc. The private mortgage insurance
industry is highly competitive. Private mortgage insurers
generally compete on the basis of underwriting guidelines,
pricing, terms and conditions, financial strength, product
and service offerings, customer relationships, reputation,
the strength of management, technology, and innovation in
the
delivery
and
servicing
of
insurance
products.
Competition in this sector may increase if additional
mortgage insurance providers enter the market or existing
providers expand their offerings. Arch MI U.S. and other
private mortgage insurers compete with federal and state
government agencies that sponsor their own mortgage
insurance programs. The private mortgage insurers’ principal
government
competitor
is
the
Federal
Housing
Administration (“FHA”) and, to a lesser degree, the U.S.
Department of Veterans Affairs (“VA”). Future changes to
the FHA program, including any reduction to premiums
charged, may impact the demand for private mortgage
insurance.
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In addition, Arch MI U.S. and other private mortgage
insurers increasingly compete with multi-line reinsurers and
capital markets alternatives to private mortgage insurance.
The GSEs continued their respective mortgage CRT
programs, including the use of front and back-end
transactions with multi-line reinsurers, with approximately
25 unique (re)insurers that regularly participate in
transactions in addition to funded credit investors. These
transactions continue to create opportunities for multi-line
property casualty reinsurance groups and capital markets
participants.
In our non-U.S. mortgage insurance businesses, we compete
with insurance subsidiaries of Helia Group Limited and QBE
Insurance Group Limited in Australia as well as the
Australian Government’s Home Guarantee Scheme that
provides coverage to participating lenders for first time
homebuyers and other eligible borrowers; in Europe, our
competitors on SRT transactions include approximately
10-15 highly rated multi-line (re)insurers in addition to over
30 funded credit investors.
ENTERPRISE RISK MANAGEMENT
General. Enterprise Risk Management (“ERM”) is a key
element in our philosophy, strategy and culture. We employ
an ERM framework that includes underwriting, reserving,
investment, credit, group and operational risks. Risk appetite
and exposure limits are set by our executive management
team, reviewed with the Board and its committees and
routinely discussed with business unit management. These
limits are articulated in our risk appetite statement, which
details risk appetite, tolerances and limits for each major risk
category, and are integrated into our operating guidelines.
Exposures are aggregated and monitored periodically by our
corporate risk management team. The reporting, review and
approval of risk management information is integrated into
our annual planning process, capital modeling and
allocation, and reinsurance purchasing strategy. Such
information is reviewed at insurance business reviews,
reinsurance underwriting meetings and board level
committees.
Risk Management Process and Procedures. The following
narrative provides an overview of our risk management
framework and our methodology for identifying, measuring,
managing and reporting on the key risks affecting us. It
outlines our approach to risk identification and assessment
and provides an overview of our risk appetite and tolerance
for each of the following major risks: underwriting
(insurance) risk including pricing, reserving and catastrophe;
investment risk including market and liquidity risks; group
risk including strategic, governance, rating agency and
capital market risk; credit risk; and operational risk including
regulatory, cyber security, investor relations (reputational
risk) and outsourcing risks. We view sustainability related
risks not as standalone risks but as an integral part of our
enterprise-wide risk management strategy. Consequently,
evaluations of these risks are embedded throughout our risk
management framework.
The framework includes details of our risk philosophy and
policies to address the material risks confronting us and the
approach and procedures to control and or mitigate these
risks. The actions and policies implemented to meet our
business management and regulatory obligations form the
core of this framework. We have adopted a holistic
approach to risk management by analyzing risk from both a
top-down and bottom-up perspective.
Risk Identification and Assessment. The Finance, Investment
and Risk Committee (“FIR Committee”), Audit Committee
and Underwriting Oversight Committee of the Board
oversee the top-down and bottom-up review of our risks.
Given the nature and scale of our operations, these
committees consider all aforementioned risks within the
scope of the assessment. Arch Capital’s Chief Risk Officer
(“CRO”) assists these committees in the identification and
assessment of all key risks. The CRO is responsible for
maintaining Arch Capital’s risk register and continually
reviewing and challenging risk assessments, including the
impact
of
emerging
risks
and
significant
business
developments. Any new high-level risks or changes in
inherent or residual designations are brought to the Board’s
or the relevant committee’s attention.
Risk Monitoring and Control. Arch Capital’s risk management
framework requires risk owners to monitor key risks on a
continuous basis. The highest residual risks are actively
managed by the Board and relevant committees. The
remaining risks are managed and monitored at a process
level by the risk owners and/or the CRO. Risk owners have
ultimate responsibility for the day-to-day management of
each designated risk, reporting to the CRO on the
satisfactory management and control of the risk and timely
escalation of significant issues that may arise in relation to
that risk. The CRO is responsible for overseeing the
monitoring of all risks across the business and for
communicating to the relevant risk owners if she becomes
aware of issues, or potential and actual breaches of risk
appetite, relevant to the assigned risks. A key element of
these monitoring activities is the periodic evaluation of our
position relative to risk tolerances and limits approved by
the Board.
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Risk Reporting. Quarterly, the CRO compiles the results of
the key risk review process into a report to the Board and
relevant committees for review and discussion at their next
meeting. The report includes an overview of selected key
risks; a risk dashboard that depicts the status of risk limit
and tolerance metrics; changes in the rating of high-level
risks in the Arch Capital risk register; and summaries of our
largest
exposures
and
reinsurance
recoverables.
If
necessary, risk management matters reviewed at the
committee meetings are presented for discussion by the
Board. The CRO is responsible for immediately escalating
any significant risk matters to executive management, the
respective Board Committee and/or the Board for approval
of the required remediation. As part of our corporate
governance, the Board and certain of its committees hold
regular
executive
sessions
with
members
of
our
management team. These sessions are intended to ensure
an open and frank dialogue exists about various forms of risk
across the organization.
Implementation and Integration. We believe that an
integrated approach to developing, measuring and reporting
our Own Risk and Solvency Assessment (“ORSA”) is an
important part of the risk management framework. The
ORSA process provides the link between Arch Capital’s risk
profile, its board-approved risk appetite including approved
risk tolerances and limits, its business strategy and its overall
solvency requirements. The ORSA is the entirety of the
processes and procedures employed to identify, assess,
monitor, manage, and report the short and long-term risks
we face or may face and to determine the capital necessary
to ensure that our overall solvency needs are met at all
times. The ORSA also makes the link between actual
reported results and the capital assessment.
The ORSA is the basis for risk reporting to the Board and its
committees and acts as a mechanism to embed the risk
management framework within our decision making
processes and operations. The Board has delegated
responsibility for supervision and oversight of the ORSA to
the FIR Committee. This oversight includes regular reviews
of the ORSA process and output. An ORSA report and
associated recovery plan are produced at least annually, and
the results of each assessment are reported to the Board.
The Board actively participates in the ORSA process by
steering how the assessment is performed and challenging
its results. This assessment is also taken into account when
formulating strategic decisions.
The ORSA process and reporting are also important parts of
our business strategy, tailored specifically to fit into our
organizational structure and risk management system with
the appropriate techniques in place to assess our overall
solvency needs, taking into consideration the nature, scale
and complexity of the risks inherent in the business.
We also take the results of the ORSA into account within our
system
of
governance,
including
long-term
capital
management,
business
planning
and
new
product
development. The results of the ORSA also contribute to
various elements of our strategic decision-making including
how best to optimize capital management, establish the
most appropriate premium levels and decide whether to
retain or transfer risks.
For further discussion of our risk management policies, see
the Ceded Reinsurance section of “Summary of Critical
Accounting Estimates” in Item 7.
REGULATION
General
Our insurance and reinsurance subsidiaries are subject to
varying degrees of regulation and supervision in the various
jurisdictions in which they operate. The current material
regulations under which we operate are described below.
We may become subject in the future to regulation in new
jurisdictions or to additional regulations in existing
jurisdictions.
Bermuda
General. Our main Bermuda insurance operating subsidiary,
Arch Re Bermuda, is dual licensed as a Class 4 general
business insurer and a Class C long-term insurer and is
subject to the Insurance Act 1978 of Bermuda and related
regulations, as amended (“Insurance Act”). AGRL, a Class 3A
general business insurer in Bermuda, is also subject to the
Insurance Act. Among other matters, the Insurance Act
imposes certain solvency and liquidity standards, auditing
and reporting requirements, the submission of certain
period examinations of its financial conditions and grants
the BMA powers to supervise, investigate, require
information and demand the production of documents and
intervene in the affairs of insurance companies. Significant
requirements include the appointment of an independent
auditor, the appointment of a loss reserve specialist, the
appointment of a principal representative in Bermuda, the
filing of annual Statutory Financial Returns, the filing of
annual financial statements in accordance with U.S.
generally accepted accounting principles (“GAAP”), the filing
of an annual capital and solvency return, compliance with
minimum and enhanced capital requirements, compliance
with certain restrictions on reductions of capital and the
payment of dividends and distributions, compliance with
group solvency and supervision rules, if applicable, and
compliance with the Insurance Code of Conduct (relating to
corporate governance, risk management and internal
controls).
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The Insurance Act provides a minimum liquidity ratio for
Bermuda insurers engaged in general business, such as Arch
Re Bermuda and AGRL. AGRL is required to maintain the
value of its relevant assets at not less than 75% of the
amount of its relevant liabilities. Arch Re Bermuda must also
comply with the same minimum liquidity ratio and minimum
solvency margin in respect of its general business, only. The
minimum solvency margin, which varies depending on the
class of the insurer, is determined as a percentage of either
net reserves for losses and loss adjustment expenses (“LAE”)
or premiums or pursuant to a risk-based capital measure.
Arch Re Bermuda and AGRL are also subject to an enhanced
capital requirement (“ECR”) which is established by
reference to either the Bermuda Solvency Capital
Requirement model (“BSCR”) or an approved internal capital
model. The BSCR model is a risk-based capital model which
provides a method for determining an insurer’s capital
requirements (statutory capital and surplus) by taking into
account the risk characteristics of different aspects of the
insurer’s business. The BMA has established a target capital
level for each Class 3A and Class 4 insurer equal to 120% of
its ECR. While a Class 3A and/or Class 4 insurer is not
currently required to maintain its available statutory
economic capital and surplus at this level, the target capital
level serves as an early warning tool for the BMA, and failure
to maintain statutory capital at least equal to the target
capital level will likely result in increased regulatory
oversight. As a Class C insurer, Arch Re Bermuda is also
required to maintain available statutory economic capital
and surplus in respect of its long-term business at a level
equal to or in excess of its long-term enhanced capital
requirement that is established by reference to either the
Class C BSCR model or an approved internal capital model.
Arch Re Bermuda is prohibited from declaring or paying any
dividends during any financial year if it is in breach of its
general business or long-term business enhanced capital
requirements, minimum solvency margins or its general
business minimum liquidity ratio or if the declaration or
payment of such dividends would cause such a breach. As a
general business insurer, AGRL is also prohibited from
declaring or paying any dividends during any financial year if
it is in breach of its capital requirements, solvency margins
or its minimum liquidity ratio or if the declaration or
payment thereof would cause such a breach. If either Arch
Re Bermuda and/or AGRL has failed to meet its minimum
solvency margins or minimum liquidity ratio on the last day
of any financial year, it will be prohibited, without the
approval of the BMA, from declaring or paying any dividends
during the next financial year. In addition, each of Arch Re
Bermuda and AGRL is prohibited from declaring or paying in
any financial year dividends of more than 25% of its total
statutory capital and surplus (as shown on its previous
financial year’s statutory balance sheet) unless it files (at
least seven days before payment of such dividends) with the
BMA an affidavit stating that it will continue to meet the
required margins. Without the approval of the BMA, each of
Arch Re Bermuda and AGRL are prohibited from reducing by
15% or more its total statutory capital as set out in its
previous year’s financial statements and any application for
such approval must include an affidavit stating that it will
continue to meet the required margins. Where such an
affidavit is filed, it shall be available for public inspection at
the offices of the BMA. Under the Bermuda Companies Act
of 1981, as amended (the “Companies Act”), Arch Re
Bermuda and AGRL may each declare or pay a dividend out
of distributable reserves only if the company has reasonable
grounds for believing that it is, or would after the payment
be, able to pay its liabilities as they become due and if the
realizable value of its assets would thereby not be less than
its liabilities.
Policyholder Priority. The Insurance Amendment (No. 2) Act
2018 amended the Insurance Act to provide for the prior
payment of policyholders’ liabilities ahead of general
unsecured creditors in the event of the liquidation or
winding up of an insurer. The amendments provide inter alia
that, subject to certain statutorily preferred debts, the
insurance debts of an insurer must be paid in priority to all
other unsecured debts of the insurer. Insurance debt is
defined as a debt to which an insurer is or may become
liable pursuant to an insurance contract excluding debts
owed to an insurer under an insurance contract where the
insurer is the person insured.
Group Supervision. The BMA acts as group supervisor of our
group of insurance and reinsurance companies (“Group”)
and has designated Arch Re Bermuda as the designated
insurer (“Designated Insurer”). As our Group supervisor, the
BMA performs a number of functions including: (i)
coordinating the gathering and dissemination of relevant or
essential information for going concerns and emergency
situations, including the dissemination of information which
is of importance for the supervisory task of other competent
authorities; (ii) carrying out supervisory reviews and
assessments of our Group; (iii) carrying out assessments of
our Group's compliance with the rules on solvency, risk
concentration,
intra-group
transactions
and
good
governance procedures; (iv) planning and coordinating
through regular meetings held at least annually (or by other
appropriate means) with other competent authorities,
supervisory activities in respect of our Group; both as a
going concern and in emergency situations (v) coordinating
any enforcement action that may need to be taken against
our Group or any Group member(s); and (vi) planning and
coordinating meetings of colleges of supervisors in order to
facilitate the carrying out of these functions. As Designated
Insurer, Arch Re Bermuda is required to facilitate compliance
by our Group with the group insurance solvency and
supervision rules.
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On an annual basis, the Group is required to file the Group
statutory financial statements, a Group statutory financial
return, a Group capital and solvency return, audited Group
financial statements, a Group Solvency Self-Assessment
(“GSSA”), and a financial condition report with the BMA. The
GSSA is designed to document our perspective on the capital
resources necessary to achieve our business strategies and
remain solvent, and to provide the BMA with insights on our
risk
management,
governance
procedures
and
documentation related to this process. In addition, the
Designated Insurer is required to file quarterly group
financial returns with the BMA. The Group is also required to
maintain available Group statutory economic capital and
surplus in an amount that is at least equal to the group
enhanced capital requirement (“Group ECR”) and the BMA
has established a group target capital level equal to 120% of
the Group ECR.
On January 7, 2026, the Insurance Amendment (No. 2) Act
2025 (“IAA”) came into effect and made certain
amendments to the Insurance Act designed to enhance the
oversight and regulation by the BMA of insurance groups by
expanding
the
criteria
for
group
supervision.
The
amendments are designed to (i) ensure that insurance group
supervision is mandatorily triggered in certain circumstances
and (ii) apply a direct approach to the supervision of
insurance groups by introducing provisions to allow for the
designation and registration of a designated “insurance
holding company” (being an entity that is a body corporate
incorporated or formed (including by way of continuation) in
Bermuda that holds participations in one or more companies
where at least one of the companies is an insurer) through
which supervision would be exercised. Of note, the IAA
provides that shareholder controller changes and certain
material change provisions of the Insurance Act affecting a
designated insurance holding company will be subject to the
supervisory processes that currently apply to the Designated
Insurer.
International Association of Insurance Supervisors (“IAIS”).
The IAIS is a voluntary membership organization of
insurance supervisors and regulators from more than 200
jurisdictions, including Bermuda and the U.S. states (through
the National Association of Insurance Commissioners, or
“NAIC”). In November 2019, the IAIS adopted the Holistic
Framework for Systemic Risk in the Insurance Sector
(“Holistic Framework”) and the Common Framework for
Supervision of Internationally Active Insurance Groups
(“ComFrame”).
The Holistic Framework is an enhanced set of supervisory
policy measures for macroprudential purposes, designed to
mitigate systemic risk and increase resilience through a
sector-wide approach. ComFrame establishes supervisory
standards and guidance focusing on the effective group-
wide supervision of large Internationally Active Insurance
Groups (“IAIGs”). Among other things, ComFrame prescribes
a risk-based, global insurance capital standard (“ICS”) for
IAIGs for the purpose of creating a common framework for
comparing
and
assessing
IAIGs’
group-wide
capital
adequacy. While IAIS standards currently have no legal
effect, IAIS members, including the BMA and the NAIC, are
required to implement certain IAIS standards to maintain
good standing and prevent retaliatory measures from other
IAIS members. On that basis, IAIS members are required to
implement ICS, or an alternative group-wide capital
requirement that provides comparable outcomes, for IAIGs,
beginning in 2025.
The BMA embedded the ComFrame and the Holistic
Framework standards, including the ICS, into the Bermuda
commercial regulatory regime (particularly for IAIGs). The
new standards aim to ensure that insurers prepare for a
range of possible adverse situations ahead of any severe
stress condition, including the creation and adoption of
recovery plans through Arch Re Bermuda’s internal
governance. These standards are expected to apply to Arch
Re Bermuda as a commercial insurer. Additional guidance
from the BMA in relation to recovery planning is expected to
be consulted and published in 2026.
In 2024, the IAIS released a public register of 59 IAIGs that
have been disclosed by relevant supervisors. Arch Capital
was formally designated as an IAIG by the BMA, its group-
wide supervisor, in 2024 and listed by the BMA on the
aforementioned public register. As such, Arch is subject to
international
oversight
coordinated
by
the
BMA.
Consultation remains ongoing between Arch Re Bermuda
and the BMA on the requirements applicable to the Group
under Bermuda law and in line with the proposed
modifications to the BMA’s prudential framework as
ComFrame and the Holistic Framework develop.
Fit and Proper Controllers. The BMA maintains supervision
over the controllers of all Bermuda registered insurers,
brokers, agents and insurance marketplace providers. For so
long as the shares of Arch Capital are listed on the Nasdaq or
another recognized stock exchange, any person who,
directly or indirectly, becomes a holder of at least 10%, 20%,
33% or 50% of our common shares must notify the BMA in
writing within 45 days of becoming such a holder (or ceasing
to be such a holder). The BMA may object to such a person
and require the holder to reduce its holding of common
shares and direct, among other things, that voting rights
attaching to the common shares shall not be exercisable.
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Economic Substance Act. In 2018, Bermuda enacted the
Economic Substance Act 2018 (as amended) of Bermuda and
its related regulations (together, the “ES Act”). The ES Act
came into force in 2019, and provides that a registered
entity other than an entity which is resident for tax purposes
in certain jurisdictions outside Bermuda (“non-resident
entity”) that carries on as a business any one or more of the
“relevant activities” referred to in the ES Act must comply
with economic substance requirements. The list of “relevant
activities” includes carrying on any one or more of the
following activities: banking, insurance, fund management,
financing, leasing, headquarters, shipping, distribution and
service center, intellectual property and holding entities.
Under the ES Act, if a company is engaged in one or more
“relevant activities”, it is required to maintain a substantial
economic presence in Bermuda and to comply with the
economic substance requirements set forth in the ES Act. A
company will comply with those economic substance
requirements if it: (a) is managed and directed in Bermuda;
(b) undertakes “core income generating activities” (as may
be prescribed under the ES Act) in Bermuda in respect of the
relevant activity; (c) maintains adequate physical presence in
Bermuda; (d) has adequate full time employees in Bermuda
with suitable qualifications; and (e) incurs adequate
operating expenditure in Bermuda in relation to the relevant
activity undertaken by it.
Companies that are licensed under the Insurance Act and
thereby carry on insurance as a relevant activity are
generally considered to operate in Bermuda with adequate
substance if they comply with the existing provisions of (a)
the Companies Act relating to corporate governance; and (b)
the Insurance Act, that are applicable to the economic
substance requirements, and the Registrar will have regard
to such companies’ compliance in his assessment of
compliance with the economic substance requirements.
That being said, such companies are still required to
complete and file a Declaration Form, with the Bermuda
Registrar of Companies and the Registrar will also have
regard to the information provided in that Declaration Form
in making his assessment of compliance with the ES Act.
Insurance Sector Operational Cyber Risk Management Code
of Conduct (“Cyber Risk Management Code of Conduct”). The
BMA implemented the Cyber Risk Management Code of
Conduct in 2020 which requires all Bermuda insurers,
insurance managers and intermediaries registered under the
Insurance Act to comply with duties, requirements and
standards established by the BMA in relation to operational
cyber risk management. This requires Arch Re Bermuda to
develop a cyber risk policy as part of an operational cyber
risk
management
program
and
also
requires
the
appointment of an appropriately qualified member of staff
or outsourced resource to the role of Chief Information
Security Officer.
The cyber risk policy is to be approved by the Arch Re
Bermuda board of directors at least annually. The BMA will
assess Arch Re Bermuda’s compliance with the Cyber Risk
Management Code of Conduct in a proportionate manner
relative to the nature, scale and complexity of its business.
Failure to comply with the requirements of the Cyber Risk
Management Code of Conduct will be taken into account by
the BMA in determining whether Arch Re Bermuda is
conducting its business in a sound and prudent manner as
prescribed by the Insurance Act and may result in the BMA
exercising its powers of intervention and investigation.
Notification of Cyber Reporting Events. Every Bermuda
insurer is required to notify the BMA forthwith if the insurer
has knowledge, or where the insurer has reason to believe
that, a Cyber Reporting Event has occurred. Within fourteen
(14) days of such notification, the insurer must also furnish
the BMA with a written report setting out all of the
particulars of the Cyber Reporting Event that are available to
it. A Cyber Reporting Event includes any act that results in
the unauthorized access to, disruption, or misuse of
electronic systems or information stored on such systems of
an insurer, including breach of security leading to the loss or
unlawful destruction or unauthorized disclosure of or access
to such systems or information where there is a likelihood of
an adverse impact to policyholders, clients or the insurer’s
insurance business, or an event that has occurred for which
notice is required to be provided to a regulatory body or
government agency.
Personal Information Protection Act 2016. Bermuda’s
principal data protection and privacy legislation is the
Personal Information Protection Act 2016 (“PIPA”). On
January 1, 2025, PIPA was fully implemented. PIPA applies to
every organization (which includes any individual, entity or
public authority) that uses personal information in Bermuda
where that personal information is used by automated or
other means which form, or are intended to form, part of a
structured filing system. PIPA does not define privacy
explicitly but rather defines “personal information” and sets
out privacy rules for institutions to follow for the collection,
use, disclosure, maintenance, retention, security and
disposal of personal information. For the purposes of PIPA,
“personal information” means any information about an
identified or identifiable individual (meaning a natural
person), and “use” or “using” are very broadly defined and
means carrying out any operation on personal information.
Personal information used by an insurer in Bermuda would
include
(without
limitation)
information
relating
to
policyholders, employees, consultants, service providers,
officers, employees, consultants or any other third party of
the insurer. Our Bermuda entities are subject to PIPA
requirements.
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Corporate Income Tax Act 2023 (the “Bermuda CIT Act”). On
December 27, 2023, Bermuda enacted the Bermuda CIT Act.
Entities subject to tax under the Bermuda CIT Act are the
Bermuda constituent entities of multi-national groups. A
multi-national group is defined under the Bermuda CIT Act
as a group with entities in more than one jurisdiction with
consolidated revenues of at least €750 million for two of the
four previous fiscal years. If Bermuda constituent entities of
a multi-national group are subject to tax under the Bermuda
CIT Act, such tax is charged at a rate of 15% of the net
income of such constituent entities (as determined in
accordance with the Bermuda CIT Act, including after
adjusting for any relevant foreign tax credits applicable to
the Bermuda constituent entities). Starting on January 1,
2025, all Arch Bermuda operations are subject to the
requirements of the Bermuda CIT Act.
Beneficial Ownership Act 2025 (the “BO Act”). Bermuda’s
new beneficial ownership framework is comprised of the BO
Act, the Beneficial Ownership Regulations 2025 and related
guidance notes. The BO Act received Royal Assent and
subsequently came into force on November 3, 2025. The BO
Act includes provisions to (a) enhance Bermuda’s current
beneficial ownership regime in accordance with the revised
Financial Action Task Force international standards, (b)
transfer the central register of beneficial ownership
information (“BOI”) from the BMA to the Registrar of
Companies (“RoC”), and (c) extend access to the central
register to certain competent authorities and “obliged
entities”. The BO Act applies to all legal persons (sometimes
referred to herein as “in scope entities”), subject to limited
exceptions. Entities already in scope under the previous
beneficial ownership regime are required to ensure that
their beneficial ownership register is updated as necessary.
Newly-in-scope entities must establish and maintain a
beneficial ownership register which meets the requirements
of the new regime. The only exception is for publicly listed
entities on the Bermuda Stock Exchange or on an appointed
stock exchange, and any subsidiary of such legal persons. All
other entities which were previously exempt and not
required to comply with the beneficial ownership
requirements under the prior legislative framework, for
example, financial institutions like (re)insurance companies,
are no longer subject to an exemption and will now be in
scope. As noted above, under the BO Act, Bermuda’s central
register has been transferred from the BMA to the RoC. As a
result, for non-regulated entities, there will be no continuing
touchpoints or interaction with the BMA. The BMA will
continue to regulate financial institutions such as AGRL and
Arch Re Bermuda, under the same legislation as they do
now, including retaining supervision over the controllers and
shareholder controllers of regulated financial institutions.
United States
General. Our U.S. based insurance operating subsidiaries are
subject
to
extensive
governmental
regulation
and
supervision by the states and jurisdictions in which they are
domiciled, licensed and/or approved to conduct business.
The insurance laws and regulations of the state of domicile
have the most significant impact on operations. We
currently
have
U.S.
insurance
and/or
reinsurance
subsidiaries domiciled in Delaware, North Carolina, Missouri,
Wisconsin, Kansas and the District of Columbia and we may
acquire insurers domiciled in other states in the future. State
insurance regulation and supervision is designed to protect
policyholders rather than investors. Generally, state
regulatory authorities have broad regulatory powers over
such matters as licenses, standards of solvency, premium
rates, policy forms, marketing practices, claims practices,
investments, methods of accounting, form and content of
financial statements, certain aspects of governance, ERM,
amounts we are required to hold as reserves for future
payments, minimum capital and surplus requirements,
annual and other report filings and transactions among
affiliates. Our U.S. based subsidiaries are required to file
detailed quarterly and audited annual statutory financial
statements with state insurance regulators. In addition,
regulatory authorities conduct periodic financial, claims and
market conduct examinations. Certain insurance regulatory
requirements are highlighted below. In addition to
regulation applicable generally to U.S. insurance and
reinsurance companies, our U.S. mortgage insurance
operations are affected by federal and state regulation
relating to mortgage insurers, mortgage lenders, and the
origination, purchase and sale of residential mortgages. Arch
Insurance (U.K.) is also subject to certain governmental
regulation and supervision in the states where it writes
excess and surplus lines insurance.
Holding Company Regulation. All states have enacted
legislation that regulates insurance holding company
systems. These regulations generally provide that each
insurance company in the system is required to register with
the insurance department of its state of domicile and furnish
information concerning the operations of companies within
the holding company system which may materially affect the
operations, management or financial condition of the
insurers within the system. Notice to the state insurance
departments is required prior to the consummation of
certain material transactions between an insurer and any
entity in its holding company system and certain
transactions may not be consummated without the
applicable insurance department’s prior approval or non-
disapproval after receiving notice. The holding company acts
also prohibit any person from directly or indirectly acquiring
control of a U.S. insurance or reinsurance company unless
that person has filed an application with specified
information with such company’s domiciliary commissioner
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2025 FORM 10-K
and has obtained the commissioner’s prior approval. Under
most states’ statutes acquiring 10% or more of the voting
securities of an insurance company or its parent company is
presumptively considered an acquisition of control of the
insurance company, although such presumption may be
rebutted.
State holding company acts and regulations also impose
extensive informational requirements on parents and other
affiliates of licensed insurers or reinsurers with the purpose
of protecting them from enterprise risk, including requiring
an annual enterprise risk report by the ultimate controlling
person identifying the material risks within the insurance
holding company system that could pose enterprise risk to
the licensed companies and requiring a person divesting its
controlling interest to make a confidential advance notice
filing.
The NAIC Insurance Holding Company System Model Act and
Model Regulation (“Insurance Holding Company Models”)
include provisions that require the ultimate controlling
person of an insurance holding company system to file an
annual group capital calculation (“GCC”), unless the ultimate
controlling person or its insurance holding company system
is exempt from the filing requirement. The GCC provisions of
the Insurance Holding Company Models aim to streamline
group-wide supervision by leveraging U.S. regulators’
existing risk and solvency measures and applying them on a
group-wide basis. Arch’s U.S. lead state regulator, the
Missouri Department of Commerce & Insurance (“MDCI”),
adopted the GCC provisions of the Insurance Holding
Company Models in 2021.
In November 2024, the form of group capital calculation set
forth
in
the
Insurance
Holding
Company
Models
(“aggregation method”) was deemed by the IAIS to be an
acceptable alternative group-wide capital requirement to
the IAIS-developed ICS, meaning that the U.S.-developed
aggregation method will be considered an outcome-
equivalent approach to the ICS. The Company has been
advised by the MDCI that it has no current intention of
requiring Arch to submit a GCC report.
Regulation of Dividends and Other Payments from Insurance
Subsidiaries. The ability of an insurer to pay dividends or
make other distributions is subject to insurance regulatory
limitations of the insurer’s state of domicile. Such laws
generally limit the payment of dividends or other
distributions above a specified level. Dividends or other
distributions
in
excess
of
such
thresholds
are
“extraordinary” and are subject to prior notice and approval,
or non-disapproval after receiving notice.
Credit for Reinsurance. A U.S. primary insurer ordinarily will
enter into a reinsurance agreement only if it is able to obtain
credit for the reinsurance ceded on its U.S. statutory-basis
financial statements. As a result of the requirements relating
to the provision of credit for reinsurance, Arch Re U.S., Arch
Re Bermuda and AGRL are indirectly subject to certain
regulatory requirements imposed by U.S. jurisdictions in
which ceding companies are domiciled. In general, credit for
reinsurance is allowed if the reinsurer is licensed or
“accredited” in the state in which the primary insurer is
domiciled; or if none of the above applies, to the extent that
the
reinsurance
obligations
of
the
reinsurer
are
collateralized appropriately, typically through the posting of
a letter of credit for the benefit of the primary insurer or the
deposit of assets into a trust fund established for the benefit
of the primary insurer.
U.S. primary insurers also may receive credit for reinsurance
ceded to unauthorized reinsurers without collateral or with
less than 100% collateral under revisions to the NAIC Credit
for Reinsurance Model Law (#785) and the Credit for
Reinsurance Model Regulation (#786) (collectively, the
“NAIC Model Law and Regulation”). All U.S. states, the
District of Columbia and Puerto Rico have adopted revisions
to the NAIC Model Law and Regulation that allow full credit
to U.S. ceding insurers for reinsurance ceded to reinsurers
that have been approved as “certified reinsurers” based
upon less than 100% collateralization. As of January 13,
2026, Arch Re Bermuda is approved as a “certified reinsurer”
for the 2026 calendar year in 46 jurisdictions with
applications pending in 7 additional jurisdictions. In addition,
as of January 13, 2026, AGRL is approved as a “certified
reinsurer” in its lead state of Missouri and an additional four
states for the 2026 calendar year.
The NAIC Model Law and Regulation also eliminate
reinsurance collateral requirements for reinsurers that (1)
have their head office or are domiciled in EU Member
States, the U.K., NAIC accredited U.S. jurisdictions and other
jurisdictions deemed “reciprocal jurisdictions” by the NAIC
(although individual states may approve or reject the
designation of such other jurisdictions as a “reciprocal
jurisdiction”), and (2) have been approved as a “reciprocal
jurisdiction reinsurer.” The NAIC list of approved reciprocal
jurisdictions includes Bermuda, Japan and Switzerland. All
U.S. states, the District of Columbia and Puerto Rico have
adopted the 2019 amendments to the NAIC Model Law and
Regulation. As of January 13, 2026, Arch Re Bermuda is
approved as a “reciprocal jurisdiction reinsurer” for the 2026
calendar year in 45 jurisdictions with applications pending in
8 additional jurisdictions. In addition, as of January 13, 2026,
AGRL is approved as a “reciprocal jurisdiction reinsurer” in
its lead state of Missouri and an additional four states for
the 2026 calendar year.
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2025 FORM 10-K
In October 2024, the U.S. Department of the Treasury
recognized Arch Re Bermuda as an Alien Reinsurer, which
allows T-Listed ceding companies to eliminate regulatory
collateral requirements under the U.S. Treasury rules
(except on excess risks running to the U.S.).
Risk Management and ORSA. The NAIC Risk Management
and Own Risk Solvency Assessment Model Act (“ORSA
Model Act”) provides that domestic insurers, or their
insurance group, must regularly conduct an ORSA consistent
with a process comparable to the ORSA Guidance Manual
process. The ORSA Model Act also provides that, no more
than once a year, an insurer’s domiciliary regulator may
request that an insurer submit an ORSA summary report, or
any combination of reports that together contain the
information described in the ORSA Guidance Manual, with
respect to the insurer and/or the insurance group of which it
is a member. States may impose additional internal review
and regulatory filing requirements on licensed insurers and
their parent companies. All states have enacted the ORSA
Model Act or substantially similar legislation.
Cybersecurity and Privacy. The SEC maintains cybersecurity
disclosure rules (“SEC Cybersecurity Rules”) mandating
cybersecurity incident and risk management disclosure for
public companies such as Arch. The SEC Cybersecurity Rules
became effective in 2023 and mandate that public
companies report a cybersecurity incident on a Form 8-K
within four days after they determine that the incident is
material. Additional disclosure by registrants in the Form 10-
K annual report should describe their processes for
assessing, identifying and managing material risks from
cybersecurity threats, the material impacts of cybersecurity
threats and previous cybersecurity incidents. See Item 1C,
“Cybersecurity”
for
further
information
about
our
disclosures.
In 2022, the U.S. government passed the Cyber Incident
Reporting for Critical Infrastructure Act of 2022, which will
require companies deemed to be part of U.S. critical
infrastructure to report any substantial cybersecurity
incidents or ransom payments to the federal government
within 72 and 24 hours, respectively. The Cybersecurity &
Infrastructure Security Agency (“CISA”) considers financial
services, which includes insurance companies, as a critical
infrastructure sector. CISA is expected to publish final
implementing regulations in May 2026.
The NAIC adopted an Insurance Data Security Model Law in
2017 that requires 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
overseeing the data security practices of third party service
providers and meeting expanded breach notification
requirements. A majority of states have adopted this model
law, including states in which our U.S. subsidiaries are
licensed and operate. In addition, certain state insurance
regulators, such as the New York Department of Financial
Services (“NYDFS”), continue to issue regulations and
guidance that impose regulatory requirements relating to
privacy and cybersecurity. This includes amendments to
NYDFS’s Cybersecurity Requirements for Financial Services
Companies, which were finalized in 2024 and established
several new requirements, including elevated requirements
regarding the use of multi-factor authentication and board
oversight of cybersecurity issues.
Privacy legislation and regulation also exists in many of the
U.S. states. The California Consumer Privacy Act of 2018
(“CCPA”), as amended by the California Privacy Rights Act
(“CPRA”) that took effect in 2023, grants California
consumers certain rights to, among other things, access,
correct and delete data about them subject to certain
exceptions, as well as a private right of action related to
cybersecurity breaches with statutory penalties. The CPRA
created a new privacy-focused California regulatory agency
with
enforcement
authority,
the
California
Privacy
Protection Agency (“CPPA”). In September 2025, the CPPA
finalized rules which impose requirements for annual
cybersecurity audits and privacy risk assessments. The
amendments went into effect as of January 1, 2026, with
various requirements under the amended regulations due to
become effective in phases through 2028.
In addition, a range of new cybersecurity and privacy laws
have been passed or are under consideration in other states,
as well as by the federal government. Nineteen states have
passed comprehensive state data privacy laws and
numerous other states are actively considering bills. These
state laws provide consumer privacy rights and protections
like those in the CCPA and CPRA, although many of them
exempt insurance licensees or entities subject to the
Gramm-Leach-Bliley Act from their requirements.
Artificial Intelligence. The increased use of automated
processes by insurers, including algorithms, artificial
intelligence (generative and predictive) (“AI”) and predictive
models that make use of large datasets and data analytics,
has led to additional regulatory attention to insurer
practices including in relation to risk selection, pricing and
claims, as well as governance and oversight of AI and
predictive models.
In 2023, the NAIC adopted a model bulletin entitled “Use of
Artificial Intelligence Systems by Insurers” that sets forth
state insurance regulators’ expectations on how insurers
should govern the use of advanced analytical and
computational technologies used to make or support
decisions impacting consumers. Such expectations include
implementation of a written program for the responsible
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2025 FORM 10-K
use of AI systems that make or support decisions related to
regulated insurance practices, which program should be
designed to mitigate certain risks. As of January 6, 2026, at
least 24 states and Washington, D.C. have adopted the
bulletin.
States with specific AI guidance or regulations impacting our
U.S. insurance companies include California, Colorado and
New York. NYDFS expects insurers doing business in New
York to observe and comply with its 2024 Insurance Circular
Letter No.7 regarding the use of AI systems which adopts a
risk-based approach to evaluating insurers’ use of AI systems
and external consumer data and information sources used
for underwriting and pricing of insurance products. AI
systems should be assessed to ensure that they do not
produce disproportionate adverse effects in underwriting or
pricing for similarly situated individuals and tested regularly
to ensure that they do not produce unfair or unlawful
outcomes. The NYDFS also issued guidance regarding
cybersecurity risks arising from AI requiring us to
continuously assess these risks and implement appropriate
cybersecurity measures to mitigate these threats.
California adopted regulations under the CCPA related to
automated decision-making technologies (“ADMT”) on
September 23, 2025. These regulations impose new rules
governing consumer notice, access, and opt-out rights with
respect to ADMT and require different risk assessments and
disclosures related to processing activities involving ADMT in
various consumer contexts, including profiling.
At the federal level, in July 2025 the White House issued the
AI Action Plan ordered by President Trump’s January 2025
executive
order
reorienting
and
reprioritizing
the
Administration’s policy approach to AI. The AI Action Plan
included a wide range of policy initiatives for accelerating AI
innovation, building American AI infrastructure, and leading
in international AI diplomacy and security. On December 11,
2025, the White House issued an executive order entitled
“Ensuring a National Policy Framework for Artificial
Intelligence”, which clarifies federal AI policy and creates a
framework for federal agencies to assess and challenge state
laws that threaten to stymie innovation on the basis that
they are preempted by federal regulation, impermissibly
regulate
interstate
commerce,
or
are
otherwise
unconstitutional.
The
extent
to
which
the
federal
government intends to apply its AI policies to state
insurance laws and the U.S. insurance industry is not yet
known and any such application could be challenged
through judicial review. At the state level, in 2025, several
hundred bills related to AI were introduced across all 50
states in the U.S. Globally, many new AI laws are being
proposed or have taken effect, the most significant of which
is in the EU. See “Regulation—Europe” for further details on
our insurance operations.
Risk-Based Capital Requirements. Licensed U.S. property and
casualty insurance and reinsurance companies are subject to
risk-based capital requirements that are designed to assess
capital adequacy and to raise the level of protection that
statutory surplus provides for policyholder obligations. The
risk-based capital model for property and casualty insurance
companies measures three major areas of risk facing
property and casualty insurers: underwriting, which
encompasses the risk of adverse loss developments and
inadequate pricing; declines in asset values arising from
credit risk; and declines in asset values arising from
investment risks. An insurer will be subject to varying
degrees of regulatory action depending on how its statutory
surplus compares to its risk-based capital calculation. Under
the approved formula, an insurer’s total adjusted capital is
compared to its authorized control level risk-based capital. If
this ratio is above a minimum threshold, no company or
regulatory action is necessary. Below this threshold are four
distinct action levels at which an insurer’s domiciliary state
regulator can intervene with increasing degrees of authority
over an insurer as the ratio of surplus to risk-based capital
requirement decreases. The mildest regulatory action
requires an insurer to submit a plan for corrective action;
the most severe requires an insurer to be rehabilitated or
liquidated.
Our mortgage insurance operations are not currently subject
to state risk-based capital requirements, but rather are
subject to state risk to capital or minimum policyholder
position requirements. The NAIC adopted a revised
Mortgage Guaranty Insurance Model Act in 2023. Wisconsin
is the only state that has begun the process to replace its
current mortgage guaranty insurance regulations to more
closely align with the revised Mortgage Guaranty Insurance
Model Act.
Guaranty Funds and Market Restrictions. Most states
require all admitted insurance companies to participate in
their respective guaranty funds which cover certain claims
against insolvent insurers. Solvent insurers licensed in these
states are required to cover the losses paid on behalf of
insolvent insurers by the guaranty funds and are generally
subject to annual assessments in the states by the guaranty
funds to cover these losses. Mortgage guaranty insurance,
among other lines of business, is typically exempt from
participation in guaranty funds.
States also limit the ability of insurers to manage risk by
restricting their ability to withdraw from or otherwise
reduce their exposure based on a change in market
conditions. Some states’ laws also require or give regulators
the discretion to take action in the aftermath of certain
events, such as natural catastrophes, including the ability to
impose moratoria on policy cancellations or non-renewals,
and to impose “grace periods” on premium payments. These
restrictions and requirements are generally limited to the
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2025 FORM 10-K
personal lines insurance markets, but may affect our
business as well.
Climate Change and Financial Risks. Some U.S. state
insurance regulators have increased their oversight of
insurance company governance, reporting and disclosure
relating to the potential risks presented by climate change
and one or more states may adopt climate-change-related
requirements that impact our insurance and reinsurance
companies. In 2020, NYDFS issued a circular letter stating
that NYDFS expects insurers authorized in New York to
integrate the consideration of climate risks into their
governance frameworks, risk management processes and
business strategies, including the designation of a board
committee or member and senior management function to
be accountable for the company’s assessment and
management of the financial risks from climate change. In
2021, NYDFS issued additional guidance for New York
Domestic Insurers on Managing the Financial Risks from
Climate Change that reiterates many of the principles
outlined in the 2020 circular letter. New York and other
states also require licensed insurers with countrywide
premium written of at least $100 million to annually provide
disclosure of their assessment and management of climate
related risks.
Other Federal Regulation. Although state regulation is the
dominant form of regulation for insurance and reinsurance
business, a number of federal laws currently affect and apply
to the insurance industry and the landscape of federal
regulation could change. The Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010 (“Dodd-Frank”)
created the Federal Insurance Office (“FIO”), which is not a
federal regulator or supervisor of insurance, but monitors
the insurance industry for systemic risk, consults with the
states regarding insurance matters, develops federal policy
on aspects of international insurance matters, is authorized
to assist the U.S. Secretary of the Treasury in negotiating
“covered agreements” between the U.S. and foreign
governments that address insurance prudential measures,
and administers the Terrorism Risk Insurance Program
(“TRIP”). The TRIP will expire on December 31, 2027 unless
reauthorized by Congress.
The U.S. Department of the Treasury, Bureau of Fiscal
Service (“BFS”), also regulates insurance companies that
write surety bonds on, or reinsure, federal surety bonds.
Arch Insurance Company and Arch Reinsurance Company
are approved by BFS as “Certified Companies” meaning that
they are permitted to insure and reinsure surety bond
business, including federal surety bonds, subject to certain
underwriting restrictions and BFS supervision. In 2024, Arch
Re Bermuda was approved for “Alien Reinsurer” status by
the BFS, which subjects it to similar restrictions and
requirements, but also enables it to provide credit for
reinsurance to Treasury-authorized insurers and to reinsure
certain risks without the need to post collateral for the
benefit of the cedent.
In addition to provisions of Dodd-Frank pertaining to
underwriting mortgages and a consumer’s ability to repay,
certain other federal laws also directly or indirectly impact
mortgage insurers, including the Real Estate Settlement
Procedures Act of 1974, the Homeowners Protection Act of
1998, the Equal Credit Opportunity Act, the Fair Housing Act,
the Truth In Lending Act, the Fair Credit Reporting Act of
1970, and the Fair Debt Collection Practices Act. Among
other things, these laws and their implementing regulations
prohibit payments for referrals of settlement service
business, require fairness and non-discrimination in granting
or
facilitating
the
granting
of
credit,
govern
the
circumstances under which companies may obtain and use
consumer credit information, define the manner in which
companies may pursue collection activities, and require
disclosures of the cost of credit and provide for other
consumer protections.
GSE Eligible Mortgage Insurer Requirements. GSEs impose
requirements on private mortgage insurers so that they may
be eligible to insure loans sold to the GSEs, known as the
Private
Mortgage
Insurer
Eligibility
Requirements
(“PMIERs”). The PMIERs apply to our eligible mortgage
insurers, but do not apply to AMG, which is not GSE-
approved. The PMIERs impose limitations on the type of risk
insured, the forms and insurance policies issued, standards
for the geographic and customer diversification of risk,
procedures for claims handling, acceptable underwriting
practices, standards for certain reinsurance cessions and
financial requirements, among other things. The financial
requirements require an eligible mortgage insurer’s
available assets, which generally include only the most liquid
assets of an insurer to meet or exceed “minimum required
assets” as of each quarter end. In August 2024, the GSEs
updated PMIERs to incorporate new deductions to the
definition of available assets for investment risk. This update
became effective March 31, 2025, but the impact will be
phased in through September 30, 2026. Minimum required
assets are calculated from PMIERs tables with several risk
dimensions including origination year, original loan-to-value,
original credit score of performing loans, and the
delinquency status of non-performing loans.
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2025 FORM 10-K
Russian Sanctions. The U.S. first imposed sanctions on the
Russian Federation following its annexation of Crimea in
2014. Since 2022, the U.S. has since imposed several new
sanctions on Russia in response to the Russian invasion of
Ukraine and the ongoing hostilities. Recent sanctions also
target the Russian energy sector, including Russian and non-
Russian companies, persons and vessels which are aiding
Russia’s production of oil. These sanctions may have extra-
territorial reach to our non-U.S. underwriting subsidiaries.
The U.S.-Russia discussions regarding the war in Ukraine and
the use of U.S. sanctions is an evolving topic which we
continue to review. We will evaluate and prepare for any
changes in our sanctions program and business operations.
Canada
Arch Insurance Canada and Arch Re Canada are subject to
federal, as well as provincial and territorial, regulation in
Canada in the provinces and territories in which they
underwrite insurance/reinsurance. The Office of the
Superintendent of Financial Institutions (“OSFI”) is the
federal regulatory body that, under the Insurance
Companies Act (Canada), prudentially regulates federal
Canadian and non-Canadian insurance and reinsurance
companies operating in Canada. Arch Insurance Canada is
licensed to carry on insurance business by OSFI and in each
province and territory. Arch Re Canada is licensed to carry
on reinsurance business by OSFI and in the provinces of
Ontario and Quebec.
Under the Insurance Companies Act (Canada), Arch
Insurance Canada is required to maintain an adequate
amount of capital in Canada, calculated in accordance with a
test promulgated by OSFI called the Minimum Capital Test,
and Arch Re Canada is required to maintain an adequate
margin of assets over liabilities in Canada, calculated in
accordance with a test promulgated by OSFI called the
Branch Adequacy of Assets Test. OSFI has implemented a
risk-based methodology for assessing insurance/reinsurance
companies operating in Canada known as its “Supervisory
Framework.” In applying the Supervisory Framework, OSFI
considers the inherent risks of the business and the quality
of risk management for each significant activity of each
operating entity. Under the Insurance Companies Act
(Canada), approval of the Minister of Finance (Canada) is
required in connection with certain acquisitions of shares of,
or control of, Canadian insurance companies such as Arch
Insurance Canada, and notice to and/or approval of OSFI is
required in connection with the payment of dividends by or
redemption of shares by Canadian insurance companies
such as Arch Insurance Canada.
United Kingdom
General. The Prudential Regulation Authority (“PRA”) and
the Financial Conduct Authority (“FCA”) regulate insurance
and reinsurance companies and the FCA regulates firms
carrying on insurance distribution activities operating in the
U.K. under the Financial Services and Markets Act 2000 (the
“FSMA”). In 2004, Arch Insurance (U.K.) was granted the
relevant permissions for the classes of insurance business
which it underwrites in the U.K. AMAL currently manages
our Lloyd’s Syndicates pursuant to its authorizations by the
U.K. regulators and Lloyd’s. All U.K. companies are also
subject to a range of statutory provisions, including the laws
and regulations of the Companies Act 2006 (as amended)
(the “U.K. Companies Act”).
The objectives of the PRA are to promote the safety and
soundness of all firms it supervises and to secure an
appropriate degree of protection for policyholders. The
objectives of the FCA are to ensure customers receive
financial services and products that meet their needs, to
promote sound financial systems and markets and to ensure
that firms are stable and resilient with transparent pricing
information and which compete effectively and have the
interests of their customers and the integrity of the market
at the heart of how they run their business. Following the
implementation of the Financial Services and Markets Act
2023 (“FSMA 2023”), the PRA and the FCA have a new
secondary
objective
to
facilitate
the
international
competitiveness of the U.K. economy and its medium to
long-term growth, subject to aligning with relevant
international standards.
The PRA and the FCA adopt separate methods of assessing
regulated firms on a periodic basis. Arch Insurance (U.K.) and
AMAL are subject to periodic assessment by the PRA along
with all regulated firms. Arch Insurance (U.K.) and AMAL are
subject to regulation by both the PRA and FCA.
Lloyd’s Supervision. The operations of AMAL (as managing
agent of our Lloyd’s Syndicates) and each syndicate’s
respective corporate members, are subject to the byelaws
and regulations made by (or on behalf of) the Council of
Lloyd’s, and requirements made under those byelaws. The
Council of Lloyd’s, established in 1982 by Lloyd’s Act 1982,
has overall responsibility and control of Lloyd’s. Those
byelaws, regulations and requirements provide a framework
for the regulation of the Lloyd’s market, including specifying
conditions in relation to underwriting and claims operations
of Lloyd’s participants. The Council of Lloyd’s has
discretionary powers to regulate corporate members’
underwriting at Lloyd’s. Lloyd’s is also subject to the
provisions of the FSMA. Lloyd's is authorized by the PRA and
regulated by the PRA and FCA. Those entities acting within
the Lloyd’s market are required to comply with the
requirements of the FSMA and provisions of the PRA’s or
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2025 FORM 10-K
FCA's rules, although the PRA has delegated certain of its
powers, including some of those relating to prudential
requirements, to Lloyd’s. Each corporate member of Lloyd’s
is required to contribute a percentage of the member’s
premium income for each year of account to the Lloyd’s
Central Fund. The Lloyd’s Central Fund is available if
members of Lloyd’s assets are not sufficient to meet claims
for which the member is liable. Each corporate member of
Lloyd’s may also be required to contribute to the Central
Fund by way of a supplement to a callable layer of up to 5%
of the corresponding member’s premium income limit for
the relevant year of account.
Principles for doing business at Lloyd’s (the “Principles”)
replaced the Lloyd’s Minimum Standards (the previous
regime which set out the Lloyd’s regulatory requirements for
Lloyd’s managing agents) and became effective from the
third quarter of 2022. The Principles set out the
fundamental responsibilities expected of all managing
agents, including AMAL, and is the basis against which
Lloyd’s will review and categorize all syndicates and
managing
agents
in
terms
of
their
capacity
and
performance.
While
offering
greater
flexibility,
the
principles-based oversight requires greater reliance on
AMAL to interpret and apply the rules.
Financial Resources. The European solvency framework and
prudential regime for insurers and reinsurers, the Solvency II
Directive 2009/138/EC (“Solvency II”), took effect in full on
January 1, 2016. Solvency II, together with European
Commission “delegated acts” and guidance issued by the
European Insurance and Occupational Pensions Authority
(“EIOPA”) sets out classification and eligibility requirements,
including the features which capital must display in order to
qualify as regulatory capital. See “European Union—
Insurance and Reinsurance Regulatory Regime” below for
additional details.
Arch Insurance (U.K.), and the corporate members of our
Lloyd’s Syndicates are required to meet economic risk-based
solvency requirements based on Solvency II. Following the
U.K. withdrawal from the EU in 2020, the EU (Withdrawal)
Act 2018, as amended, transposed all applicable direct EU
legislation into domestic U.K. law, thus ensuring the
continuing application of Solvency II under the U.K.’s
financial services regulatory regime. However, in 2022, HM
Treasury set out the U.K. government’s final reform package
on the Solvency II framework in the U.K. Significant changes
introduced by these reforms included the reduction in risk
margin by 30% for non-life insurers and the removal of
branch capital requirements.
FSMA 2023 provides a framework for the revocation of
retained EU law in financial services and its replacement
with corresponding regulators’ rules (in the case of Solvency
II, mainly in the PRA’s Rulebook).
The Insurance and Reinsurance Undertakings (Prudential
Requirements) Regulations 2023 came into force on
December 31, 2023 and modified the current risk margin
calculation. The other reforms forming part of what is
known as “Solvency U.K.” became effective on December
31, 2024, on the implementation of the PRA’s Policy
Statement PS15/24 (Review of Solvency II: Restatement of
assimilated law). The PRA has stated that these reforms to
Solvency II and restatement of rules provide a new
regulatory framework for maintaining the safety and
soundness of insurance firms and protecting their
policyholders, and that the PRA will continue to evolve its
prudential regulatory framework for the insurance sector.
The implementation of these reforms and potential
divergence between the U.K. and the EU may have an
impact on whether the U.K. is granted Solvency II
equivalence status by the EU in any of the three areas to
which equivalence applies.
Beginning June 30, 2026, the PRA can request submission of
a U.K. insurer’s Solvent Exit Analysis (“SEA”). U.K. insurers
(other than those in passive run-off, third country branches
and Lloyd’s managing agents) are expected to provide and
maintain an SEA documenting preparations for an orderly
solvent exit. If a solvent exit becomes a reasonable prospect,
the PRA expects firms to prepare a Solvent Exit Execution
Plan and to manage and monitor the execution of the
solvent exit in line with PRA expectations.
Financial Services Compensation Scheme. The Financial
Services Compensation Scheme (“FSCS”) is a scheme
established
under
FSMA
to
compensate
eligible
policyholders of insurance companies who may become
insolvent. The FSCS is funded by the levies that it has the
power to impose on all insurers. Arch Insurance (U.K.) could
be required to pay levies to the FSCS.
Restrictions on Acquisition of Control. Under FSMA, the prior
consent of the PRA or FCA, as applicable, is required, before
any person can become a controller or increase its control
over any regulated company, including Arch Insurance
(U.K.), or over the parent undertaking of any regulated
company. Therefore, the PRA's or FCA's prior consent, as
applicable, is required before any person can become a
controller of Arch Capital. Prior consent is also required from
Lloyd’s before any person can become a controller or
increase its control over a corporate member or a managing
agent or a parent undertaking of a corporate member or
managing agent. A controller is defined for these purposes
as a person who holds (either alone or in concert with
others) 10% or more of the shares or voting power in the
relevant company or its parent undertaking.
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2025 FORM 10-K
Restrictions on Payment of Dividends. Under English law, all
companies are restricted from declaring a dividend to their
shareholders unless they have “profits available for
distribution.” The calculation as to whether a company has
sufficient profits is based on its accumulated realized profits
minus its accumulated realized losses. U.K. insurance
regulatory laws do not prohibit the payment of dividends,
but the PRA or FCA, as applicable, requires that insurance
companies, insurance intermediaries and other regulated
entities maintain certain solvency margins and may restrict
the payment of a dividend by Arch Insurance (U.K.) or AMAL,
for example.
EU Considerations. In anticipation of Brexit, since 2020
nearly all of the EEA insurance business of Arch Insurance
(U.K.) has been conducted by Arch Insurance (EU). A transfer
of the EEA legacy business (excluding inwards reinsurance)
from Arch Insurance (U.K.) to Arch Insurance (EU) was
completed under Part VII of the U.K. Financial Services and
Market Act 2000 at the end of 2020 (“Part VII Transfer”).
Despite the loss of passporting rights, AMAL, and our Lloyd’s
Syndicates are still able to write business in the EEA via the
Lloyd’s Insurance Company, S.A. (“Lloyd’s Brussels”). Lloyd’s
continued to engage in discussions with the Belgium
Financial Services Markets Authority (“Belgium FSMA”) and
the National Bank of Belgium regarding the Lloyd’s Brussels
operating model and the activities performed for it by
managing agents and the question of whether it is possible
that they could be construed as constituent insurance
distribution under the Insurance Distribution Directive
(Directive (EU) 2016/97) (“IDD”), which would therefore
require them to be authorized within the EEA.
Economic relations between the U.K. and the EU are now
governed by a Trade and Cooperation Agreement (the
“TCA”). Following a report published by the European Affairs
Committee in 2022, which found that the TCA is limited in
scope and silent as to EU equivalence in decisions over
financial services, a Memorandum of Understanding
(“MoU”) on regulatory cooperation between the U.K. and
the EU was signed in 2023. However, the MoU does not
impose binding substantive commitments nor is there any
mention of taking forward the commitment in the Political
Declaration accompanying the TCA regarding mutual
equivalence. As a result, under the provisions of the TCA,
EEA financial institutions (including our Irish operating
subsidiaries) lost their passporting rights into the U.K.
Absent any future agreement between the U.K. and the EU
on the provision of financial services into the U.K., the post-
Brexit status and rules applicable to U.K. branches of EEA
financial institutions are primarily driven by U.K. law and
regulation.
The ability of U.K. firms (including Arch Insurance (U.K.) and
AMAL) to continue doing business in the EEA similarly
depends on applicable EEA state local law and regulation.
There has been no decision yet made by the European
Commission on whether or not the U.K.’s financial services
regulatory regime will be granted third-country equivalence
for the purposes of reinsurance, solvency calculation and/or
group supervision under Solvency II. In the absence of such
declarations, U.K. firms are subject to more stringent
requirements in carrying out reinsurance business with EEA
firms.
Sustainability Considerations. The U.K. government has a
long-term ambition to “green” the financial system and align
it with the U.K.’s 2050 “Net Zero” target (i.e.,100%
greenhouse gas emissions reduction) under the Climate
Change Act 2008. As part of those efforts, in 2022, the U.K.
passed mandatory climate related financial disclosure
requirements under the Companies (Strategic Report)
(Climate-related Financial Disclosure) Regulations 2022. The
regulations apply to large companies (including some of our
U.K. entities) for financial years starting on or after April
2022. The regulations generally align risk disclosures with
the recommendations of the Taskforce on Climate-related
Financial Disclosures (“TCFD”).
In 2021, the U.K. government published its Greening Finance
Roadmap to Sustainable Investing (the “Roadmap”), which
announced proposals to extend the scope of the U.K.’s
sustainable finance framework beyond climate change.
Further to the Roadmap, the FCA issued its final Policy
Statement on its sustainability disclosure requirements and
the investment labels regime. As a part of this regime, the
FCA introduced, among other things, a general ‘anti-
greenwashing’ rule to clarify that sustainability-related
claims must be clear, fair and not misleading. The general
‘anti-greenwashing’ rule came into force in May 2024 and
the FCA also published new guidance (FG24/3) on the
expectations for FCA-authorized firms subject to the general
‘anti-greenwashing rule’ which took effect at the same time.
The FCA has indicated that it continues to keep sustainability
disclosure requirements under review and may propose
further changes to the regime, which may also relate to the
anti-greenwashing rule.
Consumer protection reforms under the new U.K. Digital
Markets, Competition and Consumers Act 2024 (“DMCC
Act”) came into force on April 6, 2025, enabling the U.K.’s
competition regulator, the Competition and Markets
Authority (“CMA”) to pursue enforcement for consumer law
breaches such as greenwashing, and to directly impose fines
of up to 10% of a business’s global turnover.
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2025 FORM 10-K
In 2023, the Green Technical Advisory Group ("GTAG")
published its final advice to the U.K. government on the
development of the U.K. Green Taxonomy including
governance options (such as an advisory body to facilitate
implementation and development).
In 2022, the U.K. government said it would delay secondary
legislation under the taxonomy regulations (originally
anticipated by the end of 2022). Following the work of
GTAG, in November 2024, the U.K.’s HM Treasury published
a consultation to determine whether a U.K. Green
Taxonomy would be complementary to existing policies; the
consultation period closed on February 4, 2025. In July 2025,
HM Treasury published its consultation response and
concluded that a U.K. Green Taxonomy would not be the
most effective tool to deliver the green transition and
decided not to proceed with this policy as part of the U.K.’s
sustainable finance framework.
The PRA’s supervisory statement SS3/19 “Enhancing banks’
and insurers’ approaches to managing the financial risks
from climate change” requires U.K. regulated entities to
comply with certain sustainability-related requirements. In
December 2025, the PRA published supervisory statement
SS5/25 “Enhancing banks’ and insurers’ approaches to
managing climate-related risks”, which builds on and
updates the expectations in SS3/19. SS5/25 took effect on
December 3, 2025. The PRA expects firms to complete an
internal review of their current position against the updated
expectations in order to identify any gaps and develop an
appropriate plan to remedy such gaps within six months of
commencement (i.e. by June 3, 2026).
In addition, Lloyd’s has mandated that managing agents
create a sustainability framework and strategy. Lloyd’s has
also imposed sustainability focused outcomes by way of the
Principles with a particular focus on culture, investment and
underwriting profitability. See “Lloyd’s Supervision” above
for additional details.
In December 2025, the FCA published PS25/23 “Tackling
non-financial misconduct in financial services” finalizing FCA
Handbook guidance on how non-financial misconduct
(“NFM”) is assessed under the Code of Conduct (“COCON”)
and the Fit and Proper test (“FIT”). The FCA confirms that
serious work-related misconduct (e.g. bullying/harassment/
violence) can give rise to conduct rule breaches, inform
fitness and propriety decisions, and affect regulatory
references. The guidance will take effect on September 1,
2026, in line with the FCA’s new COCON rule extending the
NFM framework across FSMA Part 4A-authorised firms and
relevant staff.
Russian Sanctions. Since the Russian invasion of Ukraine in
2022, the U.K. government has instituted a new sanctions
regime targeting Russia. The sanctions imposed include
prohibitions on providing financial services (including
insurance and reinsurance) to persons connected with
Russia in relation to certain restricted goods and services,
and the freezing of assets owned or controlled by
designated persons. The U.K., U.S. and EU often consult with
each other with respect to their respective sanctions
programs. Given the evolving situation, we are closely
monitoring developments and the sanctions imposed, to
ensure our business remains in compliance with any
applicable sanctions measures imposed.
Privacy and Cybersecurity. The U.K. has implemented the
European General Data Protection Regulation (“EU GDPR”)
as the U.K. GDPR which sits alongside the U.K. Data
Protection Act 2018 (the “U.K. GDPR”). The U.K. GDPR has
direct effect where an entity is established in the U.K. and
has extra-territorial effect where an entity established
outside of the U.K. processes personal data in relation to the
offering of goods or services to individuals in the U.K. or the
monitoring of their behavior. The U.K. GDPR imposes
obligations on controllers, including, among others: (i)
accountability and transparency requirements, requiring
controllers to demonstrate and record compliance with the
GDPR and to provide detailed information to individuals
regarding the processing of their personal data; (ii)
requirements to process personal data lawfully including
specific requirements for obtaining valid consent where
consent is the legal basis for processing; (iii) obligations to
consider data protection when any new products or services
are developed and designed (e.g., to limit the amount of
personal data processed); (iv) obligations to comply with
individuals’ data protection rights including a right: (a) of
access to, erasure of, or rectification of personal data, (b) to
restriction of processing or to withdraw consent to
processing, (c) to object to processing or to ask for a copy of
personal data to be provided to a third party, and (d) not to
be subject to solely automated decision-making; and (v) an
obligation to report personal data breaches to: (i) the data
protection supervisory authority without undue delay (and
no later than 72 hours) after becoming aware of the
personal data breach, unless the personal data breach is
unlikely to result in a risk to the data subjects’ rights and
freedoms; and (ii) affected individuals, where the personal
data breach is likely to result in a high risk to their rights and
freedoms. Processors are required to notify the controller
without undue delay after becoming aware of a personal
data breach.
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2025 FORM 10-K
The Data (Use and Access) Act 2025 (“DUAA”) came into
force on June 19, 2025 and amends certain U.K. GDPR
provisions, including but not limited to: (i) introducing a list
of
“recognized
legitimate
interests”;
(ii)
potentially
streamlining responses to data subject access requests, by
making clear that only “reasonable and proportionate”
searches are required; and (iii) relaxing rules around
automated decision making, amongst other amendments.
The U.K. GDPR also imposes similar international data
transfer restrictions to the EU (see below) on transfers of
personal data from the U.K. to jurisdictions that the U.K.
government does not consider adequate, including the U.S.
The U.K. government has published its own form of the EU
Standard Contractual Clauses (“SCCs”), known as the
International Data Transfer Agreement and an International
Data Transfer Addendum to the new EU SCCs. Further, in
2023, the U.K. Government established a U.K.-U.S. data
bridge or adequacy decision, through the U.K. extension to
the EU-U.S. Data Privacy Framework (“DPF”). Effective as of
October 2023, U.S. organizations which self-certify to the
DPF can now transfer personal data from the U.K. to the U.S.
without using SCCs.
The U.K. Information Commissioner’s Office (“ICO”) has the
power under the U.K. GDPR to (amongst other things)
impose fines for serious breaches of up to the higher of 4%
of the organization’s annual worldwide turnover or £17.5
million. Individuals also have a right to compensation, as a
result of an organization’s breach of the U.K. GDPR which
has affected them, for financial or non-financial losses (e.g.,
distress).
Cybersecurity requirements are laid down in the U.K. GDPR,
which requires controllers and processors to implement
appropriate technical and organizational measures to
safeguard personal data to a level of security appropriate to
the data protection risk.
The U.K. GDPR does not provide for a specific set of
cybersecurity requirements or measures to be implemented,
but rather requires a controller or processor to implement
appropriate cyber and data security measures in accordance
with the then-current risk, the state of the art, the costs of
implementation and the nature, scope, context and
purposes of the processing. The U.K. GDPR however does
explicitly require that controllers notify personal data
breaches under certain circumstances.
Artificial Intelligence. The U.K. has adopted a (primarily)
“soft law” approach to AI regulation meaning it has not
adopted formal legislation to regulate AI but has adopted
soft law guidelines in the form of a White Paper published in
2023. The U.K. intends to develop a sector-specific, principle
centered approach to AI regulation, with the relevant
sectors being responsible for enforcement. In July 2024, the
U.K. government announced its intention to regulate the
most powerful AI models, though nothing has been
announced since that time.
Ireland
General. The CBI regulates insurance and reinsurance
companies and intermediaries authorized in Ireland. Our
three Irish operating subsidiaries are Arch Re Europe, Arch
Insurance (EU) and Arch Underwriters Europe Limited (“Arch
Underwriters Europe”). Arch Re Europe was licensed and
authorized by the CBI as a non-life reinsurer in 2008 and as a
life reinsurer in 2009. Arch Insurance (EU) was licensed and
authorized by the CBI as a non-life insurer in 2011. As part of
our Brexit plan, Arch Insurance (EU) received approval from
the CBI to expand the nature of its business in 2019 and
commenced writing expanded insurance lines in the EEA in
2020 with the Part VII Transfer completed at the end of
2020. Arch Underwriters Europe was registered by the CBI as
an insurance and reinsurance intermediary in 2014. Arch Re
Europe, Arch Insurance (EU) and Arch Underwriters Europe
are subject to the supervision of the CBI and must comply
with Irish insurance acts and regulations as well as with
directions and guidance issued by the CBI.
Arch Re Europe and Arch Insurance (EU) are required to
comply with Solvency II requirements. See “European Union
—Insurance and Reinsurance Regulatory Regime” below for
additional details. As an intermediary, Arch Underwriters
Europe is subject to a different regulatory regime and is not
subject to solvency capital rules but must comply with
requirements such as to maintain professional indemnity
insurance and to have directors that are fit and proper. Our
Irish subsidiaries are also subject to the general body of Irish
company laws and regulations including the provisions of
the Companies Act 2014.
In February 2025, responding to rapid changes seen in the
financial sector in recent years, the CBI published its plans to
move away from the PRISM model of risk-based supervision
in place since 2011 towards a new form of supervision that
will be (i) outcome focused, (ii) risk-based, (iii) judgment led,
(iv) forward looking and (v) focused on ensuring the
resilience, adaptability and trustworthiness in the provision
of financial services. In December 2025, the CBI published a
roadmap setting out its plans for delivering a more effective
and efficient regulatory framework. Included in the roadmap
are proposals to carry out a compatibility review of Ireland’s
insurance rulebook to eliminate duplication with Solvency II.
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2025 FORM 10-K
Arch is monitoring developments as this progresses.
Financial Resources. Arch Re Europe and Arch Insurance (EU)
are required to meet economic risk-based solvency
requirements imposed under Solvency II. Solvency II,
together with European Commission “delegated acts” and
guidance issued by EIOPA sets out classification and
eligibility requirements, including the features which capital
must display in order to qualify as regulatory capital.
Restrictions on Acquisitions. Under Irish law, the prior
consent of the CBI is required before any person can acquire
or increase a qualifying holding in an Irish insurer or
reinsurer, including Arch Insurance (EU) and Arch Re Europe,
or their parent undertakings. A qualifying holding is defined
for these purposes as a direct or indirect holding that
represents 10% or more of the capital of, or voting rights, in
the undertaking or makes it possible to exercise a significant
influence over the management of the undertaking.
Restrictions on Payment of Dividends. Under Irish company
law, Arch Re Europe, Arch Insurance (EU) and Arch
Underwriters Europe are permitted to make distributions
only out of profits available for distribution. A company’s
profits available for distribution are its accumulated, realized
profits, so far as not previously utilized by distribution or
capitalization, less its accumulated, realized losses, so far as
not previously written off in a reduction or reorganization of
capital duly made. Further, the CBI has powers to intervene
if a dividend payment were to lead to a breach of regulatory
capital requirements.
EU Considerations. As Arch Re Europe, Arch Insurance (EU)
and Arch Underwriters Europe are authorized by the CBI in
Ireland, a Member State of the EU, those authorizations are
recognized throughout the EEA. Subject only to certain
notification and application requirements, Arch Re Europe,
Arch Insurance (EU) and Arch Underwriters Europe can
provide services, or establish a branch, in any other Member
State of the EEA. Although, in doing so, they may be subject
to the laws of such Member States with respect to the
conduct of business in such Member State, company law
registrations and other matters, they will remain subject to
financial and operational supervision by the CBI only. Arch
Insurance (EU) has branches in Italy, France, Spain, the
Netherlands and the U.K. Arch Re Underwriting ApS in
Denmark (“Arch Re Denmark”) is an underwriting agency
underwriting accident and health and other reinsurance
business for Arch Re Europe. Arch Re Europe also has
branches in the U.K., France and Switzerland (“Arch Re
Europe Swiss Branch”).
Since 2021, under the provisions of the TCA our Irish
regulated entities lost their passporting rights into the U.K.
Sustainability Considerations. Sustainability matters have
been on the CBI's agenda for a number of years. In 2021, the
CBI issued its expectations in respect of climate and broader
sustainability issues for all regulated firms in Ireland
(including (re)insurers). The CBI's expectations focus on five
key areas: governance, risk management, scenario analysis
(including, but not limited to, stress testing for the purposes
of the ORSA), disclosures and strategy and business model
risk. The CBI has indicated that its expectations will be
applied in a proportionate manner. In 2022, the CBI
published a Consultation Paper setting out its proposed
guidance on climate change risk for the (re)insurance sector.
The finalized guidance was published by the CBI in 2023 and
clarifies the CBI’s expectations on how (re)insurers should
address climate change risks in their business and to assist
(re)insurers develop their governance and risk management
frameworks to do this. In September 2024 and December
2025, the CBI published key findings from thematic reviews
of (re)insurers’ climate change risk materiality assessments.
The CBI has reiterated that climate change risk remains a key
strategic priority and will continue to be a feature of regular
supervisory engagement with (re)insurers. It is expected that
over time, disclosures in respect to sustainability matters
may be captured in the Solvency and Financial Condition
Reports of Arch's Irish entities. Arch continues to consider
the impact of this guidance on its Irish entities. See also
“European Union – Sustainability Considerations.”
Irish Individual Accountability Framework Act 2023. The
Central Bank (Individual Accountability Framework) Act 2023
(the “IAF Act”) was signed into law in March 2023 and took
effect in full on July 1, 2025. The IAF Act implements
substantive changes to the fitness and probity regime
maintained by the CBI in Ireland and imposes certain
additional obligations and liability for senior executives in
Irish
regulated
financial
service
entities,
including
(re)insurance companies. Arch considered the impact of the
IAF Act on its business and implemented the IAF Act
requirements accordingly. In November 2025, following a
CBI review, further changes were made to the fitness and
probity regime, including the introduction of revised
Guidance on the Standards of Fitness and Probity.
Third Country Governance Arrangements. In September
2023, in response to a supervisory statement issued by
EIOPA in February 2023 on the use of third country
governance arrangements (such as branches) by EU
authorized (re)insurers, the CBI published its formal views
on the use of third country governance arrangements. The
CBI’s key expectations are that (i) third country branches
should primarily serve the market in which they are
established, with their sole objective to not simply support
an Irish based (re)insurer and (ii) third country governance
arrangements should not undermine the substance of Irish
based (re)insurers. The CBI instructed Irish (re)insurers to
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2025 FORM 10-K
review their current business models in light of EIOPA’s
supervisory statement and the CBI’s own expectations. Arch
reviewed, and continues to consider, the impact of this
supervisory statement on its Irish and European operations.
FDI Screening. In January 2025, the Screening of Third
Country Transactions Act 2023 (“FDI Act”) came into effect.
The FDI Act was developed in accordance with the
introduction of Regulation (EU) 2019/452 on foreign direct
investment screening. The FDI Act grants powers to the Irish
State to review, examine and potentially block investment
by acquirers from outside the EEA and Switzerland where
such acquirers pose a risk to national security or public
order. While it is not anticipated that U.S., U.K. or Bermuda
based acquirers will be negatively impacted by the FDI Act,
we will continue to review developments in respect of the
FDI Act.
European Union
Insurance and Reinsurance Regulatory Regime. Solvency II
took effect in full on January 1, 2016. Solvency II imposes
economic risk-based solvency requirements across all EU
Member States and consists of three pillars: Pillar I-
quantitative capital requirements, based on a valuation of
the entire balance sheet; Pillar II-qualitative regulatory
review, which includes governance, internal controls,
enterprise risk management and supervisory review process;
and Pillar III-market discipline, which is accomplished
through reporting of the insurer’s financial condition to
regulators and the public. Solvency II is supplemented by
European Commission Delegated Regulation (EU) 2015/35
(the “Delegated Regulation”), other European Commission
“delegated acts” and binding technical standards, and
guidelines issued by EIOPA. The Delegated Regulation sets
out more detailed requirements for individual insurance and
reinsurance undertakings, as well as for groups, based on
the overarching provisions of Solvency II, which together
make up the core of the single prudential rulebook for
insurance and reinsurance undertakings in the EU.
In 2020, EIOPA provided an opinion to the European
Commission in relation to the review of the Solvency II
regime. This review was initiated by the European
Commission to determine whether the Solvency II regime
remains fit for purpose. In its opinion, EIOPA confirmed that
the overall Solvency II framework is working well from a
prudential perspective, suggesting that there are no
fundamental changes needed but that a number of
amendments are required to ensure the regime continues as
a well-functioning risk-based regime. In 2021, the European
Commission published legislative proposals for amendments
to the Solvency II Directive arising out of EIOPA's review of
the Solvency II regime. The proposed amendments cover a
number of areas including proportionality, quality of
supervision, sustainability risks and group and cross-border
supervision. The European Parliament and the Council voted
to adopt the amendments to the Solvency II Directive in
April
2024
and
November
2024
respectively.
The
amendments to Solvency II entered into force on January 28,
2025 and will apply two years from this date.
In tandem with the Solvency II reforms, EIOPA has been
engaging with stakeholders in the (re)insurance sector and
publishing detailed guidelines, recommendations and
expectations relating to the revised Solvency II framework.
In addition to the above Solvency II reform proposals, the
European
Commission
continues
to
promote
the
development of the Insurance Recovery and Resolution
Directive (“IRRD”). The IRRD aims to harmonize national
laws
on
recovery
and
resolution
of
(re)insurance
undertakings. The European Parliament and the Council
voted to adopt the IRRD in April 2024 and November 2024
respectively. The IRRD entered into force on January 28,
2025 and will apply two years from this date. While the CBI
has
already
introduced
certain
insurance
recovery
requirements under Irish law that apply to Arch’s Irish
operations (including the preparation of recovery plans) in
December 2025 it indicated that it intended to review these
requirements to ensure no unnecessary duplication with
between the Irish and IRRD regimes. We will continue to
monitor the implementation of IRRD and its potential impact
on our operations.
Following entry into the TCA by the U.K. and the EU, and the
U.K.’s withdrawal from the EU under the provisions of the
TCA, U.K. financial institutions have lost their passporting
rights into the EU. It was originally envisaged that there
would be a level of cooperation in relation to financial
services, to be reflected in a MoU between the U.K. and the
EU. However, the text of the MoU does not impose any
binding substantive commitments nor is there any mention
of taking forward the commitment in the Political
Declaration accompanying the TCA regarding mutual
equivalence.
In early 2023, EIOPA issued its finalized Supervisory
Statement on the use by EU-authorized (re)insurers of
governance arrangements (such as branches) in third
countries to perform functions or activities in respect of EU
policyholders and risks. Arch has considered the impact of
the supervisory statement on its Irish and European
operations and will continue to monitor developments.
Arch Re Europe and Arch Insurance (EU), being established
in Ireland and authorized by the CBI, are able to establish
branches and provide reinsurance services and, in respect of
Arch Insurance (EU), insurance services in all EEA states. This
is subject to certain regulatory notifications and there being
no objection from the CBI and the Member States
concerned.
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Solvency II does not prohibit EEA insurers from obtaining
reinsurance from reinsurers licensed outside the EEA, such
as Arch Re Bermuda. As such, and subject to the specific
rules in each Member State, Arch Re Bermuda may do
business from Bermuda with insurers in EEA Member States,
but it may not directly operate its reinsurance business
within the EEA. Article 172 of Solvency II provides that
reinsurance contracts concluded by insurance undertakings
in the EEA with reinsurers having their head office in a
country whose solvency regime has been determined to be
equivalent to Solvency II shall be treated in the same
manner as reinsurance contracts with undertakings in the
EEA authorized under Solvency II. Beginning in 2016,
Bermuda was deemed by the European Commission to be
equivalent for Solvency II purposes. Solvency II also includes
specific measures providing for the supervision of insurance
and reinsurance groups. However, as a consequence of the
above determination of equivalence, pursuant to Article 260
of Solvency II, regulators within the EEA are required to rely
on the worldwide group supervision exercised by the BMA.
EIOPA has also indicated that, on a case by case basis,
groups subject to this worldwide supervision may be
exempted from any EEA sub-group supervision, where this
results in more efficient supervision of the group and does
not impair EEA supervisors in respect of their individual
responsibilities.
The IDD was published in 2016. EEA Member States were
required to transpose the IDD by 2018. The IDD replaced the
Insurance Mediation Directive. The IDD applies to all
distributors of insurance and reinsurance products (including
insurers and reinsurers selling directly to customers) and
strengthens the regulatory regime applicable to distribution
activities through increased transparency, information and
conduct requirements. The principal impact of the IDD is on
the insurance market, however, requirements that apply
across insurance and reinsurance include more specific
conditions regarding knowledge and continuing professional
development for those involved in distribution of
(re)insurance products. The IDD continues the pre-existing
ability of intermediaries established in a Member State of
the EU to establish branches and provide services to all EEA
states. Arch Underwriters Europe, being established in
Ireland and authorized by the CBI, is able, subject to
regulatory notifications and there being no objection from
the CBI, to establish branches and provide services in all EEA
states.
Privacy and Cybersecurity. The EU GDPR came into effect on
May 25, 2018. The EU GDPR governs the collection, use,
disclosure, transfer or other processing of personal data. Its
scope extends to certain entities not established in the EEA
if they offer goods or services to, or monitor the behavior of,
EEA data subjects. The EU GDPR contains a number of
requirements regarding the processing of personal data
about individuals, including mandatory security breach
reporting,
new
and
strengthened
individual
rights,
evidenced data controller accountability for compliance with
the GDPR principles (including fairness and transparency),
maintenance of data processing activity records and the
implementation of “privacy by design,” including through
the completion of mandatory Data Protection Impact
Assessments in connection with higher risk data processing
activities.
In addition, the EU GDPR increases scrutiny of transfers of
personal data to jurisdictions which the European
Commission does not recognize as having “adequate” data
protection laws. In particular in 2020, the Court of Justice of
the EU (Court of Justice) in Schrems II invalidated the
European Union-United States (EU-U.S.) Privacy Shield on
the grounds that the EU-U.S. Privacy Shield failed to offer
adequate
protections
to
EU
personal
information
transferred to the U.S. While the Court of Justice upheld the
use of other data transfer mechanisms, such as the Standard
Contractual Clauses (“EU SCCs”), the decision has led to
some uncertainty regarding the use of such mechanisms for
data transfers to the U.S., and the Court of Justice made
clear that reliance on EU SCCs alone may not necessarily be
sufficient in all circumstances. The European Data Protection
Board issued additional guidance regarding international
transfers which may require us to implement additional
safeguards to further enhance the security of data
transferred out of the EEA. The European Commission
published new versions of the EU SCCs in 2021, which place
onerous obligations on the parties. In 2022, the U.S.
President introduced an Executive Order to facilitate a new
Trans-Atlantic Data Privacy Framework to act as a successor
to the invalidated EU-U.S. Privacy Shield. On July 10, 2023,
the European Commission adopted an adequacy decision
relating to the transfer of personal data from the EU to the
U.S. which takes place under the DPF. The DPF is the
successor to the EU-U.S. Privacy Shield and allows
companies that are subject to the GDPR to transfer personal
data to U.S. entities that participate in the DPF without the
need for alternative data protection transfer mechanisms
(such as SCCs or binding corporate rules). On December 19,
2025, the EU Commission renewed the 2021 adequacy
decision which allows for the free flow of personal data
between the EU Member States and the UK.
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2025 FORM 10-K
The EU GDPR imposes substantial fines for breaches and
violations (up to the greater of €20 million or 4% of global
turnover). The EU GDPR allows data subjects and consumer
associations
to
lodge
complaints
with
supervisory
authorities, seek judicial remedies and obtain compensation
for damages resulting from violations of the EU GDPR. The
GDPR Procedural Regulation (Regulation 2025/2518) was
published on December 12, 2025 and will apply from April 2,
2027. The Regulation provides additional procedural rules
for enforcing the GDPR and its key aim is to improve the
cooperation
mechanisms
amongst
GDPR
supervisory
authorities.
In addition, the EU Data Act (“EUDA”) was published in the
Official Journal of the EU in 2023, and is coming into effect
on a phased basis from September 12, 2025, through to
September 12, 2027. EUDA creates a harmonized set of rules
on fair access to and use of data in the interest of fostering
data-driven innovation and increasing data availability in the
EU. EUDA may apply to certain insurance activities, primarily
relating to the use of telemetric and similar devices. Arch is
assessing the impact of EUDA on its operations.
Cybersecurity and information security are an area of
increasing focus for the EU. The Digital Operational
Resilience Act (“DORA”) entered into force in January 2023.
The core aim of DORA is to prevent and mitigate cyber
threats and sets uniform requirements for the security of
network and information systems of financial sector entities
(including (re)insurers) as well as critical third parties which
provide ICT (information and communication technology)-
related services, such as cloud platforms or data analytics
services. Certain of our in-scope Irish entities are required to
comply with the obligations set out under DORA since
January 17, 2025.
In addition to the above, EIOPA continues to publish detailed
guidelines, recommendations and expectations relating to
cyber matters and how these should be managed and
considered by the (re)insurance sector.
Artificial Intelligence. The EU Artificial Intelligence Act (the
“EU AI Act”) came into effect in August 2024. As of February
2, 2025, companies are required to cease the use of AI
systems which pose an unacceptable risk. Further
compliance obligations applicable to general purpose AI
models take effect in August 2025, and the remainder of the
EU AI Act (including compliance rules relating to AI systems)
takes effect in August 2026. The EU AI Act regulates the use
of AI systems and general purpose AI models in all EU
Member States through a risk-based framework, and a
governance program relating to the use of AI systems
generally. Certain of the AI systems utilized by our
(re)insurers will fall within the scope of the EU AI Act.
In August 2025, EIOPA issued an Opinion on Artificial
Intelligence Governance and Risk management. The opinion
provides guidance on the interpretation of insurance-
focused legislation in the context of AI systems which may
not have existed when the legislation entered into force. It
sets
out
expectations,
which
are
risk-based
and
proportionate in approach, relating to insurers’ governance
and risk-management systems in the context of AI and seeks
to
ensure
consistency
among
national
supervisory
authorities in their approach to supervision of AI. EIOPA
plans to develop a more detailed analysis of specific AI
systems and emerging challenges and provide further
guidance where appropriate. Arch continues to monitor the
impact of this development on its operations.
Sustainability Considerations. A comprehensive package of
measures to facilitate the progression towards sustainable
economic activities was approved in principle by the
European Commission in 2021. In 2021, two delegated
regulations (the “EC Regulations”) amending sectoral
legislation, including the Solvency II Directive and the IDD,
were published. The EC Regulations focus on the integration
of sustainability into key activities including product
oversight and governance, risk management and suitability
assessment procedures. The EC Regulations apply from
2022.
The Corporate Sustainability Reporting Directive (“CSRD”),
which replaces the Non-Financial Reporting Directive
(“NFRD”), was published in the Official Journal of the EU in
2022 and entered into effect in 2023. CSRD was transposed
under Irish law pursuant to the EU (Corporate Sustainability
Reporting) Regulations 2024, which came into effect in July
2024. Amending legislation was published in October 2024
to clarify certain provisions in the 2024 Regulations. In July
2025, further implementing legislation was introduced to
transpose the “Stop-the-Clock” Directive and to further
clarify
certain
provisions
introduced
by
the
2024
Regulations. The CSRD expands the scope of sustainability
reporting obligations to any European listed company or any
company (including (re)insurers) meeting certain criteria.
Certain of our European entities and non-European entities
will fall within the scope of certain reporting obligations
under the CSRD. See also, “Simplification of EU sustainability
framework,” below.
An additional environmental sustainability framework, the
EU Taxonomy, came into force in 2020, with in-scope
companies required to comply with certain reporting
obligations from January 1, 2022. The EU Taxonomy (which
is a classification standard for reporting) sets out six
environmental objectives with which companies' economic
activities must comply if they are to be described as
environmentally sustainable. These six environmental
objectives are: (1) climate change mitigation, (2) climate
change adaptation, (3) sustainable use and protection of
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2025 FORM 10-K
water and marine resources, (4) transition to a circular
economy, (5) pollution prevention and control and (6) the
protection and restoration of biodiversity and ecosystems. In
addition, reporting obligations apply to in-scope companies
regarding (1) the financial products they provide and (2) the
environmental sustainability of an in-scope company's
activities, which is to be disclosed in non-financial
statements that are required under the CSRD. See also,
“Simplification of EU sustainability framework,” below.
In 2022, the European Commission adopted a proposal for
the Corporate Sustainability Due Diligence Directive
(“CSDDD”). The CSDDD entered into force in July 2024 and
its obligations will come into effect on a phased basis
depending on an in-scope entity’s turnover threshold,
employee count and jurisdiction of incorporation. The main
focus of the CSDDD is for in-scope entities to conduct due
diligence on human rights and environmental impacts within
such in-scope entities, their subsidiaries and across its value
chain. Initially, the CSDDD will only apply in respect of
financial service providers’ (including (re)insurers) upstream
business partners. This means that currently (re)insurers do
not need to consider any downstream business partners
when complying with their obligations under CSDDD.
However, the CSDDD provides scope for this to change upon
future review by the European Commission, and financial
service providers could be required in the future to comply
with CSDDD in respect of both upstream and downstream
business
partners.
See
also,
“Simplification
of
EU
sustainability framework,” below.
Simplification of EU sustainability framework. In 2025, the
European Commission proposed major changes to CSRD,
CSDDD and the EU Taxonomy as part of its ‘Omnibus I’
simplification package. These included simplification of the
EU Taxonomy (with changes effective from January 1, 2026),
CSRD and CSDDD. Among other things, CSRD reporting was
delayed by two years for certain in-scope entities and
CSDDD reporting was delayed by one year via a ‘Stop the
Clock’ directive (effective April 2025), which was transposed
into Irish law in July 2025. The EU institutions are at an
advanced stage of agreeing substantive amendments to
CSRD and CSDDD, which are expected to be formalized in
early 2026. We continue to monitor the European
Commission’s proposals to simplify sustainability reporting
requirements and their impact on CSRD and CSDDD
obligations of our European and non-European operations.
In tandem with all of the above, EIOPA continues to engage
with stakeholders in the (re)insurance sector and publish
detailed guidelines, recommendations and expectations
relating to sustainability matters and how these should be
managed and considered by the (re)insurance sector.
Russian Sanctions. Since 2022, the EU has imposed
significant sanctions on the Russian Federation in response
to its invasion of Ukraine. These sanctions are similar to
those imposed by the U.K. and U.S. Given the evolving
situation, we are closely monitoring developments and the
sanctions imposed, to ensure our European entities remain
in compliance with any sanctions measures imposed.
Inflation. The EU has adopted a range of measures to
combat unprecedented levels of inflation, with EIOPA issuing
a supervisory statement outlining its expectations of
(re)insurers on inflation-related issues in 2022. We are
monitoring ongoing developments and considering the
impact of EU and EIOPA guidance on inflation on its
business.
Third Country Governance Arrangements. In 2023, EIOPA
published a supervisory statement on the use by EU
authorized (re)insurers of governance arrangements (such as
branches) in third countries to perform functions or
activities in respect of EU policyholders and risks. See also
“Ireland – Third Country Governance Arrangements.”
Switzerland
In 2008, Arch Re Europe opened Arch Re Europe Swiss
Branch as a branch office. As Arch Re Europe is domiciled
outside of Switzerland and its activities are limited to
reinsurance, the Arch Re Europe Swiss Branch in Switzerland
is not required to be licensed by the Swiss insurance
regulatory authorities.
In 2014, Arch Underwriters Europe opened a branch office in
Zurich (“Arch Underwriters Europe Swiss Branch”) to render
reinsurance advisory services to certain group companies.
Arch Underwriters Europe Swiss Branch is registered with
the commercial register of the Canton of Zurich. Since its
activities are limited to advisory services for reinsurance
matters, the Arch Underwriters Europe Swiss Branch is not
required to be licensed by the Swiss insurance regulatory
authorities.
Australia
APRA is an independent statutory authority responsible for
prudential supervision of institutions across banking,
insurance and superannuation and promotes financial
stability in Australia. Arch Indemnity has been authorized to
conduct monoline lenders’ mortgage insurance business in
Australia since 2002 and was acquired by Arch Capital in
2021. Arch LMI, which was formerly authorized by APRA in
2019 to conduct monoline lenders’ mortgage insurance
business in Australia, relinquished its APRA authorization in
2022 and has been converted to a services company for our
Australian lenders mortgage insurance operations. Major
regulatory requirements that are applicable to Arch
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2025 FORM 10-K
Indemnity as a general insurance provider in Australia
include
requirements
on
minimum
capital
levels,
remuneration practices, risk management, compliance with
corporate governance standards, including requirements
pursuant to the Financial Accountability Act passed in 2023
which took effect on March 15, 2025 for general insurers
and additional operational risk management requirements
on and from July 1, 2025 under APRA Prudential Standard
CPS 230 Operational Risk Management.
In addition to its APRA authorization, Arch Indemnity has
been licensed by the Australian Securities and Investments
Commission (“ASIC”) since 2011 to engage in credit activities
in Australia. Arch LMI has been licensed by ASIC since 2023
as a Financial Services Licensee in Australia.
Our group also conducts property and casualty insurance
business in Australia through Lloyd’s. This insurance business
is managed by and distributed through local coverholders
and is subject to Lloyd’s Supervision. In addition, the
business is subject to local Australian prudential regulatory
oversight by APRA, and additional separate financial services
market conduct regulation by ASIC.
In addition, there are other Australian legislation and
regulations applicable to the financial services sector in
which our group operates, such as:
• privacy legislation on the collection, use and storage of
personal information and sensitive information of
individuals and a mandatory data breach notification
regime, which are overseen by the Office of the Australian
Information Commissioner under the Privacy Act 1988
(Cth) (with a new statutory cause of action for serious
invasions of privacy effective as of June 10, 2025, and new
obligations related to automated decision making to come
into effect on December 10, 2026);
• cyber security obligations imposed by APRA and ASIC as
part of their respective licensing regimes for insurers (such
as APRA Prudential Standard CPS 234 Information
Security), and also on larger insurers in Australia under
Australian security of critical infrastructure legislation;
• additional obligations under cyber security legislation
passed in 2024, which came into force in part at the end
of May 2025. These obligations apply to various entities
operating in Australia (subject to specific eligibility
thresholds to be confirmed) and will be implemented in
two stages, with the second phase commencing on
January 1, 2026. The requirements include mandatory
reporting of cyber security incidents, which involve the
payment of a ransom, to the Australian Government’s
Department of Home Affairs and Australian Signals
Directorate;
• modern slavery legislation which imposes a statutory
reporting regime for larger companies operating in
Australia (which is subject to an ongoing public
consultation process on options to strengthen the Modern
Slavery Act 2018 (Cth));
• anti-money laundering and counter-terrorism financing
(“AML/CTF”) legislation, which is administered by the
Australian Transaction Reports and Analysis Centre.
Artificial Intelligence. In Australia, businesses which develop
and use AI are subject to various Australian laws relating to
privacy, corporations and anti-discrimination which apply
across all sectors of the economy. There are also financial
services sector specific laws in Australia administered by
APRA and ASIC which impact the development and
deployment of AI in the sector in which our group operates,
although such existing laws are technology-neutral.
The
Australian
Government
has
been
undertaking
consultation on “Safe and Responsible AI” regulation in
Australia since 2023. In September 2024, the Australian
Government published a Voluntary AI Safety Standard which
can be used on a voluntary basis by Australian businesses
developing or implementing AI systems while the Australian
Government continues to undertake consultation on
proposed mandatory AI guardrails for high-risk applications
that were to be defined following consultation.
At the time of the consultation, the proposed mandatory AI
guardrails for high-risk applications were expected to
replicate the 10 voluntary guardrails in the Voluntary AI
Safety Standard, with the exception of the 10th voluntary
guardrail which proposed to focus on conformity standards
under the mandatory guardrails rather than stakeholder
engagement as set out under the voluntary guardrails.
In December 2025, the Australian Government released the
National AI Plan signaling a shift away from the proposed
mandatory AI guardrails for high-risk applications which was
subject to consultation in September 2024. Instead, the
Australian Government’s National AI Plan seeks to use the
existing, largely technology-neutral legal frameworks and
regulators’ existing expertise rather than implementation of
any standalone AI act.
The Australian Government is also establishing an AI Safety
Institute (“AISI”) to monitor, test and share information on
emerging AI capabilities, risks and harms. Its operations will
commence in early 2026 and will include supporting existing
regulators with independent advice to ensure AI companies
are compliant with Australian law and uphold legal
standards around fairness and transparency. Hence, AISI and
the National AI Plan will reinforce existing technology-
neutral legal frameworks such as the Privacy Act 1988 (Cth)
and the Corporations Act 2001 (Cth).
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2025 FORM 10-K
Regulators such as APRA and ASIC, which already provide
guidance on AI use in banking, insurance, and financial
services
(including
operational
risk
and
governance
standards) will continue to identify and manage potential
harms and report any legislative gaps to the AISI.
Climate Change Reporting. A mandatory climate-related risk
disclosure regime has been introduced with the regime to be
phased in for 3 groups of large Australian companies
required to report under Chapter 2M of the Corporations Act
2001 (Cth) and the relevant commencement date of the
reporting requirements determined by the Australian
company (and its controlled entities) meeting certain criteria
for each group of companies under the regime based on
consolidated revenue, consolidated gross assets and number
of employees. The regime is regulated by ASIC and includes
new sustainability reporting requirements to be phased in
over 3 years for the first annual reporting period beginning
on or after January 1, 2025 for Group 1 companies, July 1,
2026 for Group 2 companies and July 1, 2027 for Group 3
companies. Our Australia mortgage operations will be
reporting as a Group 2 company.
Gibraltar
General. The insurance industry is regulated by the Gibraltar
Financial Services Commission (“GFSC”). We have two
carriers, Alwyn Insurance Company Limited (“Alwyn
Insurance”) and Southern Rock Insurance Company Limited
(“SRICL”), which are authorized and regulated by the GFSC.
SRICL is no longer authorized to enter into new contracts of
insurance or renew existing contracts of insurance and is no
longer writing business. At the end of 2025, SRICL completed
a transfer of its remaining business to Alwyn Insurance and
will proceed to wind up its business. Following the departure
of the U.K. from the EU, Gibraltar is not part of the EU and
remains a British Overseas Territory. Post-Brexit, Gibraltar’s
licensed insurers are able to cover risks in the U.K. via the
Financial Services (Gibraltar) (Amendment) (EU Exit)
Regulations, and Alwyn Insurance currently writes business
for U.K. policyholders. Gibraltar is a Solvency II equivalent
jurisdiction, and its regulatory requirements are similar to
those in the U.K. requiring compliance with minimum and
solvency capital requirements and other relevant regulatory
requirements.
TAX MATTERS
The following summary of the taxation of Arch Capital and
the taxation of our shareholders is based upon current law
and is for general information only. Legislative, judicial or
administrative changes may be forthcoming that could affect
this summary.
The following legal discussion (including and subject to the
matters and qualifications set forth in such summary) of
certain tax considerations (a) under “—Taxation of Arch
Capital—Bermuda” and “—Taxation of Shareholders—
Bermuda” is based upon the advice of Conyers Dill &
Pearman Limited, Hamilton, Bermuda and (b) under “—
Taxation of Arch Capital-United States,” “—Taxation of
Shareholders-United States Taxation,” “—Taxation of Our
U.S. Shareholders” and “—United States Taxation of Non-
U.S. Shareholders” is based upon the advice of White & Case
LLP, New York, New York (the advice of such firms does not
include accounting matters, determinations or conclusions
relating to the business or activities of Arch Capital). The
summary is based upon current law and is for general
information only. The tax treatment of a holder of our
common or preferred shares, or of a person treated as a
holder of our shares for U.S. federal income, state, local or
non-U.S. tax purposes, may vary depending on the holder’s
particular tax situation. Legislative, judicial or administrative
changes or interpretations may be forthcoming that could
be retroactive and could affect the tax consequences to us
or to holders of our shares.
Taxation of Arch Capital
OECD’s Pillar II. Under Pillar II, the OECD’s Inclusive
Framework published the “Global Anti-Base Erosion,” or
“GloBE” model rules in 2021, which apply to certain in scope
entities and provide for a coordinated system of taxation
that imposes a “top-up” tax to ensure that any in scope
entity pays a minimum rate of 15% tax on its net taxable
income in each country where it operates. The members of
the EU have either already adopted domestic legislation
implementing the minimum tax rules, pursuant to the EU’s
minimum tax directive, unanimously agreed by the member
states in 2022, or have exercised their option to postpone
implementation on the basis of certain exceptions available
to countries that have a small number of multinational
groups to which the rules would apply. For many members
of the EU, such rules are effective for periods beginning on
or after December 31, 2023, with the “under-taxed profit
rule” taking effect for periods beginning on or after January
1, 2025.
Legislatures in multiple countries outside of the EU
(including the United Kingdom, Australia, Canada and
Switzerland) have enacted, and are continuing to enact,
legislation to implement the GloBE model rules.
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2025 FORM 10-K
A number of elements of Pillar II remain uncertain. The
OECD continues to release guidance regarding Pillar II, only
certain jurisdictions have currently enacted laws to give
effect to Pillar II, jurisdictions may interpret such laws in
different manners, and certain elements of such laws are
currently subject to challenge pursuant to legal proceedings.
Thus, the overall implementation of Pillar II is subject to
change, possibly on a retroactive basis. Although certain
jurisdictions in which we and our affiliates do business have
enacted an “under-taxed profit rule”, the impact of such rule
and the extent to which such rule will change or be
eliminated based on current legal and political challenges is
uncertain. The adoption of the tax laws described above
(including, the “under-taxed profit rule”, which is now
effective in several jurisdictions in which we and our
affiliates do business) resulted in an increase to our 2025
effective tax rate and aggregate tax liability. See Item 1A,
“Risk Factors — Risks Relating to Taxation” for additional
information.
Bermuda. Prior to January 1, 2025 and in accordance with
the Exempted Undertakings Tax Protection Act 1966 of
Bermuda, as amended, Arch Capital was not subject to tax
on income or profits, withholding tax, capital transfer tax,
estate duty or inheritance tax. In response to the OECD Pillar
II initiative, in 2023, the Government of Bermuda enacted
the Bermuda CIT Act, which is effective for tax years
beginning on or after January 1, 2025. Arch Capital is subject
to tax on income under the Bermuda CIT Act, which tax is
charged at a rate of 15% of the Company’s net taxable
income as determined in accordance with and subject to the
adjustments set out in the Bermuda CIT Act (including in
respect of any foreign tax credits applicable to us) for tax
years starting on January 1, 2025. The Bermuda CIT Act does
not impose any withholding tax, capital transfer tax, estate
duty or inheritance tax, so there will continue to be no such
taxes payable by us or by our shareholders in respect of our
shares following January 1, 2025. See Item 1A, “Risk Factors
— Risks Relating to Taxation” for additional information. In
addition to the Bermuda corporate income tax, we also
currently pay our Bermuda annual government fee; and, our
Bermuda insurance and reinsurance subsidiaries also pay
their respective Bermuda annual government fees and
annual insurance license fees. In addition, all entities
employing individuals in Bermuda are required to pay a
payroll tax and other sundry taxes payable, directly or
indirectly, to the Bermuda government.
United States. Arch Capital and its non-U.S. subsidiaries
believe they have conducted their operations and currently
intend to conduct their operations going forward in a
manner that has not caused them and will not cause them to
be treated as engaged in a trade or business in the U.S. and,
therefore, has not been and will not be required to pay U.S.
federal income taxes (other than U.S. excise taxes on
insurance and reinsurance premiums and withholding taxes
on dividends and certain other U.S. source investment
income). However, because definitive identification of
activities which constitute being engaged in a trade or
business in the U.S. is not provided by the Internal Revenue
Code of 1986, as amended (the “Code”), U.S. Treasury
regulations (“Treasury Regulations”) or court decisions,
there can be no assurance that our position on being
engaged in a trade or business in the U.S. is correct. A
foreign corporation deemed to be so engaged would be
subject to U.S. federal income tax, as well as the branch
profits tax, on its income, which is treated as effectively
connected with the conduct of that trade or business unless
the corporation is entitled to relief under a tax treaty. Such
income tax, if imposed, would be based on effectively
connected income computed in a manner generally
analogous to that applied to the income of a domestic
corporation, except that deductions and credits generally
are not permitted unless the foreign corporation has timely
filed a U.S. federal income tax return in accordance with
applicable Treasury Regulations. Penalties may be assessed
for failure to file tax returns. In addition, in such case, a 30%
branch profits tax would be imposed on net income after
subtracting the regular corporate tax and making certain
other adjustments.
Under the income tax treaty between Bermuda and the U.S.
(the “Treaty”), Arch Capital's Bermuda insurance subsidiaries
will be subject to U.S. income tax on any insurance premium
income that is effectively connected with a U.S. trade or
business only if that trade or business is conducted through
a permanent establishment in the U.S. No Treasury
Regulations interpreting the Treaty have been issued. While
there can be no assurances, Arch Capital does not believe
that any of its Bermuda insurance subsidiaries has a
permanent establishment in the U.S. Such subsidiaries
would not be entitled to the benefits of the Treaty if (i) 50%
or less of Arch Capital's shares were beneficially owned,
directly or indirectly, by Bermuda residents or U.S. citizens
or residents, or (ii) any such subsidiary's income were used
in substantial part to make disproportionate distributions to,
or to meet certain liabilities to, persons who are not
Bermuda residents or U.S. citizens or residents. While Arch
Capital believes that its Bermuda insurance subsidiaries have
been eligible for Treaty benefits to date, there can be no
assurance that this is the case or that the Bermuda
insurance subsidiaries will continue to be eligible for Treaty
benefits.
The Treaty clearly applies to premium income but may be
construed as not protecting investment income. If Arch
Capital’s Bermuda insurance subsidiaries were considered to
be engaged in a U.S. trade or business and were entitled to
the benefits of the Treaty in general, but the Treaty were
not found to protect investment income, a portion of such
subsidiaries’ investment income could be subject to U.S.
federal income tax.
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2025 FORM 10-K
Non-U.S. insurance companies carrying on an insurance
business within the U.S. have a certain minimum amount of
effectively connected net investment income, determined in
accordance with a formula that depends, in part, on the
amount of U.S. risk insured or reinsured by such companies.
If any of Arch Capital's non-U.S. insurance subsidiaries is
considered to be engaged in the conduct of an insurance
business in the U.S., a significant portion of such subsidiary’s
investment income could be subject to U.S. federal income
tax.
Non-U.S. corporations not engaged in a trade or business in
the U.S. are nonetheless subject to U.S. withholding tax on
certain “fixed or determinable annual or periodic gains,
profits and income” derived from sources within the U.S. as
enumerated in Section 881(a) of the Code (such as dividends
and certain interest on investments), subject to exemption
under the Code or reduction by an applicable treaty.
The U.S. also imposes an excise tax on insurance and
reinsurance premiums paid to non-U.S. insurers or
reinsurers with respect to risks located in the U.S. The rates
of tax, unless reduced by an applicable U.S. tax treaty, are
4% for non-life insurance premiums and 1% for life
insurance and all reinsurance premiums.
On July 4, 2025, P.L. 119-21, commonly referred to as the
One Big Beautiful Bill Act (the "OBBBA"), was enacted into
law. Among other provisions, the OBBBA amended Section
59A of the Code relating to the base erosion and anti-abuse
tax ("BEAT"). The BEAT operates as a minimum tax that
applies when a taxpayer's regular U.S. federal income tax
liability (as reduced by certain tax credits) is less than a
specified percentage of its "modified taxable income," which
is generally computed without deductions for certain
payments to non-U.S. affiliates (including, in certain
circumstances, intercompany reinsurance premiums). The
OBBBA amended the BEAT percentage applicable to a
taxpayer's modified taxable income such that the rate is now
permanently 10.5%, removing the prior statutory increase to
12.5% that would otherwise have applied for taxable years
beginning
after
December
31,
2025.
The
OBBBA
amendments to Section 59A are effective for taxable years
beginning after December 31, 2025. The Company does not
believe these amendments will have a material impact on its
U.S. operations, including the impact, if any, on its effective
tax rate, cash taxes, and intercompany arrangements.
United Kingdom. Our U.K. subsidiaries are companies that
are incorporated and have their central management and
control in the U.K. and are therefore resident in the U.K. for
corporation tax purposes. As a result, they are subject to
U.K. corporation tax on their respective profits. The U.K.
branches of Arch Re Europe and Arch Insurance (EU) are
subject to U.K. corporation tax on the profits (both income
profits and chargeable gains) attributable to each branch.
The rate of U.K. corporation tax for the 2025 financial year is
25%. Pillar II has been enacted and in force in the U.K. by
way of a multinational top-up tax and a domestic top-up tax,
together designed to ensure that any Pillar II taxes which can
be levied on profits earned in the U.K. will be paid in the U.K.
and not elsewhere. Due to the staggered UK implementation
of OECD Pillar II guidance, a top up tax has been accrued on
non-UK operations in 2025.
Canada. Arch Insurance Canada is taxed on its worldwide
income. Arch Re U.S. is taxed on its net business income
earned in Canada. The general federal corporate income tax
rate in Canada is currently 15%. Provincial and territorial
corporate income tax rates are added to the general federal
corporate income tax rate and generally vary between 8%
and 16%. Pillar II has largely been enacted in Canada and,
due to the staggered Canadian implementation of OECD
Pillar II guidance, a top up tax has been accrued on non-
Canadian operations in 2025.
Ireland. Each of Arch Re Europe, Arch Insurance (EU) and
Arch Underwriters Europe is incorporated and resident in
Ireland for corporation tax purposes and will be subject to
Irish corporate tax on worldwide profits, including the
profits of the branches of Arch Re Europe, Arch Insurance
(EU) and Arch Underwriters Europe. Any foreign branch
corporate tax payable is creditable against Arch Re Europe’s
Irish corporate tax liability on the results of Arch Re Europe’s
branches with the same principle applied to Arch Insurance
(EU)’s branches and Arch Underwriters Europe’s branches.
The current rate of Irish corporation tax applicable to such
trading profits is 12.5%. Pillar II has been enacted in Ireland,
including the Irish Qualified Domestic Minimum Top-Up Tax
(“QDMTT”), which is intended to ensure a minimum
effective tax rate of 15% for in-scope groups. As a result, our
Irish subsidiaries may be subject to additional Irish tax
liabilities under the QDMTT if their Pillar II effective tax rate
falls below 15%.
Switzerland. Arch Re Europe Swiss Branch and Arch
Underwriters Europe Swiss Branch are subject to Swiss
corporation tax on the profit which is allocated to each
branch. The effective tax rate is approximately 19.61% for
Swiss federal, cantonal and communal corporation taxes on
the profit. The effective tax rate of the annual cantonal and
communal capital taxes on the equity which is allocated to
Arch Re Europe Swiss Branch and Arch Underwriters Europe
Swiss Branch is approximately 0.17%. Pillar II has largely
been enacted in Switzerland but should not adversely
impact taxes payable in Switzerland.
Denmark. Arch Re Denmark, established as a subsidiary of
Arch Re Bermuda, is subject to Danish corporation taxes on
its profits at a rate of 22%. Pillar II has been enacted in
Denmark but should not adversely impact taxes payable in
Denmark.
ARCH CAPITAL
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2025 FORM 10-K
Gibraltar. Our Gibraltar subsidiaries are companies that are
incorporated and have their central management and
control in Gibraltar and are therefore resident in Gibraltar
for corporation tax purposes. As a result, they are subject to
Gibraltar corporation tax on their respective profits at a rate
of 15%. Pillar II has largely been enacted in Gibraltar but
should not adversely impact taxes payable in Gibraltar.
Australia. Arch LMI and Arch Indemnity, Australian
incorporated and tax resident companies, are subject to
Australian corporate tax on their worldwide profits. The
current rate of Australian corporation tax applicable to such
profits is 30%. Pillar II has been enacted in Australia but
should not adversely impact taxes payable in Australia.
Taxation of Shareholders
Bermuda. Currently, there is no Bermuda withholding tax on
dividends paid by us.
United States—General. The following summary sets forth
certain U.S. federal income tax considerations related to the
purchase, ownership and disposition of our common shares
and our non-cumulative preferred shares (“preferred
shares”). Unless otherwise stated, this summary deals only
with shareholders (“U.S. holders”) that are U.S. Persons (as
defined below) and to common shares and preferred shares
beneficially owned by such holder and held as capital assets.
The following discussion is only a general summary of the
U.S. federal income tax matters described herein and does
not purport to address all of the U.S. federal income tax
consequences that may be relevant to a particular
shareholder in light of such shareholder’s specific
circumstances. In addition, the following summary (except
as to matters explicitly discussed therein) does not describe
the U.S. federal income tax consequences that may be
relevant to certain types of shareholders, such as banks,
insurance companies, and other financial institutions,
regulated investment companies, real estate investment
trusts, financial asset securitization investment trusts,
brokers, dealers or traders in securities, entities or
arrangements classified as partnerships or pass-through
entities for U.S. federal income tax purposes or holders of
equity interests therein, tax exempt entities, “individual
retirement accounts” or “Roth IRAs”, expatriates and former
citizens or long-term residents of the United States, persons
whose functional currency for U.S. federal income tax
purposes is not the U.S. dollar, persons that own, directly,
indirectly or constructively, ten percent (10%) or more of the
total voting power or value of all of our outstanding shares,
persons owning our common shares or preferred shares in
connection with a trade or business conducted outside the
United States, U.S. holders that hold our common shares or
preferred shares through a non-U.S. broker or other non-
U.S. intermediary, persons who hold our common shares or
preferred shares as part of a hedging or conversion
transaction or as part of a straddle or wash sale, who may be
subject to special rules or treatment under the Code or
persons required for U.S. federal income tax purposed to
recognize income no later than such income is reported on
such persons’ applicable financial statements, and persons
subject to the alternative minimum tax. This discussion is
based upon the Code, the Treasury Regulations promulgated
there under and any relevant administrative rulings or
pronouncements or judicial decisions, all as in effect on the
date of this annual report and as currently interpreted and
does not take into account possible changes in such tax laws
or interpretations thereof, which may apply retroactively.
This discussion does not include any description of the tax
laws of any state or local governments within the U.S., or of
any foreign government, that may be applicable to our
common shares or preferred shares or the shareholders.
There can be no assurance the U.S. Internal Revenue Service
(“IRS”) or a court will not take a contrary position to that
discussed below regarding the tax consequences of the
purchase, ownership and disposition of our common shares
and preferred shares. Persons holding or considering an
investment in the common shares or preferred shares
should consult their own tax advisors concerning the
application of the U.S. federal tax laws to their particular
situations as well as any tax consequences arising under the
laws of any state, local or foreign taxing jurisdiction prior to
making such investment.
If an entity that is treated as a partnership holds our
common shares or preferred shares, the tax treatment of a
partner will generally depend upon the status of the partner
and the activities of the partnership. If you are a partnership
holding or considering an investment in our common shares
or preferred shares or a partner therein, you should consult
your tax advisor.
For purposes of this discussion, the term “U.S. Person”
means a person that is, for U.S. federal income tax purposes:
•
an individual who is a citizen or resident of the U.S.;
•
a corporation created or organized under the laws of
the U.S., any state thereof or the District of Columbia;
•
an estate, the income of which is subject to U.S. federal
income taxation regardless of its source; or
•
a trust, if either (i) a court within the U.S. is able to
exercise primary supervision over the administration of
such trust and one or more U.S. persons have the
authority to control all substantial decisions of such
trust or (ii) the trust has a valid election in effect to be
treated as a U.S. person for U.S. federal income tax
purposes.
ARCH CAPITAL
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2025 FORM 10-K
United States—Taxation of Dividends. The preferred shares
should be properly classified as equity rather than debt for
U.S. federal income tax purposes. Subject to the discussions
below relating to the potential application of the controlled
foreign corporation (“CFC”), “related person insurance
income” (“RPII”) and passive foreign investment company
(“PFIC”) rules, as defined below, cash distributions, if any,
made with respect to our common shares or preferred
shares will constitute dividends for U.S. federal income tax
purposes to the extent paid out of our current or
accumulated earnings and profits (as computed using U.S.
tax principles). If a U.S. holder of our common shares or our
preferred shares is an individual or other non-corporate
holder, dividends paid, if any, to that holder that constitute
qualified dividend income generally will be taxable at the
rate applicable for long-term capital gains (generally up to
20%), provided that such person meets a holding period
requirement. Generally, in order to meet the holding period
requirement, the U.S. holder must hold the common shares
for more than 60 days during the 121-day period beginning
60 days before the ex-dividend date and must hold
preferred shares for more than 90 days during the 181-day
period beginning 90 days before the ex-dividend date.
Dividends paid, if any, with respect to common shares or
preferred shares generally will be qualified dividend income,
provided the common shares or preferred shares are readily
tradable on an established securities market in the U.S. in
the year in which the shareholder receives the dividend
(which should be the case for shares that are listed on the
Nasdaq Stock Market or the New York Stock Exchange) and
Arch Capital is not considered to be a passive foreign
investment company in either the year of the distribution or
the preceding taxable year. No assurance can be given that
the preferred shares will be considered readily tradable on
an established securities market in the U.S. See “—Taxation
of Our U.S. Shareholders” below.
A U.S. holder that is an individual, estate or a trust that does
not fall into a special class of trusts that is exempt from such
tax, will be subject to a 3.8% tax on the lesser of (1) the U.S.
holder’s “net investment income” for the relevant taxable
year and (2) the excess of the U.S. holder’s modified
adjusted gross income for the taxable year over a certain
threshold (which in the case of individuals will be between
$125,000 and $250,000, depending on the individual’s filing
status). A U.S. holder’s net investment income generally will
include its dividend income and its net gains from the
disposition of our common shares and preferred shares,
unless such dividend income or net gains are derived in the
ordinary course of the conduct of a trade or business (other
than a trade or business that consists of certain passive or
trading activities).
Distributions with respect to the common shares and the
preferred shares will not be eligible for the dividends
received deduction allowed to U.S. corporations under the
Code. To the extent distributions on our common shares and
preferred shares exceed our earnings and profits, they will
be treated first as a return of the U.S. holder's basis in our
common shares and our preferred shares to the extent
thereof, and then as gain from the sale of a capital asset.
United States—Sale, Exchange or Other Disposition. Subject
to the discussions below relating to the potential application
of the CFC, RPII and PFIC rules, U.S holders of common
shares and preferred shares generally will recognize capital
gain or loss, if any, for U.S. federal income tax purposes on
the sale, exchange or other taxable disposition of common
shares or preferred shares, as applicable in an amount equal
to the difference between the amount realized on the sale,
exchange or other taxable disposition and the U.S holder’s
adjusted tax basis in the shares. Such gain or loss generally
will be long term capital gain or loss if the U.S. holder’s
holding period for the shares exceeds one year. Long-term
capital gains of certain non-corporate U.S. holders (including
individuals) are generally eligible for reduced rates of
taxation. The deductibility of capital losses is subject to
limitations.
United
States—Redemption
of
Preferred
Shares.
A
redemption of the preferred shares will be treated under
Section 302 of the Code as a dividend to the extent we have
earnings and profits allocable to such shares, unless the
redemption satisfies one of the tests set forth in Section
302(b) of the Code enabling the redemption to be treated as
a sale or exchange, subject to the discussion herein relating
to the potential application of the CFC, RPII and PFIC rules.
Under the relevant Code Section 302(b) tests, the
redemption should be treated as a sale or exchange only if it
(1) is substantially disproportionate, (2) constitutes a
complete termination of the holder's stock interest in us or
(3) is “not essentially equivalent to a dividend.” In
determining whether any of these tests are met, shares
considered to be owned by the holder by reason of certain
constructive ownership rules set forth in the Code, as well as
shares actually owned, must generally be taken into
account. It may be more difficult for a U.S. holder who owns,
actually or constructively by operation of the attribution
rules, any of our other shares to satisfy any of the above
requirements.
In order to meet the substantially disproportionate test, the
percentage of our issued and outstanding voting shares
actually and constructively owned by the U.S. holder
immediately following the redemption of our shares must,
among other requirements, be less than 80% of the
percentage of our issued and outstanding voting shares
actually and constructively owned by the U.S. holder
immediately before the redemption. There will be a
ARCH CAPITAL
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2025 FORM 10-K
complete termination of a U.S. holder’s interest if either (i)
all of our shares actually and constructively owned by the
U.S. holder are redeemed or (ii) all of our shares actually
owned by the U.S. holder are redeemed and the U.S. holder
is eligible to waive, and effectively waives in accordance with
specific rules, the attribution of shares owned by certain
family members and the U.S. holder does not constructively
own any other of our shares. The redemption of our shares
will not be essentially equivalent to a dividend if such
redemption results in a “meaningful reduction” of the U.S.
holder’s proportionate interest in us. Whether the
redemption will result in a meaningful reduction in a U.S.
holder’s proportionate interest in us will depend on the
particular facts and circumstances. However, the IRS has
indicated in a published ruling that even a small reduction in
the proportionate interest of a small minority shareholder in
a publicly held corporation who exercises no control over
corporate affairs may constitute such a “meaningful
reduction.” The determination as to whether any of the
alternative tests of Section 302(b) of the Code is satisfied
with respect to a particular holder of the preferred shares
depends on the facts and circumstances as of the time the
determination is made.
If none of the foregoing tests are satisfied, then the
redemption of any of our shares will be treated as a
distribution and the tax effects will be as described under
“—United States—Taxation of Dividends” above. After the
application of those rules, any remaining tax basis of the U.S.
holder in the redeemed shares will be added to the U.S.
holder’s adjusted tax basis in its remaining shares, or,
possibly, in other shares constructively owned by it. A U.S.
holder should consult with its own tax advisors as to the tax
consequences of a redemption of ours shares.
U.S. holders who actually or constructively own five percent
or more of our shares (by vote or value) may be subject to
special reporting requirements with respect to a redemption
of our shares, and such holders are urged to consult with
their own tax advisors with respect to their reporting
requirements.
Taxation of Our U.S. Shareholders
Controlled Foreign Corporation Rules. We or any of our non-
U.S. subsidiaries generally will be treated as a CFC with
respect to any taxable year if at any time during such taxable
year, one or more “10% U.S. Shareholders” (as defined
below) collectively own more than 50% of us or such non-
U.S. subsidiary (as applicable) by vote or value (taking into
account shares actually owned by such U.S. holder as well as
shares attributed to such U.S. holder under the Code or the
Treasury Regulations thereunder). Moreover, with respect
to insurance income (including reinsurance income), the
“more than 50%” requirement described in the preceding
sentence is replaced with a more expansive “more than
25%” requirement. A 10% U.S. Shareholder means any U.S.
Person
who
was
considered
to
own,
actually
or
constructively, 10% or more of the total combined voting
power or total combined value of our shares or those of our
non-U.S. subsidiaries (as applicable). As a result of a change
in law for taxable years beginning after December 31, 2017,
the voting cut-back limitation contained in our bye-laws that
limits the votes conferred by the Controlled Shares (as
defined in our bye-laws) of any U.S. Person to 9.9% of the
total voting power of all our shares entitled to vote will not
prevent any U.S. holder from being treated as a 10% U.S.
Shareholder. Section 958(b)(4) of the Code was repealed
under the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts Act”),
however, the OBBBA restored the limitation on downward
attribution of stock ownership under Section 958(b)(4) of
the Code. The restoration is generally effective for taxable
years of foreign corporations beginning after December 31,
2025.
Thus, for the last taxable year beginning before January 1,
2018, and through taxable years beginning on or before
December 31, 2025, Section 958(b)(4) was not in effect as a
result of the Tax Cuts Act. For those periods, our U.S.
subsidiaries were treated as constructively owning stock of
our non-U.S. subsidiaries under the constructive ownership
rules, and accordingly our non-U.S. subsidiaries were treated
as CFCs for U.S. federal income tax purposes.
For taxable years of our non-U.S. subsidiaries that begin
after December 31, 2025, as a result of the restoration of
Section 958(b)(4), our non-U.S. subsidiaries are no longer
treated as constructively owned by our U.S. subsidiaries, and
accordingly, whether any such non-U.S. subsidiary is treated
as a CFC under the Code will depend on whether such
subsidiary otherwise meets the requirements to be treated
as a CFC (including ownership by 10% U.S. Shareholders
applying relevant attribution and constructive ownership
rules). The OBBBA also enacted new Section 951B, which
may, in certain circumstances, cause U.S. persons to be
subject to CFC-type income inclusion and/or reporting rules
with respect to certain foreign corporations even if such
ARCH CAPITAL
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2025 FORM 10-K
corporations are not otherwise treated as CFCs after the
restoration of Section 958(b)(4). U.S. holders should consult
their own tax advisors regarding the application of these
rules to their particular circumstances.
Status as a CFC would not cause us or any of our non-U.S.
subsidiaries to be subject to U.S. federal income tax. Such
status also would have no adverse U.S. federal income tax
consequences for any U.S. holder that is not a 10% U.S.
Shareholder with respect to us or any such non-U.S.
subsidiary (as applicable). If we or any of our non-U.S.
subsidiaries are or were a CFC with respect to any taxable
year, a U.S. holder that is considered a 10% U.S. Shareholder
(including, after December 31, 2025, a U.S. holder that is
considered a 10% U.S. Shareholder on any day during a
taxable year of the CFC) would be subject to current U.S.
federal income taxation (at ordinary income tax rates) to the
extent of all or a portion of the undistributed earnings and
profits of Arch Capital and our subsidiaries attributable to
“subpart F income” (including certain insurance premium
income and investment income) or global intangible low-
taxed income and may be taxable at ordinary income tax
rates on any gain recognized on a sale or other disposition
(including by way of repurchase or liquidation) of our
common shares or preferred shares to the extent of the
current and accumulated earnings and profits attributable to
such common shares or preferred shares.
Related Person Insurance Income Rules. In general, with
respect to RPII (a limited category of insurance income, as
defined below), the CFC rules are expanded in two
significant respects. First, in determining CFC status, as well
as determining which U.S. shareholders are subject to
current taxation with respect to a CFC’s RPII (whether or not
currently distributed), all U.S. shareholders (as opposed to
only 10% U.S. Shareholders) are taken into account. Second,
the amount of stock in a foreign corporation that all U.S.
shareholders, in the aggregate, must own for such
corporation to be treated as a CFC is reduced from more
than 50% (by vote or value), and more than 25% (by vote or
value) with respect to insurance income generally, to 25% or
more (by vote or value). Generally, RPII is insurance income
(including reinsurance income) of a foreign corporation with
respect to which the insured is a United States shareholder
of the foreign corporation or a related person to such a
shareholder.
Under one exception to the foregoing RPII rules, U.S.
shareholders are not required to include a CFC’s RPII
currently in income if the CFC’s gross RPII is less than 20% of
its total gross insurance income for the taxable year in
question (the “RPII 20% gross income exception”).
Under current law, we currently expect each of our non-U.S.
subsidiaries to satisfy the RPII 20% gross income exception,
and therefore we currently do not expect any U.S.
shareholder to be required to include RPII in income
(although there can be no assurance that this is or will
continue be the case). However, proposed Treasury
Regulations issued on January 24, 2022, if finalized in their
current form, would for the first time (on a prospective
basis) expand the definition of RPII to include certain
intercompany insurance income (including reinsurance
income) in a manner that could cause certain of our foreign
subsidiaries not to satisfy the RPII 20% gross income
exception. In such event, (1) as noted above, all U.S.
shareholders (not just 10% U.S. Shareholders) would be
required to include RPII in income currently, whether or not
distributed, and (2) as noted below, U.S. shareholders that
are tax exempt entities would be required to treat such RPII
inclusions as unrelated business taxable income. Current
and prospective U.S. holders should consult their own tax
advisors as to the potential impact of these proposed
Treasury Regulations.
Section 953(c)(7) of the Code generally provides that Section
1248 of the Code (which generally would require a U.S.
holder to treat certain gains attributable to the sale,
exchange or disposition of common shares or preferred
shares as a dividend) will apply to the sale or exchange by a
U.S. shareholder of shares in a foreign corporation that is
characterized as a CFC under the RPII rules if the foreign
corporation would be taxed as an insurance company if it
were a U.S. corporation, regardless of whether the U.S.
shareholder is a 10% U.S. Shareholder or whether the
corporation qualifies for the RPII 20% gross income
exception. Although existing Treasury Regulations do not
address the question, proposed Treasury Regulations issued
in 1991 create some ambiguity as to whether Section 1248
and the requirement to file Form 5471 would apply when
the non-U.S. corporation has a foreign insurance subsidiary
that is a CFC for RPII purposes and that would be taxed as an
insurance company if it were a domestic corporation. We
believe that Section 1248 and the requirement to file Form
5471 will not apply to a less than 10% U.S. Shareholder
because Arch Capital is not directly engaged in the insurance
business. There can be no assurance, however, that the IRS
will interpret the proposed Treasury Regulations in this
manner or that the Treasury will not take the position that
Section 1248 and the requirement to file Form 5471 will
apply to dispositions of our common shares or our preferred
shares.
ARCH CAPITAL
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2025 FORM 10-K
If the IRS or U.S. Treasury were to make Section 1248 of the
Code and the Form 5471 filing requirement applicable to the
sale of our shares, we would notify shareholders that
Section 1248 of the Code and the requirement to file Form
5471 will apply to dispositions of our shares. Thereafter, we
would send a notice after the end of each calendar year to
all persons who were shareholders during the year notifying
them that Section 1248 of the Code and the requirement to
file Form 5471 apply to dispositions of our shares by U.S.
holders. We would attach to this notice a copy of Form 5471
completed with all our information and instructions for
completing the shareholder information.
Tax-Exempt Shareholders. Tax-exempt entities may be
required to treat certain Subpart F insurance income,
including RPII, that is includible in income by the tax-exempt
entity as unrelated business taxable income. Current and
prospective U.S. holders that are tax exempt entities should
consult their own tax advisors as to the potential impact of
the unrelated business taxable income provisions of the
Code.
Passive Foreign Investment Companies. Sections 1291
through 1298 of the Code contain special rules applicable
with respect to foreign corporations that are PFICs. In
general, a foreign corporation will be a PFIC if 75% or more
of its income constitutes “passive income” or 50% or more
of its assets produce passive income. If we were to be
characterized as a PFIC, U.S. holders would be subject to a
penalty tax at the time of their sale of (or receipt of an
“excess distribution” with respect to) their common shares
or preferred shares imposed at the highest applicable rate
under the Code for the applicable tax year. In general, a
shareholder receives an “excess distribution” if the amount
of the distribution is more than 125% of the average
distribution with respect to the shares during the three
preceding taxable years (or shorter period during which the
taxpayer held the stock). In general, the penalty tax is
equivalent to an interest charge on taxes that are deemed
due during the period the shareholder owned the shares,
computed by assuming that the excess distribution or gain
(in the case of a sale) with respect to the shares was taxable
in equal portions throughout the holder’s period of
ownership. The interest charge is equal to the applicable
rate imposed on underpayments of U.S. federal income tax
for such period. A U.S. shareholder may avoid some of the
adverse tax consequences of owning shares in a PFIC by
making a qualified electing fund (“QEF”) election. A QEF
election is revocable only with the consent of the IRS and
has the following consequences to a shareholder:
•
For any year in which Arch Capital is a PFIC, the
shareholder would include in its taxable income a
proportionate share of the net ordinary income and net
capital gains of Arch Capital and certain of its non-U.S.
subsidiaries.
•
For any year in which Arch Capital is not a PFIC, the
shareholder would not be subject to the QEF inclusion
regime described in the preceding paragraph for such
taxable year.
For taxable years beginning on or before December 31,
2017, the determination of whether the active insurance
company exception applies to an insurance company was
made on a case-by-case basis and the analysis was
inherently subjective. Under the Tax Cuts Act, for taxable
years beginning after December 31, 2017, the active
insurance company exception applies only if (i) the company
would be taxed as an insurance company were it a U.S.
corporation and (ii) either (A) loss and loss adjustment
expense and certain reserves constitute more than 25% of
the company’s gross assets for the relevant year or (B) loss
and loss adjustment expenses and certain reserves
constitute more than 10% of the company’s gross assets for
the relevant year and, based on the applicable facts and
circumstances, the company is predominantly engaged in an
insurance business and the failure of the company to satisfy
the preceding 25% test is due solely to run-off related or
other specified circumstances involving the insurance
business. The PFIC statutory provisions contain a look-
through rule that states that, for purposes of determining
whether a foreign corporation is a PFIC, such foreign
corporation shall be treated as if it “received directly its
proportionate share of the income” and as if it “held its
proportionate share of the assets” of any other corporation
in which it owns at least 25% of the stock. We believe that
we were not a PFIC for any taxable year ended on or before
December 31, 2025, and we currently are not expecting to
become a PFIC for any subsequent taxable year. However,
due to the complexity and uncertainty of the PFIC rules and
the limited guidance interpreting them, there can be no
assurance that we have not been a PFIC to date or that we
will not become a PFIC at some time in the future. In
addition, our U.S. counsel expresses no opinion with respect
to our PFIC status for our current or future taxable years.
On December 4, 2020, the IRS issued certain final Treasury
Regulations (the “2020 final PFIC insurance regulations”) and
revised proposed Treasury Regulations (the “2020 proposed
PFIC insurance regulations”) regarding the application of the
insurance company exception. While we believe that the
2020 final PFIC insurance regulations and the 2020 proposed
PFIC insurance regulations should not adversely impact our
ability to satisfy the insurance company exception and avoid
being treated as a PFIC, there can be no assurance that such
exception will in fact apply and/or will continue to apply at
all times in the future. Each U.S. holder should consult its
own tax advisor as to the effects of these rules.
ARCH CAPITAL
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2025 FORM 10-K
Backup Withholding and Information Reporting. Payments of
dividends and sales proceeds from a sale, exchange or other
taxable disposition (including redemption) of our common
shares or preferred shares that are made within the United
States, by a U.S. payor or through certain U.S.-related
financial intermediaries to a U.S. holder generally are subject
to information reporting, unless the U.S. holder is a
corporation or other exempt recipient, and if required,
demonstrates that fact. In addition, such payments may be
subject to backup withholding, unless (1) the U.S. holder is a
corporation or other exempt recipient or (2) the U.S. holder
provides a correct taxpayer identification number and
certifies that it is not subject to backup withholding in the
manner required. Backup withholding is not an additional
tax. The amount of any backup withholding from a payment
to a U.S. holder will generally be allowed as a credit against
the U.S. holder’s U.S. federal income tax liability or may
entitle the U.S. holder to a refund, provided that the
required information is timely furnished to the IRS.
Foreign Financial Asset Reporting. Certain U.S. persons are
required to report information relating to interests in
“specified foreign financial assets”, including shares issued
by a non-U.S. corporation, for any year in which the
aggregate value of all specified foreign financial assets
exceeds certain thresholds, subject to certain exceptions
(including an exception for shares held in a custodial account
maintained with a U.S. financial institution). Penalties may
be imposed for a failure to disclose such information. U.S.
holders are urged to consult their tax advisers regarding the
effect, if any, of these additional reporting requirements on
their ownership and disposition of our common shares or
preferred shares.
United States Taxation of Non-U.S. Shareholders
Taxation of Dividends. Cash distributions, if any, made with
respect to common shares or preferred shares held by a
holder that is, for U.S. federal income tax purposes, an
individual, corporation, estate or trust that is not a U.S.
holder (a “Non-U.S. holder”) generally will not be subject to
U.S. withholding tax (subject to certain exceptions that may
apply if we were determined to be engaged in a trade or
business in the United States and 25% or more of our gross
income were to be effectively connected to such U.S. trade
or business).
Sale, Exchange or Other Disposition. Non-U.S. holders of
common shares or preferred shares generally will not be
subject to U.S. federal income tax with respect to gain
recognized upon the sale, exchange or other disposition of
such shares unless such gain is effectively connected with a
U.S. trade or business of the Non-U.S. holder or such person
is present in the U.S. for 183 days or more in the taxable
year the gain is recognized and certain other requirements
are satisfied.
Information Reporting and Backup Withholding. Non-U.S.
holders of common shares or preferred shares will not be
subject to U.S. information reporting or backup withholding
with respect to dispositions of common or preferred shares
effected through a non-U.S. office of a broker, unless the
broker has certain connections to the U.S. or is a U.S.
person. No U.S. backup withholding will apply to payments
of dividends, if any, on our common shares or our preferred
shares.
FATCA Withholding. Sections 1471 through 1474 to the
Code, known as the Foreign Account Tax Compliance Act
(“FATCA”), impose a withholding tax of 30% on U.S.-source
interest, dividends and certain other types of income, which
is received by a foreign financial institution (“FFI”), unless
such FFI enters into an agreement with the IRS to obtain
certain information as to the identity of the direct and
indirect owners of accounts in such institution. In addition, a
30% withholding tax may be imposed on the above
payments to certain non-financial foreign entities which do
not (i) certify to each applicable withholding agent that they
have no “substantial U.S. owners” (i.e., a U.S. 10% direct or
indirect shareholder), or (ii) provide such withholding agent
with the certain information as to the identity of such
substantial U.S. owners. The U.S. has entered into
intergovernmental
agreements
to
implement
FATCA
(“IGAs”) with a number of jurisdictions. Bermuda has signed
an IGA with the U.S. Different rules than those described
above may apply under such an IGA.
Although dividends with respect to our common shares or
preferred shares generally will be treated as foreign source
for U.S. federal withholding tax purposes, it is unclear
whether, for FATCA purposes, some or all of our dividends
may be recharacterized as U.S. source dividends. Treasury
Regulations addressing this topic have not yet been issued.
Current and prospective investors should consult their own
tax advisors as to the filing and information requirements
that may be imposed on them in respect of their ownership
of our common share or preferred shares.
Other Tax Laws. Shareholders should consult their own tax
advisors with respect to the applicability to them of the tax
laws of other jurisdictions.
ARCH CAPITAL
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2025 FORM 10-K
ITEM 1A. RISK FACTORS
Set forth below are risk factors relating to our business.
These risks and uncertainties are not the only ones we face.
There may be additional risks that we currently consider not
to be material or of which we are not currently aware, and
any of these risks could cause our actual results to differ
materially from historical or anticipated results. You should
carefully consider these risks along with the other
information
provided
in
this
report,
including
our
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our accompanying
consolidated financial statements, as well as the information
under the heading “Cautionary Note Regarding Forward-
Looking Statements” before investing in any of our
securities. We may amend, supplement or add to the risk
factors described below from time to time in future reports
filed with the SEC.
RISK FACTORS SUMMARY
The following is a summary description of the material risks
and uncertainties to which we may be exposed. Each of
these risks could adversely affect our business, financial
condition and results of operations, and any such effects
may be material. These and other risks are more fully
described after this summary description.
Risks Relating to Our Industry, Business and Operations
• We operate in a highly competitive environment, and we
may not be able to compete successfully in our industry.
• The insurance and reinsurance industry is highly cyclical,
and we may at times experience periods characterized by
excess underwriting capacity and unfavorable premium
rates.
• The effects of inflation, trade and tariff disputes and other
economic
conditions
impact
the
insurance
and
reinsurance industry in ways which may negatively impact
our business, financial condition and results of operations.
• Claims for natural 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.
• The 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.
• Our insurance, reinsurance and mortgage 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 operations.
• We are subject to ongoing legal and policy actions around
climate
change
which
may
result
in
additional
requirements that could prompt us to shift our risk
selection and business strategy in ways which may
adversely impact our results of operations.
• Sanctions imposed by the U.S., U.K. and EU on Russia and
Russia-related businesses have impacted certain sectors in
which we write business.
• Certain U.S. policies and actions have created geopolitical
risks which are not possible to manage or predict, some of
which may result in uncertainty in the global markets.
• Our 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.
• We 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.
• We 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.
• Underwriting risks and reserving for losses are based on
probabilities and related modeling, which are subject to
inherent uncertainties.
• The failure of any of the loss limitation methods we
employ could have a material adverse effect on our
financial condition or results of operations.
• The availability of reinsurance, retrocessional coverage
and capital market transactions to limit our exposure to
risks may be limited, and counterparty credit and other
risks associated with our reinsurance arrangements may
result in losses which could adversely affect our financial
condition and results of operations.
• We 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.
• Emerging claim and coverage issues may adversely affect
our business.
• Acquisitions, 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.
ARCH CAPITAL
46
2025 FORM 10-K
• Our information technology systems and our pace of
adoption of new technologies, including AI, may not be
adequate to meet the demands of our customers or
impact negatively our ability to compete with our peers.
• Technology
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.
• We 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.
• Changes in criteria used by rating agencies which may
result in a downgrade in our ratings, our inability to obtain
a rating or a change in capital allocation or requirements
for our operating insurance and reinsurance subsidiaries
may adversely affect our relationships with clients and
brokers and negatively impact sales of our products.
• Our 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.
• Our success will depend on our ability to maintain and
enhance effective operating procedures and internal
controls and our ERM program.
• We are exposed to credit risk in certain of our business
operations.
• Our 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
• Adverse developments in the financial markets could have
a material adverse effect on our results of operations,
financial position and our businesses, and may also limit
our access to capital; our policyholders, reinsurers and
retrocessionaires
may
also
be
affected
by
such
developments, which could adversely affect their ability to
meet their obligations to us.
• Disruption 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.
• Foreign currency exchange rate fluctuation may adversely
affect our financial results.
• The determination of the amount of current expected
credit
losses
(“CECL”)
allowances
taken
on
our
investments is highly subjective and could materially
impact our results of operations or financial position.
• Our 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
• The ultimate performance of our mortgage insurance
portfolios remains uncertain.
• If 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.
• Changes 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.
• The implementation of the Basel III Capital Accord and
FHFA’s Enterprise Regulatory Capital Framework may
adversely affect the use of mortgage insurance and SRT
and CRT opportunities.
Risks Relating to Our Company
• Some of the provisions of our bye-laws and our
shareholders agreement may have the effect of hindering,
delaying or preventing third party takeovers or changes in
management initiated by shareholders. These provisions
may also prevent our shareholders from receiving
premium prices for their shares in an unsolicited takeover.
• There are regulatory limitations on the ownership and
transfer of our common shares.
• Arch Capital is a holding company and is dependent on
dividends and other distributions from its operating
subsidiaries.
• General market conditions and unpredictable factors
could adversely affect market prices for our outstanding
preferred shares.
• Dividends on our preferred shares are non-cumulative.
• Our preferred shares are equity and are subordinate to
our existing and future indebtedness.
• The voting rights of holders of our preferred shares are
limited.
Risks Relating to Taxation
• We are subject to increased taxation in Bermuda as a
result of the Bermuda CIT Act, effective January 1, 2025
and may become subject to increased taxation in other
countries as a result of the implementation of the OECD's
plan on “Base Erosion and Profit Shifting.”
ARCH CAPITAL
47
2025 FORM 10-K
Risks Relating to Our Industry, Business and Operations
We operate in a highly competitive environment, and we
may not be able to compete successfully in our industry.
The
insurance
and
reinsurance
industry
is
highly
competitive. We compete on an international and regional
basis with major U.S. and non-U.S. insurers and reinsurers,
many of which have greater financial, marketing and
management resources than we do. See “Competition” in
Item 1 for details on our competitors in each of the major
segments we operate in. We compete on the basis of
product offerings, pricing, terms and conditions, claims
servicing and customer relationships. Other factors, such as
our proven cycle management skills, our expertise in
specialty lines of business and our use of technologies and
data analytics are other factors, may differentiate us from
our competitors. Any failure by us to effectively compete
could adversely affect our financial condition and results of
operations.
The insurance and reinsurance industry is highly cyclical, and
we may at times experience periods characterized by excess
underwriting capacity and unfavorable premium rates.
Historically, insurers and reinsurers have experienced
significant fluctuations in operating results due to
competition, frequency of occurrence or severity of
catastrophic events, levels of capacity, general economic
conditions, inflation, changes in equity, debt and other
investment markets, changes in legislation, case law and
prevailing concepts of liability and other factors. Demand for
reinsurance is influenced significantly by the underwriting
results of primary insurers and prevailing general economic
conditions. The supply of insurance and reinsurance is
related to prevailing prices and levels of surplus capacity
that, in turn, may fluctuate in response to changes in rates
of return being realized in the insurance and reinsurance
industry on both underwriting and investment sides. As a
result, the insurance and reinsurance business historically
has been a cyclical industry characterized by periods of
intense price competition due to excessive underwriting
capacity as well as periods when shortages of capacity
permitted favorable premium levels and changes in terms
and conditions. The supply of insurance and reinsurance is
increasing, either as a result of capital provided by new
entrants or by the commitment of additional capital by
existing insurers or reinsurers. Continued increases in the
supply of insurance and reinsurance may have consequences
for us, including fewer contracts written, lower New
Insurance Written (“NIW”), lower premium rates, increased
expenses for customer acquisition and retention, and less
favorable policy terms and conditions.
The effects of inflation, trade and tariff disputes and other
economic conditions impact the insurance and reinsurance
industry in ways which may negatively impact our business,
financial condition and results of operations.
While general economic inflation has eased in recent
quarters, higher inflationary conditions may continue to
remain in place. The potential also exists, after a catastrophe
loss or geopolitical hostilities for the development of
inflationary pressures in a local or regional economy. This
may have a material effect on the adequacy of our reserves
for losses and loss adjustment expenses, especially in longer-
tailed lines of business. In addition, governmental actions in
response to inflationary pressures, such as increasing
interest rates, may have a material impact, such as on the
market value of our investment portfolio, or on the size of
the mortgage origination market available to be insured by
our mortgage business. While we consider the anticipated
effects of inflation in our pricing models, reserving processes
and exposure management across all lines of business and
types of loss including natural catastrophe events, the actual
effects of inflation on our results cannot be accurately
known until claims are settled. In addition, there are
different types of inflation relevant to certain lines of
business, the impact of which is difficult to accurately assess
at this time. For example, in our mortgage business, the
failure of general wages to keep pace with economic
inflation, or increases in unemployment due to prolonged
recessionary conditions, could prevent borrowers from
being able to afford their mortgage payments and thereby
increase the frequency of claims beyond our modeled
results. Global recessionary conditions, including inflation,
the slow recovery of certain sectors from the pandemic,
predicted slow growth rates across key markets and other
factors, will impact the insurance and reinsurance industry.
While our business has not been directly impacted by the
existing and proposed Trump administration tariffs on
imported goods, there may be a ripple effect on how these
impact certain industries where we provide insurance or
reinsurance. It is too early to determine the long-term
effect, if any, of the Trump administration tariff policy, but
sustained escalation of tariffs and trade disputes may result
in a global economic slowdown which impacts us and our
clients.
ARCH CAPITAL
48
2025 FORM 10-K
Claims for natural 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.
We have large aggregate exposures to natural catastrophic
events. Natural catastrophes can be caused by various
events, including hurricanes, floods, wildfires, tsunamis,
windstorms, earthquakes, hailstorms, tornadoes, severe
winter weather, fires, droughts and other natural disasters.
The frequency and severity of natural catastrophe activity
has also been greater in recent years due to climate change
caused in part by human actions and other related factors.
Catastrophes can cause losses in non-property business such
as workers’ compensation or general liability. In addition to
the nature of the property business, we believe that
economic and geographic trends affecting insured property,
including inflation, property value appreciation and
geographic concentration tend to generally increase the size
of losses from catastrophic events over time. Actual losses
from future catastrophic events have varied materially from
estimates due to the inherent uncertainties in making such
determinations resulting from several factors, including the
potential inaccuracies and inadequacies in the data provided
by clients, brokers and ceding companies, the modeling
techniques and the application of such techniques, the
contingent nature of business interruption exposures, the
effects of any resultant demand surge on claims activity and
attendant coverage issues. In estimating our losses from
catastrophic events our considerations can include factors
such as overall market losses, additional claims information
from our clients, multiple model views and proprietary
scenario testing. All of the catastrophe modeling tools that
we use or rely on to evaluate our catastrophe exposures are
therefore based on significant assumptions and judgments
and are subject to error and misestimation. As a result, our
estimated exposures could be materially different than our
actual results.
The 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.
Changing weather patterns and climatic conditions, such as
global warming, have added to the unpredictability, severity
and frequency of natural disasters. Uncertainty about
complexities of climate change affects our ability to assess
with certainty the full impact of climate change and creates
uncertainty about future trends and exposures. Although
the loss experience of catastrophe insurers and reinsurers
has historically been characterized as low frequency, climate
change has impacted the frequency and severity of extreme
weather events and natural catastrophes such as hurricanes,
tornado activity, other windstorms, floods, wildfires and
droughts in recent years and may continue to increase in the
future.
Claims for catastrophic events, or an unusual frequency of
smaller losses in a particular period, could expose us to large
losses, cause substantial volatility in our results of
operations and could have a material adverse effect on our
ability to write new business if we are not able to adequately
assess and reserve for the increased frequency and severity
of catastrophes resulting from these environmental factors.
Climate change and increasing catastrophic events could
increase property damage to residential real estate secured
by mortgages owned by the GSEs, and by extension could
increase losses to CRT investors. Increasing catastrophic
events could increase the cost of homeowners insurance
and could negatively impact mortgagees’ ability to meet
their monthly housing payment obligations, and by
extension could increase the frequency of claims.
Additionally, climate change may make modeled outcomes
less
certain
or
produce
new,
non-modeled
risks.
Catastrophic events could result in increased credit exposure
to reinsurers and other counterparties we transact business
with, declines in the value of investments we hold and
significant disruptions to our physical infrastructure, systems
and operations. Climate change-related risks may also
specifically adversely impact the value of the securities that
we hold.
Changes in security asset prices may impact the value of our
fixed income, real estate and commercial mortgage
investments, resulting in realized or unrealized losses on our
invested assets. These risks are not limited to, but can
include: (i) changes in supply/demand characteristics for
fossil fuels (e.g., coal, oil, natural gas); (ii) advances in low-
carbon technology and renewable energy development; and
(iii) effects of extreme weather events on the physical and
operational exposure of industries and issuers, and the
transition that these companies make towards addressing
climate risk in their own businesses.
We attempt to manage our exposure to these risks relating
to climate change through the use of underwriting controls,
proprietary and third party risk models, and the purchase of
third party reinsurance. Underwriting controls can include
more restrictive underwriting criteria such as higher
premiums and deductibles, reduction in limits offered or
losses retained, and more specifically excluded policy risks.
Our exposure in connection with a catastrophic event is
determined
by
market
capacity,
pricing
conditions,
regulatory capital requirements, our perceptions of
underlying risk and surplus preservation. There can be no
assurance that our reinsurance coverage and other
measures taken will be sufficient to mitigate losses resulting
from one or more catastrophic events. As a result, the
occurrence of one or more catastrophic events and the
ARCH CAPITAL
49
2025 FORM 10-K
continuation and worsening of recent trends could have an
adverse effect on our results of operations and financial
condition.
Our insurance, reinsurance and mortgage 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.
Our insurance and reinsurance subsidiaries conduct business
globally and are subject to varying degrees of regulation in
the various jurisdictions in which they conduct business,
including by state, federal and national insurance regulators.
In August 2024, we were added to the list of IAIGs,
subjecting our global operations to additional regulation and
scrutiny. The purpose of insurance laws and regulations
generally is to protect policyholders and ceding insurance
companies, not our shareholders. See “Regulation” in Item
1.
We may not be able to comply fully with, or obtain
appropriate
exemptions
from,
these
statutes
and
regulations, which could result in restrictions on our ability
to do business or undertake activities that are regulated in
one or more of the jurisdictions in which we conduct
business and could subject us to fines and other sanctions.
Local and regulatory authorities also may seek to exercise
their supervisory or enforcement authority in new or more
extensive ways, such as imposing increased capital
requirements or limiting or impeding the oversight that we
are able to exercise over our subsidiaries. Additionally, it is
possible that requirements or guidance under one
jurisdiction may be contradictory or divergent from
requirements or guidance in other jurisdictions where we
operate. Examples include disclosure requirements relating
to
climate
change
and
sustainability.
Regulatory
fragmentation could affect the competitive market, how we
are regulated and the way we conduct our business and
manage our capital and could result in lower revenues and
higher costs. As a result, such actions could have a material
effect on our results of operations and financial condition.
We 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.
Governments, regulators, legislators and influential non-
governmental organizations (“NGOs”) continue to develop
laws, regulations and other requirements related to climate
change. Regulatory and shareholder scrutiny of potential
“greenwashing” also continues. We are subject to these
evolving and often unpredictable requirements and policy
debates, which are difficult to forecast or quantify and may
adversely affect our business. Legislative or regulatory
actions, as well as court decisions following major
catastrophes, could require broader insurance coverage or
otherwise negatively impact our operations. In addition,
climate-related regulatory changes or our own strategic
responses to climate risks could increase our operating costs
or reduce premiums in certain business lines.
We are subject to CSRD and other EU and U.K.
climate-related disclosure regulations, which require more
extensive reporting than current U.S. rules. Proposed
changes by the European Commission may further affect our
obligations. We cannot predict how these or other evolving
sustainability requirements across our jurisdictions will
impact our operations, customers or shareholders.
Our efforts to address these risks rely on loss-mitigation
measures, risk modeling, operating results and engagement
with customers and shareholders. We continue to monitor
industry and geographic developments, and our Board
regularly considers these exposures. Although we may take
strategic actions in response to legal and policy changes,
there is no assurance these actions will fully address the
risks or avoid material adverse effects on our results,
financial condition or share price.
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2025 FORM 10-K
Sanctions imposed by the U.S., U.K. and EU on Russia and
Russia-related businesses have impacted certain sectors in
which we write business.
The ongoing Russia-Ukraine hostilities have created
disruptions in certain sectors of the global economy. It is
impossible to predict whether Russia will expand hostilities
to other countries in Europe or elsewhere. The prolonged
war has impacted the global energy sector and resulted in
general increase in risks worldwide. Additionally, certain
lines of business we write have been impacted by sanctions,
such as the marine and energy lines of business, although
the extent of the impact will depend on the outcome of the
war in Ukraine and the nature of future sanctions packages.
It is possible that the U.S. approach to Russian sanctions may
diverge from that of the U.K. and EU in the future, which
may cause uncertainty in certain lines of business such as
marine and energy.
Certain U.S. policies and actions have created geopolitical
risks which are not possible to manage or predict, some of
which may result in uncertainty in the global markets.
Recent U.S. policies and actions, such as actions relating to
Venezuela and Greenland, may jeopardize certain global
alliances and create geopolitical uncertainty. While the long-
term impact of these policies is currently unknown, these
policies and other geopolitical tensions have resulted in, or
could result in, volatile global capital markets, sanctions,
trade restrictions and harm countries’ relationships.
Our 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.
Our policyholders and customers are located primarily in
countries and regions, such as the U.S., U.K., EU and
Australia where there are regulatory, policy, legal and
technological changes resulting from actions relating to
climate change. In some cases, those policyholders and
customers may not be able to shift their business strategies
or adjust adequately to these changes, and their businesses
may be negatively impacted or, in some cases, cease to
exist. Climate change on a global and regional level may
impact businesses on a temporary or permanent basis,
resulting in shifting needs for our products and services in
ways we cannot predict. More stringent regulations and
other requirements imposed on our policyholders may
negatively impact their ability to conduct business. As a
result of these factors, our results of operations may be
impacted by the loss of those customers or a shift in their
patterns or levels of insurance coverage in ways we cannot
predict.
We 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.
Shareholders, investors and regulators have historically
focused on climate and sustainability matters, leading to
evolving and sometimes conflicting expectations and
standards. Our leadership and Board assess these issues and
evaluate where incorporating sustainability practices is
appropriate for our business. Changes to governmental,
investor and societal priorities could adversely impact our
reputation, share price and results of operation or result in
litigation.
We 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.
We have substantial exposure to unexpected, large losses
resulting from man-made catastrophic events, such as acts
of war, regional hostilities, acts of terrorism, political
instability, social unrest, cyber attacks and pandemics similar
to the COVID-19 pandemic. These risks are inherently
unpredictable. It is difficult to predict the timing of such
events with statistical certainty or estimate the amount of
loss any given occurrence will generate. In certain instances,
we specifically insure and reinsure risks resulting from acts
of terrorism. We may also insure against risk related to
cybersecurity and cyber attacks. In addition, our exposure to
cyber attacks includes exposure to ‘silent cyber’ risks,
meaning risks and potential losses associated with policies
where cyber risk is not specifically included nor excluded in
the policies. Even in cases where we attempt to exclude
losses from terrorism, cybersecurity and certain other
similar risks from some coverages written by us, we may not
be successful in doing so. Moreover, irrespective of the
clarity and inclusiveness of policy language, there can be no
assurance that a court or arbitration panel will not limit
enforceability of policy language or otherwise issue a ruling
adverse to us. Accordingly, while we believe our reinsurance
programs, together with the coverage provided under the
Terrorism Risk Insurance Act of 2002, as amended (“TRIA”)
are sufficient to reasonably limit our net losses relating to
potential future terrorist attacks, we can offer no assurance
that our available capital will be adequate to cover losses
when they materialize. To the extent that an act of terrorism
is certified by the Secretary of the Treasury and aggregate
industry insured losses resulting from the act of terrorism
exceeds the prescribed program trigger, our U.S. insurance
operations may be covered under TRIA for up to 80% subject
to (i) a mandatory deductible of 20% of our prior year’s
direct earned premium for covered property and liability
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2025 FORM 10-K
coverages, and (ii) an industry aggregate retention of $53.4
billion. The program trigger for calendar year 2025 and any
program year thereafter through 2027 is $200 million. If an
act (or acts) of terrorism result in covered losses exceeding
the $100 billion annual limit, insurers with losses exceeding
their deductibles will not be responsible for additional
losses. It is not possible to completely eliminate our
exposure to unforecasted or unpredictable events, and to
the extent that losses from such risks occur, our financial
condition and results of operations could be materially
adversely affected.
Underwriting risks and reserving for losses are based on
probabilities and related modeling, which are subject to
inherent uncertainties.
Our success is dependent upon our ability to assess
accurately the risks associated with the businesses that we
insure and reinsure. We establish reserves for losses and
loss adjustment expenses which represent estimates based
on actuarial and statistical projections, at a given point in
time, of our expectations of the ultimate future settlement
and administration costs of losses incurred. We utilize
actuarial models as well as available historical insurance
industry loss ratio experience and loss development patterns
to assist in the establishment of loss reserves. Most or all of
these factors are not directly quantifiable, particularly on a
prospective basis, and the effects of these and unforeseen
factors could negatively impact our ability to accurately
assess the risks of the policies that we write. Changes in the
assumptions used by these models or by management could
lead to an increase in our estimate of ultimate losses in the
future. In addition, there may be significant reporting lags
between the occurrence of the insured event and the time it
is reported to the insurer and additional lags between the
time of reporting and final settlement of claims. In addition,
the estimation of loss reserves is more difficult during times
of adverse economic and market conditions due to
unexpected changes in behavior of claimants and
policyholders, including an increase in fraudulent reporting
of exposures and/or losses, reduced maintenance of insured
properties or increased frequency of small claims. Changes
in the level of inflation also result in an increased level of
uncertainty in our estimation of loss reserves. As a result,
actual losses and loss adjustment expenses paid can deviate,
perhaps substantially, from the reserve estimates reflected
in our financial statements.
If our loss reserves are determined to be inadequate, we will
be required to increase loss reserves at the time of such
determination with a corresponding reduction in our net
income in the period when the deficiency becomes known.
It is possible that claims in respect of events that have
occurred could exceed our claim reserves and have a
material adverse effect on our results of operations, in a
particular period, or our financial condition in general. As a
compounding factor, although most insurance contracts
have policy limits, the nature of property and casualty
insurance and reinsurance is such that losses and the
associated expenses can exceed policy limits for a variety of
reasons and could significantly exceed the premiums
received on the underlying policies, thereby further
adversely affecting our financial condition.
As of December 31, 2025, our consolidated reserves for
unpaid losses and loss adjustment expenses, net of unpaid
losses and loss adjustment expenses recoverable, were
approximately $24.5 billion. Such reserves were established
in accordance with applicable insurance laws and GAAP. Loss
reserves
are
inherently
subject
to
uncertainty.
In
establishing the reserves for losses and loss adjustment
expenses, we have made various assumptions relating to the
pricing of our reinsurance contracts and insurance policies
and have also considered available historical industry
experience and current industry conditions. Any estimates
and assumptions made as part of the reserving process
could prove to be inaccurate due to several factors,
including the fact that for certain lines of business relatively
limited historical information has been reported to us
through December 31, 2025.
The failure of any of the loss limitation methods we employ
could have a material adverse effect on our financial
condition or results of operations.
We seek to limit our loss exposure by writing a number of
our reinsurance contracts on an excess of loss basis,
adhering to maximum limitations on reinsurance written in
defined geographical zones, limiting program size for each
client and prudent underwriting of each program written. In
the case of proportional treaties, we may seek per
occurrence limitations or loss ratio caps to limit the impact
of losses from any one or series of events. In our insurance
operations, we seek to limit our exposure through the
purchase of reinsurance. For our U.S. mortgage insurance
business, in addition to utilizing reinsurance, we have
developed a proprietary risk model that simulates the
maximum probable loss resulting from a severe economic
event impacting the housing market. We also seek to limit
our loss exposure by geographic diversification, including by
pricing adjustments in our U.S. mortgage insurance business.
Geographic pricing decisions and zone limitations involve
significant
underwriting
judgments,
including
the
determination of the area of the zones and the inclusion of a
particular policy within a particular zone’s limits. Various
provisions of our policies, negotiated to limit our risk, such
as limitations or exclusions from coverage or choice of
forum, may not be enforceable in the manner we intend, as
it is possible that a court or regulatory authority could nullify
or void an exclusion or limitation, or legislation could be
enacted modifying or barring the use of these exclusions and
limitations. Disputes relating to coverage and choice of legal
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2025 FORM 10-K
forum may also arise. Underwriting is inherently a matter of
judgment, involving important assumptions about matters
that are inherently unpredictable and beyond our control,
and for which historical experience and probability analysis
may not provide sufficient guidance. One or more
catastrophic events or severe economic events could result
in claims that substantially exceed our expectations, or the
protections set forth in our policies could be voided, which,
in either case, could have a material adverse effect on our
financial condition or our results of operations, possibly to
the extent of eliminating our shareholders’ equity. In
addition, factors such as global climate change limit the
value of historical experience and therefore further limit the
effectiveness
of
our
loss
limitation
methods.
See
“Catastrophic Events and Severe Economic Events” in Item 7
for further details. Depending on business opportunities and
the mix of business that may comprise our insurance,
reinsurance and mortgage insurance portfolio, we may seek
to adjust our self-imposed limitations on probable maximum
pre-tax loss for catastrophe exposed business and mortgage
default exposed business.
The availability of reinsurance, retrocessional coverage and
capital market transactions to limit our exposure to risks
may be limited, and counterparty credit and other risks
associated with our reinsurance arrangements may result in
losses which could adversely affect our financial condition
and results of operations.
We manage risk using reinsurance, retrocessional coverage
and capital markets transactions. Our insurance subsidiaries
typically cede a portion of their premiums through pro rata,
excess of loss and facultative reinsurance agreements. Our
reinsurance subsidiaries purchase a limited amount of
retrocessional coverage as part of their aggregate risk
management program. In addition, our reinsurance
subsidiaries participate in “common account” retrocessional
arrangements
for
certain
pro
rata
treaties.
Such
arrangements reduce the effect of individual or aggregate
losses to all companies participating on such treaties,
including
the
reinsurers,
such
as
our
reinsurance
subsidiaries, and the ceding company. Economic conditions,
including but not limited to unemployment, inflation,
declining home prices or the impact of climate change could
also have a material impact on our ability to manage our risk
aggregations through reinsurance or capital markets
transactions. The availability and cost of excess of loss
reinsurance sold into the capital markets is subject to
investor appetite and market conditions when compared to
the terms and yield opportunities of other similar
investment opportunities. As a result of these factors, we
may not be able to successfully mitigate risk through
reinsurance and retrocessional arrangements.
Further, we are subject to credit risk with respect to our
reinsurance and retrocessions because the ceding of risk to
reinsurers and retrocessionaires does not relieve us of our
liability to the clients or companies we insure or reinsure.
We monitor the financial condition of our reinsurers and
attempt to place coverages only with carriers we view as
substantial and financially sound. An inability of our
reinsurers or retrocessionaires to meet their obligations to
us could have a material adverse effect on our financial
condition and results of operations. Our losses for a given
event or occurrence may increase if our reinsurers or
retrocessionaires dispute or fail to meet their obligations to
us or the reinsurance or retrocessional protections
purchased by us are exhausted or are otherwise unavailable
for any reason. In certain instances, we also require
collateral to mitigate our credit risk to our reinsurers or
retrocessionaires. We are at risk that losses could exceed
the collateral we have obtained. Our failure to establish
adequate reinsurance or retrocessional arrangements or the
failure of our existing reinsurance or retrocessional
arrangements to protect us from overly concentrated risk
exposure could adversely affect our financial condition and
results of operations.
We 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.
For certain lines of our insurance business, we authorize
managing general agents, general agents and other
producers to write business on our behalf within
underwriting authorities prescribed by us. In addition, our
mortgage group delegates the underwriting of a significant
percentage of its primary new insurance written to certain
mortgage lenders. Under this delegated underwriting
program, the approved customer may determine whether
mortgage loans meet our mortgage insurance program
guidelines and commit us to issue mortgage insurance. We
rely on the underwriting controls of these agents to write
business within the underwriting authorities provided by us.
Although we have contractual protections in some instances
and we monitor such business on an ongoing basis, our
monitoring efforts may not be adequate or our agents may
exceed their underwriting authorities or otherwise breach
obligations owed to us. In addition, our agents, our insureds
or other third parties may commit fraud or otherwise breach
their obligations to us. Our financial condition and results of
operations could be materially adversely affected by any one
of these issues.
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While we conduct underwriting, financial, claims and
information technology due diligence reviews and apply
rigorous standards in the selection of these counterparties,
there is no assurance they have provided us accurate or
complete information to assess their risk or that they can
manage effectively their own risks. The counterparties are
also subject to the same global increase in cyber incidents,
including ransomware, and we cannot offer assurances that
these
counterparties
have
sufficient
technical
and
organizational
controls
to
mitigate
these
risks.
Consequently, we assume a degree of credit and operational
risk of those parties, and a material failure to manage their
risks may result in material losses or damage to us.
Emerging claim and coverage issues may adversely affect
our business.
As industry practices and legal, social and new coverage
issues change, unexpected and unintended issues related to
claims and coverage may emerge, including new or
expanded theories of liability. These or other changes could
impose new financial obligations on us by extending
coverage beyond our underwriting intent or otherwise
require us to make unplanned modifications to the products
and services that we provide, or cause the delay or
cancellation of products and services that we provide. In
some instances, these changes may not become apparent
until sometime after we have issued insurance or
reinsurance contracts that are affected by the changes. As a
result, the full extent of liability under our insurance or
reinsurance contracts may not be known for many years
after a contract is issued. The effects of unforeseen
developments or substantial government intervention could
adversely impact us.
Acquisitions, 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.
We have acquired other companies and selected blocks of
business and also expanded our business lines and
geographies and/or entered into joint ventures or
partnerships as part of our strategy. The MCE Acquisition is
an example of such expansion. We may seek, from time to
time, to acquire other companies, acquire selected blocks of
business, expand our business lines, expand into new
geographic regions and/or enter into joint ventures or
partnerships. Such activities expose us to challenges and
risks, including: integrating financial and operational
reporting systems; establishing satisfactory budgetary and
other financial controls; funding increased capital needs,
overhead expenses or cash flow shortages that may occur if
anticipated sales and revenues are not realized or are
delayed, whether by general economic or market conditions
or unforeseen internal difficulties; obtaining management
personnel required for expanded operations; obtaining
necessary regulatory permissions; and establishing adequate
reserves for any acquired book of business. In addition, the
value of assets acquired may be lower than expected or may
diminish due to credit defaults or changes in interest rates;
the liabilities assumed may be greater than expected; and
assets and liabilities acquired may be subject to foreign
currency exchange rate fluctuation. We may also be subject
to financial exposures in the event that the sellers of the
entities or business we acquire are unable or unwilling to
meet
their
indemnification,
reinsurance
and
other
contractual obligations to us. Our failure to manage
successfully any of the foregoing challenges and risks may
adversely impact our results of operations.
Our information technology systems and our pace of
adoption of new technologies, including AI, may not be
adequate to meet the demands of our customers or impact
negatively our ability to compete with our peers.
We are dependent on our information technology systems
to conduct our business and drive strategic decisions based
on data analytics. Our information technology systems also
support areas of our business, such as mortgage servicing or
underwriting pricing portals where we connect with third
party information technology systems. Accordingly, we are
highly dependent on the effective operation, availability and
integrity of these systems. While we believe that the
systems are adequate to service our business, there can be
no assurance that they will operate in all manners in which
we intend, possess all of the functionality required by
customers currently or in the future or continuously operate
without significant disruption.
Our customers and regulators require that our information
technology systems perform as intended, whether they are
hosted by us, managed by a third party on our behalf or rely
on seamless electronic integrations with customer systems.
Regulators and customers regularly request information
about our cybersecurity program and disaster recovery
plans. We must continually invest significant resources in
maintaining, monitoring and enhancing our information
technology systems’ capabilities to meet customer needs
and business strategy. Our business, financial condition and
operating results may be adversely affected if we do not
adequately maintain our information technology systems,
both internal and third party, and continuously test and
upgrade them. We continuously evaluate the adequacy of
our information technology systems in order to ensure that
we are utilizing the most appropriate technologies and
innovating or adopting new technologies to support our
underwriting business.
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2025 FORM 10-K
With new technologies and AI tools emerging at a rapid
pace, there is no assurance that we will be able to evaluate
and integrate new technologies or update our existing
systems to keep pace with our competitors and customer
needs.
While
we
believe
AI
presents
significant
opportunities to support our strategic goals, we may not be
successful in implementing AI technologies. It is possible
that any AI we use does not perform as anticipated, suffers
from “hallucinations” or that its outputs may not be as
expected or may result in unlawful discrimination, which
may put us at a competitive disadvantage, result in
reputational damage and regulatory fines and actions.
Additionally,
the
regulatory
landscape
surrounding
traditional AI and generative AI is evolving, and the
expanded use of these technologies may become subject to
regulatory scrutiny under new or existing laws. Moreover,
the intellectual property and ownership rights associated
with both forms of artificial intelligence have not been fully
addressed by courts in the U.S. or in other jurisdictions that
we operate in. We established the Artificial Intelligence
Governance and Oversight Committee (“AIGOC”) to evaluate
and approve new AI use cases and issue and oversee our
Company’s Artificial Intelligence Policy. While we believe the
AIGOC and our larger AI governance framework is
responsive to new risks and regulations, failure to comply
with the applicable AI-related regulations could result in
fines, penalties, litigation, or restrictions on our business
operations. These outcomes may have a materially adverse
effect on our business or financial condition.
Technology 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.
We rely on information technology systems to securely
process, transmit, store and protect the confidential and
electronic information, financial data and proprietary
models that are critical to our business. Furthermore, a
significant portion of the communications between our
employees and our business partners and service providers
depends
on
information
technology
and
electronic
information exchange. Like all companies, our information
technology systems and the systems of third parties that we
do business with are vulnerable to data breaches,
interruptions or failures due to events that may be beyond
our control, including, but not limited to, natural disasters,
power outages, theft, terrorist attacks, computer viruses,
hackers, employee or vendor error or misconduct, malicious
actors, errors in usage or deepfake or social engineering or
schemes, phishing attacks, other external hazards and
general technology failures.
We rely on certain third party technology service providers
and other service providers, notably major cloud providers,
Software-as-a-Service (or “SaaS”) solutions, and on-premise
software, including proprietary and open source solutions.
We also outsource certain business processes to third
parties and may continue do so in the future. This practice
exposes us to increased risks if those third party systems,
including AI technologies that may be in use, are not
maintained and monitored in accordance with contractual
terms, regulations or due to human error. There is no
assurance that we will not be materially adversely affected
by such incidents impacting our critical and important
functions. See Item 1C, “Cybersecurity” for additional
information.
We 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.
Cybersecurity incidents and attacks resulting in unauthorized
access to our systems and those of third parties we use in
our business could have a material impact on our business
operations as a result of loss or misuse of our information,
including personal data and sensitive data, and disruption to
normal business operations. Specifically, these incidents,
and the disruptions resulting therefrom, may impact the
availability, reliability, speed, accuracy or other proper
functioning of these systems.
The 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.
While we believe we have effective technical and
organizational measures in place to prevent, detect, manage
and mitigate the impact of data breaches and cybersecurity
incidents caused by malicious actors, systemic failures or
human error, we cannot offer complete assurances that
significant data breaches on our systems and those of third
parties we use will not occur.
We are subject to many laws and regulations relating to the
adequacy of cybersecurity programs and business resiliency,
including the SEC Cybersecurity Rules, and comprehensive
privacy, security and business resiliency laws in the EU such
as GDPR and DORA. Some U.S. industry regulators like the
NYDFS
in
New
York
also
impose
comprehensive
cybersecurity requirements on our U.S. operations. A
cybersecurity incident could result in a violation of these and
other applicable laws, resulting in damage to our reputation,
loss of customers, decline in our stock price, litigation,
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2025 FORM 10-K
remediation costs, increased insurance premiums, employee
dissatisfaction and/or monetary fines, penalties or litigation,
any of which could adversely affect our business.
Based on our investigations and incident management, the
Company does not believe these and other cybersecurity
incidents we have experienced to date have materially
affected the Company’s business operations, but we cannot
provide assurances that our controls will defend against all
cyber attacks. See Item 1C, “Cybersecurity” for additional
information.
Changes in criteria used by rating agencies which may result
in a downgrade in our ratings, our inability to obtain a rating
or a change in capital application or requirements for our
operating insurance and reinsurance subsidiaries may
adversely affect our relationships with clients and brokers
and negatively impact sales of our products.
Similar to our competitors, a ratings downgrade or the
potential for such a downgrade, or failure to obtain a
necessary rating, could adversely affect our relationships
with agents, brokers, wholesalers, intermediaries, clients
and other distributors of our existing and new products and
services. Some of our assumed reinsurance agreements
include provisions that a ratings downgrade or other
specified triggering event with respect to our reinsurance
operations, such as a reduction in surplus by specified
amounts during specified periods, provide our ceding
company clients certain rights, including, the right to
terminate the subject reinsurance agreement and/or to
require us to post additional collateral. Any ratings
downgrade or failure to obtain a necessary rating could
adversely affect our ability to compete in our markets, could
cause our premiums and earnings to decrease and could
have a material adverse impact on our financial condition
and results of operations. In some cases, a downgrade in
ratings of certain of our operating subsidiaries may
constitute an event of default under our credit facilities.
We can offer no assurances that our ratings will remain at
their current levels. Changes in the criteria used by rating
agencies may impact our capital position, our capital
requirements and the treatment of certain items on our
balance sheet. It is possible that rating agencies may modify
their evaluation criteria, heighten the level of scrutiny they
apply when analyzing companies in our industry, adjust
upward the capital and other requirements employed in
their models and/or discontinue recognition of credit and
debt instruments or other structures deployed for
maintenance of certain rating levels. We may need to raise
additional funds through equity or debt financings or other
investments. Any equity or debt financing, if available at all,
may be on terms that are unfavorable to us. Equity
financings could be dilutive to our existing shareholders and
could result in the issuance of securities that have rights,
preferences and privileges that are senior to those of our
outstanding securities. If we are not able to obtain adequate
capital through such financings or through our investment
strategy, our business, results of operations and financial
condition could be adversely affected. See “Capital
Resources” in Item 7 for further details.
For further information on our financial strength and/or
issuer ratings, see “Ratings” in Item 1. For further
information on our letter of credit facilities, see the Letter of
Credit and Revolving Credit Facilities section of “Contractual
Obligations and Commercial Commitments” in Item 7.
Our 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.
The success of our business depends on attracting and
retaining a capable and talented workforce. We provide a
work environment and culture which reflects our goal to
“Enable Possibility”. We offer flexible and hybrid work
arrangements, when possible, for our employees globally, as
well as competitive compensation packages which include
participation in our Employee Stock Purchase Plan and the
possibility of equity awards at certain job levels. Over the
past few years, we have also implemented and expanded
our learning programs, career leveling and employee
networks, all of which we believe will help us retain talent.
While our efforts to attract, develop and retain talented
employees continues to be a top priority, we may not be
able to compete successfully for talented executives and
employees, which may adversely impact our ability to fully
realize our business strategy.
Our success will depend on our ability to maintain and
enhance effective operating procedures and internal controls
and our ERM program.
We operate within an ERM framework designed to identify,
assess and monitor our risks. We consider underwriting,
reserving, investment, credit, group and operational risk in
our
ERM
framework.
Losses,
reputational
damage,
regulatory fines, supervisory criticism, contractual disputes
and litigation are among the adverse impacts which can
arise if we fail to operate an effective ERM framework. Our
operational risks include the ongoing obligation to comply
with applicable laws, regulations, regulatory expectations,
and legal standards across all jurisdictions where Arch
conducts business. Additionally, operational risk and losses
can result from, among other things, fraud, errors, failure to
document transactions properly or to obtain proper internal
authorization,
failure
to
comply
with
regulatory
requirements across all jurisdictions where Arch conducts
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2025 FORM 10-K
business, information technology or information security
failures and failure to train employees appropriately or
adequately. We continuously enhance our operating
procedures and internal controls to effectively support our
business and our regulatory and reporting requirements. As
a result of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the
company have been detected. These inherent limitations
include the realities that judgments in decision making can
be faulty, and that breakdowns can occur because of simple
error or mistake or circumvention of controls. There can be
no assurance that our control system will succeed in
achieving its stated goals under all potential future
conditions. Any ineffectiveness in our controls or procedures
could have a material adverse effect on our business. For
further information on our ERM framework, see “Enterprise
Risk Management” in Item 1.
We are exposed to credit risk in certain of our business
operations.
In addition to exposure to credit risk related to our
investment portfolio, reinsurance recoverables and reliance
on brokers and other agents, we are exposed to credit risk in
other areas of our business related to policyholders. We are
exposed to credit risk in our insurance group’s surety unit
where we guarantee to a third party that our policyholder
will satisfy certain performance or financial obligations. If
our policyholder defaults, we may suffer losses and be
unable to be reimbursed by our policyholder. We are also
exposed to credit risk from policyholders on smaller
deductibles in other insurance group lines, such as
healthcare and excess and surplus casualty. Although we
have not experienced any material credit losses to date, an
increased inability of our policyholders to meet their
obligations to us could have a material adverse effect on our
financial condition and results of operations. See note 3,
“Significant Accounting Policies.”
Our 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.
We must comply with all applicable economic sanctions and
anti-bribery laws and regulations of the U.S. and other
foreign jurisdictions where we operate. U.S. laws and
regulations applicable to us and others who provide
insurance and reinsurance include the economic trade
sanctions laws and regulations administered by the
Treasury’s Office of Foreign Assets Control as well as certain
laws administered by the U.S. Department of State. New
sanctions regimes may be initiated, or existing sanctions
expanded or lifted, at any time, which can immediately
impact our business activities. Since the Russian invasion of
Ukraine in 2022, there have been several sanctions packages
imposed by the U.S., U.K. and EU which impact our business.
The sanctions are complex, numerous and nuanced,
requiring close review and assessment as they pertain to our
business. We are also subject to the U.S. Foreign Corrupt
Practices Act and other anti-bribery laws such as the U.K.
Bribery Act that generally bar corrupt payments or
unreasonable gifts to foreign governments or officials.
Although we have policies and controls in place designed to
ensure compliance with these laws and regulations, it is
possible that an employee or intermediary could fail to
comply with applicable laws and regulations. In addition, we
may interpret a complex sanction in a way which may differ
from a regulator. In these cases, we could be exposed to
fines, criminal penalties and other sanctions. Such violations
could limit our ability to conduct business and/or damage
our reputation, resulting in a material adverse effect on our
financial condition and results of operations.
Risks Relating to Financial Markets and Investments
Adverse developments in the financial markets could have a
material adverse effect on our results of operations, financial
position and our businesses, and may also limit our access to
capital; our policyholders, reinsurers and retrocessionaires
may also be affected by such developments, which could
adversely affect their ability to meet their obligations to us.
Adverse developments in the financial markets, resulting
from inflation, global recessionary pressures, geopolitical
conflict, liquidity conditions among other factors, can
increase uncertainty and heighten volatility in the credit and
equity markets. These developments may result in realized
and unrealized losses on our investment portfolio that could
have a material adverse effect on our results of operations,
financial position and our businesses, and may also limit our
access to capital required to operate our business. In
addition, our policyholders, reinsurers and retrocessionaires
may be affected by developments in the financial markets,
which could adversely affect their ability to meet their
obligations to us. Volatility in the financial markets could
significantly affect our investment returns, reported results
and shareholders’ equity.
The capital requirements of our businesses depend on many
factors,
including
regulatory
and
rating
agency
requirements, the performance of our investment portfolio,
our ability to write new business successfully, the frequency
and severity of catastrophe events and our ability to
establish premium rates and reserves at levels sufficient to
cover losses.
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2025 FORM 10-K
Disruption 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.
Disruption in the financial markets and the downturn in
global economic activity resulting from geopolitical conflict
or economic decisions/trade wars, elevated financing rates,
property market declines or other macro-and micro-
economic conditions could adversely affect the valuation of
securities in our investment portfolio. Credit deterioration
spread widening and/or equity market volatility could result
in temporary or permanent impairment. Elevated levels of
inflation could drive higher U.S. and global interest rates,
negatively impacting asset prices, particularly in fixed
income and undermine financial flexibility of operating
businesses. In addition, a lack of pricing transparency,
decreased market liquidity, the strengthening or weakening
of foreign currencies against the U.S. Dollar, individually or
in tandem, could have a material adverse effect on our
results through realized losses, impairments and changes in
unrealized
positions
in
our
investment
portfolio.
Furthermore, issuers of the investments we hold under the
equity method of accounting report their financial
information to us one month to three months following the
end of the reporting period. Accordingly, the adverse impact
of any disruptions in global financial markets on equity
method income from these investments would likely not be
reflected in our current quarter results and would instead be
reported in the subsequent quarter.
Our operating results depend in part on the performance of
our investment portfolio. A significant portion of cash and
invested assets held by Arch consists of fixed maturities
(70.8% as of December 31, 2025). Although our current
investment guidelines and approach emphasize preservation
of capital, market liquidity and diversification of risk, our
investments are subject to market-wide risks and valuation
fluctuations. In addition, we are subject to risks inherent in
particular securities or types of securities, as well as sector
concentrations. We may not be able to realize our
investment objectives, which could have a material adverse
effect on our financial results. In the event that we are
unsuccessful in calibrating the liquidity of our investment
portfolio with our expected insurance and reinsurance
liabilities, we may be forced to liquidate our investments at
times and prices that are not optimal, which could have a
material adverse effect on our financial results and ability to
conduct our business.
Foreign currency exchange rate fluctuation may adversely
affect our financial results.
We write business on a worldwide basis, and our results of
operations may be affected by fluctuations in the value of
currencies other than the U.S. Dollar. The primary foreign
currencies in which we operate are the Euro, the British
Pound Sterling, the Australian Dollar and the Canadian
Dollar. In order to minimize the possibility of losses we may
suffer as a result of our exposure to foreign currency
fluctuations in our net insurance liabilities, we invest in
securities denominated in currencies other than the U.S.
Dollar. In addition, we may replicate investment positions in
foreign currencies using derivative financial instruments.
Changes in the value of available-for-sale investments due to
foreign currency rate movements are reflected as a direct
increase or decrease to shareholders' equity and are not
included in the statement of income.
The 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.
On a quarterly basis, we review our investments by applying
an approach based on the CECL and whether declines in fair
value below the cost basis requires an estimate of the
expected credit loss. There can be no assurance that our
management has accurately assessed the level of the credit
loss allowance taken, as reflected in our financial
statements. Furthermore, additional allowance may need to
be taken or allowances provided for in the future. Further,
rapidly changing and unpredictable credit and equity market
conditions could materially affect the valuation of securities
carried at fair value as reported within our consolidated
financial statements and the period-to-period changes in
value could vary significantly.
Our 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.
Arch Re Bermuda is a registered Bermuda insurance
company and is not licensed or admitted as an insurer in any
jurisdiction in the U.S., although Arch Re Bermuda has been
approved as a “certified reinsurer” and a “reciprocal
reinsurer” in certain U.S. states that allow for the reduction
or elimination of statutory collateral for reinsurance ceded
to such reinsurers. Arch Re Bermuda's contracts generally
require it to post a letter of credit or provide other security,
even in U.S. states where it has been approved for reduced
collateral, upon the happening of certain events. State credit
for reinsurance rules also generally provide that reinsurers
such as Arch Re Bermuda must provide statutory collateral
in the event their certified or reciprocal status is
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2025 FORM 10-K
“terminated” or 100% collateral upon the entry of an order
of rehabilitation, liquidation or conservation against a ceding
insurer.
Although, to date, Arch Re Bermuda has not experienced
any difficulties in providing collateral when required, if we
are unable to post security in the form of letters of credit or
trust funds when required, the operations of Arch Re
Bermuda could be significantly and negatively affected.
Risks Relating to Our Mortgage Operations
The ultimate performance of our mortgage insurance
portfolios remains uncertain.
The mix of business in our insured loan portfolio may affect
losses. The presence of multiple higher-risk characteristics in
a loan materially increases the likelihood of a claim unless
there are other characteristics to mitigate the risk. Changes
in underwriting standards, loan terms or credit evaluation
methodologies (including those driven by the GSEs,
regulators or market competition) could result in a higher-
risk mortgage insurance portfolio and increase the
frequency and severity of claims, which could have a
material adverse effect on our business, results of operation
and financial condition. The geographic mix of our insured
loan portfolio could also increase losses and harm our
financial performance.
Mortgage insurance premiums are set at the time coverage
is procured, based in part on the expected duration of the
coverage. We cannot cancel mortgage insurance coverage or
adjust renewal premiums during the life of the policy. Thus,
higher than anticipated claims generally cannot be offset by
premium increases on policies in force or mitigated by our
non-renewal or cancellation of insurance coverage. Further,
in the U.S., to the extent that the insured cancels coverage
as a result of prior home price appreciation, the duration of
coverage will be shorter, and we will receive less premium.
The premiums charged, and the associated investment
income, may not be adequate to compensate us for the risks
and costs associated with the insurance coverage provided
to customers. Intense competition within the private
mortgage insurance industry and the potential for new
entrants could result in lower premiums and/or negatively
impact our level of NIW. A decrease in the amount of
premium received or an increase in the number or size of
claims, compared to what we anticipate, could adversely
affect our results of operations and financial condition.
The frequency and severity of claims we incur is uncertain
and will depend largely on general economic factors outside
of our control, including, among others, changes in
unemployment and home prices affordability. Inflated home
prices followed by a decline in home values could
significantly decrease a borrower’s equity in their home,
which would limit their ability to sell the property without
incurring a loss and could increase the frequency and
severity of claims. Changes to credit scoring models, data
inputs or evaluation frameworks could result in borrowers
being assessed as lower risk than their actual performance
ultimately reflect, increasing uncertainty in default and claim
performance due to model changes.
Monthly interest rate changes in Australia or the increasing
cost of homeowners insurance in the U.S. could make a
borrower’s monthly housing-related payment obligations
increase and could increase the frequency of claims.
Deteriorating economic conditions, potentially due to
prolonged recessionary conditions increasing levels of
unemployment and inflation, could adversely affect the
performance of our mortgage insurance portfolio and could
adversely affect our results of operations and financial
condition.
If 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.
The size of the U.S. and Australian mortgage insurance
market depends in large part upon the volume of low down
payment
home
mortgage
originations.
Increases
to
mortgage interest rates have materially increased financing
costs, and as a result have decreased the number of
qualified borrowers and the volume of low down payment
mortgage originations. Other factors affecting the volume of
low down payment mortgage originations include, among
others: restrictions on mortgage credit due to stringent
underwriting standards and liquidity issues affecting lenders;
changes in affordability due to increased mortgage interest
rates and home prices, and other economic conditions in the
U.S., Australian and regional economies; population trends,
including the rate of household formation and immigration;
supply constraints and increased building costs; and U.S. and
Australian government housing policy, including policies
encouraging loans to first time home buyers.
The private mortgage insurers’ principal government
competitor in the U.S. is the Federal Housing Administration
(“FHA”). In 2023, the FHA reduced its annual mortgage
insurance premium rates by 30bps from .85% to .55% for
most single family mortgages. This change, and any future
changes to the FHA program may, cause a decline in the
volume of low down payment home mortgages purchased
by the GSEs and negatively impact the amount of mortgage
insurance we write in the U.S.
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2025 FORM 10-K
The FHFA as conservator of the GSEs continues to evaluate
loan level price adjustments (“LLPAs”) and guarantees fees
assessed by the GSEs when purchasing loans. Future pricing
changes, which may include increasing LLPAs and guarantee
fees, limiting the purchase of certain categories of loans, or
restricting loan limits could cause a decline in the volume of
low down payment home mortgage purchases by the GSEs
and could negatively impact U.S. new insurance written and
mortgage insurance revenues.
To reduce pressure on housing affordability in Australia, the
Australian
Government
introduced
the
First
Home
Guarantee Scheme (“HGS”) in 2020, designed to support
eligible first home buyers by allowing them to purchase a
home with a deposit of as little as 5%. Under HGS, Housing
Australia, the Australian Government’s independent national
housing agency, provides a free guarantee to the lender of
up to 15% of the value of the property for first home buyers,
negating the requirement to pay for mortgage insurance.
Since inception through 2025, the HGS was substantially
expanded, negatively impacting the amount of mortgage
insurance we write in Australia, and we cannot predict
whether this will continue in the future.
Changes 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.
Substantially all of Arch MI U.S.’s insurance written has been
for loans sold to the GSEs. The charters of the GSEs require
credit enhancement for low down payment mortgages to be
eligible for purchase or guarantee by the GSEs. Any changes
to the charters or statutory authorities of the GSEs would
require congressional action to implement. If the charters of
the GSEs were amended to change or eliminate the
acceptability of private mortgage insurance, our mortgage
insurance business could decline significantly.
On January 2, 2025, the U.S. Department of Treasury (the
“Treasury Department”) and FHFA announced an agreement
to amend the preferred stock purchase agreements
between the Treasury Department and the GSEs, originally
entered into in 2008, in order to, among other things, codify
the requirement that Treasury consent before the
conservatorships can be terminated, memorialize that
ending
the
conservatorship
should
be
based
on
consideration of the financial condition of the GSEs and the
potential impact on the housing market, and outline an
agreed upon process for eventual public input. If any GSE
reform, including privatization, is pursued, whether through
legislation or administrative action, it could impact the
current role of private mortgage insurance as credit
enhancement, including its reduction or elimination. Passage
and timing of any comprehensive GSE reform or incremental
change (legislative or administrative) is uncertain, making
the actual impact on the mortgage insurance industry
difficult to predict. Furthermore, the FHFA and/or the GSEs
could choose to reduce the amount of CRT protection
purchased on their loan portfolios, which could reduce the
CRT investment opportunities available for reinsurers.
Future legislative or administrative action or changes to
business practices related to the use or requirement for
credit enhancement could have a material adverse impact
on the Company.
The PMIERs apply to AMIC and UGRIC, which are eligible
mortgage insurers. The PMIERs impose limitations on the
type of risk insured, the forms and insurance policies issued,
standards for geographic and customer diversification of
risk, acceptable underwriting practices, quality assurance,
loss mitigation, claims handling, reinsurance cessions and
financial requirements, among other things. The financial
requirements require a mortgage insurer’s available assets
to meet or exceed “minimum required assets” as of each
quarter end. In August 2024, the GSEs updated PMIERs to
incorporate new deductions to the definition of available
assets for investment risk. This update became effective
March 31, 2025, but the impact will be phased in through
September 30, 2026. Arch MI U.S.’s minimum required
assets under the PMIERs will be determined, in part, by the
particular risk profiles of the loans it insures. If, absent other
changes, Arch MI U.S.’s mix of business changes to include
more loans with higher loan-to-value ratios or lower credit
scores, it will have a higher minimum required asset amount
under the PMIERs and, accordingly, be required to hold
more capital in order to maintain GSE eligibility. Our eligible
mortgage insurers each satisfied the PMIERs’ financial
requirements as of December 31, 2025. While we intend to
continue to comply with these requirements, there can be
no assurance that the GSEs will not change the PMIERs or
that AMIC or UGRIC will continue as eligible mortgage
insurers. If either or both of the GSEs were to cease to
consider AMIC or UGRIC as eligible mortgage insurers and,
therefore,
cease
accepting
our
mortgage
insurance
products, our results of operations and financial condition
would be adversely affected.
The implementation of the Basel III Capital Accord and
FHFA’s Enterprise Regulatory Capital Framework may
adversely affect the use of mortgage insurance and SRT and
CRT opportunities.
In 2017, the Basel Committee on Banking Supervision
published final revisions to the Basel Capital Accord which is
informally denominated in the U.S., as “Basel III Endgame.”
The Basel Committee expects the new rules to be fully
implemented by January 2027.
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2025 FORM 10-K
In 2023, the Federal banking agencies released a proposed
rule to implement the Basel III Endgame in the United
States, which would apply to banks with assets greater than
$100 billion. The proposal would increase the capital charges
for mortgages held in portfolio and eliminate the capital
relief currently afforded mortgage loans protected by
private mortgage insurance, which could adversely affect
the volume of mortgages originated by banks subject to the
rule and the demand for mortgage insurance. With the
change in the Presidential administration in 2025, and based
on feedback received in response to the proposed rule, the
Federal banking agencies have indicated an intent to
repropose the Basel III Rules. In September 2025, Federal
Reserve Vice Chair for Supervision, Michelle Bowman, stated
that the U.S. bank regulators are working toward unveiling a
revised Basel III Endgame by early 2026. She indicated that
the revised proposal would be more “industry friendly” than
prior versions, though the timing, requirements, and
implementation of the reproposed rule remain uncertain.
While some countries outside of the EU have begun
implementing the Basel III Endgame, both the U.K. and the
EU have announced that the start of implementation will be
delayed until January 1, 2027. In addition, the U.K. is
considering applying different rules for smaller banks, and
the EU is consulting on proposals to amend the EU
Securitization Regulation (“SECR”) and Capital Requirements
Regulation (“CRR”), which implement the Basel III Endgame.
The proposed SECR and CRR amendments improve the
capital relief EU banks receive from insurance-based SRT
transactions in which the Company participates. The timing,
requirements, and implementation of the final rules remain
uncertain and subject to continued debate, which could
negatively impact the capital relief afforded by the
protection we provide and the volume of insurance-based
SRT transactions in the EU.
In 2020, the FHFA published a new Enterprise Regulatory
Capital Framework (“ERCF”) for Fannie Mae and Freddie
Mac
that
significantly
increased
minimum
capital
requirements for the GSEs. The rule requires each GSE to
maintain both higher minimum capital ratios and capital
“buffers” to avoid restrictions on capital distributions and
discretionary bonus payments. Changes were made to the
ERCF in 2022 to incentivize CRT transactions, and in 2023 to
address capital requirements for derivatives; market risk;
multifamily loans; and exposures of an Enterprise to the
other Enterprise.
The ERCF includes higher risk-capital charges for residential
mortgages and continues to take into account the benefits
of private mortgage insurance, provided the mortgage
insurer is compliant with the PMIERs. The higher risk-capital
charges for residential mortgages under the ERCF could be
incorporated into future PMIERs amendments, thereby
requiring mortgage insurers to hold higher capital levels in
order to be recognized as an eligible insurer for the GSEs.
This could have a negative impact on our return on equity.
Future changes to the ERCF, or the guarantee fees charged
to acquire loans, could adversely impact credit for credit risk
transfer, the capital relief afforded private mortgage
insurance or the volume of loans purchased by the
Enterprises and the demand for mortgage insurance.
Risks Relating to Our Company and Our Shares
Some of the provisions of our bye-laws and our shareholders
agreement may have the effect of hindering, delaying or
preventing third party takeovers or changes in management
initiated by shareholders. These provisions may also prevent
our shareholders from receiving premium prices for their
shares in an unsolicited takeover.
Some provisions of our bye-laws could have the effect of
discouraging unsolicited takeover bids from third parties or
changes in management initiated by shareholders. These
provisions may encourage companies interested in acquiring
us to negotiate in advance with our Board, since the Board
has the authority to overrule the operation of several of the
limitations.
Among other things, our bye-laws provide: for a classified
Board, in which the directors of the class elected at each
annual general meeting holds office for a term of three
years, with the term of each class expiring at successive
annual general meetings of shareholders; that the number
of directors is determined by the Board from time to time by
a vote of the majority of the Board; that directors may only
be removed for cause, and cause removal shall be deemed
to exist only if the director whose removal is proposed has
been convicted of a felony or been found by a court to be
liable for gross negligence or misconduct in the performance
of his or her duties; that the Board has the right to fill
vacancies, including vacancies created by an expansion of
the Board; and for limitations on a shareholder’s right to
raise proposals or nominate directors at general meetings.
Our bye-laws provide that certain provisions that may have
anti-takeover effects may be repealed or altered only with
prior Board approval and upon the affirmative vote of
holders of shares representing at least 65% of the total
voting power of our shares entitled generally to vote at an
election of directors.
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2025 FORM 10-K
The bye-laws also contain a provision limiting the rights of
any U.S. person (as defined in section 7701(a)(30) of the
Internal Revenue Code of 1986, as amended (the “Code”))
that owns shares of Arch Capital, directly, indirectly or
constructively (within the meaning of section 958 of the
Code), representing more than 9.9% of the voting power of
all shares entitled to vote generally at an election of
directors. The votes conferred by such shares of such U.S.
person will be reduced by whatever amount is necessary so
that after any such reduction the votes conferred by the
shares of such person will constitute 9.9% of the total voting
power of all shares entitled to vote generally at an election
of directors. Notwithstanding this provision, the Board may
make such final adjustments to the aggregate number of
votes conferred by the shares of any U.S. person that the
Board considers fair and reasonable in all circumstances to
ensure that such votes represent 9.9% of the aggregate
voting power of the votes conferred by all shares of Arch
Capital entitled to vote generally at an election of directors.
Arch Capital will assume that all shareholders (other than
specified persons) are U.S. persons unless we receive
assurance satisfactory to us that they are not U.S. persons.
The bye-laws also provide that the affirmative vote of at
least 66 2/3% of the outstanding voting power of our shares
(excluding shares owned by any person (and such person’s
affiliates and associates) that is the owner of 15% or more (a
“15% Holder”) of our outstanding voting shares) shall be
required for various corporate actions, including: merger or
consolidation of the company into a 15% Holder; sale of any
or all of our assets to a 15% Holder; the issuance of voting
securities to a 15% Holder; or amendment of these
provisions; provided, however, the super majority vote will
not apply to any transaction approved by the Board.
The provisions described above may have the effect of
making more difficult or discouraging unsolicited takeover
bids from third parties. To the extent that these effects
occur, shareholders could be deprived of opportunities to
realize takeover premiums for their shares and the market
price of their shares could be depressed. In addition, these
provisions could also result in the entrenchment of
incumbent management.
There are regulatory limitations on the ownership and
transfer of our common shares.
The jurisdictions where we operate have laws and
regulations that require regulatory approval of a change in
control of an insurer or an insurer's holding company.
Where such laws apply to us, there can be no effective
change in our control unless the person seeking to acquire
control has filed a statement with the regulators and
obtained prior approval for the proposed change. Certain
regulators may at any time, by written notice, object to a
person holding shares in an insurer or an insurer's holding
company if it appears to the regulator that the person is not
or is no longer fit and proper to be such a holder. The
regulator may require the shareholder to reduce its holding
in the insurer or an insurer's holding company and direct,
among other things, that such shareholder’s voting rights
attaching to the shares in an insurer or an insurer's holding
company shall not be exercisable.
Arch Capital is a holding company and is dependent on
dividends and other distributions from its operating
subsidiaries.
Arch Capital is a holding company whose assets primarily
consist of the shares in our subsidiaries. Generally, Arch
Capital depends on its available cash resources, liquid
investments and dividends or other distributions from
subsidiaries to make payments, including the payment of
debt service obligations and operating expenses it may incur
and any payments of dividends, redemption amounts or
liquidation amounts with respect to our preferred shares
and common shares, and to fund the share repurchase
program. The ability of our regulated insurance and
reinsurance subsidiaries to pay dividends or make
distributions is subject to legislative constraints and
dependent on their ability to meet applicable regulatory
standards. In addition, the ability of our insurance and
reinsurance subsidiaries to pay dividends to Arch Capital and
to intermediate parent companies owned by Arch Capital
could be constrained by our dependence on financial
strength ratings from independent rating agencies. Our
ratings from these agencies depend to a large extent on the
capitalization levels of our insurance and reinsurance
subsidiaries.
General market conditions and unpredictable factors could
adversely affect market prices for our outstanding preferred
shares.
There can be no assurance about the market prices for our
series of preferred shares that are traded publicly. Several
factors, many of which are beyond our control, will influence
the fair value of our preferred shares, including, but not
limited to:
•
whether dividends have been declared and are likely to
be declared on any series of our preferred shares from
time to time;
•
our creditworthiness, financial condition, performance
and prospects;
•
whether the ratings on any series of our preferred
shares provided by any ratings agency have changed;
•
the market for similar securities; and
•
economic, financial, geopolitical, social, regulatory or
judicial events that affect us and/or the insurance or
financial markets generally.
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2025 FORM 10-K
Dividends on our preferred shares are non-cumulative.
Dividends on our preferred shares are non-cumulative and
payable only out of lawfully available funds of Arch Capital
under Bermuda law. Consequently, if the Board (or a duly
authorized committee of the Board) does not authorize and
declare a dividend for any dividend period with respect to
any series of our preferred shares, holders of such preferred
shares would not be entitled to receive any such dividend,
and such unpaid dividend will not accrue and will never be
payable. Arch Capital will have no obligation to pay
dividends for a dividend period on or after the dividend
payment date for such period if the Board (or a duly
authorized committee of the Board) has not declared such
dividend before the related dividend payment date; if
dividends on our series F or series G preferred shares are
authorized and declared with respect to any subsequent
dividend period, Arch Capital will be free to pay dividends on
any other series of preferred shares and/or our common
shares. We paid a special cash dividend on our common
shares during fiscal year 2024, but there is no assurance that
any dividend will be declared and paid in the future.
Our preferred shares are equity and are subordinate to our
existing and future indebtedness.
Our preferred shares are equity interests and do not
constitute indebtedness. As such, these preferred shares will
rank junior to all of our indebtedness and other non-equity
claims with respect to assets available to satisfy our claims,
including in our liquidation. Our existing and future
indebtedness may restrict payments of dividends on our
preferred shares. Additionally, unlike indebtedness, where
principal and interest would customarily be payable on
specified due dates, in the case of preferred shares, (1)
dividends are payable only if declared by the Board (or a
duly authorized committee of the Board) and (2) as
described under “Risks Relating to Our Company—Arch
Capital is a holding company and is dependent on dividends
and other distributions from its operating subsidiaries,” we
are subject to certain regulatory and other constraints
affecting our ability to pay dividends and make other
payments.
We may issue additional securities that rank equally with or
senior to our series F and series G preferred shares without
limitation. The issuance of securities ranking equally with or
senior to our preferred shares may reduce the amount
available for dividends and the amount recoverable by
holders of such series in the event of a liquidation,
dissolution or winding-up of Arch Capital.
The voting rights of holders of our preferred shares are
limited.
Holders of our preferred shares have no voting rights with
respect to matters that generally require the approval of
voting shareholders. The limited voting rights of holders of
our preferred shares include the right to vote as a class on
certain fundamental matters that affect the preference or
special rights of our preferred shares as set forth in the
certificate of designations relating to each series of
preferred shares. In addition, if dividends on our series F or
series G preferred shares have not been declared or paid for
the equivalent of six dividend payments, whether or not for
consecutive dividend periods, holders of the outstanding
series F or series G preferred shares will be entitled to vote
for the election of two additional directors to the Board
subject to the terms and to the limited extent as set forth in
the certificate of designations relating to such series of
preferred shares.
Risks Relating to Taxation
We are subject to increased taxation in Bermuda as a result
of the Bermuda CIT Act, effective January 1, 2025 and may
become subject to increased taxation in other countries as a
result of the implementation of the OECD's plan on “Base
Erosion and Profit Shifting.”
The OECD, with the support of the G20, initiated the “Base
Erosion and Profit Shifting” (“BEPS”) project in 2013 in
response to concerns that changes are needed to
international tax laws to address situations where
multinationals may pay little or no tax in certain jurisdictions
by shifting profits away from jurisdictions where the
activities creating those profits may take place. In 2015,
“final reports” were approved for adoption by the G20
finance ministers. The final reports provide the basis for
international standards for corporate taxation that are
designed to prevent, among other things, the artificial
shifting of income to tax havens and low-tax jurisdictions,
the erosion of the tax base through interest deductions on
intercompany debt and the artificial avoidance of
permanent
establishments
(i.e.,
tax
nexus
with
a
jurisdiction).
Legislation to adopt and implement these standards,
including country by country reporting, has been enacted or
is currently under consideration in a number of jurisdictions.
As a result, our income may be taxed in jurisdictions where it
is not currently taxed and at higher rates of tax than
currently taxed, which may substantially increase our
effective tax rate. Also, the continued adoption of these
standards may increase the complexity and costs associated
with tax compliance and adversely affect our financial
position and results of operations.
In 2019, the OECD published a “Programme of Work,”
divided into two pillars, which is designed to address the tax
challenges created by an increasing digitalized economy.
Pillar I addresses the broader challenge of a digitalized
ARCH CAPITAL
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2025 FORM 10-K
economy and focuses on the allocation of group profits
among taxing jurisdictions based on a market-based concept
rather than historical “permanent establishment” concepts.
In 2020, the OECD released a statement excluding most
financial services activities, including insurance activities,
from the scope of the profit reallocation mechanism in Pillar
I (referred to under Pillar I as “Amount A”). The OECD
statement cited the presence of commercial (rather than
consumer) customers as grounds for the carve-out, but also
acknowledged that a “compelling case” could be made that
the consumer-facing business lines of insurance companies
should be excluded from the scope of Pillar I given the
impact of regulations and licensing requirements that
typically ensure that residual profits are largely realized in
local customer markets. However, profits from “unregulated
elements of the financial services sector” remain in scope
but only where revenue exceeds €20 billion. The revenue
threshold 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.
Pillar II addresses the remaining BEPS risk of profit shifting to
certain in-scope entities in low tax jurisdictions by
introducing a global minimum tax (15%). In calculating
whether the effective tax rate of an in-scope entity meets
the minimum tax rate, certain deferred income tax assets
and liabilities (“Deferred Tax Items”) reflected or disclosed in
the financial accounts of an in-scope entity are taken into
account. In 2021, 136 jurisdictions agreed on a two-pillar
solution to address the tax challenges arising from the
digitalization of the economy. In 2021, the OECD released
Model Rules for implementation of Pillar II followed by the
release of detailed commentary in 2022, with the latest
update to the commentary in May 2025. The OECD has
released additional administrative guidance on the global
minimum tax in February, July and December of 2023, June
of 2024, January of 2025 and January of 2026 (the Side-by-
Side package). The 2025 guidance introduced a new
interpretation (with retroactive effect) for determining the
treatment of Deferred Tax Items, which may affect the
effective tax rate calculations of an in-scope entity following
a grace period including a potential write-off of a portion of
the net deferred tax asset related to the economic transition
adjustment established upon the enactment of the Bermuda
CIT Act in 2023.
The members of the EU have either already adopted
domestic legislation implementing the minimum tax rules,
pursuant to the EU’s minimum tax directive, unanimously
agreed by the member states in 2022 or have exercised their
option to postpone implementation on the basis of certain
exceptions available to countries that have a small number
of multi-national groups to which the rules would apply. For
many members of the EU that have adopted such rules, such
rules are effective for periods beginning on or after
December 31, 2023, with the “under-taxed profit rule”
taking effect for periods beginning on or after January 1,
2025. Legislatures in multiple countries outside of the EU
have also drafted and/or enacted legislation to implement
the OECD’s minimum tax proposal. Given the OECD’s
continued release of guidance regarding Pillar II, that only
certain jurisdictions have currently enacted laws to give
effect to Pillar II, that some jurisdictions have just recently
enacted such laws, that jurisdictions may interpret such laws
in different manners, and that certain elements of such laws
are currently subject to challenge pursuant to legal
proceedings, the overall implementation of Pillar II remains
uncertain and subject to change, possibly on a retroactive
basis.
The Bermuda CIT Act was enacted in December 2023 and is
effective for tax years beginning on or after January 1, 2025.
The Bermuda Government announced in its Second Public
Consultation that any new Bermuda corporate income tax
regime would supersede existing Tax Assurance Certificates
held by entities within the scope of the new Bermuda
corporate income tax (such as those issued to us, referred to
above under “—Taxation of Arch Capital. Bermuda.”). Thus,
with effect from January 1, 2025, Arch Capital is subject to
tax on income or profits under the Bermuda CIT Act.
It is expected that the Bermuda CIT Act generally will
prevent or mitigate the risk of other adopting countries from
collecting “top-up” taxes from Bermuda companies to reach
the 15% minimum rate, although the continued evolution of
the implementation of Pillar II may in some cases mean that
the Bermuda CIT Act does not avoid a “top-up” tax in all
scenarios. In addition, the Tax Credits Act 2025 (the “Credits
Act”) was enacted in Bermuda on December 11, 2025, and is
effective for tax years beginning on or after January 1, 2025.
The tax credits under the Credits Act are intended to qualify
as qualified refundable tax credits for purposes of the Pillar II
rules. Arch Capital currently expects to receive a material tax
benefit as a result of such tax credits, but the extent of such
tax benefit may be impacted by any further revisions to the
implementation of Pillar II.
The adoption of the tax laws described above (in particular,
the adoption of an “under-taxed profit rule” by certain
countries in which we and our affiliates do business and the
enactment of a corporate income tax regime in Bermuda)
are expected to result in an increase to our effective tax rate
and aggregate tax liability, which may adversely affect our
financial position and results of operations, and is expected
to increase the complexity and cost of our worldwide tax
compliance. Such tax laws may not be enacted or the form
of such tax laws could change on a prospective or
retroactive basis. The impact of any such changes is
unknown, but such changes could have an adverse effect on
our effective tax rate and aggregate tax liability and could
increase the complexity and costs associated with our tax
compliance worldwide.
ARCH CAPITAL
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2025 FORM 10-K
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk management and strategy
We prioritize the management of cybersecurity risk and the
protection of information across our enterprise by
embedding
data
protection
and
cybersecurity
risk
management in our operations. Our processes for assessing,
identifying, and managing material risks from cybersecurity
threats have been integrated into our overall risk
management system and processes. For example, to identify
and assess risks from cybersecurity threats, our enterprise
risk management program considers cybersecurity as part of
the Company’s risk assessment process, and our risk
management framework requires risk owners to monitor
key risks such as cybersecurity on a continuous basis. See
Item 1, “Business—Enterprise Risk Management” for
additional information.
As a foundation of our approach to cybersecurity risk, we
have implemented processes at several levels across our
enterprise to help assess, identify and manage cybersecurity
risks and incidents. Our privacy and information security
policies and standards cover topics such as information
sharing, privacy, data handling and data management as
well as more detailed information technology (“IT”)
processes encompassing incident response, access control,
artificial intelligence, disaster recovery and testing, among
other areas. These policies and standards are regularly
reviewed and updated at least annually based on the risk
and regulatory environment in which we operate. We
closely
monitor
privacy
and
cybersecurity,
AI
and
operational resilience laws, regulations and guidance
applicable to us. See Item 1, “Business—Regulation—
Cybersecurity and Privacy” for additional details.
We use many third parties for IT functions and our vendor
management group performs information security risk
assessments on our third party service providers with
respect to their ability to protect data from unauthorized
access, and on a risk weighted basis, we perform re-
assessments routinely. The Company also requires these
third party service providers to adhere to privacy and
cybersecurity measures and has a third party service
provider monitoring program in place that reviews changes
to the security posture of certain higher risk third party
service providers.
Our operations rely on the secure processing, storage and
transmission of confidential and other information in our
computer systems and networks. Computer viruses, hackers,
employee or vendor error or misconduct, and other external
hazards could expose our information systems and those of
our vendors to security breaches, cybersecurity incidents or
other disruptions, any of which could materially and
adversely affect our ability to conduct our business. We
annually undergo an external penetration testing by a third
party cybersecurity firm. These tests and our tabletop
exercises enable us to incorporate recommendations and
learnings in our program. While we and third parties with
which we do business have experienced cybersecurity
incidents, to date, the Company does not believe that any
previous cybersecurity incidents have materially affected the
Company.
The sophistication of cybersecurity threats, including
through the use of AI, continues to increase, and the
controls and preventative actions that we take to reduce the
risk of cybersecurity incidents and protect our systems,
including the regular testing of our cybersecurity incident
response plan, may be insufficient. In addition, new
technology that could result in greater operational efficiency
such as AI may further expose our information systems to
the risk of cybersecurity incidents. See Item 1A, “Risk Factors
—Risk Relating to Our Industry, Business & Operations—
Technology failures and cyber attacks, including, but not
limited to, ransomware, exploitation in software or code
with malicious intent, state-sponsored cyber attacks, as well
as vulnerabilities relating to new technologies, such as
generative AI, may impact us or our business partners and
service providers, causing a disruption in service and
operations which could materially and negatively impact our
business and/or expose us to litigation.”
ARCH CAPITAL
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2025 FORM 10-K
Governance
As part of our overall risk management approach, we
recognize the importance of identifying and managing
cybersecurity risk at several levels, including Board
oversight, executive commitment and employee training.
Our Audit Committee, comprised of independent directors
from our Board, oversees the Board’s responsibilities
relating to the operational (including IT risks, business
continuity and data security) risk affairs of the Company.
Our Audit Committee is informed of such risks through
quarterly reports from our Chief Information Officer (“CIO”)
and Chief Operations Officer (“COO”), with input from our
Chief Information Security Officer (“CISO”).
Our cybersecurity and IT executives include our CIO, who
has 35 years of experience in Information Technology,
including 22 years in the financial services space. His
responsibilities as the CIO include all areas of Information
Technology and information security oversight. Our CISO,
has 20 years of experience in information security. The CISO
holds certifications from leading security associations. The
information security personnel reporting to the CISO hold
various leading security certifications. The CISO, reporting to
the CIO, oversees the implementation and compliance of
our information security standards and mitigation of related
risks. We also have three management level committees and
a team that supports our processes to assess and manage
cybersecurity risk.
• The Privacy and Security Committee (“P&S Committee”),
co-chaired by the CISO and our Deputy General Counsel,
brings together Information Security, legal, compliance,
human resources and other function leads. The P&S
Committee provides a forum for these cross-functional
members of management to: consider new laws and
regulations relating to privacy and security; consider
emerging risks relating to cybersecurity and data
protection; approve, review and update policies and
standards as appropriate; and promote cross-functional
collaboration to manage cybersecurity and privacy risks
across the enterprise.
• The Operational Risk Committee (“ORC”), comprised of
senior IT, operations, risk, legal and compliance leaders
across business segments, manages risks from matters
related to business continuity including risks posed by
cybersecurity threats, and implements controls to mitigate
such operational risks. Among other processes, the ORC
reviews the Company’s programs and processes related to
business operations and resiliency, including crisis incident
management and cyber risk response, third party risk,
vendor management, facilities, unplanned downtime,
business disruption, business continuity and disaster
recovery. Key information reviewed by the ORC, including
as it relates to cybersecurity, are included in the COO’s
quarterly report to the Audit Committee.
• The Crisis Incident Management Team (“CIMT”), which
includes senior executives across the Company, is alerted
as appropriate to cybersecurity incidents, natural disasters
and business outages. Each quarter, the CIMT exercises its
communication plan to confirm that its members can be
alerted quickly in the event of an actual crisis and meet as
a team to discuss the event and response options.
• The IT Steering Committee (“IT Committee”, which
includes our CIO, CISO, COO and members of executive
leadership, oversees IT initiatives while considering
cybersecurity risk mitigation with respect to these
initiatives.
• The Artificial Intelligence Governance and Oversight
Committee (“AIGOC”), which includes senior executives
from IT, legal, compliance, risk and analytics, focuses on
the governance of AI through the Company Artificial
Intelligence Policy, annual training and vetting new AI
technologies. New AI use cases presented to the AIGOC
for approval include a review of cybersecurity controls,
among other considerations such as regulatory and
business factors.
The P&S Committee, ORC, CIMT, AIGOC and IT Committee
are comprised of executives with reporting lines to the CIO
and/or the COO.
At the employee level, we maintain an experienced IT
security team tasked with ongoing reviews of our technology
systems, implementation of our privacy and cybersecurity
program and support for the CIO and CISO in carrying out
their reporting, security and mitigation functions. We also
hold employee training on privacy and cybersecurity,
records and information management, conduct regular
phishing tests and generally seek to promote awareness of
cybersecurity risk through communication and education to
all our employees.
ARCH CAPITAL
66
2025 FORM 10-K
ITEM 2. PROPERTIES
We lease office space in Bermuda where our principal offices are located. Our insurance group leases space for offices in the
U.S., Canada, Bermuda, U.K., Europe and Australia. Our reinsurance group leases space for offices in the U.S., Bermuda, U.K.,
Europe, Canada and Dubai. Our mortgage group leases space for offices in the U.S., Bermuda and Australia. We believe that
the above described office space is adequate for our needs. However, as we continue to develop our business, we may open
additional office locations in 2026.
ITEM 3. LEGAL PROCEEDINGS
We, in common with the insurance industry in general, are subject to litigation and arbitration in the normal course of our
business. As of December 31, 2025, we were not a party to any litigation or arbitration which is expected by management to
have a material adverse effect on our results of operations and financial condition and liquidity.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ARCH CAPITAL
67
2025 FORM 10-K
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
HOLDERS
As of February 6, 2026, and based on information provided to us by our transfer agent and proxy solicitor, there were 976
holders of record of our common shares (Nasdaq: ACGL) and approximately 646,333 beneficial holders of our common shares.
ISSUER PURCHASES OF EQUITY SECURITIES
The following table summarizes our purchases of common shares for the 2025 fourth quarter:
Issuer Purchases of Common Shares
Period
Total Number of Shares
Purchased (1)
Average Price Paid per
Share
Total Number of Shares
Purchased as Part of
Publicly Announced Plans
or Programs
Approximate Dollar Value
of Shares that May Yet be
Purchased Under the Plan
or Programs ($000’s) (2)
10/1/2025-10/31/2025
3,532,228
$
89.07
3,532,228
$
1,590,313
11/1/2025-11/30/2025
3,479,250
$
89.13
3,469,676
$
1,281,163
12/1/2025-12/31/2025
1,858,791
$
93.71
1,858,788
$
1,107,004
Total
8,870,269
$
90.07
8,860,692
(1) This column represents (in whole shares) open market share repurchases, including an aggregate of nil shares, 9,574 shares and 3
shares repurchased by Arch Capital during October, November and December, respectively, other than through publicly announced
plans or programs. We repurchased these shares from employees in order to facilitate the payment of withholding taxes on restricted
and performance shares granted and the exercise of stock appreciation rights, in each case at their fair value as determined by
reference to the closing price of our common shares on the day the restricted and performance shares vested or the stock appreciation
rights were exercised.
(2) This column represents the remaining approximate dollar amount available at the end of each applicable period under Arch Capital’s
repurchase authorization. On September 4, 2025, the Company increased its authorization for its existing $1.0 billion share repurchase
program by $2.0 billion, and having no expiration date. Repurchases may be effected from time to time in open market or privately
negotiated transactions.
ARCH CAPITAL
68
2025 FORM 10-K
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on our common shares for each of the last five years
through December 31, 2025 to the cumulative total return, assuming reinvestment of dividends, of (1) S&P 500 Composite
Stock Index (“S&P 500 Index”) and (2) the S&P 500 Property & Casualty Insurance Index. The share price performance
presented below is not necessarily indicative of future results.
CUMULATIVE TOTAL SHAREHOLDER RETURN (1)(2)(3)
Arch Capital Group Ltd.
S&P 500 Index
S&P 500 Property & Casualty Insurance Index
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
12/31/25
$0.00
$100.00
$200.00
$300.00
Base Period
Company Name/Index
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
12/31/25
l Arch Capital Group Ltd.
$100.00
$123.23
$174.05
$205.91
$269.25
$279.66
n S&P 500 Index
$100.00
$128.71
$105.40
$133.10
$166.40
$196.16
p S&P 500 Property & Casualty Insurance Index
$100.00
$119.28
$141.79
$157.12
$212.86
$234.32
(1)
Stock price appreciation plus dividends.
(2)
The above graph assumes that the value of the investment was $100 on December 31, 2020.
(3)
This graph is not “soliciting material,” is not deemed filed with the SEC and is not to be incorporated by reference in any filing by us under the
Securities Act of 1933 or the Securities and Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general
incorporation language in any such filing.
ITEM 6. [RESERVED]
ARCH CAPITAL
69
2025 FORM 10-K
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of the financial condition and results of operations for the year ended December 31,
2025 and 2024. Comparisons between 2024 and 2023 have been omitted from this Form 10-K, but may be found in
"Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's
Annual Report on Form 10-K year ended December 31, 2024 filed with the SEC. This discussion and analysis contains forward-
looking statements which involve inherent risks and uncertainties. All statements other than statements of historical fact are
forward-looking statements. These statements are based on our current assessment of risks and uncertainties. Actual results
may differ materially from those expressed or implied in these statements and, therefore, undue reliance should not be
placed on them. Important factors that could cause actual events or results to differ materially from those indicated in such
statements are discussed in this report, including the sections entitled “Cautionary Note Regarding Forward-Looking
Statements,” and “Risk Factors.”
This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes
thereto presented under Item 8. All amounts are in millions, except per share amounts, unless otherwise noted.
Page No.
Overview
71
Current Outlook
71
Financial Measures
72
Comments on Non-GAAP Measures
73
Results of Operations
75
Insurance Segment
75
Reinsurance Segment
77
Mortgage Segment
78
Corporate
80
Summary of Critical Accounting Estimates
81
Financial Condition
89
Liquidity
92
Capital Resources
94
Contractual Obligations and Commitments
97
Ratings
97
Catastrophic Events and Severe Economic Events
98
Market Sensitive Instruments and Risk Management
100
ARCH CAPITAL
70
2025 FORM 10-K
OVERVIEW
Arch Capital Group Ltd. (“Arch Capital” and, together with its
subsidiaries, “we” or “us”) is a publicly listed Bermuda
exempted company with approximately $26.9 billion in
capital at December 31, 2025 and is part of the S&P 500
index. Through operations in Bermuda, the United States,
United Kingdom, Europe, Canada and Australia, we write
specialty lines of property and casualty insurance and
reinsurance, as well as mortgage insurance and reinsurance,
on a worldwide basis. It is our belief that our underwriting
platform, experienced management team and strong capital
base enable us to establish a strong presence in the markets
where we operate.
The worldwide property casualty insurance and reinsurance
industry is highly competitive and has traditionally been
subject to an underwriting cycle. In that cycle, a “hard”
market is evidenced by high premium rates, restrictive
underwriting standards, narrow terms and conditions, and
strong underwriting profits for insurers. A “hard” market
typically attracts new capital and new entrants to the
market and is eventually followed by a “soft” market, which
has
characteristics
of
low
premium
rates,
relaxed
underwriting standards, broader terms and conditions, and
lower underwriting profits for insurers. Market conditions in
the property and casualty arena may affect, among other
things, the demand for our products, our ability to increase
premium rates, the terms and conditions of the insurance
policies we write, changes in the products offered by us or
changes in our business strategy.
The financial results of the property casualty insurance and
reinsurance industry are influenced by factors such as the
frequency and/or severity of claims and losses, including
natural disasters or other catastrophic events, variations in
interest rates and financial markets, changes in the legal,
regulatory and judicial environments, inflationary pressures
and general economic conditions. These factors influence,
among other things, the demand for insurance or
reinsurance, the supply of which is generally related to the
total capital of competitors in the market.
Mortgage insurance and reinsurance are subject to similar
cycles to property casualty except that they have historically
been more dependent on macroeconomic conditions.
CURRENT OUTLOOK
We reported very good results for 2025, with an annualized
net income return on average common equity and operating
return on average common equity of 20.1% and 17.1%,
respectively. See “Comment on Non-GAAP Financial
Measures.” Meaningful contributions from all three
segments along with solid investment returns resulted in
book value growth for 2025 of 22.6%. Our strong balance
sheet and capital-generating capabilities permit us to both
invest in our business and return capital to investors. During
2025, we repurchased $1.9 billion of Arch common shares.
As we head into 2026 with measured optimism and
increased competition across our property and casualty
businesses, our commitment to deliver long-term value for
our shareholders remains unchanged. Critical to our cycle
management is emphasizing risk selection, as we continue to
leverage our diversified specialty platform and the expertise
of our underwriting teams. We invest and use data and
analytics to sharpen insights, enhance risk selection and
deliver a differentiated customer experience while fostering
a culture that attracts the best-in-class talent. We closed
2025 with a balance sheet in excellent health, giving us
optionality as we remain prudent stewards of the capital
entrusted to us by our shareholders.
Our
insurance
segment
reported
$375
million
of
underwriting income in 2025, with net premium written
nearly $7.8 billion, an increase of 13.4% from 2024. Growth
in net premiums written primarily resulted from the U.S
MidCorp and Entertainment insurance businesses acquired
from Allianz on August 1, 2024 (“MCE Acquisition”). The
acquired business further expands our insurance platform,
providing more opportunities to capitalize on attractive
margins. Across the insurance platform, our underwriters
continue to pursue growth in areas where risk-adjusted
returns exceed or meet our long-term objectives. In North
America, the casualty rate environment is largely keeping
pace with loss cost trends, while pricing in our international
business units is tracking slightly below loss trends. In North
America, we continue to grow in specialty casualty lines,
including alternative markets, construction and E&S
casualty. Within each geography, consistent with our cycle
management approach, we adjust our business mix in
response to changing market conditions and pricing
dynamics.
ARCH CAPITAL
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2025 FORM 10-K
Our reinsurance segment contributed $1.6 billion of
underwriting income in 2025. At the January 1, 2026
renewals, property catastrophe and more generally short-
tail excess of loss renewals were highly competitive with
rates down 10% to 20%. Despite these headwinds, our
underwriting teams leveraged the strength of our platform
and trading relationships to source new opportunities that
mitigate the impact of the rate pressure in the market. We
are growing selectively and focusing on areas where margins
are attractive. We continue to like our prospects in most
lines of business and, with improving conditions in casualty
lines, our agility and ability to create opportunities is an
advantage for us in this market. Our diversified reinsurance
platform, supported by strong partnerships with brokers and
cedants across multiple lines and geographies, further
enhance our ability to navigate a competitive environment.
Our mortgage segment continued to deliver a steady level of
earnings, generating $1.0 billion of underwriting income in
2025, resulting in the fourth consecutive year exceeding the
$1 billion threshold. While lower mortgage rates are
beginning to support increased origination activity, the
current market is still constrained due to affordability
challenges. Underlying fundamentals remained strong and
our U.S. market share was stable as industry pricing
discipline held. Our team remains focused on underwriting
discipline, expense management and enhancing our data
and analytical platforms to further optimize the business.
The persistency of our in-force U.S. primary mortgage
insurance portfolio remained a healthy 81.8% and our
delinquency rate remained low. We continue to expect the
mortgage segment to serve as a steady diversifying
contributor to our overall earnings and generate attractive
underwriting income given the high credit quality of our in-
force portfolio.
FINANCIAL MEASURES
Management uses the following three key financial
indicators in evaluating our performance and measuring the
overall growth in value generated for Arch Capital’s common
shareholders:
Book Value per Share
Book
value
per
share
represents
total
common
shareholders’ equity available to Arch divided by the
number of common shares and common share equivalents
outstanding. Management uses growth in book value per
share as a key measure of the value generated for our
common shareholders each period and believes that book
value per share is the key driver of Arch Capital’s share price
over time. Book value per share is impacted by, among other
factors, our underwriting results, investment returns and
share repurchase activity, which has an accretive or dilutive
impact on book value per share depending on the purchase
price. Book value per share was $65.11 at December 31,
2025, a 22.6% increase from $53.11 at December 31, 2024.
The growth in book value per share in 2025 primarily
reflected strong underwriting and investment returns.
Operating Return on Average Common Equity
Operating return on average common equity (“Operating
ROAE”) represents annualized after-tax operating income
available to Arch common shareholders divided by average
common shareholders’ equity available to Arch during the
period. After-tax operating income available to Arch
common shareholders, a “non-GAAP measure” as defined in
the SEC rules, represents net income available to Arch
common shareholders, excluding net realized gains or losses
(which includes, but is not limited to, realized and unrealized
changes in the fair value of equity securities and assets
accounted for using the fair value option, realized and
unrealized gains or losses on derivative instruments,
changes in the allowance for credit losses on financial assets
and gains or losses realized from the acquisition or
disposition of subsidiaries), equity in net income or loss of
investments accounted for using the equity method, net
foreign exchange gains or losses, transaction costs and
other, loss on redemption of preferred shares and income
taxes. Management uses Operating ROAE as a key measure
of the return generated to Arch common shareholders. See
“Comment on Non-GAAP Financial Measures.”
Our annualized net income return on average common
equity was 20.1% for 2025, compared to 22.8% for 2024.
Our Operating ROAE was 17.1% for 2025, compared to
18.9% for 2024. Returns for the 2025 period reflected strong
underwriting and investment returns.
ARCH CAPITAL
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2025 FORM 10-K
Total Return on Investments
Total return on investments includes investment income,
equity in net income or loss of investments accounted for
using the equity method, net realized gains or losses and the
change in unrealized gains or losses generated by Arch’s
investment portfolio. Total return is calculated on a pre-tax
basis before investment expenses and reflects the effect of
financial market conditions along with foreign currency
fluctuations. Management uses total return on investments
as a key measure of the return generated for Arch common
shareholders on the capital held in the business, and
compares the return generated by our investment portfolio
against benchmark returns. See “Comment on Non-GAAP
Financial Measures.”
The following table summarizes the pre-tax total return
(before investment expenses) of investments held by Arch
compared to the benchmark return (both based in U.S.
Dollars) against which we measured our portfolio during the
periods:
Arch
Portfolio
Benchmark
Return
Year Ended December 31, 2025
8.52 %
8.78 %
Year Ended December 31, 2024
5.08 %
5.22 %
Total return for 2025 primarily reflected the effects of lower
bond yields, a weaker U.S. dollar and equity market returns.
The portfolio slightly underperformed their benchmark
returns, primarily due to the impairment and sale of certain
alternative investments accounted for using the equity
method. The allocation of our portfolio remained neutral
relative to our targeted benchmark. We continue to
maintain a relatively short duration on our fixed income
portfolio of 3.34 years at December 31, 2025.
The benchmark return index is a customized combination of
indices intended to approximate a target portfolio by asset
mix and average credit quality with a fixed income
component matching the approximate estimated duration
and currency mix of our insurance and reinsurance liabilities.
It is recalibrated annually. Although the estimated fixed
income duration and average credit quality of this index will
move as the duration and rating of its constituent securities
change, generally we do not adjust the composition of the
benchmark return index during the year except to
incorporate changes to the mix of liability currencies and
durations noted above. The benchmark return index should
not be interpreted as expressing a preference for or aversion
to any particular sector or sector weight. At December 31,
2025, the fixed income portion of the benchmark had an
average credit quality of “A1” by Moody’s and an estimated
fixed income duration of 3.18 years.
The benchmark return index included weightings to the
following indices:
%
ICE BofA 1-10 Year U.S. Corporate Index
26.70
Yield on 3-5 Year U.S. Treasury Index plus 6%
17.00
ICE BofA 1-10 Year U.S. Treasury Index
15.00
ICE BofA 0-3 Month U.S. Treasury Index
3.00
JPM CLOIE Investment Grade
6.00
ICE BofA 1-5 Year U.K. Gilt Index
5.25
ICE BofA U.S. High Yield Constrained Index
5.00
ICE BofA U.S. ABS & CMBS Index
4.70
S&P 500 Total Return Index
4.50
ICE BofA 3-5 Year US Agency CMO Excluding IO & PO Index
3.50
ICE BofA German Government 1-5 Year Index
3.25
ICE BofA German Government 5-7 Year Index
0.60
ICE BofA 1-5 Year Canada Government Index
2.60
ICE BofA 15+ Year Canada Government Index
0.30
ICE BofA 1-5 Year Australia Government Index
1.90
ICE BofA 5-10 Year Australia Government Index
0.45
ICE BofA 1-5 Year Japan Government Index
0.25
Total
100 %
COMMENT ON NON-GAAP FINANCIAL MEASURES
Throughout this filing, we present our operations in the way
we believe will be the most meaningful and useful to
investors, analysts, rating agencies and others who use our
financial information in evaluating the performance of our
company. This presentation includes the use of after-tax
operating income available to Arch common shareholders,
which is defined as net income available to Arch common
shareholders, excluding net realized gains or losses (which
includes, but is not limited to, realized and unrealized
changes in the fair value of equity securities and assets
accounted for using the fair value option, realized and
unrealized gains or losses on derivative instruments,
changes in the allowance for credit losses on financial assets
and gains or losses realized from the acquisition or
disposition of subsidiaries), equity in net income or loss of
investments accounted for using the equity method, net
foreign exchange gains or losses, transaction costs and
other, net of income taxes, and the use of annualized
operating return on average common equity. The
presentation of after-tax operating income available to Arch
common shareholders and annualized operating return on
average common equity are non-GAAP financial measures as
defined in Regulation G. The reconciliation of such measures
to net income available to Arch common shareholders and
annualized net income return on average common equity
(the most directly comparable GAAP financial measures) in
accordance with Regulation G is included under “Results of
Operations” below.
ARCH CAPITAL
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2025 FORM 10-K
We believe that net realized gains or losses, equity in net
income or loss of investments accounted for using the equity
method, net foreign exchange gains or losses and
transaction costs and other in any particular period are not
indicative of the performance of, or trends in, our business.
Although net realized gains or losses, equity in net income or
loss of investments accounted for using the equity method
and net foreign exchange gains or losses are an integral part
of our operations, the decision to realize these items are
independent of the insurance underwriting process and
result, in large part, from general economic and financial
market conditions. Furthermore, certain users of our
financial information believe that, for many companies, the
timing of the realization of investment gains or losses is
largely opportunistic. In addition, changes in the allowance
for credit losses and net impairment losses recognized in
earnings
on
our
investments
represent
other-than-
temporary declines in expected recovery values on securities
without actual realization. Furthermore, we exclude net
realized gains or losses from the acquisition or disposition of
subsidiaries, due to their non-recurring nature, such items
are not indicative of the performance of, or trends in, our
business performance.
The use of the equity method on certain of our investments
funds that invest in fixed maturity securities is driven by the
ownership
structure
of
such
funds
(either
limited
partnerships or limited liability companies). In applying the
equity method, these investments are initially recorded at
cost and are subsequently adjusted based on our
proportionate share of the net income or loss of the funds
(which include changes in the market value of the underlying
securities in the funds). This method of accounting is
different from the way in which we account for our other
investments; and the timing of the recognition of equity in
net income or loss of investments accounted for using the
equity method may differ from gains or losses in the future
upon sale or maturity of such investments.
Transaction costs and other include integration, advisory,
financing, legal, severance, incentive compensation and all
other transaction costs directly related to acquisitions. We
believe that transaction costs and other, due to their
nonrecurring nature, are not indicative of the performance
of, or trends in, our business performance.
We believe that showing net income available to Arch
common shareholders exclusive of the items referred to
above reflects the underlying fundamentals of our business
since we evaluate the performance of and manage our
business to produce an underwriting profit. In addition to
presenting net income available to Arch common
shareholders, we believe that this presentation enables
investors and other users of our financial information to
analyze our performance in a manner similar to how
management analyzes performance. We also believe that
this measure follows industry practice and, therefore, allows
the users of financial information to compare our
performance with our industry peer group. We believe that
the equity analysts and certain rating agencies that follow us
and the insurance industry as a whole generally exclude
these items from their analyses for the same reasons.
Our segment information includes the presentation of
consolidated underwriting income or loss. Such measures
represent the pre-tax profitability of our underwriting
operations and include net premiums earned plus other
underwriting income, less losses and loss adjustment
expenses, acquisition expenses and other operating
expenses. Other operating expenses include those operating
expenses that are incremental and/or directly attributable to
our
individual
underwriting
operations.
Underwriting
income or loss does not incorporate certain income and
expense items which are included in corporate. While these
measures are presented in note 4, “Segment Information,”
to our consolidated financial statements in Item 8, they are
considered non-GAAP financial measures when presented
elsewhere on a consolidated basis. The reconciliations of
underwriting income or loss to income before income taxes
(the most directly comparable GAAP financial measure) on a
consolidated basis, in accordance with Regulation G, is
shown in note 4, “Segment Information,” to our
consolidated financial statements in Item 8.
We
measure
segment
performance
for
our
three
underwriting segments based on underwriting income or
loss. We do not manage our assets by underwriting
segment, with the exception of goodwill and intangible
assets, and, accordingly, investment income, income from
operating affiliates and other non-underwriting related
items are not allocated to each underwriting segment.
Our presentation of segment information includes the use of
a current year loss ratio which excludes favorable or adverse
development in prior year loss reserves. This ratio is a non-
GAAP financial measure as defined in Regulation G. The
reconciliation of such measure to the loss ratio (the most
directly comparable GAAP financial measure) in accordance
with Regulation G is shown on the individual segment pages.
Management utilizes the current year loss ratio in its
analysis of the underwriting performance of each of our
underwriting segments. Effective in the 2025 period, the
‘Other operating expense ratio’ includes ‘Other underwriting
income.’
Total return on investments includes investment income,
equity in net income or loss of investments accounted for
using the equity method, net realized gains or losses
(excluding changes in the allowance for credit losses on non-
investment related financial assets) and the change in
unrealized gains or losses generated by Arch’s investment
portfolio. Total return is calculated on a pre-tax basis and
ARCH CAPITAL
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2025 FORM 10-K
before investment expenses, and reflects the effect of
financial market conditions along with foreign currency
fluctuations. In addition, total return incorporates the timing
of investment returns during the periods. There is no directly
comparable GAAP financial measure for total return.
Management uses total return on investments as a key
measure of the return generated to Arch common
shareholders on the capital held in the business, and
compares the return generated by our investment portfolio
against benchmark returns which we measured our portfolio
against during the periods.
RESULTS OF OPERATIONS
The following table summarizes our consolidated financial
data, including a reconciliation of net income available to
Arch common shareholders to after-tax operating income
available to Arch common shareholders. See “Comment on
Non-GAAP Financial Measures.”
Year Ended December 31,
2025
2024
Net income available to Arch common
shareholders
$
4,359
$
4,272
Net realized (gains) losses (1)
(464)
(197)
Equity in net (income) loss of investments
accounted for using the equity method
(504)
(580)
Net foreign exchange (gains) losses
128
(75)
Transaction costs and other
75
81
Income tax expense (benefit) (2)
106
41
After-tax operating income available to Arch
common shareholders
$
3,700
$
3,542
Beginning common shareholders’ equity
$
19,990
$
17,523
Ending common shareholders’ equity
23,376
19,990
Average common shareholders’ equity
$
21,683
$
18,757
Annualized net income return on average
common equity %
20.1
22.8
Annualized operating return on average
common equity %
17.1
18.9
(1) Net realized gains or losses include, but is not limited to, realized and
unrealized changes in the fair value of equity securities and assets
accounted for using the fair value option, realized and unrealized gains and
losses on derivative instruments, changes in the allowance for credit losses
on financial assets and gains or losses realized from the acquisition or
disposition of subsidiaries.
(2) Income tax on net realized gains or losses, equity in net income or loss of
investments accounted for using the equity method, net foreign exchange
gains or losses and transaction costs and other reflects the relative mix
reported by jurisdiction and the varying tax rates in each jurisdiction.
Segment Information
We classify our businesses into three underwriting
segments: insurance, reinsurance and mortgage. Our
insurance, reinsurance and mortgage segments each have
managers who are responsible for the overall profitability of
their respective segments and who are directly accountable
to our chief operating decision-makers, the Chief Executive
Officer of Arch Capital and the Chief Financial Officer and
Treasurer of Arch Capital. The chief operating decision-
makers do not assess performance, measure return on
equity or make resource allocation decisions on a line of
business
basis.
Management
measures
segment
performance for our three underwriting segments based on
underwriting income or loss. We do not manage our assets
by underwriting segment, with the exception of goodwill
and intangible assets and accordingly investment income is
not allocated to each underwriting segment.
We determined our reportable segments using the
management approach described in accounting guidance
regarding disclosures about segments of an enterprise and
related information. The accounting policies of the segments
are the same as those used for the preparation of our
consolidated financial statements. Inter-segment business is
allocated to the segment accountable for the underwriting
results.
Insurance Segment
The following tables set forth our insurance segment’s
underwriting results:
Year Ended December 31,
2025
2024
% Change
Gross premiums written
$ 10,435
$ 9,053
15.3
Premiums ceded
(2,637)
(2,179)
Net premiums written
7,798
6,874
13.4
Change in unearned premiums
(27)
(247)
Net premiums earned
7,771
6,627
17.3
Other underwriting income (1)
36
—
Losses and loss adjustment
expenses
(4,764)
(4,070)
Acquisition expenses
(1,496)
(1,217)
Other operating expenses
(1,172)
(995)
Underwriting income
$
375
$
345
8.7
Underwriting Ratios
% Point
Change
Loss ratio
61.3 %
61.4 %
(0.1)
Acquisition expense ratio
19.3 %
18.4 %
0.9
Other operating expense ratio (2)
14.6 %
15.0 %
(0.4)
Combined ratio
95.2 %
94.8 %
0.4
(1) ‘Other underwriting income’ includes revenue earned from underwriting
related activities covered under existing service contracts.
(2) The ‘Other operating expense ratio’ for the 2025 period includes ‘Other
underwriting income.’ See ‘Comments on Non-GAAP Financial Measures’
for further details.
ARCH CAPITAL
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2025 FORM 10-K
The
insurance
segment
consists
of
our
insurance
underwriting units which offer specialty product lines on a
worldwide basis, as described in note 4, “Segment
Information,” to our consolidated financial statements in
Item 8.
Net Premiums Written.
The following tables set forth our insurance segment’s net
premiums written by major line of business:
Year Ended December 31,
2025
2024
Amount
%
Amount
%
North America
Property and short-tail specialty $ 1,329
17.0
$ 1,220
17.7
Other liability - occurrence
1,302
16.7
1,002
14.6
Other liability - claims made
793
10.2
858
12.5
Commercial multi-peril
781
10.0
461
6.7
Commercial automobile
602
7.7
485
7.1
Workers compensation
576
7.4
555
8.1
Other
341
4.4
288
4.2
Total North America
5,724
73.4
4,869
70.8
International
Property and short-tail specialty $ 1,102
14.1
$ 1,082
15.7
Casualty and other
972
12.5
923
13.4
Total International
2,074
26.6
2,005
29.2
Total
$ 7,798
100.0
$ 6,874
100.0
Net premiums written by the insurance segment were 13.4%
higher in 2025 than in 2024. Growth in net premiums
written primarily reflected the impact of the MCE
Acquisition.
Net Premiums Earned.
The following tables set forth our insurance segment’s net
premiums earned by major line of business:
Year Ended December 31,
2025
2024
Amount
%
Amount
%
North America
Property and short-tail specialty $ 1,373
17.7
$ 1,165
17.6
Other liability - occurrence
1,321
17.0
942
14.2
Other liability - claims made
786
10.1
843
12.7
Commercial multi-peril
792
10.2
435
6.6
Commercial automobile
581
7.5
459
6.9
Workers compensation
591
7.6
549
8.3
Other
291
3.7
309
4.7
Total North America
5,735
73.8
4,702
71.0
International
Property and short-tail specialty $ 1,099
14.1
$ 1,061
16.0
Casualty and other
937
12.1
864
13.0
Total International
2,036
26.2
1,925
29.0
Total
$ 7,771
100.0
$ 6,627
100.0
Net premiums written are primarily earned on a pro rata
basis over the terms of the policies for all products, usually
12 months. Net premiums earned by the insurance segment
were 17.3% higher in 2025 than in 2024, reflecting changes
in net premiums written over the previous five quarters.
Other Underwriting Income (Loss).
Other underwriting income, which includes revenue earned
from underwriting-related activities covered under existing
service contracts, was $36 million in 2025, compared to nil in
2024.
Losses and Loss Adjustment Expenses.
The table below shows the components of the insurance
segment’s loss ratio:
Year Ended December 31,
2025
2024
Current year
61.9 %
61.9 %
Prior period reserve development
(0.6) %
(0.5) %
Loss ratio
61.3 %
61.4 %
Current Year Loss Ratio.
The insurance segment’s current year loss ratio in 2025 was
consistent with 2024. The 2025 loss ratio included 4.4 points
of current year catastrophic event activity, compared to 4.6
points in 2024. The current year loss ratio for the 2025
period also reflected the impact of the MCE Acquisition and
changes in mix of business.
ARCH CAPITAL
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2025 FORM 10-K
Prior Period Reserve Development.
The insurance segment’s net favorable development was
$43 million, or 0.6 points, for 2025, compared to $37 million,
or 0.5 points, for 2024. See note 5, “Reserve for Losses and
Loss Adjustment Expenses,” to our consolidated financial
statements in Item 8 for information about the insurance
segment’s prior year reserve development.
Underwriting Expenses.
The insurance segment’s underwriting expense ratio was
33.9% in 2025, compared to 33.4% in 2024.
Reinsurance Segment
The following tables set forth our reinsurance segment’s
underwriting results:
Year Ended December 31,
2025
2024
% Change
Gross premiums written
$ 11,149
$ 11,112
0.3
Premiums ceded
(3,531)
(3,366)
Net premiums written
7,618
7,746
(1.7)
Change in unearned premiums
504
(504)
Net premiums earned
8,122
7,242
12.2
Other underwriting income (1)
159
9
Losses and loss adjustment
expenses
(4,610)
(4,327)
Acquisition expenses
(1,644)
(1,432)
Other operating expenses
(469)
(270)
Underwriting income
$ 1,558
$ 1,222
27.5
Underwriting Ratios
% Point
Change
Loss ratio
56.8 %
59.7 %
(2.9)
Acquisition expense ratio
20.2 %
19.8 %
0.4
Other operating expense ratio (2)
3.8 %
3.7 %
0.1
Combined ratio
80.8 %
83.2 %
(2.4)
(1) ‘Other underwriting income’ includes revenue earned from underwriting
related activities covered under existing service contracts.
(2) The ‘Other operating expense ratio’ for the 2025 period includes ‘Other
underwriting income.’ See ‘Comments on Non-GAAP Financial Measures’
for further details.
The reinsurance segment consists of our reinsurance
underwriting units which offer specialty product lines on a
worldwide basis, as described in note 4, “Segment
Information,” to our consolidated financial statements in
Item 8.
Net Premiums Written.
The following tables set forth our reinsurance segment’s net
premiums written by major line of business:
Year Ended December 31,
2025
2024
Amount
%
Amount
%
Specialty
$
2,543
33.4
$
2,849
36.8
Property excluding
property catastrophe
2,043
26.8
2,264
29.2
Casualty
1,507
19.8
1,222
15.8
Property catastrophe
1,073
14.1
958
12.4
Marine and aviation
301
4.0
300
3.9
Other
151
2.0
153
2.0
Total
$
7,618
100.0
$
7,746
100.0
Net premiums written by the reinsurance segment were
1.7% lower in 2025 than in 2024. The lower level of net
premiums written primarily reflected non-renewals and
share decreases in the specialty line of business offset, in
part, by increases in casualty.
Net Premiums Earned.
The following tables set forth our reinsurance segment’s net
premiums earned by major line of business:
Year Ended December 31,
2025
2024
Amount
%
Amount
%
Specialty
$
2,906
35.8
$
2,619
36.2
Property excluding
property catastrophe
2,252
27.7
2,148
29.7
Casualty
1,432
17.6
1,088
15.0
Property catastrophe
1,065
13.1
959
13.2
Marine and aviation
317
3.9
276
3.8
Other
150
1.8
152
2.1
Total
$
8,122
100.0
$
7,242
100.0
Net premiums earned in 2025 were 12.2% higher than in
2024, reflecting changes in net premiums written over the
previous five quarters, including the mix and type of
business written.
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2025 FORM 10-K
Other Underwriting Income (Loss).
Other underwriting income, which includes revenue earned
from underwriting-related activities covered under existing
service contracts was $159 million in 2025, compared to $9
million in 2024.
Losses and Loss Adjustment Expenses.
The table below shows the components of the reinsurance
segment’s loss ratio:
Year Ended December 31,
2025
2024
Current year
60.8 %
62.3 %
Prior period reserve development
(4.0) %
(2.6) %
Loss ratio
56.8 %
59.7 %
Current Year Loss Ratio.
The reinsurance segment’s current year loss ratio was 1.5
points lower in 2025 than in 2024. The 2025 loss ratio
included 8.5 points for current year catastrophic event
activity, primarily related to the California wildfires,
compared to 11.8 points in 2024, primarily related to
Hurricanes Milton, Helene and a series of other global
events. The current year loss ratio for 2025 also reflected
changes in mix of business.
Prior Period Reserve Development.
The reinsurance segment’s net favorable development was
$322 million, or 4.0 points, for 2025, compared to $188
million, or 2.6 points, for 2024, See note 5, “Reserve for
Losses and Loss Adjustment Expenses,” to our consolidated
financial statements in Item 8 for information about the
reinsurance segment’s prior year reserve development.
Underwriting Expenses.
The underwriting expense ratio for the reinsurance segment
was 24.0% in 2025, compared to 23.5% in 2024. The increase
in the 2025 period primarily reflected lower profit and
sliding scale commissions on ceded business.
Mortgage Segment
The following tables set forth our mortgage segment’s
underwriting results.
Year Ended December 31,
2025
2024
% Change
Gross premiums written
$ 1,305
$ 1,351
(3.4)
Premiums ceded
(245)
(239)
Net premiums written
1,060
1,112
(4.7)
Change in unearned premiums
112
119
Net premiums earned
1,172
1,231
(4.8)
Other underwriting income (1)
22
17
Losses and loss adjustment
expenses
4
55
Acquisition expenses
(13)
(2)
Other operating expenses
(185)
(207)
Underwriting income
$ 1,000
$ 1,094
(8.6)
Underwriting Ratios
% Point
Change
Loss ratio
(0.4) %
(4.4) %
4.0
Acquisition expense ratio
1.1 %
0.2 %
0.9
Other operating expense ratio (2)
13.9 %
16.8 %
(2.9)
Combined ratio
14.6 %
12.6 %
2.0
(1) ‘Other underwriting income’ includes revenue earned from underwriting
related activities covered under existing service contracts.
(2) The ‘Other operating expense ratio’ for the 2025 period includes ‘Other
underwriting income.’ See ‘Comments on Non-GAAP Financial Measures’
for further details.
Net Premiums Written.
The following table sets forth our mortgage segment’s net
premiums written by underwriting unit:
Year Ended December 31,
2025
2024
U.S. primary mortgage insurance
$
779
$
820
U.S. credit risk transfer (CRT) and other
207
212
International mortgage insurance/reinsurance
74
80
Total
$
1,060
$
1,112
Net premiums written for 2025 were 4.7% lower than in
2024. The reduction in net premiums written in the 2025
period primarily reflected lower gross premiums written and
expenses related to tender offers of certain Bellemeade Re
mortgage insurance linked notes.
The persistency rate of the U.S. primary portfolio of
mortgage loans was 81.8% at December 31, 2025 compared
to 82.1% at December 31, 2024. The persistency rate
represents the percentage of mortgage insurance in force at
the beginning of a 12 month period that remains in force at
the end of such period.
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2025 FORM 10-K
The following tables provide details on the new insurance
written (“NIW”) generated by U.S. primary mortgage
insurance operations. NIW represents the original principal
balance of all loans that received coverage during the
period.
Year Ended December 31,
2025
2024
Amount
%
Amount
%
Total new insurance
written (NIW) (1)
$
48,705
$
48,479
Credit quality:
>=740
$
37,335
76.7
$
34,023
70.2
680-739
10,142
20.8
12,805
26.4
620-679
1,214
2.5
1,644
3.4
<620
14
0.0
7
0.0
Total
$
48,705
100.0
$
48,479
100.0
Loan-to-value (LTV):
95.01% and above
$
3,387
7.0
$
3,564
7.4
90.01% to 95.00%
21,568
44.3
24,837
51.2
85.01% to 90.00%
16,525
33.9
14,735
30.4
85.01% and below
7,225
14.8
5,343
11.0
Total
$
48,705
100.0
$
48,479
100.0
Monthly vs. single:
Monthly
$
46,196
94.8
$
45,589
94.0
Single
2,509
5.2
2,890
6.0
Total
$
48,705
100.0
$
48,479
100.0
Purchase vs. refinance:
Purchase
$
44,387
91.1
$
46,952
96.9
Refinance
4,318
8.9
1,527
3.1
Total
$
48,705
100.0
$
48,479
100.0
(1)
Represents the original principal balance of all loans that received
coverage during the period.
Net Premiums Earned.
The following table sets forth our mortgage segment’s net
premiums earned by underwriting unit:
Year Ended December 31,
2025
2024
U.S. primary mortgage insurance
$
802
$
845
U.S. credit risk transfer (CRT) and other
207
213
reinsurance
163
173
Total
$
1,172
$
1,231
Net premiums earned for 2025 were 4.8% lower than in
2024, reflecting changes in net premiums written over the
previous five quarters.
Other Underwriting Income.
Other underwriting income, which is primarily related to GSE
risk-sharing transactions services, was $22 million for 2025,
compared to $17 million for 2024.
Losses and Loss Adjustment Expenses.
The table below shows the components of the mortgage
segment’s loss ratio:
Year Ended December 31,
2025
2024
Current year
19.8 %
18.6 %
Prior period reserve development
(20.2) %
(23.0) %
Loss ratio
(0.4) %
(4.4) %
Unlike property and casualty business for which we estimate
ultimate losses on premiums earned, losses on U.S. primary
mortgage insurance business are only recorded at the time a
borrower is delinquent on their mortgage, in accordance
with primary mortgage insurance industry practice. Because
our primary mortgage insurance reserving process does not
take into account the impact of future losses from loans that
are not delinquent, mortgage insurance loss reserves are not
an estimate of ultimate losses. In addition to establishing
loss reserves for delinquent loans, under GAAP, we are
required to establish a premium deficiency reserve for our
mortgage insurance products if the amount of expected
future losses and maintenance costs exceeds expected
future premiums, existing reserves and the anticipated
investment income for such product. We assess the need for
a premium deficiency reserve on a quarterly basis and
perform a full analysis annually. No such reserve was
established during 2025 or 2024.
Current Year Loss Ratio.
The mortgage segment’s current year loss ratio was 1.2
points higher in 2025 compared to 2024. The higher current
year loss ratio in 2025 period reflected slightly higher new
delinquencies and the impact of the Bellemeade Re tender
offers noted above. The percentage of loans in default on
U.S. primary mortgage insurance increased from 2.09% at
December 31, 2024 to 2.17% at December 31, 2025.
We insure mortgages for homes in areas that have been
impacted by catastrophic events. Generally, mortgage
insurance losses occur only when a credit event occurs and,
following a physical damage event, when the home is
restored to pre-storm condition. Our ultimate claims
exposure will depend on the number of delinquency notices
received and the ultimate claim rate related to such notices.
In the event of natural disasters, cure rates are influenced by
the adequacy of homeowners and flood insurance carried on
a related property, and a borrower's access to aid from
government entities and private organizations, in addition to
other factors which generally impact cure rates in
unaffected areas.
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2025 FORM 10-K
Prior Period Reserve Development.
The mortgage segment’s net favorable development was
$235 million, or 20.2 points, for 2025, compared to $282
million, or 23.0 points, for 2024. See note 5, “Reserve for
Losses and Loss Adjustment Expenses,” to our consolidated
financial statements in Item 8 for information about the
mortgage segment’s prior year reserve development.
Underwriting Expenses.
The underwriting expense ratio for the mortgage segment
was 15.0% for 2025, compared to 17.0% for 2024. The
decrease in the 2025 period primarily reflects a lower
headcount as a result of the 2024 voluntary separation
program.
Corporate
The Company’s corporate results include net investment
income, net realized gains or losses (which includes, but is
not limited to, realized and unrealized changes in the fair
value of equity securities and assets accounted for using the
fair value option, realized and unrealized gains or losses on
derivative instruments, changes in the allowance for credit
losses on financial assets and gains or losses realized from
the acquisition or disposition of subsidiaries), equity in net
income or loss of investments accounted for using the equity
method, other income or loss, corporate expenses,
transaction costs and other, amortization of intangible
assets, interest expense, net foreign exchange gains or
losses, income taxes, income from operating affiliates and
items related to our non-cumulative preferred shares.
Net Investment Income.
The components of net investment income were derived
from the following sources:
Year Ended December 31,
2025
2024
Fixed maturities
$
1,465
$
1,266
Short-term investments
102
144
Equity securities (dividends)
41
40
Other (1)
109
136
Gross investment income
1,717
1,586
Investment expenses (2)
(92)
(91)
Net investment income
$
1,625
$
1,495
(1)
Amounts include dividends and other distributions on investment
funds, term loan investments, funds held balances, cash balances and
other items.
(2)
Investment expenses were approximately 0.23% of average invested
assets for 2025, compared to 0.26% for 2024.
The pre-tax investment income yield was 4.11% for 2025,
compared to 4.25% for 2024. The pre-tax investment income
yields were calculated based on amortized cost. Net cash
flow from operating activities contributed $6.2 billion in
2025, which increased our invested asset base and
contributed to the growth in net investment income. Yields
on future investment income may vary based on financial
market conditions, investment allocation decisions and
other factors.
Net Realized Gains or Losses.
We recorded net realized gains of $464 million for 2025,
compared to net realized gains of $197 million for 2024.
Amounts in both periods reflected sales of investments as
well as the impact of financial market movements on the
Company’s equity securities and investments accounted for
under the fair value option method. Amounts in the 2025
period also include losses related to the impairment and sale
of certain alternative investments accounted for under the
equity method. Currently, our portfolio is actively managed
to maximize total return within certain guidelines. The effect
of financial market movements on the investment portfolio
will directly impact net realized gains or losses as the
portfolio is rebalanced. Net realized gains or losses from the
sale of fixed maturities primarily results from our decisions
to reduce credit exposure, to change duration targets, to
rebalance our portfolios or due to relative value
determinations.
Net realized gains or losses also include realized and
unrealized contract gains and losses on our derivative
instruments, changes in the fair value of assets accounted
for using the fair value option and in the fair value of
equities, along with changes in the allowance for credit
losses on financial assets, net impairment losses recognized
in earnings and gains or losses realized from the acquisition
or disposition of subsidiaries. See note 9, “Investment
Information—Net Realized Gains (Losses),” and note 9,
“Investment Information—Allowance for Expected Credit
Losses,” to our consolidated financial statements for
additional information.
Equity in Net Income (Loss) of Investments Accounted for
Using the Equity Method.
We recorded $504 million of equity in net income related to
investments accounted for using the equity method for
2025, compared to $580 million for 2024. Investments
accounted for using the equity method totaled $6.5 billion at
December 31, 2025, compared to $6.0 billion at
December 31, 2024. See note 9, “Investment Information—
Equity in Net Income (Loss) of Investments Accounted For
Using the Equity Method,” to our consolidated financial
statements in Item 8 for additional information.
ARCH CAPITAL
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2025 FORM 10-K
Other Income or Losses
Other income for 2025 was $54 million, compared to $42
million for 2024. Amounts in both periods primarily reflect
changes in the cash surrender value of our investment in
corporate-owned life insurance.
Corporate Expenses.
Corporate expenses were $57 million for 2025, compared to
$119 million for 2024. Such expenses primarily represent
certain holding company costs necessary to support our
worldwide operations and costs associated with operating as
a publicly traded company. The 2025 period reflected
Bermuda substance-based tax credits enacted in December
2025 with retroactive effect to January 1, 2025.
Transaction Costs and Other.
Transaction costs and other were $75 million for 2025,
compared to $81 million for 2024. The amounts for both the
2025 and 2024 periods primarily reflect direct costs related
to the MCE Acquisition and ongoing integration efforts.
Amortization of Intangible Assets.
Amortization of intangible assets for 2025 was $193 million,
compared to $235 million for 2024. Amounts in both 2025
and 2024 primarily related to amortization of finite-lived
intangible assets acquired as part of the MCE Acquisition.
Interest Expense.
Interest expense was $148 million for 2025, compared to
$141 million for 2024. Interest expense primarily reflects
amounts related to our outstanding senior notes.
Net Foreign Exchange Gains or Losses.
Net foreign exchange losses for 2025 were $128 million,
compared to net foreign exchange gains for 2024 of $75
million. Amounts in such periods were primarily unrealized
and resulted from the effects of revaluing our net insurance
liabilities required to be settled in foreign currencies at each
balance sheet date.
Income Tax Expense.
Our income tax provision on income before income taxes
resulted in an expense of 14.7% for 2025, compared to an
expense of 7.7% for 2024. Our effective tax rate fluctuates
from year to year consistent with the relative mix of income
or loss reported by jurisdiction and the varying tax rates in
each jurisdiction. The increase in the 2025 period is primarily
attributed to the enactment of the Corporate Income Tax
Act 2023 by the Government of Bermuda, which established
a 15% corporate income tax effective January 1, 2025. See
note 15, “Income Taxes,” to our consolidated financial
statements in Item 8.
Income (Loss) from Operating Affiliates.
We recorded $180 million of net income from our operating
affiliates in 2025, compared to $200 million in 2024.
Amounts in both periods primarily reflected amounts related
to our investments in Somers Group Holdings Ltd. and
Coface SA. See note 9, “Investment Information—
Investments in Operating Affiliates,” to our consolidated
financial statements for additional information.
SUMMARY OF CRITICAL ACCOUNTING ESTIMATES
The preparation of consolidated financial statements in
accordance with GAAP requires us to make many estimates
and judgments that affect the reported amounts of assets,
liabilities (including reserves), revenues and expenses, and
related disclosures of contingent liabilities. On an ongoing
basis, we evaluate our estimates, including those related to
revenue
recognition,
insurance
and
other
reserves,
reinsurance recoverables, allowance for current expected
credit losses, investment valuations, goodwill and intangible
assets, bad debts, income taxes, contingencies and litigation.
We base our estimates on historical experience, where
possible, and on various other assumptions that we believe
to be reasonable under the circumstances, which form the
basis for our judgments about the carrying values of assets
and liabilities that are not readily apparent from other
sources. Actual results will differ from these estimates and
such differences may be material. We believe that the
following critical accounting policies affect significant
estimates used in the preparation of our consolidated
financial statements.
Loss Reserves
We are required by applicable insurance laws and
regulations and GAAP to establish reserves for losses and
loss adjustment expenses, or “Loss Reserves”, that arise
from the business we underwrite. Loss Reserves for our
insurance, reinsurance and mortgage operations are balance
sheet liabilities representing estimates of future amounts
required to pay losses and loss adjustment expenses for
insured or reinsured events which have occurred at or
before the balance sheet date. Loss Reserves do not reflect
contingency reserve allowances to account for future loss
occurrences. Losses arising from future events will be
estimated and recognized at the time the losses are incurred
and could be substantial. See note 6, “Short Duration
Contracts,” to our consolidated financial statements in Item
8 for additional information on our reserving process.
ARCH CAPITAL
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2025 FORM 10-K
At December 31, 2025 and 2024, our Loss Reserves, net of
unpaid losses and loss adjustment expenses recoverable, by
type and by operating segment were as follows:
December 31,
2025
2024
Insurance segment:
Case reserves
$
3,489
$
3,730
IBNR reserves
9,251
8,238
Total net reserves
12,740
11,968
Reinsurance segment:
Case reserves
2,929
2,721
Additional case reserves
1,034
806
IBNR reserves
7,349
5,580
Total net reserves
11,312
9,107
Mortgage segment:
Case reserves
324
331
IBNR reserves
117
142
Total net reserves
441
473
Total:
Case reserves
6,742
6,782
Additional case reserves
1,034
806
IBNR reserves
16,717
13,960
Total net reserves
$
24,493
$
21,548
At December 31, 2025 and 2024, the insurance segment’s
Loss Reserves by major line of business, net of unpaid losses
and loss adjustment expenses recoverable, were as follows:
December 31,
2025
2024
Third party occurrence business
$
4,610
$
4,104
Multi-line and other specialty
4,345
4,105
Third party claims-made business
2,861
2,630
Property, energy, marine and aviation
924
1,129
Total net reserves
$
12,740
$
11,968
At December 31, 2025 and 2024, the reinsurance segment’s
Loss Reserves by major line of business, net of unpaid losses
and loss adjustment expenses recoverable, were as follows:
December 31,
2025
2024
Casualty
$
3,823
$
3,089
Specialty
3,658
2,791
Property excluding property catastrophe
2,107
1,778
Property catastrophe
953
845
Marine and aviation
582
461
Other
189
143
Total net reserves
$
11,312
$
9,107
At December 31, 2025 and 2024, the mortgage segment’s
Loss Reserves by major line of business, net of unpaid losses
and loss adjustment expenses recoverable, were as follows:
December 31,
2025
2024
U.S. primary mortgage insurance
$
321
$
333
U.S. credit risk transfer (CRT) and other
64
85
International mortgage insurance/
reinsurance
56
55
Total net reserves
$
441
$
473
Potential Variability in Loss Reserves
The following tables summarize the effect of reasonably
likely scenarios on the key actuarial assumptions used to
estimate our Loss Reserves, net of unpaid losses and loss
adjustment expenses recoverable, at December 31, 2025 by
underwriting segment and reserving lines. See note 6, “Short
Duration
Contracts,”
to
our
consolidated
financial
statements in Item 8 for a description of the lines of
business included in each reserving line.
The scenarios shown in the tables summarize the effect of (i)
changes to the expected loss ratio selections used at
December 31, 2025, which represent loss ratio point
increases or decreases to the expected loss ratios used, and
(ii) changes to the loss development patterns used in our
reserving process at December 31, 2025, which represent
claims reporting that is either slower or faster than the
reporting patterns used. We believe that the illustrated
sensitivities are indicative of the potential variability
inherent in the estimation process of those parameters. The
results show the impact of varying each key actuarial
assumption using the chosen sensitivity on our Loss
Reserves, on a net basis and across all accident years.
ARCH CAPITAL
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2025 FORM 10-K
INSURANCE SEGMENT
Higher
Expected Loss
Ratios
Slower Loss
Development
Patterns
Reserving lines selected assumptions:
Multi-line and other specialty
10 points
6 months
Third party occurrence business
10
6
Third party claims-made business
10
6
Property, energy, marine and aviation
5
3
Increase (decrease) in Loss Reserves:
Multi-line and other specialty
$
600
$
370
Third party occurrence business
453
248
Third party claims-made business
244
275
Property, energy, marine and aviation
61
129
INSURANCE SEGMENT
Lower Expected
Loss Ratios
Faster Loss
Development
Patterns
Reserving lines selected assumptions:
Multi-line and other specialty
(10) points
(6) months
Third party occurrence business
(10)
(6)
Third party claims-made business
(10)
(6)
Property, energy, marine and aviation
(5)
(3)
Increase (decrease) in Loss Reserves:
Multi-line and other specialty
$
(581) $
(296)
Third party occurrence business
(451)
(215)
Third party claims-made business
(244)
(216)
Property, energy, marine and aviation
(54)
(108)
REINSURANCE SEGMENT
Higher
Expected Loss
Ratios
Slower Loss
Development
Patterns
Reserving lines selected assumptions:
Casualty
10 points
6 months
Specialty
5
3
Property excluding property
catastrophe
5
3
Property catastrophe
5
3
Marine and aviation
5
3
Other
5
3
Increase (decrease) in Loss Reserves:
Casualty
$
361
$
378
Specialty
310
232
Property excluding property
catastrophe
106
237
Property catastrophe
42
65
Marine and aviation
25
50
Other
11
9
REINSURANCE SEGMENT
Lower Expected
Loss Ratios
Faster Loss
Development
Patterns
Reserving lines selected assumptions:
Casualty
(10) points
(6) months
Specialty
(5)
(3)
Property excluding property
catastrophe
(5)
(3)
Property catastrophe
(5)
(3)
Marine and aviation
(5)
(3)
Other
(5)
(3)
Increase (decrease) in Loss Reserves:
Casualty
$
(361) $
(270)
Specialty
(311)
(295)
Property excluding property
catastrophe
(106)
(229)
Property catastrophe
(42)
(36)
Marine and aviation
(25)
(53)
Other
(11)
(8)
It is not necessarily appropriate to sum the total impact for a
specific factor or the total impact for a specific business
category as the business categories are not perfectly
correlated. In addition, the potential variability shown in the
tables above are reasonably likely scenarios of changes in
our key assumptions at December 31, 2025 and are not
meant to be a “best case” or “worst case” series of
outcomes and therefore, it is possible that future variations
may be more or less than the amounts set forth above.
For our mortgage segment, we considered the sensitivity of
loss reserve estimates at December 31, 2025 by assessing
the potential changes resulting from a parallel shift in
severity and default to claim rate. For example, assuming all
other factors remain constant, for every one percentage
point change in primary claim severity (which we estimate to
be approximately 30% of the unpaid principal balance at
December 31, 2025), we estimated that our loss reserves
would change by approximately $15 million at December 31,
2025. For every one percentage point change in our primary
net default to claim rate (which we estimate to be
approximately 22% at December 31, 2025), we estimated a
$20 million change in our loss reserves at December 31,
2025.
ARCH CAPITAL
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2025 FORM 10-K
Simulation Results
In order to illustrate the potential volatility in our Loss
Reserves, we used a Monte Carlo simulation approach to
simulate a range of results based on various probabilities.
Both the probabilities and related modeling are subject to
inherent uncertainties. The simulation relies on a significant
number of assumptions, such as the potential for multiple
entities to react similarly to external events, and includes
other statistical assumptions. The simulation results shown
for each segment do not add to the total simulation results,
as the individual segment simulation results do not reflect
the diversification effects across our segments.
At December 31, 2025, our recorded Loss Reserves by
underwriting segment, net of unpaid losses and loss
adjustment expenses recoverable, and the results of the
simulation were as follows:
Insurance
Segment
Reinsurance
Segment
Mortgage
Segment
Total
Loss
Reserves (1)
$12,740
$11,312
$441
$24,493
Simulation
results:
90th
percentile (2)
$15,138
$13,866
$528
$28,996
10th
percentile (3)
$10,455
$8,951
$360
$20,236
(1)
Net of reinsurance recoverables.
(2)
Simulation results indicate that a 90% probability exists that the net
reserves for losses and loss adjustment expenses will not exceed the
indicated amount.
(3)
Simulation results indicate that a 10% probability exists that the net
reserves for losses and loss adjustment expenses will be at or below
the indicated amount.
For informational purposes, based on the total simulation
results, a change in our Loss Reserves to the amount
indicated at the 90th percentile would result in a decrease in
income before income taxes of approximately $4.5 billion, or
$11.98 per diluted share, while a change in our Loss
Reserves to the amount indicated at the 10th percentile
would result in an increase in income before income taxes of
approximately $4.3 billion, or $11.32 per diluted share. The
simulation results noted above are informational only, and
no assurance can be given that our ultimate losses will not
be significantly different than the simulation results shown
above, and such differences could directly and significantly
impact earnings favorably or unfavorably in the period they
are determined. We do not have significant exposure to
pre-2002 liabilities, such as asbestos-related illnesses and
other long-tail liabilities. It is difficult to provide meaningful
trend information for certain liability/casualty coverages for
which the claim-tail may be especially long, as claims are
often reported and ultimately paid or settled years, or even
decades, after the related loss events occur. Any estimates
and assumptions made as part of the reserving process
could prove to be inaccurate due to several factors,
including the fact that for certain lines of business relatively
limited historical information has been reported to us
through December 31, 2025. Accordingly, the reserving for
incurred losses in these lines of business could be subject to
greater variability. See Item 1A, “Risk Factors – Risks Relating
to Our Industry, Business & Operations – Underwriting risks
and reserving for losses are based on probabilities and
related
modeling,
which
are
subject
to
inherent
uncertainties.”
Mortgage Operations Supplemental Information
The mortgage segment’s insurance in force (“IIF”) and risk in
force (“RIF”) were as follows at December 31, 2025 and
2024:
December 31,
2025
2024
Amount
%
Amount
%
Insurance In Force (IIF) (1):
U.S. primary mortgage
insurance
$ 286,318
59.1
$ 290,435
58.0
U.S. credit risk transfer
(CRT) and other
132,205
27.3
145,892
29.1
International mortgage
insurance/reinsurance
66,084
13.6
64,822
12.9
Total
$ 484,607
100.0
$ 501,149
100.0
Risk In Force (RIF) (2):
U.S. primary mortgage
insurance
$
74,679
85.0
$
76,034
85.3
U.S. credit risk transfer
(CRT) and other
5,358
6.1
5,876
6.6
International mortgage
insurance/reinsurance
7,864
8.9
7,215
8.1
Total
$
87,901
100.0
$
89,125
100.0
(1)
Represents the aggregate dollar amount of each insured mortgage
loan’s current principal balance. Such amounts are shown before
external reinsurance.
(2)
The aggregate dollar amount of each insured mortgage loan’s current
principal balance multiplied by the insurance coverage percentage
specified in the policy for insurance policies issued and after contract
limits and/or loss ratio caps for risk-sharing or reinsurance
transactions. Such amounts are shown before external reinsurance.
ARCH CAPITAL
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2025 FORM 10-K
The insurance in force and risk in force for our U.S. primary
mortgage insurance business by policy year were as follows
at December 31, 2025:
IIF
RIF
Delinquency
Amount
%
Amount
%
Rate (1)
Policy year:
2015 and prior $ 16,143
5.6
$
4,117
5.5
5.31 %
2016
3,241
1.1
806
1.1
3.57 %
2017
4,250
1.5
1,127
1.5
3.87 %
2018
5,673
2.0
1,479
2.0
4.48 %
2019
10,553
3.7
2,770
3.7
3.08 %
2020
30,968
10.8
8,487
11.4
1.85 %
2021
50,141
17.5
13,767
18.4
1.88 %
2022
49,492
17.3
13,236
17.7
1.87 %
2023
31,049
10.8
8,006
10.7
1.93 %
2024
39,306
13.7
9,840
13.2
1.17 %
2025
45,502
15.9
11,044
14.8
0.20 %
Total
$ 286,318
100.0
$ 74,679
100.0
2.17 %
(1)
Represents the ending percentage of loans in default.
The insurance in force and risk in force for our U.S. primary
mortgage insurance business by policy year were as follows
at December 31, 2024:
IIF
RIF
Delinquency
Amount
%
Amount
%
Rate (1)
Policy year:
2015 and prior $ 18,329
6.3
$
4,670
6.1
5.85 %
2016
5,240
1.8
1,371
1.8
3.23 %
2017
5,554
1.9
1,489
2.0
3.52 %
2018
7,081
2.4
1,843
2.4
4.31 %
2019
12,919
4.4
3,386
4.5
2.85 %
2020
39,426
13.6
10,718
14.1
1.52 %
2021
62,382
21.5
16,620
21.9
1.52 %
2022
57,175
19.7
15,113
19.9
1.51 %
2023
36,827
12.7
9,479
12.5
1.12 %
2024
45,502
15.7
11,345
14.9
0.30 %
Total
$ 290,435
100.0
$ 76,034
100.0
2.09 %
(1)
Represents the ending percentage of loans in default.
The following tables provide supplemental disclosures on
risk in force for our U.S. primary mortgage insurance
business at December 31, 2025 and 2024:
December 31,
2025
2024
Amount
%
Amount
%
Credit quality:
>=740
$ 47,757
63.9
$ 47,360
62.3
680-739
23,271
31.2
24,688
32.5
620-679
3,340
4.5
3,638
4.8
<620
311
0.4
348
0.5
Total
$ 74,679
100.0
$ 76,034
100.0
Weighted average
credit score
749
748
Loan-to-Value (LTV):
95.01% and above
$
7,314
9.8
$
7,420
9.8
90.01% to 95.00%
44,494
59.6
45,311
59.6
85.01% to 90.00%
20,195
27.0
20,637
27.1
85.00% and below
2,676
3.6
2,666
3.5
Total
$ 74,679
100.0
$ 76,034
100.0
Weighted average LTV
93.2 %
93.2 %
Total RIF, net of
external reinsurance
$ 60,259
$ 60,085
December 31,
2025
2024
Amount
%
Amount
%
Total RIF by State:
California
$
5,901
7.9
$
5,989
7.9
Texas
5,382
7.2
5,613
7.4
North Carolina
3,343
4.5
3,355
4.4
Minnesota
3,129
4.2
3,108
4.1
Illinois
3,042
4.1
3,056
4.0
Georgia
3,005
4.0
3,143
4.1
Michigan
2,816
3.8
2,855
3.8
Massachusetts
2,780
3.7
2,885
3.8
Florida
2,672
3.6
2,824
3.7
Ohio
2,666
3.6
2,716
3.6
Others
39,943
53.5
40,490
53.3
Total
$
74,679
100.0
$
76,034
100.0
ARCH CAPITAL
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2025 FORM 10-K
The following table provides supplemental disclosures for
our U.S. primary mortgage insurance business related to
insured loans and loss metrics for the years ended
December 31, 2025 and 2024:
(U.S. Dollars in thousands, except loan
and claim count)
Year Ended December 31,
2025
2024
Rollforward of insured loans in default:
Beginning delinquent number of loans
22,982
19,457
New notices
47,378
45,785
Cures
(46,057)
(43,506)
Paid claims
(1,318)
(1,279)
Acquired delinquent loans (1)
—
2,525
Ending delinquent number of loans (2)
22,985
22,982
Ending number of policies in force (2)
1,058,907
1,100,653
Delinquency rate (2)
2.17 %
2.09 %
Losses:
Number of claims paid
1,318
1,279
Total paid claims
$
53,504
$
43,895
Average per claim
$
40.6
$
34.3
Severity (3)
76.9 %
71.6 %
Average reserve per default (in
thousands) (2)
$
15.3
$
15.3
(1)
Represents delinquent loans related to the acquisition of RMIC
Companies, Inc.
(2)
Includes first lien primary and pool policies.
(3)
Represents total direct first lien paid claims divided by RIF of loans
for which claims were paid, excluding paid claim settlements.
The risk-to-capital ratio, which represents total current (non-
delinquent) risk in force, net of reinsurance, divided by total
statutory capital, for Arch MI U.S. was approximately 8.2 to
1 at December 31, 2025, compared to 7.8 to 1 at
December 31, 2024.
Ceded Reinsurance
In the normal course of business, our insurance and
mortgage insurance operations cede a portion of their
premium on a quota share or excess of loss basis through
treaty
or
facultative
reinsurance
agreements.
Our
reinsurance operations also obtain reinsurance whereby
another reinsurer contractually agrees to indemnify it for all
or a portion of the reinsurance risks underwritten by our
reinsurance operations. Such arrangements, where one
reinsurer provides reinsurance to another reinsurer, are
usually
referred
to
as
“retrocessional
reinsurance”
arrangements. In addition, our reinsurance subsidiaries
participate
in
“common
account”
retrocessional
arrangements
for
certain
pro
rata
treaties.
Such
arrangements reduce the effect of individual or aggregate
losses to all companies participating on such treaties,
including the reinsurers, such as our reinsurance operations,
and
the
ceding
company.
Estimating
reinsurance
recoverables can be more subjective than estimating the
underlying reserves for losses and loss adjustment expenses
as discussed above in “—Loss Reserves.” In particular,
reinsurance recoverables may be affected by deemed
inuring reinsurance, industry losses reported by various
statistical reporting services, and other factors. Reinsurance
recoverables are recorded as assets, predicated on the
reinsurers’ ability to meet their obligations under the
reinsurance agreements. If the reinsurers are unable to
satisfy their obligations under the agreements, our
insurance or reinsurance operations would be liable for such
defaulted amounts.
The availability and cost of reinsurance and retrocessional
protection is subject to market conditions, which are beyond
our control. Although we believe that our insurance and
reinsurance operations have been successful in obtaining
adequate reinsurance and retrocessional protection, it is not
certain that they will be able to continue to obtain adequate
protection at cost effective levels. As a result of such market
conditions and other factors, our insurance, reinsurance and
mortgage operations may not be able to successfully
mitigate risk through reinsurance and retrocessional
arrangements and may lead to increased volatility in our
results of operations in future periods. See Item 1A, “Risk
Factors—Risks Relating to Our Industry, Business and
Operations—The failure of any of the loss limitation
methods we employ could have a material adverse effect on
our financial condition or results of operations.”
For purposes of managing risk, we reinsure a portion of our
exposures, paying to reinsurers a part of the premiums
received on the policies we write, and we may also use
retrocessional protection. On a consolidated basis, ceded
premiums written represented 28.0% of gross premiums
written for 2025, compared to 26.9% for 2024. We monitor
the financial condition of our reinsurers and attempt to
place coverages only with substantial, financially sound
carriers. If the financial condition of our reinsurers or
retrocessionaires deteriorates, resulting in an impairment of
their ability to make payments, we will be responsible for
probable losses resulting from our inability to collect
amounts due from such parties, as appropriate. We evaluate
the credit worthiness of all the reinsurers to which we cede
business. We report reinsurance recoverables net of an
allowance for expected credit loss. The allowance is based
upon our ongoing review of amounts outstanding, the
financial condition of our reinsurers, amounts and form of
collateral obtained and other relevant factors. A ratings
based
probability-of-default
and
loss-given-default
methodology is used to estimate the allowance for expected
credit loss. See Item 1A, “Risk Factors—Risks Relating to Our
Industry, Business and Operations—We are exposed to
credit risk in certain of our business operations” and
“Financial Condition, Liquidity and Capital Resources” for
further details.
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We have entered into various aggregate excess of loss
reinsurance agreements with various special purpose
reinsurance companies domiciled in Bermuda. These are
special purpose variable interest entities that are not
consolidated in our financial results because we do not have
the unilateral power to direct those activities that are
significant to its economic performance. See note 12,
“Variable Interest Entities” to our consolidated financial
statements in Item 8 for additional information.
Premium Revenues and Related Expenses
Insurance premiums written are generally recorded at the
policy inception and are primarily earned on a pro rata basis
over the terms of the policies for all products, usually 12
months. Premiums written include estimates in our
insurance operations’ programs, specialty lines, collateral
protection business and for participation in involuntary
pools. Such premium estimates are derived from multiple
sources which include the historical experience of the
underlying business, similar business and available industry
information. Unearned premium reserves represent the
portion of premiums written that relates to the unexpired
terms of in-force insurance policies.
Reinsurance premiums written include amounts reported by
brokers and ceding companies, supplemented by our own
estimates of premiums where reports have not been
received. The determination of premium estimates requires
a review of our experience with the ceding companies,
familiarity with each market, the timing of the reported
information, an analysis and understanding of the
characteristics of each line of business, and management’s
judgment of the impact of various factors, including
premium or loss trends, on the volume of business written
and ceded to us. On an ongoing basis, our underwriters
review the amounts reported by these third parties for
reasonableness based on their experience and knowledge of
the subject class of business, taking into account our
historical experience with the brokers or ceding companies.
In addition, reinsurance contracts under which we assume
business generally contain specific provisions which allow us
to perform audits of the ceding company to ensure
compliance with the terms and conditions of the contract,
including accurate and timely reporting of information.
Based on a review of all available information, management
establishes premium estimates where reports have not been
received. Premium estimates are updated when new
information is received and differences between such
estimates and actual amounts are recorded in the period in
which estimates are changed or the actual amounts are
determined. Premiums written are recorded based on the
type of contracts we write. Premiums on our excess of loss
and pro rata reinsurance contracts are estimated when the
business is underwritten. For excess of loss contracts,
premiums are recorded as written based on the terms of the
contract. Estimates of premiums written under pro rata
contracts are recorded in the period in which the underlying
risks incept and are based on information provided by the
brokers and the ceding companies. For multi-year
reinsurance
treaties
which
are
payable
in
annual
installments, generally, only the initial annual installment is
included as premiums written at policy inception due to the
ability of the reinsured to commute or cancel coverage
during the term of the policy. The remaining annual
installments are included as premiums written at each
successive anniversary date within the multi-year term.
Reinstatement premiums for our insurance and reinsurance
operations are recognized at the time a loss event occurs,
where coverage limits for the remaining life of the contract
are
reinstated
under
pre-defined
contract
terms.
Reinstatement premiums, if obligatory, are fully earned
when recognized. The accrual of reinstatement premiums is
based on an estimate of losses and loss adjustment
expenses, which reflects management’s judgment, as
described above in “—Loss Reserves.”
The amount of reinsurance premium estimates included in
premiums receivable and the amount of related acquisition
expenses by type of business were as follows at
December 31, 2025:
December 31, 2025
Gross Amount
Acquisition
Expenses
Net
Amount
Specialty
$
1,417
$
(359) $
1,058
Casualty
547
(177)
370
Property excluding
property catastrophe
469
(136)
333
Marine and aviation
237
(43)
194
Property catastrophe
5
—
5
Other
109
(14)
95
Total
$
2,784
$
(729) $
2,055
Premium estimates are reviewed by management at least
quarterly. Such review includes a comparison of actual
reported premiums to expected ultimate premiums along
with a review of the aging and collection of premium
estimates.
Based
on
management’s
review,
the
appropriateness of the premium estimates is evaluated, and
any adjustment to these estimates is recorded in the period
in which it becomes known. Adjustments to premium
estimates could be material and such adjustments could
directly and significantly impact earnings favorably or
unfavorably in the period they are determined because the
estimated premium may be fully or substantially earned.
A significant portion of amounts included as premiums
receivable, which represent estimated premiums written,
net of commissions, are not currently due based on the
terms of the underlying contracts. Based on currently
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available information, we report premiums receivable net of
an allowance for expected credit loss. We monitor credit risk
associated with premiums receivable through our ongoing
review of amounts outstanding, aging of the receivable,
historical
data
and
counterparty
financial
strength
measures.
Reinsurance premiums assumed, irrespective of the class of
business, are generally earned on a pro rata basis over the
terms of the underlying policies or reinsurance contracts.
Contracts and policies written on a “losses occurring” basis
cover claims that may occur during the term of the contract
or policy, which is typically 12 months. Accordingly, the
premium is earned evenly over the term. Contracts which
are written on a “risks attaching” basis cover claims which
attach to the underlying insurance policies written during
the terms of such contracts. Premiums earned on such
contracts usually extend beyond the original term of the
reinsurance contract, typically resulting in recognition of
premiums earned in proportion to the period of risk
coverage.
Certain of our reinsurance contracts include provisions that
adjust premiums or acquisition expenses based upon the
experience under the contracts. Premiums written and
earned, as well as related acquisition expenses, are recorded
based upon the projected experience under such contracts.
Retroactive reinsurance reimburses a ceding company for
liabilities incurred as a result of past insurable events
covered by the underlying policies reinsured. In certain
instances, reinsurance contracts cover losses both on a
prospective basis and on a retroactive basis and,
accordingly, we bifurcate the prospective and retrospective
elements of these reinsurance contracts and accounts for
each element separately where practical. Underwriting
income
generated
in
connection
with
retroactive
reinsurance contracts is deferred and amortized into income
over the settlement period while losses are charged to
income immediately. Subsequent changes in estimated
amount or timing of cash flows under such retroactive
reinsurance contracts are accounted for by adjusting the
previously deferred amount to the balance that would have
existed had the revised estimate been available at the
inception
of
the
reinsurance
transaction,
with
a
corresponding charge or credit to income.
Mortgage guaranty insurance policies are contracts that are
generally non-cancelable by the insurer, are renewable at a
fixed price, and provide for payment of premiums on a
monthly, annual or single basis. Upon renewal, we are not
able to re-underwrite or re-price our policies. Consistent
with industry accounting practices, premiums written on a
monthly basis are earned as coverage is provided. Premiums
written on an annual basis are amortized on a monthly pro
rata basis over the year of coverage. Primary mortgage
insurance premiums written on policies covering more than
one year are referred to as single premiums. A portion of the
revenue from single premiums is recognized in premiums
earned in the current period, and the remaining portion is
deferred as unearned premiums and earned over the
estimated expiration of risk of the policy. If single premium
policies related to insured loans are canceled for any reason
and the policy is a non-refundable product, the remaining
unearned premium related to each canceled policy is
recognized as earned premium upon notification of the
cancellation.
Unearned premiums represent the portion of premiums
written that is applicable to the estimated unexpired risk of
insured loans. A portion of premium payments may be
refundable if the insured cancels coverage, which generally
occurs when the loan is repaid, the loan amortizes to a
sufficiently low amount to trigger a lender permitted or
legally required cancellation, or the value of the property
has increased sufficiently in accordance with the terms of
the contract. Premium refunds reduce premiums earned in
the consolidated statements of income. Generally, only
unearned premiums are refundable.
Acquisition costs that are directly related and incremental to
the successful acquisition or renewal of business are
deferred and amortized based on the type of contract. For
property and casualty insurance and reinsurance contracts,
deferred acquisition costs are amortized over the period in
which the related premiums are earned. Consistent with
mortgage
insurance
industry
accounting
practice,
amortization of acquisition costs related to the mortgage
insurance contracts for each underwriting year’s book of
business is recorded in proportion to estimated gross profits.
Estimated gross profits are comprised of earned premiums
and losses and loss adjustment expenses. For each
underwriting year, we estimate the rate of amortization to
reflect actual experience and any changes to persistency or
loss development.
Acquisition expenses and other expenses related to our
underwriting operations that vary with, and are directly
related to, the successful acquisition or renewal of business
are deferred and amortized based on the type of contract.
Our insurance and reinsurance operations capitalize
incremental direct external costs that result from acquiring a
contract but do not capitalize salaries, benefits and other
internal underwriting costs. For our mortgage insurance
operations, which include a substantial direct sales force,
both external and certain internal direct costs are deferred
and amortized. Deferred acquisition costs are carried at
their estimated realizable value and take into account
anticipated losses and loss adjustment expenses, based on
historical
and
current
experience,
and
anticipated
investment income.
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2025 FORM 10-K
A premium deficiency occurs if the sum of anticipated losses
and loss adjustment expenses, unamortized acquisition costs
and maintenance costs and anticipated investment income
exceed unearned premiums. A premium deficiency reserve
(“PDR”) is recorded by charging any unamortized acquisition
costs to expense to the extent required in order to eliminate
the deficiency. If the premium deficiency exceeds
unamortized acquisition costs then a liability is accrued for
the excess deficiency.
To assess the need for a PDR on our mortgage exposures, we
develop loss projections based on modeled loan defaults
related to our current policies in force. This projection is
based on recent trends in default experience, severity and
rates of defaulted loans moving to claim, as well as recent
trends in the rate at which loans are prepaid, and
incorporates anticipated interest income. Evaluating the
expected profitability of our existing mortgage insurance
business and the need for a PDR for our mortgage business
involves significant reliance upon assumptions and estimates
with regard to the likelihood, magnitude and timing of
potential losses and premium revenues. The models,
assumptions and estimates we use to evaluate the need for
a PDR may prove to be inaccurate, especially during an
extended economic downturn or a period of extreme
market volatility and uncertainty.
No premium deficiency charges were recorded by us during
2025 or 2024.
Net Deferred Income Tax Assets Measurement
Deferred income tax assets and liabilities reflect temporary
differences based on enacted tax rates between the carrying
amounts of assets and liabilities for financial reporting and
income tax purposes. We determine deferred tax assets and
liabilities separately for each tax-paying component (an
individual entity or group of entities that is consolidated for
tax purposes) in each tax jurisdiction. There may be changes
in tax laws where we transact business that impact our
deferred tax assets and liabilities. The most significant
deferred income tax assets recognized relate to goodwill and
intangible assets. With respect to our Bermuda entities, we
estimated the fair value of its intangible assets using
discounted cash flow (“DCF”) models. The significant
assumptions utilized in the DCF models included the future
revenue and profits expected to be generated by the
identifiable intangible assets and the discount rates. See
note 15, “Income Taxes” to our consolidated financial
statements in Item 8 for disclosures concerning our
Company’s deferred income tax asset.
Fair Value Measurements
We review our securities measured at fair value and discuss
the proper classification of such investments with
investment advisors and others. See note 10, “Fair Value,” to
our consolidated financial statements in Item 8 for a
summary of our financial assets and liabilities measured at
fair value at December 31, 2025 by valuation hierarchy.
Reclassifications
We have reclassified the presentation of certain prior year
information to conform to the current presentation. Such
reclassifications had no effect on our net income,
shareholders’ equity or cash flows.
Significant Accounting Pronouncements
For all other significant accounting policies see note 3,
“Significant Accounting Policies” and note 3(u), “Recent
Accounting Pronouncements” to our consolidated financial
statements in Item 8 for disclosures concerning our
companies significant accounting policies and recent
accounting pronouncements.
FINANCIAL CONDITION
Investable Assets
At December 31, 2025, total investable assets held by Arch
were $47.4 billion.
Investable Assets Held by Arch
The Finance, Investment and Risk Committee (“FIR
Committee”) of our Board of Directors (the “Board”)
establishes our investment policies and sets the parameters
for creating guidelines for our investment managers. The FIR
Committee reviews the implementation of the investment
strategy on a regular basis. Our current approach stresses
preservation of capital, market liquidity and diversification
of risk. While maintaining our emphasis on preservation of
capital and liquidity, we expect our portfolio to become
more diversified and, as a result, we may expand into areas
which are not currently part of our investment strategy. Our
Chief Investment Officer administers the investment
portfolio, oversees our investment managers and formulates
investment strategy in conjunction with the FIR Committee.
At December 31, 2025, approximately $29.5 billion, or 62%,
of total investable assets held by Arch were internally
managed, compared to $25.6 billion, or 62%, at
December 31, 2024.
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2025 FORM 10-K
The following table summarizes the duration and average
credit quality of fixed income assets held by Arch:
December 31,
2025
2024
Average effective fixed maturities duration (in years)
3.34
3.31
Average S&P/Moody’s credit ratings (1)
AA-/Aa3
AA-/Aa3
(1)
Average credit ratings on our investment portfolio on securities with
ratings by S&P and Moody’s.
The following table provides the credit quality distribution of
our fixed maturities. For individual fixed maturities, S&P
ratings are used. In the absence of an S&P rating, ratings
from Moody’s are used, followed by ratings from Fitch
Ratings.
Estimated
Fair Value
% of
Total
December 31, 2025
U.S. government and gov’t agencies (1)
$
9,561
28.5
AAA
5,667
16.9
AA
2,564
7.6
A
6,448
19.2
BBB
6,533
19.5
BB
1,330
4.0
B
734
2.2
Lower than B
35
0.1
Not rated
664
2.0
Total
$
33,536
100.0
December 31, 2024
U.S. government and gov’t agencies (1)
$
7,498
26.9
AAA
4,330
15.5
AA
2,285
8.2
A
5,138
18.4
BBB
6,467
23.2
BB
978
3.5
B
458
1.6
Lower than B
28
0.1
Not rated
707
2.5
Total
$
27,889
100.0
(1)
Includes U.S. government-sponsored agency residential mortgage
backed securities and agency commercial mortgage backed
securities.
The following table provides information on the severity of
the unrealized loss position as a percentage of amortized
cost for all fixed maturities which were in an unrealized loss
position:
Severity of gross
unrealized losses:
Estimated
Fair Value
Gross
Unrealized
Losses
% of
Total Gross
Unrealized
Losses
December 31, 2025
0-10%
$
11,702
$
(202)
69.9
10-20%
556
(80)
27.7
20-30%
20
(6)
2.1
Greater than 30%
1
(1)
0.3
Total
$
12,279
$
(289)
100.0
December 31, 2024
0-10%
$
16,044
$
(453)
65.5
10-20%
1,357
(216)
31.2
20-30%
70
(20)
2.9
Greater than 30%
6
(3)
0.4
Total
$
17,477
$
(692)
100.0
The following table summarizes our top ten exposures to
fixed income corporate issuers by fair value at December 31,
2025, excluding guaranteed amounts and covered bonds:
Estimated
Fair Value
Credit
Rating (1)
Morgan Stanley
$
449
A/A1
JPMorgan Chase & Co.
433
A/A1
Bank of America Corporation
342
A-/A1
The Goldman Sachs Group, Inc.
307
BBB+/A2
Wells Fargo & Company
263
BBB+/A1
Citigroup Inc.
211
A-/A2
The Toronto-Dominion Bank
191
A-/A2
UBS Group AG
179
A-/A2
Philip Morris International Inc.
160
A-/A2
Ford Motor Company
140
BBB-/Ba1
Total
$
2,675
(1)
Average credit ratings as assigned by S&P and Moody’s, respectively.
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2025 FORM 10-K
The following table provides information on our structured
securities, which include residential mortgage-backed
securities (“RMBS”), commercial mortgage-backed securities
(“CMBS”) and asset backed securities (“ABS”):
Agencies
Investment
Grade
Below
Investment
Grade
Total
Dec. 31, 2025
RMBS
$
2,105
$
600
$
—
$
2,705
CMBS
6
1,129
77
1,212
ABS
—
3,368
206
3,574
Total
$
2,111
$
5,097
$
283
$
7,491
Dec. 31, 2024
RMBS
$
769
$
310
$
—
$
1,079
CMBS
7
959
92
1,058
ABS
—
2,667
233
2,900
Total
$
776
$
3,936
$
325
$
5,037
The following table summarizes our equity securities, which
include investments in exchange traded funds:
December 31,
2025
2024
Equities (1)
$
1,296
$
1,041
Exchange traded funds
Fixed income (2)
316
428
Equity and other (3)
257
213
Total
$
1,869
$
1,682
(1)
Primarily in technology, communications, consumer non-cyclical,
financial and industrials at December 31, 2025.
(2)
Primarily in structured and corporates at December 31, 2025.
(3)
Primarily in technology, financials, communications, consumer cyclical
and healthcare sectors at December 31, 2025.
Our investment strategy allows for the use of derivative
instruments. We utilize various derivative instruments such
as futures contracts to enhance investment performance,
replicate investment positions or manage market exposures
and fixed income duration risk that would be allowed under
our investment guidelines if implemented in other ways. See
note 11, “Derivative Instruments,” to our consolidated
financial statements in Item 8 for additional disclosures
concerning derivatives.
Accounting guidance regarding fair value measurements
addresses how companies should measure fair value when
they are required to use a fair value measure for recognition
or disclosure purposes under GAAP and provides a common
definition of fair value to be used throughout GAAP. See
note 10, “Fair Value,” to our consolidated financial
statements in Item 8 for a summary of our financial assets
and liabilities measured at fair value at December 31, 2025
and 2024 segregated by level in the fair value hierarchy.
Reinsurance Recoverables
The following table details our reinsurance recoverables at
December 31, 2025:
% of Total
A.M. Best
Rating (1)
Somers Re Ltd. (2)
20.5
A-
Lloyd’s syndicates (3)
4.9
A+
Hannover Rück SE
4.1
A+
Munich Re Group
2.9
A+
RenaissanceRe Holdings Ltd.
2.4
A+
Swiss Reinsurance Company Ltd.
2.1
A+
Everest Group Ltd.
1.9
A+
Allianz
1.5
A+
AXIS Capital Holdings Limited
1.5
A
Transatlantic Reinsurance Company
1.4
A++
All other -- “A-” or better
18.9
All other -- not rated (4)
37.9
Total
100.0
(1)
The financial strength ratings are as of January 5, 2026 and were
assigned by A.M. Best based on its opinion of the insurer’s financial
strength as of such date. An explanation of the ratings listed in the
table follows: the rating of “A++” and “A+” are designated “Superior”;
and the “A” and “A-” ratings are designated “Excellent.”
(2)
See note 16, “Transactions with Related Parties.”
(3)
The A.M. Best group rating of “A+” (Superior) has been applied to all
Lloyd’s syndicates.
(4)
Over 96% of such amount is collateralized through reinsurance trusts,
funds withheld arrangements, letters of credit or other.
See note 8, “Reinsurance,” to our consolidated financial
statements in Item 8 for further details.
Reserves for Losses and Loss Adjustment Expenses
We establish Loss Reserves which represent estimates
involving actuarial and statistical projections, at a given
point in time, of our expectations of the ultimate settlement
and administration costs of losses incurred. Estimating Loss
Reserves is inherently difficult. We utilize actuarial models as
well as available historical insurance industry loss ratio
experience and loss development patterns to assist in the
establishment of Loss Reserves. Actual losses and loss
adjustment
expenses
paid
will
deviate,
perhaps
substantially, from the reserve estimates reflected in our
financial statements. See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations—
Summary of Critical Accounting Estimates—Loss Reserves”
and see Item 1, “Business—Reserves” for further details.
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Shareholders’ Equity and Book Value per Share
The following table presents the calculation of book value
per share:
(U.S. dollars in millions, except per share
data)
December 31,
2025
2024
Total shareholders’ equity available to
Arch
$
24,206
$
20,820
Less preferred shareholders’ equity
830
830
Common shareholders’ equity available to
Arch
$
23,376
$
19,990
Common shares and common share
equivalents outstanding, net of treasury
shares (1)
359.0
376.4
Book value per share
$
65.11
$
53.11
(1)
Excludes the effects of 10.2 million and 12.4 million stock options and
0.3 million and 0.3 million restricted and performance share units
outstanding at December 31, 2025 and 2024, respectively.
LIQUIDITY
Liquidity is a measure of our ability to access sufficient cash
flows to meet the short-term and long-term cash
requirements of our business operations.
Arch Capital is a holding company whose assets primarily
consist of the shares in its subsidiaries. Generally, Arch
Capital depends on its available cash resources, liquid
investments and dividends or other distributions from its
subsidiaries to make payments, including the payment of
debt service obligations and operating expenses it may incur
and any dividends or liquidation amounts with respect to
our preferred and common shares.
In 2025, Arch Capital received dividends of $2.0 billion from
Arch Reinsurance Ltd. (“Arch Re Bermuda”), our Bermuda-
based reinsurer and insurer. Arch Re Bermuda can pay
approximately $6.4 billion to Arch Capital in 2026 without
providing an affidavit to the Bermuda Monetary Authority
(“BMA”).
Our insurance and reinsurance operations provide liquidity
in that premiums are received in advance, sometimes
substantially in advance, of the time losses are paid. The
period of time from the occurrence of a claim through the
settlement of the liability may extend many years into the
future. Sources of liquidity include cash flows from
operations, financing arrangements or routine sales of
investments.
As part of our investment strategy, we seek to establish a
level of cash and highly liquid short-term and intermediate-
term securities which, combined with expected cash flow, is
believed by us to be adequate to meet our foreseeable
payment obligations. However, due to the nature of our
operations, cash flows are affected by claim payments that
may comprise large payments on a limited number of claims
and which can fluctuate from year to year. We believe that
our liquid investments and cash flow will provide us with
sufficient liquidity in order to meet our claim payment
obligations. However, the timing and amounts of actual
claim payments related to recorded Loss Reserves vary
based on many factors, including large individual losses,
changes in the legal environment, as well as general market
conditions. The ultimate amount of the claim payments
could differ materially from our estimated amounts. Certain
lines of business written by us, such as excess casualty, have
loss experience characterized as low frequency and high
severity. The foregoing may result in significant variability in
loss payment patterns. The impact of this variability can be
exacerbated by the fact that the timing of the receipt of
reinsurance recoverables owed to us may be slower than
anticipated by us. Therefore, the irregular timing of claim
payments can create significant variations in cash flows from
operations between periods and may require us to utilize
other sources of liquidity to make these payments, which
may include the sale of investments or utilization of existing
or new credit facilities or capital market transactions. If the
source of liquidity is the sale of investments, we may be
forced to sell such investments at a loss, which may be
material.
We expect that our liquidity needs, including our anticipated
insurance obligations and operating and capital expenditure
needs, will be met by funds generated from underwriting
activities and investment income, as well as by our balance
of cash, short-term investments, proceeds on the sale or
maturity of our investments, and our credit facilities, for the
next twelve months, at a minimum.
Dividend Restrictions
Arch Capital has no material restrictions on its ability to
make distributions to shareholders. However, the ability of
our regulated insurance and reinsurance subsidiaries to pay
dividends or make distributions or other payments to us is
limited by the applicable local laws and relevant regulations
of the various countries and states in which we operate. See
note 25, “Statutory Information,” to our consolidated
financial statements in Item 8 for additional information on
dividend restrictions.
The payment of dividends from Arch Re Bermuda is, under
certain circumstances, limited under Bermuda law, which
requires our Bermuda operating subsidiary to maintain
certain measures of solvency and liquidity.
Our U.S. insurance and reinsurance subsidiaries are subject
to insurance laws and regulations in the jurisdictions in
which they operate. The ability of our regulated insurance
subsidiaries to pay dividends or make distributions is
dependent on their ability to meet applicable regulatory
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2025 FORM 10-K
standards. These regulations include restrictions that limit
the amount of dividends or other distributions, such as loans
or cash advances, available to shareholders without prior
approval of the insurance regulatory authorities. Each state
requires prior regulatory approval of any payment of
extraordinary dividends.
We also have insurance subsidiaries that are the parent
company for other insurance subsidiaries, which means that
dividends and other distributions will be subject to multiple
layers of regulations in order for our insurance subsidiaries
to be able to dividend funds to Arch Capital. The inability of
the subsidiaries of Arch Capital to pay dividends and other
permitted distributions could have a material adverse effect
on Arch Capital’s cash requirements and our ability to make
principal, interest and dividend payments on the senior
notes, preferred shares and common shares.
In addition to meeting applicable regulatory standards, the
ability of our insurance and reinsurance subsidiaries to pay
dividends is also constrained by our dependence on the
financial strength ratings of our insurance and reinsurance
subsidiaries from independent rating agencies. The ratings
from these agencies depend to a large extent on the
capitalization levels of our insurance and reinsurance
subsidiaries. We believe that Arch Capital has sufficient cash
resources and available dividend capacity to service its
indebtedness and other current outstanding obligations.
Restricted Assets
Our insurance, reinsurance and mortgage insurance
subsidiaries are required to maintain assets on deposit,
which primarily consist of fixed maturities, with various
regulatory authorities to support their operations. The
assets on deposit are available to settle insurance and
reinsurance liabilities to third parties. Our insurance and
reinsurance subsidiaries maintain assets in trust accounts as
collateral for insurance and reinsurance transactions with
affiliated companies and also have investments in
segregated portfolios primarily to provide collateral or
guarantees for letters of credit to third parties. At
December 31, 2025 and 2024, such amounts approximated
$15.0 billion and $13.0 billion, respectively.
Our investments in certain securities, including certain fixed
income and structured securities, investments in funds
accounted for using the equity method, other alternative
investments and investments in operating affiliates may be
illiquid due to contractual provisions or investment market
conditions. If we require significant amounts of cash on
short notice in excess of anticipated cash requirements, then
we may have difficulty selling these investments in a timely
manner or may be forced to sell or terminate them at
unfavorable values. Our unfunded investment commitments
totaled approximately $3.7 billion at December 31, 2025 and
are callable by our investment managers. The timing of the
funding of investment commitments is uncertain and may
require us to access cash on short notice.
Cash Flows
The following table summarizes our cash flows from
operating, investing and financing activities:
Year Ended December 31,
2025
2024
Total cash provided by (used for):
Operating activities
$
6,172
$
6,673
Investing activities
(4,036)
(4,461)
Financing activities
(1,890)
(1,925)
Effects of exchange rate changes on foreign
currency cash
61
(25)
Increase (decrease) in cash
$
307
$
262
Cash provided by operating activities in 2025 was lower than
in 2024. Activity in the 2025 period primarily reflected a
higher level of losses paid than in the 2024 period.
Cash used for investing activities in 2025 reflected lower net
purchases than in 2024, due in part to a higher level of
losses paid than in the 2024 period. Activity in 2024 also
reflected $852 million of net cash received related to the
MCE Acquisition.
Cash used for financing activities in 2025 was lower than in
2024. Activity in 2025 consisted of $1.9 billion of share
repurchases under our share repurchase program, while
activity in 2024 included a $1.9 billion special dividend paid
to common shareholders.
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2025 FORM 10-K
Investments
At December 31, 2025, our investable assets were $47.4
billion. The primary goals of our asset liability management
process are to meet our insurance liabilities, manage the
interest rate risk embedded in those insurance liabilities and
maintain sufficient liquidity to cover fluctuations in
projected liability cash flows, including debt service
obligations. Generally, the expected principal and interest
payments produced by our fixed income portfolio
adequately fund the estimated runoff of our insurance
reserves. Although this is not an exact cash flow match in
each period, the substantial degree by which the fair value
of the fixed income portfolio exceeds the expected present
value of the net insurance liabilities, as well as the positive
cash flow from newly sold policies and the large amount of
high quality liquid bonds, provide assurance of our ability to
fund the payment of claims and to service our outstanding
debt without having to sell securities at distressed prices or
access credit facilities. See Item 1A “Risk Factors” for a
discussion of other risks relating to our business and
investment portfolio.
CAPITAL RESOURCES
The following table provides an analysis of our capital
structure:
December 31,
2025
2024
Senior notes
$
2,729
$
2,728
Shareholders’ equity available to Arch:
Series F non-cumulative preferred shares
330
330
Series G non-cumulative preferred shares
500
500
Common shareholders’ equity
23,376
19,990
Total
$
24,206
$
20,820
Total capital available to Arch
$
26,935
$
23,548
Senior notes to total capital (%)
10.1
11.6
Revolving credit agreement borrowings to
total capital (%)
—
—
Debt to total capital (%)
10.1
11.6
Preferred to total capital (%)
3.1
3.5
Debt and preferred to total capital (%)
13.2
15.1
See note 19, “Debt and Financing Arrangements" and note
21, “Shareholders' Equity”, to our consolidated financial
statements in Item 8 for additional information on capital
structure.
Capital Adequacy
We monitor our capital adequacy on a regular basis and will
seek to adjust our capital base (up or down) according to the
needs of our business. The future capital requirements of
our business will depend on many factors, including our
ability to write new business successfully and to establish
premium rates and reserves at levels sufficient to cover
losses. Our ability to underwrite is largely dependent upon
the quality of our claims paying and financial strength
ratings as evaluated by independent rating agencies. In
particular, we require (1) sufficient capital to maintain our
financial strength ratings, as issued by several ratings
agencies, at a level considered necessary by management to
enable our key operating subsidiaries to compete; (2)
sufficient capital to enable our underwriting subsidiaries to
meet the capital adequacy tests performed by statutory
agencies in the U.S. and other key markets; and (3) our non-
U.S. operating companies are required to post letters of
credit and other forms of collateral that are necessary for
them to operate as they are “non-admitted” under U.S.
state insurance regulations.
In addition, Arch Mortgage Insurance Company and United
Guaranty Residential Insurance Company (together, “eligible
mortgage insurer”) are required to maintain compliance
with the GSE requirements, known as PMIERs. The financial
requirements require an eligible mortgage insurer’s
available assets, which generally include only the most liquid
assets of an insurer, to meet or exceed “minimum required
assets” as of each quarter end. Minimum required assets are
calculated from PMIERs tables with several risk dimensions
(including origination year, original loan-to-value and
original credit score of performing loans, and the
delinquency status of non-performing loans) and are subject
to a minimum amount. Together, our eligible mortgage
insurers satisfied the PMIERs’ financial requirements as of
December 31, 2025 with a PMIER sufficiency ratio of 179%,
compared to 186% at December 31, 2024. On August 21,
2024, Fannie Mae and Freddie Mac (collectively the GSEs)
each updated their PMIERs to incorporate new deductions
to available assets for investment risk. This update became
effective on March 31, 2025, but the impact will be phased
in through September 30, 2026. If the GSEs had fully
implemented this update to PMIERs as of December 31,
2025, the changes would have reduced the available assets
by 6% and resulted in a pro-forma PMIERs sufficiency ratio
of 173%.
As part of our capital management program, we may seek to
raise additional capital or may seek to return capital to our
shareholders through share repurchases, cash dividends or
other methods (or a combination of such methods). We may
also seek to retire or purchase our outstanding debt through
cash purchases and/or exchanges for equity or debt, in
open-market purchases, privately negotiated transactions or
ARCH CAPITAL
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2025 FORM 10-K
otherwise. Any such determination will be at the discretion
of the Board and will be dependent upon our profits,
financial requirements and other factors, including legal
restrictions, rating agency requirements, prevailing market
conditions and such other factors as our Board deems
relevant. The amounts involved may be material.
To the extent that our existing capital is insufficient to fund
our future operating requirements or maintain such ratings,
we may need to raise additional funds through financings or
limit our growth. We can provide no assurance that, if
needed, we would be able to obtain additional funds
through financing on satisfactory terms or at all. Any adverse
developments in the financial markets, such as disruptions,
uncertainty or volatility in the capital and credit markets,
may result in realized and unrealized capital losses that
could have a material adverse effect on our results of
operations, financial position and our businesses, and may
also limit our access to capital required to operate our
business. In addition to common share capital, we depend
on external sources of finance to support our underwriting
activities, which can be in the form (or any combination) of
debt securities, preference shares, common equity and bank
credit facilities providing loans and/or letters of credit.
Arch Capital, through its subsidiaries, provides financial
support to certain of its insurance subsidiaries and affiliates,
through certain reinsurance arrangements beneficial to the
ratings of such subsidiaries. Historically, our insurance,
reinsurance and mortgage insurance subsidiaries have
entered into separate reinsurance arrangements with Arch
Re Bermuda covering individual lines of business.
Except as described in the above paragraph, or where
express reinsurance, guarantee or other financial support
contractual arrangements are in place, each of Arch Capital’s
subsidiaries or affiliates is solely responsible for its own
liabilities and commitments (and no other Arch Capital
subsidiary or affiliate is so responsible). Any reinsurance
arrangements, guarantees or other financial support
contractual arrangements that are in place are solely for the
benefit of the Arch Capital subsidiary or affiliate involved
and third parties (creditors or insureds of such entity) are
not express beneficiaries of such arrangements.
Share Repurchase Program
Our Board has authorized the investment in Arch Capital’s
common shares through a share repurchase program. Since
the inception of the share repurchase program through
December 31, 2025, Arch Capital has repurchased
approximately 455.0 million common shares for an
aggregate purchase price of $7.8 billion. At December 31,
2025, $1.1 billion of share repurchases were available under
the program. Repurchases under the program may be
effected from time to time in open market. The timing and
amount of the repurchase transactions under this program
will depend on a variety of factors, including market
conditions, the development of the economy, corporate and
regulatory considerations. We will continue to monitor our
share price and, depending upon results of operations,
market conditions and the development of the economy, as
well as other factors, we will consider share repurchases on
an opportunistic basis.
GUARANTOR INFORMATION
The below table provides a description of our senior notes
payable at December 31, 2025:
Interest
Principal
Carrying
Issuer/Due
(Fixed)
Amount
Amount
Arch Capital:
May 1, 2034
7.350 %
$
300
$
298
June 30, 2050
3.635 %
1,000
990
Arch-U.S.:
Nov. 1, 2043 (1)
5.144 %
500
496
Arch Finance:
Dec. 15, 2026 (1)
4.011 %
500
499
Dec. 15, 2046 (1)
5.031 %
450
446
Total
$
2,750
$
2,729
(1) Fully and unconditionally guaranteed by Arch Capital.
Our senior notes were issued by Arch Capital, Arch Capital
Group (U.S.) Inc. (“Arch-U.S.”) and Arch Capital Finance LLC
(“Arch Finance”). Arch-U.S. is a wholly-owned subsidiary of
Arch Capital and Arch Finance is a wholly-owned finance
subsidiary of Arch-U.S. Our 2034 senior notes and 2050
senior notes issued by Arch Capital are unsecured and
unsubordinated obligations of Arch Capital and ranked
equally with all of its existing and future unsecured and
unsubordinated indebtedness. The 2043 senior notes issued
by Arch-U.S. are unsecured and unsubordinated obligations
of Arch-U.S. and Arch Capital and rank equally and ratably
with the other unsecured and unsubordinated indebtedness
of Arch-U.S. and Arch Capital. The 2026 senior notes and
2046 senior notes issued by Arch Finance are unsecured and
unsubordinated obligations of Arch Finance and Arch Capital
and rank equally and ratably with the other unsecured and
unsubordinated indebtedness of Arch Finance and Arch
Capital.
Arch Capital and Arch-U.S. are each holding companies and,
accordingly, they conduct substantially all of their
operations through their operating subsidiaries. Arch
Finance is a wholly owned subsidiary of Arch U.S. MI
Holdings Inc., a U.S. holding company. As a result, Arch
Capital, Arch-U.S. and Arch Finance's cash flows and their
ability to service their debt depends upon the earnings of
their operating subsidiaries and on their ability to distribute
the earnings, loans or other payments from such subsidiaries
to Arch Capital, Arch-U.S. and Arch Finance, respectively.
ARCH CAPITAL
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2025 FORM 10-K
During 2025 and 2024, we made interest payments of $127
million and $127 million, respectively, primarily related to
our senior notes and other financing arrangements. See note
19, “Debt and Financing Arrangements,” to our consolidated
financial statements in Item 8 for additional disclosures
concerning our senior notes and revolving credit agreement
borrowings. For additional information on our preferred
shares, see note 21, “Shareholders’ Equity,” to our
consolidated financial statements in Item 8.
The
following
tables
present
condensed
financial
information for Arch Capital (parent guarantor) and Arch-
U.S. (subsidiary issuer):
December 31,
2025
2024
Arch
Capital
Arch-
U.S.
Arch
Capital
Arch-
U.S.
Assets
Total investments
$
40 $ 442
$
43 $ 549
Cash
13
4
13
5
Investment in operating affiliates
3
—
3
—
Due from subsidiaries
and affiliates
16
14
6
10
Other assets
194
129
66
101
Total assets
$ 266 $ 589
$ 131 $ 665
Liabilities
Senior notes
1,288
496
1,287
495
Due to subsidiaries
and affiliates
6
993
11
994
Other liabilities
41
58
48
50
Total liabilities
1,335 1,547
1,346 1,539
Non-cumulative preferred shares
$ 830 $
—
$ 830 $
—
Year Ended
,
2025
,
2024
Arch
Capital
Arch-
U.S.
Arch
Capital
Arch-
U.S.
Revenues
Net investment income
$
3
$
27
$
5
$
14
Net realized gains (losses)
(10)
(1)
(4)
—
Equity in net income (loss) of
investments accounted for using
the equity method
—
—
—
(4)
Total revenues
(7)
26
1
10
Expenses
Corporate expenses
57
10
116
7
Interest expense
59
26
59
26
Interest expense (intercompany)
—
58
—
53
Total expenses
116
94
175
86
Income (loss) before income
taxes
(123)
(68)
(174)
(76)
Income tax (expense) benefit
58
9
—
22
Income (loss) from
operating affiliates
(1)
—
(1)
—
Net income available to Arch
(66)
(59)
(175)
(54)
Preferred dividends
(40)
—
(40)
—
Net income available to
Arch common shareholders
$ (106) $
(59) $ (215) $
(54)
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2025 FORM 10-K
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
Contractual Obligations
The following table provides an analysis of our contractual commitments at December 31, 2025:
Payment due by period
Total
2026
2027 and
2028
2029 and
2030
Thereafter
Operating activities
Estimated gross payments for losses and loss adjustment expenses (1)
$
33,547
$
9,960
$
10,880
$
5,122
$
7,585
Contractholder payables (2)
2,277
741
770
318
448
Operating lease obligations
234
34
65
50
85
Purchase obligations
307
160
124
23
—
Contingent and deferred consideration liabilities
18
6
8
4
—
Investing activities
Unfunded investment commitments (3)
3,679
3,679
—
—
—
Financing activities
Senior notes (including interest payments)
4,788
627
214
214
3,733
Total contractual obligations and commitments
$
44,850
$
15,207
$
12,061
$
5,731
$
11,851
(1)
The estimated expected contractual commitments related to the reserves for losses and loss adjustment expenses are presented on a gross basis (i.e.,
not reflecting any corresponding reinsurance recoverable amounts that would be due to us). It should be noted that until a claim has been presented to
us, determined to be valid, quantified and settled, there is no known obligation on an individual transaction basis, and while estimable in the aggregate,
the timing and amount contain significant uncertainty.
(2)
Certain insurance policies written by our insurance operations feature large deductibles, primarily in construction and national accounts lines. Under
such contracts, we are obligated to pay the claimant for the full amount of the claim and are subsequently reimbursed by the policyholder for the
deductible amount. In the event we are unable to collect from the policyholder, we would be liable for such defaulted amounts.
(3)
Unfunded investment commitments are callable by our investment managers. We have assumed that such investments will be funded in the next year
but the funding may occur over a longer period of time, due to market conditions and other factors.
Letter of Credit and Revolving Credit Facilities
Arch Capital and certain of its subsidiaries have access to a
credit facility with a syndicate of financial institutions (the
“Group Credit Facility”) that expires on August 23, 2028. The
Group Credit Facility consists of a $425 million secured
facility for letters of credit (the “Secured Facility”) and a
$500 million unsecured facility for revolving loans and letters
of credit (the “Unsecured Facility”). At December 31, 2025,
the Secured Facility had $224 million of letters of credit
outstanding and remaining capacity of $201 million, and the
Unsecured Facility had no outstanding revolving loans or
letters of credit, with remaining capacity of $500 million.
The Group Credit Facility contains certain restrictive and
maintenance covenants customary for facilities of this type,
including
restrictions
on
indebtedness,
minimum
consolidated tangible net worth, maximum leverage levels
and minimum financial strength ratings. Arch Capital and its
subsidiaries which are party to the agreement were in
compliance with all covenants contained therein at
December 31, 2025.
See note 19, “Debt and Financing Arrangements,” to our
consolidated financial statements in Item 8 for additional
disclosures concerning our senior notes and revolving credit
agreement borrowings.
RATINGS
Our ability to underwrite business is affected by the quality
of our claims paying ability and financial strength ratings as
evaluated by independent agencies. Such ratings from third
party
internationally
recognized
statistical
rating
organizations or agencies are instrumental in establishing
the financial security of companies in our industry. We
believe that the primary users of such ratings include
commercial and investment banks, policyholders, brokers,
ceding companies and investors. Insurance ratings are also
used by insurance and reinsurance intermediaries as an
important means of assessing the financial strength and
quality of insurers and reinsurers, and are often an
important factor in the decision by an insured or
intermediary of whether to place business with a particular
insurance or reinsurance provider. Periodically, rating
agencies evaluate us to confirm that we continue to meet
their criteria for the ratings assigned to us by them. S&P,
Moody’s, A.M. Best Company and Fitch Ratings are ratings
agencies which have assigned financial strength ratings to
one or more of Arch Capital’s subsidiaries.
If we are not able to obtain adequate capital, our business,
results of operations and financial condition could be
adversely affected, which could include, among other things,
the following possible outcomes: (1) potential downgrades
in the financial strength ratings assigned by ratings agencies
ARCH CAPITAL
97
2025 FORM 10-K
to our operating subsidiaries, which could place those
operating subsidiaries at a competitive disadvantage
compared to higher-rated competitors; (2) reductions in the
amount of business that our operating subsidiaries are able
to write in order to meet capital adequacy-based tests
enforced by statutory agencies; and (3) any resultant ratings
downgrades could, among other things, affect our ability to
write business and increase the cost of bank credit and
letters of credit. In addition, under certain of the reinsurance
agreements assumed by our reinsurance operations, upon
the occurrence of a ratings downgrade or other specified
triggering event with respect to our reinsurance operations,
such as a reduction in surplus by specified amounts during
specified periods, our ceding company clients may be
provided with certain rights, including, among other things,
the right to terminate the subject reinsurance agreement
and/or to require that our reinsurance operations post
additional collateral.
The ratings issued on our companies by these agencies are
announced publicly and are available directly from the
agencies.
Our
website
www.archgroup.com
(Investor
Relations-Credit Ratings) contains information about our
ratings, but such information on our website is not
incorporated by reference into this report.
CATASTROPHIC AND SEVERE ECONOMIC EVENTS
We have large aggregate exposures to natural and man-
made catastrophic events, pandemic events and severe
economic events. Natural catastrophes can be caused by
various events, including hurricanes, floods, windstorms,
earthquakes, hailstorms, tornadoes, explosions, severe
winter weather, fires, droughts and other natural disasters.
Man-made catastrophic events may include acts of war, acts
of terrorism and political instability. Catastrophes can also
cause losses in non-property business such as mortgage
insurance, workers’ compensation or general liability. In
addition to the nature of property business, we believe that
economic and geographic trends affecting insured property,
including inflation, property value appreciation and
geographic concentration, tend to generally increase the size
of losses from catastrophic events over time.
We have substantial exposure to unexpected, large losses
resulting from future man-made catastrophic events, such as
acts of war, acts of terrorism and political instability. These
risks are inherently unpredictable. It is difficult to predict the
timing of such events with statistical certainty or estimate
the amount of loss any given occurrence will generate. It is
not possible to completely eliminate our exposure to
unpredictable events and, to the extent that losses from
such risks occur, our financial condition and results of
operations
could
be
materially
adversely
affected.
Therefore, claims for natural and man-made catastrophic
events could expose us to large losses and cause substantial
volatility in our results of operations, which could cause the
value of our common shares to fluctuate widely. In certain
instances, we specifically insure and reinsure risks resulting
from terrorism. Even in cases where we attempt to exclude
losses from terrorism and certain other similar risks from
some coverages written by us, we may not be successful in
doing so. Moreover, irrespective of the clarity and
inclusiveness of policy language, there can be no assurance
that a court or arbitration panel will limit enforceability of
policy language or otherwise issue a ruling adverse to us.
We seek to limit our loss exposure by writing a number of
our reinsurance contracts on an excess of loss basis,
adhering to maximum limitations on reinsurance written in
defined geographical zones, limiting program size for each
client and prudent underwriting of each program written. In
the case of proportional treaties, we may seek per
occurrence limitations or loss ratio caps to limit the impact
of losses from any one or series of events. In our insurance
operations, we seek to limit our exposure through the
purchase of reinsurance. We cannot be certain that any of
these loss limitation methods will be effective. We also seek
to limit our loss exposure by geographic diversification.
Geographic zone limitations involve significant underwriting
judgments, including the determination of the area of the
zones and the inclusion of a particular policy within a
particular zone's limits. There can be no assurance that
various provisions of our policies, such as limitations or
exclusions from coverage or choice of forum, will be
enforceable in the manner we intend. Disputes relating to
coverage and choice of legal forum may also arise.
Underwriting is inherently a matter of judgment, involving
important assumptions about matters that are inherently
unpredictable and beyond our control, and for which
historical experience and probability analysis may not
provide sufficient guidance. One or more catastrophic or
other events could result in claims that substantially exceed
our expectations, which could have a material adverse effect
on our financial condition or our results of operations,
possibly to the extent of eliminating our shareholders'
equity.
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2025 FORM 10-K
For our natural catastrophe exposed business, we seek to
limit the amount of exposure we will assume from any one
insured or reinsured and the amount of the exposure to
catastrophe losses from a single event in any geographic
zone. We monitor our exposure to catastrophic events,
including earthquake and wind and periodically reevaluate
the estimated probable maximum pre-tax loss for such
exposures. Our estimated probable maximum pre-tax loss is
determined through the use of modeling techniques, but
such estimate does not represent our total potential loss for
such exposures.
Our models employ both proprietary and vendor-based
systems and include cross-line correlations for property,
marine, offshore energy, aviation, workers compensation
and personal accident. We seek to limit the probable
maximum pre-tax loss to a specific level for severe
catastrophic events. Currently, we seek to limit our 1-in-250
year return period net probable maximum loss from a
severe catastrophic event in any geographic zone to
approximately 25% of tangible shareholders’ equity available
to Arch (total shareholders’ equity available to Arch less
goodwill and intangible assets). We reserve the right to
change this threshold at any time.
Based on in-force exposure estimated as of January 1, 2026,
our modeled peak zone catastrophe exposure was a
windstorm affecting the Florida Tri-County, with a net
probable maximum pre-tax loss of $1.9 billion, followed by
windstorms affecting the Northeast U.S., and the Gulf of
Mexico with net probable maximum pre-tax losses of $1.7
billion and $1.5 billion, respectively. As of January 1, 2026,
our modeled peak zone earthquake exposure (San Francisco
area earthquake) represented approximately 51% of our
peak zone catastrophe exposure, and our modeled peak
zone international exposure (German windstorm) was
substantially less than both our peak zone windstorm and
earthquake exposures.
We also have significant exposure to losses due to mortgage
defaults resulting from severe economic events in the
future. For our U.S. and Australian mortgage insurance
business, we have developed a proprietary risk model
(“Realistic Disaster Scenario” or “RDS”) that simulates the
maximum loss resulting from a severe economic downturn
impacting the housing market. The RDS models the
collective impact of adverse conditions for key economic
indicators, the most significant of which is a decline in home
prices. The RDS model projects paths of future home prices,
unemployment rates, income levels and interest rates and
assumes correlation across states and geographic regions.
The resulting future performance of our in-force portfolio is
then estimated under the economic stress scenario,
reflecting loan and borrower information.
Currently, we seek to limit our modeled RDS loss from a
severe economic event to approximately 25% of tangible
shareholders’ equity available to Arch. We reserve the right
to change this threshold at any time. Based on in-force
exposure estimated as of January 1, 2026, our modeled RDS
loss was $931 million, or 4.1% of tangible shareholders’
equity available to Arch.
Net probable maximum loss estimates are net of expected
reinsurance recoveries, before income tax and before excess
reinsurance reinstatement premiums. RDS loss estimates are
net of expected reinsurance recoveries and before income
tax. Catastrophe loss estimates are reflective of the zone
indicated and not the entire portfolio. Since hurricanes and
windstorms can affect more than one zone and make
multiple landfalls, our catastrophe loss estimates include
clash estimates from other zones. Our catastrophe loss
estimates and RDS loss estimates do not represent our
maximum exposures and it is highly likely that our actual
incurred losses would vary materially from the modeled
estimates. There can be no assurances that we will not
suffer pre-tax losses greater than 25% of our tangible
shareholders’ equity from one or more catastrophic events
or severe economic events due to several factors. These
factors include the inherent uncertainties in estimating the
frequency and severity of such events and the margin of
error in making such determinations resulting from potential
inaccuracies and inadequacies in the data provided by
clients and brokers, the modeling techniques and the
application of such techniques or as a result of a decision to
change the percentage of shareholders' equity exposed to a
single catastrophic event or severe economic event. In
addition, actual losses may increase if our reinsurers fail to
meet their obligations to us or the reinsurance protections
purchased by us are exhausted or are otherwise unavailable.
See Item 1A, “Risk Factors—Risks Relating to Our Industry,
Business
and
Operations”
Depending
on
business
opportunities and the mix of business that may comprise our
insurance, reinsurance and mortgage portfolios, we may
seek to adjust our self-imposed limitations on probable
maximum pre-tax loss for catastrophe exposed business and
mortgage default exposed business. See “—Summary of
Critical Accounting Estimates—Ceded Reinsurance” for a
discussion of our catastrophe reinsurance programs.
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2025 FORM 10-K
MARKET SENSITIVE INSTRUMENTS AND RISK
MANAGEMENT
Our investment results are subject to a variety of risks,
including risks related to changes in the business, financial
condition or results of operations of the entities in which we
invest, as well as changes in general economic conditions
and overall market conditions. We are also exposed to
potential loss from various market risks, including changes in
equity prices, interest rates and foreign currency exchange
rates.
In accordance with the SEC’s Financial Reporting Release No.
48, we performed a sensitivity analysis to determine the
effects that market risk exposures could have on the future
earnings, fair values or cash flows of our financial
instruments as of December 31, 2025. Market risk
represents the risk of changes in the fair value of a financial
instrument and consists of several components, including
liquidity, basis and price risks.
The sensitivity analysis performed as of December 31, 2025
presents hypothetical losses in cash flows, earnings and fair
values of market sensitive instruments which were held by
us on December 31, 2025 and are sensitive to changes in
interest rates and equity security prices. This risk
management discussion and the estimated amounts
generated from the following sensitivity analysis represent
forward-looking statements of market risk assuming certain
adverse market conditions occur. Actual results in the future
may differ materially from these projected results due to
actual developments in the global financial markets. The
analysis methods used by us to assess and mitigate risk
should not be considered projections of future events of
losses.
The focus of the SEC’s market risk rules is on price risk. For
purposes of specific risk analysis, we employ sensitivity
analysis to determine the effects that market risk exposures
could have on the future earnings, fair values or cash flows
of our financial instruments. The financial instruments
included in the following sensitivity analysis consist of all of
our investments and cash.
Investment Market Risk
Fixed Income Securities. We invest in interest rate sensitive
securities, primarily debt securities. We consider the effect
of interest rate movements on the fair value of our fixed
maturities, short-term investments and certain of our other
investments, equity securities and investment funds
accounted for using the equity method which invest in fixed
income securities (collectively, “Fixed Income Securities”)
and the corresponding change in unrealized appreciation. As
interest rates rise, the fair value of our Fixed Income
Securities falls, and the converse is also true. Based on
historical observations, there is a low probability that all
interest rate yield curves would shift in the same direction at
the same time. Furthermore, at times interest rate
movements in certain credit sectors exhibit a much lower
correlation to changes in U.S. Treasury yields. Accordingly,
the actual effect of interest rate movements may differ
materially from the amounts set forth in the following
tables.
The following table summarizes the effect that an
immediate, parallel shift in the interest rate yield curve
would
have
had
on
our
investment
portfolio
at
December 31, 2025 and 2024:
(U.S. dollars in
billions)
Interest Rate Shift in Basis Points
-100
-50
-
+50
+100
Dec. 31, 2025
Total fair value
$ 45.8
$ 45.2
$
44.6
$ 44.0
$ 43.3
Change from base
2.8 %
1.4 %
(1.4) %
(2.8) %
Change in
unrealized value
$
1.2
$
0.6
$ (0.6)
$ (1.2)
Dec. 31, 2024
Total fair value
$ 40.0
$ 39.5
$
38.9
$ 38.4
$ 37.9
Change from base
2.8 %
1.4 %
(1.4) %
(2.7) %
Change in
unrealized value
$
1.1
$
0.5
$ (0.5)
$ (1.1)
In addition, we consider the effect of credit spread
movements on the market value of our Fixed Income
Securities and the corresponding change in unrealized value.
As credit spreads widen, the fair value of our Fixed Income
Securities falls, and the converse is also true. In periods
where the spreads on our Fixed Income Securities are much
higher than their historical average due to short-term
market dislocations, a parallel shift in credit spread levels
would result in a much more pronounced change in
unrealized value.
The following table summarizes the effect that an
immediate, parallel shift in credit spreads in a static interest
rate environment would have had on the portfolio at
December 31, 2025 and 2024:
(U.S. dollars in
billions)
Credit Spread Shift in Percentage
-100
-50
-
+50
+100
Dec. 31, 2025
Total fair value
$ 45.8
$ 45.2
$
44.6
$ 44.0
$ 43.3
Change from base
2.8 %
1.4 %
(1.4) %
(2.8) %
Change in
unrealized value
$
1.2
$
0.6
$ (0.6)
$ (1.2)
Dec. 31, 2024
Total fair value
$ 40.0
$ 39.5
$
38.9
$ 38.4
$ 37.8
Change from base
2.8 %
1.4 %
(1.4) %
(2.8) %
Change in
unrealized value
$
1.1
$
0.5
$ (0.5)
$ (1.1)
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2025 FORM 10-K
Another method that attempts to measure portfolio risk is
Value-at-Risk (“VaR”). VaR measures the worst expected loss
under normal market conditions over a specific time interval
at a given confidence level. The 1-year 95th percentile
parametric VaR reported herein estimates that 95% of the
time, the portfolio loss in a one-year horizon would be less
than or equal to the calculated number, stated as a
percentage of the measured portfolio’s initial value. The VaR
is a variance-covariance based estimate, based on linear
sensitivities of a portfolio to a broad set of systematic
market risk factors and idiosyncratic risk factors mapped to
the portfolio exposures. The relationships between the risk
factors are estimated using historical data, and the most
recent data points are generally given more weight. As of
December 31, 2025, our portfolio’s 95th percentile VaR was
estimated to be 6.5%, compared to an estimated 5.6% at
December 31, 2024. In periods where the volatility of the
risk factors mapped to our portfolio’s exposures is higher
due to market conditions, the resulting VaR is higher than in
other periods.
Equity Securities. At December 31, 2025 and 2024, the fair
value of our investments in equity securities and certain
investments accounted for using the equity method with
underlying equity strategies totaled $1.8 billion and $1.5
billion, respectively. These investments are exposed to price
risk, which is the potential loss arising from decreases in fair
value. An immediate hypothetical 10% decline in the value
of each position would reduce the fair value of such
investments by approximately $178 million and $149 million
at December 31, 2025 and 2024, respectively, and would
have decreased book value per share by approximately
$0.50 and $0.40, respectively. An immediate hypothetical
10% increase in the value of each position would increase
the fair value of such investments by approximately $178
million and $149 million at December 31, 2025 and 2024,
respectively, and would have increased book value per share
by approximately $0.50 and $0.40, respectively.
Investment-Related Derivatives. At December 31, 2025, the
notional value of all derivative instruments (excluding
foreign currency forward contracts which are included in the
foreign currency exchange risk analysis below) was $8.0
billion, compared to $5.0 billion at December 31, 2024. If the
underlying exposure of each investment-related derivative
held at December 31, 2025 depreciated by 100 basis points,
it would have resulted in a reduction in net income of
approximately $80 million, and a decrease in book value per
share of $0.22, compared to $50 million and $0.13,
respectively, on investment-related derivatives held at
December 31, 2024. If the underlying exposure of each
investment-related derivative held at December 31, 2025
appreciated by 100 basis points, it would have resulted in an
increase in net income of approximately $80 million, and an
increase in book value per share of $0.22, compared to $50
million and $0.13, respectively, on investment-related
derivatives held at December 31, 2024. See note 11,
“Derivative Instruments,” to our consolidated financial
statements in Item 8 for additional disclosures concerning
derivatives.
For further discussion on investment activity, please refer to
“Financial Condition—Investable Assets.”
Foreign Currency Exchange Risk
Foreign currency rate risk is the potential change in value,
income and cash flow arising from adverse changes in
foreign currency exchange rates. Through our subsidiaries
and branches located in various foreign countries, we
conduct our insurance and reinsurance operations in a
variety of local currencies other than the U.S. Dollar. We
generally hold investments in foreign currencies which are
intended to mitigate our exposure to foreign currency
fluctuations in our net insurance liabilities. We may also
utilize foreign currency forward contracts and currency
options as part of our investment strategy. See note 11,
“Derivative Instruments,” to our consolidated financial
statements in Item 8 for additional information.
The following table provides a summary of our net foreign
currency exchange exposures, as well as foreign currency
derivatives in place to manage these exposures:
(U.S. dollars in millions, except
per share data)
December 31,
2025
December 31,
2024
Net assets (liabilities), denominated in
foreign currencies, excluding
shareholders’ equity and derivatives
$
(498) $
(815)
Shareholders’ equity denominated in
foreign currencies (1)
1,220
1,120
Net foreign currency forward contracts
outstanding (2)
478
453
Net exposures denominated in foreign
currencies
$
1,200
$
758
Pre-tax impact of a hypothetical 10%
appreciation of the U.S. Dollar against
foreign currencies:
Shareholders’ equity
$
(120) $
(76)
Book value per share
$
(0.33) $
(0.20)
Pre-tax impact of a hypothetical 10%
decline of the U.S. Dollar against foreign
currencies:
Shareholders’ equity
$
120
$
76
Book value per share
$
0.33
$
0.20
(1)
Represents capital contributions held in the foreign currencies of our
operating units.
(2)
Represents the net notional value of outstanding foreign currency
forward contracts.
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2025 FORM 10-K
Although the Company generally attempts to match the
currency of its projected liabilities with investments in the
same currencies, from time to time the Company may elect
to over or underweight one or more currencies, which could
increase the Company’s exposure to foreign currency
fluctuations and increase the volatility of the Company’s
shareholders’ equity. Historical observations indicate a low
probability that all foreign currency exchange rates would
shift against the U.S. Dollar in the same direction and at the
same time and, accordingly, the actual effect of foreign
currency rate movements may differ materially from the
amounts set forth above. For further discussion on foreign
exchange activity, please refer to “—Results of Operations.”
Effects of Inflation
General economic inflation has increased in recent quarters
and may continue to remain at elevated levels for an
extended period of time. The potential also exists, after a
catastrophe loss or pandemic events, for the development
of inflationary pressures in a local economy. This risk may be
heightened from time to time by geopolitical tensions,
global
supply
chain
disruptions,
tariffs,
and
other
contributing factors. This may have a material effect on the
adequacy of our reserves for losses and loss adjustment
expenses, especially in longer-tailed lines of business, and on
the market value of our investment portfolio through rising
interest rates. The anticipated effects of inflation are
considered in our pricing models, reserving processes and
exposure management, across all lines of business and types
of loss including natural catastrophe events. The actual
effects of inflation on our results cannot be accurately
known until claims are ultimately settled and will vary by the
specific type of inflation affecting each line of business.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Reference is made to the information appearing above
under the subheading “Market Sensitive Instruments and
Risk Management” under the caption “Management’s
Discussion and Analysis of Financial Condition and Results of
Operation,” which information is hereby incorporated by
reference.
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2025 FORM 10-K
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Page No.
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
104
Consolidated Balance Sheets
At December 31, 2025 and December 31, 2024
106
Consolidated Statements of Income
For the years ended December 31, 2025, 2024 and 2023
107
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2025, 2024 and 2023
108
Consolidated Statements of Changes in Shareholders’ Equity
For the years ended December 31, 2025, 2024 and 2023
109
Consolidated Statements of Cash Flows
For the years ended December 31, 2025, 2024 and 2023
110
Notes to Consolidated Financial Statements
Note 1 - General
111
Note 2 - Acquisitions
111
Note 3 - Significant Accounting Policies
112
Note 4 - Segment Information
121
Note 5 - Reserve for Losses and Loss Adjustment Expenses
126
Note 6 - Short Duration Contracts
128
Note 7 - Allowance for Expected Credit Losses
142
Note 8 - Reinsurance
143
Note 9 - Investment Information
145
Note 10 - Fair Value
150
Note 11 - Derivative Instruments
156
Note 12 - Variable interest entities
157
Note 13 - Other Comprehensive Income (Loss)
158
Note 14 - Earnings Per Common Share
160
Note 15 - Income Taxes
160
Note 16 - Transactions with Related Parties
164
Note 17 - Leases
164
Note 18 - Commitments and Contingencies
165
Note 19 - Debt and Financing Arrangements
166
Note 20 - Goodwill and Intangible Assets
167
Note 21 - Shareholders’ Equity
168
Note 22 - Share-Based Compensation
170
Note 23 - Retirement Plans
173
Note 24 - Legal Proceedings
173
Note 25 - Statutory Information
173
ARCH CAPITAL
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2025 FORM 10-K
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Arch Capital Group Ltd.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Arch Capital Group Ltd. and its subsidiaries (the
"Company") as of December 31, 2025 and 2024, and the related consolidated statements of income, of comprehensive
income, of changes in shareholders' equity and of cash flows for each of the three years in the period ended December 31,
2025, including the related notes and financial statement schedules listed in the index appearing under Item 15(a)(2)
(collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over
financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our
responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal
control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our
audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
ARCH CAPITAL
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2025 FORM 10-K
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts
or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of Reserve for Losses and Loss Adjustment Expenses
As described in Notes 3, 5 and 6 to the consolidated financial statements, the reserve for losses and loss adjustment expenses
represents estimates of future amounts required to pay losses and loss adjustment expenses for insured or reinsured events
which have occurred at or before the balance sheet date. As of December 31, 2025, the Company’s total reserve for losses
and loss adjustment expenses was $33.5 billion. For the insurance and reinsurance segments, management estimates
ultimate losses and loss adjustment expenses using various generally accepted actuarial methods applied to known losses and
other relevant information. Ultimate losses and loss adjustment expenses are generally determined by projection of claim
emergence and settlement patterns observed in the past that can reasonably be expected to persist into the future.
Management makes a number of key assumptions in their reserving process, including estimating loss development patterns
and expected loss ratios. For the mortgage segment, the lead actuarial methodology used by management is a frequency-
severity method based on the inventory of pending delinquencies. The assumptions of frequency and severity reflect
judgments based on historical data and experience.
The principal considerations for our determination that performing procedures relating to the valuation of the reserve for
losses and loss adjustment expenses is a critical audit matter are (i) the significant judgment by management when
developing their estimate, (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and
evaluating audit evidence relating to the aforementioned key actuarial methods and key assumptions, and (iii) the audit effort
involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
the valuation of the reserve for losses and loss adjustment expenses, including controls over the selection of key actuarial
methods and development of key assumptions. These procedures also included, among others, the involvement of
professionals with specialized skill and knowledge to assist in performing one or a combination of procedures, including (i)
developing an independent estimate, on a test basis, of the reserve for losses and loss adjustment expenses, and comparing
the independent estimate to management’s actuarially determined reserve for losses and loss adjustment expenses to
evaluate the reasonableness of the reserve for losses and loss adjustment expenses and (ii) evaluating the appropriateness of
the actuarial methods and reasonableness of the assumptions related to loss development patterns, expected loss ratios,
frequency, and severity used by management to determine the Company’s reserve for losses and loss adjustment expenses.
Developing the independent estimate and evaluating the appropriateness of the key methods and reasonableness of the key
assumptions related to loss development patterns, expected loss ratios, frequency and severity, as applicable, involved testing
the completeness and accuracy of historical data provided by management.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 26, 2026
We have served as the Company’s or its predecessor’s auditor since 1995.
ARCH CAPITAL
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2025 FORM 10-K
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U.S. dollars and shares in millions)
December 31,
2025
2024
Assets
Investments:
Fixed maturities available for sale, at fair value (amortized cost: $32,329 and $27,570; net of allowance for credit
losses: $20 and $22)
$
32,426
$
27,035
Short-term investments available for sale, at fair value (amortized cost: $2,624 and $2,784; net of allowance for
credit losses: $0 and $0 )
2,625
2,784
Equity securities, at fair value
1,864
1,675
Other investments (portion measured at fair value: $3,136 and $3,066)
3,136
3,066
Investments accounted for using the equity method
6,453
5,980
Total investments
46,504
40,540
Cash
993
979
Accrued investment income
338
298
Investment in operating affiliates
1,313
1,240
Premiums receivable (net of allowance for credit losses: $43 and $45)
5,723
5,634
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses (net of allowance for credit losses:
$17 and $17)
9,526
8,260
Contractholder receivables (net of allowance for credit losses: $7 and $5)
2,270
2,161
Ceded unearned premiums
2,659
2,428
Deferred acquisition costs
1,717
1,734
Receivable for securities sold
180
50
Goodwill and intangible assets
1,222
1,351
Other assets
6,796
6,231
Total assets
$
79,241
$
70,906
Liabilities
Reserve for losses and loss adjustment expenses
$
33,547
$
29,369
Unearned premiums
10,100
10,218
Reinsurance balances payable
2,320
2,137
Contractholder payables
2,277
2,165
Collateral held for insured obligations
237
249
Senior notes
2,729
2,728
Payable for securities purchased
308
181
Other liabilities
3,517
3,039
Total liabilities
55,035
50,086
Commitments and Contingencies (refer to Note 18)
Shareholders’ Equity
Non-cumulative preferred shares
830
830
Common shares ($0.0011 par, shares issued: 599.8 and 595.6)
1
1
Additional paid-in capital
2,735
2,510
Retained earnings
27,045
22,686
Accumulated other comprehensive income (loss), net of deferred income tax
5
(720)
Common shares held in treasury, at cost (shares: 240.8 and 219.2)
(6,410)
(4,487)
Total shareholders' equity
24,206
20,820
Total liabilities and shareholders' equity
$
79,241
$
70,906
See Notes to Consolidated Financial Statements
ARCH CAPITAL
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2025 FORM 10-K
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(U.S. dollars and shares in millions, except per share data)
Year Ended December 31,
2025
2024
2023
Revenues
Net premiums earned
$
17,065
$
15,100
$
12,440
Net investment income
1,625
1,495
1,023
Net realized gains (losses)
464
197
(165)
Other underwriting income
217
26
31
Equity in net income of investments accounted for using the equity method
504
580
278
Other income (loss)
54
42
27
Total revenues
19,929
17,440
13,634
Expenses
Losses and loss adjustment expenses
9,370
8,342
6,246
Acquisition expenses
3,153
2,651
2,312
Other operating expenses
1,826
1,472
1,301
Corporate expenses
132
200
102
Amortization of intangible assets
193
235
95
Interest expense
148
141
133
Net foreign exchange losses (gains)
128
(75)
60
Total expenses
14,950
12,966
10,249
Income before income taxes and income (loss) from operating affiliates
4,979
4,474
3,385
Income taxes:
Current tax expense (benefit)
586
397
288
Deferred tax expense (benefit)
174
(35)
(1,161)
Income tax expense (benefit)
760
362
(873)
Income (loss) from operating affiliates
180
200
184
Net income
$
4,399
$
4,312
$
4,442
Net (income) loss attributable to noncontrolling interests
—
—
1
Net income available to Arch
4,399
4,312
4,443
Preferred dividends
(40)
(40)
(40)
Net income available to Arch common shareholders
$
4,359
$
4,272
$
4,403
Net income per common share and common share equivalent
Basic
$
11.83
$
11.47
$
11.94
Diluted
$
11.60
$
11.19
$
11.62
Weighted average common shares and common share equivalents outstanding
Basic
368.4
372.5
368.7
Diluted
375.9
381.8
378.8
See Notes to Consolidated Financial Statements
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2025 FORM 10-K
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(U.S. dollars in millions)
Year Ended December 31,
2025
2024
2023
Comprehensive Income
Net income
$
4,399
$
4,312
$
4,442
Other comprehensive income (loss), net of deferred income tax
Unrealized appreciation (decline) in value of available-for-sale investments:
Unrealized holding gains (losses) arising during year
661
(23)
547
Reclassification of net realized (gains) losses, included in net income
(20)
81
400
Foreign currency translation adjustments
84
(102)
23
Comprehensive income (loss)
5,124
4,268
5,412
Net (income) loss attributable to noncontrolling interests
—
—
1
Comprehensive income available to Arch (loss)
$
5,124
$
4,268
$
5,413
See Notes to Consolidated Financial Statements
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2025 FORM 10-K
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(U.S. dollars in millions)
Year Ended December 31,
2025
2024
2023
Non-cumulative preferred shares
Balance at beginning and end of year
$
830
$
830
$
830
Common shares
Balance at beginning and end of year
1
1
1
Additional paid-in capital
Balance at beginning of year
2,510
2,327
2,211
Amortization of share-based compensation
148
133
93
Other changes
77
50
23
Balance at end of year
2,735
2,510
2,327
Retained earnings
Balance at beginning of year
22,686
20,295
15,892
Net income
4,399
4,312
4,442
Net (income) loss attributable to noncontrolling interests
—
—
1
Common share dividends
—
(1,881)
—
Preferred share dividends
(40)
(40)
(40)
Balance at end of year
27,045
22,686
20,295
Accumulated other comprehensive income (loss)
Balance at beginning of year
(720)
(676)
(1,646)
Unrealized appreciation (decline) in value of available-for-sale investments, net of deferred income tax:
Balance at beginning of year
(507)
(565)
(1,512)
Unrealized holding gains (losses) during period, net of reclassification adjustment
641
58
947
Balance at end of year
134
(507)
(565)
Foreign currency translation adjustments, net of deferred income tax:
Balance at beginning of year
(213)
(111)
(134)
Foreign currency translation adjustments
84
(102)
23
Balance at end of year
(129)
(213)
(111)
Balance at end of year
5
(720)
(676)
Common shares held in treasury, at cost
Balance at beginning of year
(4,487)
(4,424)
(4,378)
Shares repurchased for treasury
(1,923)
(63)
(46)
Balance at end of year
(6,410)
(4,487)
(4,424)
Total shareholders’ equity
$
24,206
$
20,820
$
18,353
See Notes to Consolidated Financial Statements
ARCH CAPITAL
109
2025 FORM 10-K
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in millions)
Year Ended December 31,
2025
2024
2023
Operating Activities
Net income
$
4,399
$
4,312
$
4,442
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized (gains) losses
(440)
(185)
182
Equity in net (income) or loss of investments accounted for using the
equity method and other income or loss
(459)
(488)
(215)
Amortization of intangible assets
193
235
95
Share-based compensation
148
133
93
Changes in:
Reserve for losses and loss adjustment expenses, net of unpaid losses and loss adjustment
expenses recoverable
2,350
3,279
2,138
Unearned premiums, net of ceded unearned premiums
(589)
632
1,028
Premiums receivable
38
(818)
(981)
Deferred acquisition costs
86
(212)
(235)
Reinsurance balances payable
137
179
455
Deferred income tax assets, net
174
(35)
(1,161)
Other items, net
135
(359)
(92)
Net cash provided by operating activities
6,172
6,673
5,749
Investing Activities
Purchases of fixed maturity investments
(36,480)
(31,290)
(18,062)
Purchases of equity securities
(1,448)
(1,423)
(456)
Purchases of other investments
(2,238)
(3,485)
(2,171)
Proceeds from sales of fixed maturity investments
29,313
26,245
14,105
Proceeds from sales of equity securities
1,507
1,101
288
Proceeds from sales, redemptions and maturities of other investments
2,186
1,858
768
Proceeds from redemptions and maturities of fixed maturity investments
2,494
2,036
781
Net settlements of derivative instruments
310
(5)
50
Net (purchases) sales of short-term investments
258
(269)
(696)
Acquisitions, net of cash
—
852
—
Purchases of fixed assets
(44)
(51)
(52)
Other
106
(30)
(23)
Net cash used for investing activities
(4,036)
(4,461)
(5,468)
Financing Activities
Purchases of common shares under share repurchase program
(1,889)
(24)
—
Proceeds from common shares issued, net
50
7
(2)
Third party investment in redeemable noncontrolling interests
—
—
(22)
Common dividends paid
(7)
(1,866)
—
Preferred dividends paid
(40)
(40)
(40)
Other
(4)
(2)
(5)
Net cash provided by (used for) financing activities
(1,890)
(1,925)
(69)
Effects of exchange rate changes on foreign currency cash and restricted cash
61
(25)
13
Increase (decrease) in cash and restricted cash
307
262
225
Cash and restricted cash, beginning of year
1,760
1,498
1,273
Cash and restricted cash, end of year
$
2,067
$
1,760
$
1,498
Income taxes paid (received)
$
458
$
378
$
267
Interest paid
$
127
$
127
$
127
See Notes to Consolidated Financial Statements
ARCH CAPITAL
110
2025 FORM 10-K
1.
General
Arch Capital Group Ltd. (“Arch Capital,” “Arch” or the
“Company”) is a publicly listed Bermuda exempted company
which provides insurance, reinsurance and mortgage
insurance on a worldwide basis through its wholly owned
subsidiaries. As used herein, the Company means Arch
Capital and its subsidiaries. Similarly, “Common Shares”
means the common shares of Arch Capital.
The Company has reclassified the presentation of certain
prior year information to conform to the current
presentation. Such reclassifications had no effect on the
Company’s net income, shareholders’equity or cash flows.
All amounts are in millions, except per share amounts,
unless otherwise noted.
2.
Acquisition
On August 1, 2024, the Company completed the acquisition
of Allianz’s U.S Middle Market Property and Casualty
insurance business and U.S. Entertainment business (“MCE
Acquisition”).This business is written by Fireman’s Fund
Insurance Company, an affiliate of Allianz, and its
subsidiaries (collectively, the “Business Entities”), in each
case, relating to relevant policies with accident years 2016
and onwards (collectively, the “Business”), as well as certain
assets of Allianz and its affiliates related to the Business. In
connection with the acquisition of the Business, the
Company also entered into certain reinsurance agreements
relating to the Business and the Business Entities and other
agreements providing for administration and other services
for the Business Entities by the Company for the applicable
policies being reinsured following the closing. The
acquisition of the Business is an important part of the
Company’s growth strategy, and provides a ballast to our
existing insurance business. It further enhances the
Company’s capabilities in the U.S. middle markets and
represents an attractive way to enter the entertainment
insurance market, a new niche for us.
Aggregate cash consideration for the transaction was $450
million. Direct costs related to the acquisition are
immaterial, and were expensed as incurred. These include
one-time costs that are directly attributable to third party
consulting fees and other professional and legal fees related
to the acquisition. Such costs are included within ‘corporate
expenses’ in the consolidated statement of income. The
Business acquired is included within the Company’s
insurance segment beginning from the acquisition date.
The MCE Acquisition was accounted for as a business
combination under FASB Accounting Standards Codification
Topic 805, Business Combinations (“Topic 805”). Pursuant to
Topic 805, the Company allocated the MCE Acquisition
purchase price to tangible and identifiable intangible assets
acquired and liabilities assumed based on their estimated
fair values as of the acquisition date. The excess of the
purchase price over those fair values was recorded to
goodwill. During the measurement period, the Company
adjusted the provisional amounts to reflect new information
obtained about facts and circumstances that existed as of
the acquisition date, which, if known, would have affected
the measurement of the amounts recognized as of that date.
Such adjustments impacted certain identifiable assets
acquired and liabilities assumed, resulting in a decrease in
net assets acquired and a corresponding increase to
goodwill of $10 million. The Company completed the
analysis of the fair value of the assets, liabilities assumed
and the related allocation of the purchase price during the
second quarter 2025.
The following table summarizes the Company’s allocation of
the purchase price to the acquired assets and liabilities
assumed based on estimated fair values on August 1, 2024.
Total
Useful
Purchase price
Cash paid (a)
$
450
Assets Acquired
Cash and investments, at fair value
$
2,332
Premiums receivable, net of commissions
224
Intangible asset -- distribution relationships
220
10 years
Intangible asset -- value of business acquired
165
1-2 years
Intangible asset -- other (1)
180
5-7 years
Other assets acquired
175
Total assets acquired
$
3,296
Liabilities Acquired
Reserves for losses and loss adjustment
expenses
$
2,468
Unearned premiums
636
Other liabilities acquired
18
Total liabilities acquired
3,122
Identifiable net assets acquired (b)
$
174
Goodwill (a) - (b)
$
276
(1) Includes $130 million related to the net fair value adjustment to reserves
for loss and loss adjustment expenses on August 1, 2024.
The Company recognized goodwill of $276 million that is
primarily attributed to the expanded presence and long-
term growth opportunities in the insurance market provided
by this strategic acquisition. Approximately $555 million of
the acquired goodwill and intangibles is expected to be
deductible for income tax purposes. At the date of the
acquisition, the Company established a net deferred tax
asset of $24 million related to the estimated fair value of
reserves for losses and loss adjustment expenses and
unearned premiums.
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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
111
2025 FORM 10-K
Intangible assets resulting from the acquisition are
amortized as part of ‘amortization of intangible assets’ in the
Company’s consolidated statements of income. The
significant fair value adjustments and related future
amortization are as follows:
Value of business acquired (“VOBA”)— which represents the
present value of the expected underwriting profit within the
unearned premium liability, less costs to service the related
policies and a risk premium. The fair value of VOBA was
determined after taking into consideration certain key
assumptions, including the estimated cost of capital,
investment yield, loss ratio and related expenses.
Reserves for losses and loss adjustment expenses—to reflect
a decrease related to the present value of the reserve for
losses and loss adjustment expenses based on the estimated
payout patterns, partially offset by an increase in losses and
loss adjustment expenses related to the estimated market
based risk margin. The risk margin represents the estimated
costs of capital required by a market participant to assume
the losses and loss adjustment expenses. The fair value of
the reserve for losses and loss adjustment expenses was
determined after taking into consideration certain key
assumptions, including the estimated cost of capital, and
investment yield.
Distribution relationships—the value of the distribution
relationships was determined after taking into consideration
certain key assumptions, including the estimated cost of
capital, investment yield, retention rates, loss ratios, related
expenses and effective tax rates that would impact the
expected cash flows from Business policies written on a go
forward basis.
The results of the acquired Business have been included in
the Company’s consolidated financial statements beginning
as of their acquisition date. It is impracticable to provide
historical supplemental pro forma financial information
along with revenue and earnings subsequent to the
acquisition due to a variety of factors, including access to
historical information and the operations of acquirees being
integrated within the Company shortly after closing and not
operating as discrete operations within the Company’s
organizational structure.
3.
Significant Accounting Policies
(a) Basis of Presentation
The consolidated financial statements have been prepared
in conformity with accounting principles generally accepted
in the United States of America (“GAAP”) and include the
accounts of Arch Capital and its subsidiaries, including Arch
Reinsurance Ltd. (“Arch Re Bermuda”), Arch Reinsurance
Company (“Arch Re U.S.”), Arch Capital Group (U.S.) Inc.
(“Arch-U.S.”), Arch Insurance Company, Arch Specialty
Insurance Company, Arch Property Casualty Insurance
Company, Arch Indemnity Insurance Company, Arch Wilsure
Insurance Company, Arch Insurance Canada Ltd. (“Arch
Insurance Canada”), Arch Reinsurance Europe Designated
Activity Company (“Arch Re Europe”), Arch Mortgage
Insurance Company (“AMIC”), Arch Mortgage Guaranty
Company (“AMG”), United Guaranty Residential Insurance
Company (“UGRIC”), Arch Lenders Mortgage Indemnity Ltd.
(“Arch Indemnity”), Arch Insurance (EU) Designated Activity
Company (“Arch Insurance (EU)”), Arch Insurance (U.K.)
Limited (“Arch Insurance (U.K.)”) and the Company’s
participation on Lloyd’s of London syndicates: 2012 (“Arch
Syndicate 2012”) and 1955 (“Arch Syndicate 1955” and
together with Arch Syndicate 2012, the Company’s “Lloyd’s
Syndicates”). All significant intercompany transactions and
balances have been eliminated in consolidation.
The preparation of financial statements in conformity with
GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported
amounts of revenues and expenses during the reporting
period. Actual results could differ materially from those
estimates and assumptions. The Company’s principal
estimates include:
•
The reserve for losses and loss adjustment expenses;
•
Reinsurance recoverable on unpaid and paid losses and
loss adjustment expenses, including the provision for
uncollectible amounts;
•
Estimates of written and earned premiums;
•
The valuation of the investment portfolio and
assessment of allowance for credit losses;
•
The valuation of purchased intangible assets;
•
The assessment of goodwill and intangible assets for
impairment; and
•
The valuation of deferred income tax assets.
(b) Premium Revenues and Related Expenses
Insurance. Insurance premiums written are generally
recorded at the policy inception and are primarily earned on
a pro rata basis over the terms of the policies for all
products, usually 12 months. Premiums written include
estimates that are derived from multiple sources which
include the historical experience of the underlying business,
similar business and available industry information.
Unearned premium reserves represent the portion of
premiums written that relates to the unexpired terms of in-
force insurance policies.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
112
2025 FORM 10-K
Reinsurance.
Reinsurance
premiums
written
include
amounts reported by brokers and ceding companies,
supplemented by the Company’s own estimates of
premiums where reports have not been received. The
determination of premium estimates requires a review of
the Company’s experience with the ceding companies,
familiarity with each market, the timing of the reported
information, an analysis and understanding of the
characteristics of each line of business, and management’s
judgment of the impact of various factors, including
premium or loss trends, on the volume of business written
and ceded to the Company. On an ongoing basis, the
Company’s underwriters review the amounts reported by
these third parties for reasonableness based on their
experience and knowledge of the subject class of business,
taking into account the Company’s historical experience with
the brokers or ceding companies. In addition, reinsurance
contracts under which the Company assumes business
generally contain specific provisions which allow the
Company to perform audits of the ceding company to
ensure compliance with the terms and conditions of the
contract, including accurate and timely reporting of
information. Based on a review of all available information,
management establishes premium estimates where reports
have not been received. Premium estimates are updated
when new information is received and differences between
such estimates and actual amounts are recorded in the
period in which estimates are changed or the actual
amounts are determined.
Reinsurance premiums written are recorded based on the
type of contracts the Company writes. Premiums on the
Company’s excess of loss and pro rata reinsurance contracts
are estimated when the business is underwritten. For excess
of loss contracts, premiums are recorded as written based
on the terms of the contract. Estimates of premiums written
under pro rata contracts are recorded in the period in which
the underlying risks are expected to incept and are based on
information provided by the brokers and the ceding
companies. For multi-year reinsurance treaties which are
payable in annual installments, generally, only the initial
annual installment is included as premiums written at policy
inception due to the ability of the reinsured to commute or
cancel coverage during the term of the policy. The remaining
annual installments are included as premiums written at
each successive anniversary date within the multi-year term.
Reinsurance premiums written, irrespective of the class of
business, are generally earned on a pro rata basis over the
terms of the underlying policies or reinsurance contracts.
Contracts and policies written on a “losses occurring” basis
cover claims that may occur during the term of the contract
or policy, which is typically 12 months. Accordingly, the
premium is earned evenly over the term. Contracts which
are written on a “risks attaching” basis cover claims which
attach to the underlying insurance policies written during
the terms of such contracts. Premiums earned on such
contracts usually extend beyond the original term of the
reinsurance contract, typically resulting in recognition of
premiums earned in proportion to the period of risk
coverage. Certain of the Company’s reinsurance contracts
include provisions that adjust premiums or acquisition
expenses based upon the experience under the contracts.
Premiums written and earned, as well as related acquisition
expenses, are recorded based upon the projected
experience under such contracts.
The Company also writes certain reinsurance business that is
intended to provide insurers with risk management
solutions that complement traditional reinsurance. Under
these contracts, the Company assumes a measured amount
of insurance risk in exchange for an anticipated margin,
which is typically lower than on traditional reinsurance
contracts. The terms and conditions of these contracts may
include additional or return premiums based on loss
experience, loss corridors, sublimits and caps. Examples of
such business include aggregate stop-loss coverages,
financial
quota
share
coverages
and
multi-year
retrospectively rated excess of loss coverages. If these
contracts are deemed to transfer risk, they are accounted
for as reinsurance. Otherwise, such contracts are accounted
for under the deposit method.
Mortgage. Mortgage guaranty insurance policies are
contracts that are generally non-cancelable by the insurer,
are renewable at a fixed price, and provide for payment of
premiums on a monthly, annual or single basis. Upon
renewal, the Company is not able to re-underwrite or re-
price its policies. Consistent with industry accounting
practices, premiums written on a monthly basis are earned
as coverage is provided. Premiums written on an annual
basis are amortized on a monthly pro rata basis over the
year of coverage. Primary mortgage insurance premiums
written on policies covering more than one year are referred
to as single premiums. A portion of the revenue from single
premiums is recognized in premiums earned in the current
period, and the remaining portion is deferred as unearned
premiums and earned over the estimated expiration of risk
of the policy. If single premium policies related to insured
loans are canceled due to repayment by the borrower and
the policy is a non-refundable product, the remaining
unearned premium related to each canceled policy is
recognized as earned premium upon notification of the
cancellation.
Unearned
premiums
for
the
Company’s
mortgage
operations represent the portion of premiums written that is
applicable to the estimated unexpired risk of insured loans.
A portion of premium payments may be refundable if the
insured cancels coverage, which generally occurs when the
loan is repaid and the policy is refundable, the loan
amortizes to a sufficiently low amount to trigger a lender
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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113
2025 FORM 10-K
permitted or legally required cancellation, or the value of
the property has increased sufficiently to trigger a lender
permitted cancellation.Premium refunds reduce premiums
earned in the consolidated statements of income. Generally,
only unearned premiums are refundable.
Reinstatement premiums for the Company’s insurance and
reinsurance operations are recognized at the time a loss
event occurs, where coverage limits for the remaining life of
the contract are reinstated under pre-defined contract
terms. Reinstatement premiums, if obligatory, are fully
earned when recognized. The accrual of reinstatement
premiums is based on an estimate of losses and loss
adjustment
expenses,
which
reflects
management’s
judgment.
Premium estimates are reviewed by management at least
quarterly. Such review includes a comparison of actual
reported premiums to expected ultimate premiums along
with a review of the aging and collection of premium
estimates.
Based
on
management’s
review,
the
appropriateness of the premium estimates is evaluated, and
any adjustment to these estimates is recorded in the period
in which it becomes known. Adjustments to premium
estimates could be material and such adjustments could
directly and significantly impact earnings favorably or
unfavorably in the period they are determined because the
estimated premium may be fully or substantially earned. A
significant portion of amounts included as premiums
receivable, which represent estimated premiums written,
net of commissions, are not currently due based on the
terms of the underlying contracts.
Premiums receivable include amounts receivable from
agents, brokers and insured that are both currently due and
amounts not yet due on insurance, reinsurance and
mortgage insurance policies. Premiums receivable balances
are reported net of an allowance for expected credit losses.
The Company monitors credit risk associated with premiums
receivable through its ongoing review of amounts
outstanding, aging of the receivable, historical loss data, and
counterparty financial strength measures. The allowance
also includes estimated uncollectible amounts related to
dispute risk. In certain instances, credit risk may be reduced
by the Company’s right to offset loss obligations or
unearned premiums against premiums receivable. Any
allowance for credit losses is charged to net realized gains
(losses) in the period the receivable is recorded and revised
in subsequent periods to reflect changes in the Company’s
estimate of expected credit losses. See note 7, for additional
information.
Acquisition Costs. Acquisition costs that are directly related
and incremental to the successful acquisition or renewal of
business are deferred and amortized based on the type of
contract. The Company’s insurance and reinsurance
operations capitalize incremental direct external costs that
result from acquiring a contract but do not capitalize
salaries, benefits and other internal underwriting costs. For
the Company’s mortgage insurance operations, which
include a substantial direct sales force, both external and
certain internal direct costs are deferred and amortized. For
property and casualty insurance and reinsurance contracts,
deferred acquisition costs are amortized over the period in
which the related premiums are earned. Consistent with
mortgage
insurance
industry
accounting
practice,
amortization of acquisition costs related to the mortgage
insurance contracts for each underwriting year’s book of
business is recorded in proportion to estimated gross profits.
Estimated gross profits are comprised of earned premiums
and losses and loss adjustment expenses. For each
underwriting year, the Company estimates the rate of
amortization to reflect actual experience and any changes to
persistency or loss development.
Deferred acquisition costs are carried at their estimated
realizable value and take into account anticipated losses and
loss adjustment expenses, based on historical and current
experience, and anticipated investment income.
A premium deficiency occurs if the sum of anticipated losses
and loss adjustment expenses, unamortized acquisition costs
and maintenance costs exceed unearned premiums
(including expected future premiums) and anticipated
investment income. A premium deficiency reserve (“PDR”) is
recorded by charging any unamortized acquisition costs to
expense to the extent required in order to eliminate the
deficiency. If the premium deficiency exceeds unamortized
acquisition costs then a liability is accrued for the excess
deficiency.
To assess the need for a PDR on mortgage exposures, the
Company develops loss projections based on modeled loan
defaults related to its current policies in force. This
projection is based on recent trends in default experience,
severity and rates of defaulted loans moving to claim, as well
as recent trends in the rate at which loans are prepaid, and
incorporates anticipated interest income. Evaluating the
expected profitability of the Company’s existing mortgage
insurance business and the need for a PDR for its mortgage
business involves significant reliance upon assumptions and
estimates with regard to the likelihood, magnitude and
timing of potential losses and premium revenues. No
premium deficiency charges were recorded by the Company
during 2025, 2024 or 2023.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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2025 FORM 10-K
(c) Deposit Accounting
Certain assumed reinsurance contracts that are deemed not
to transfer insurance risk, are accounted for using the
deposit method of accounting. However, it is possible that
the Company could incur financial losses on such contracts.
Management
exercises
significant
judgment
in
the
assumptions used in determining whether assumed
contracts should be accounted for as reinsurance contracts
or deposit contracts. For those contracts that contain only
significant underwriting risk, the estimated profit margin is
deferred and amortized over the contract period and such
amount is included in the Company’s underwriting results.
When the estimated profit margin is explicit, the margin is
reflected as other underwriting income and any adverse
financial results on such contracts are reflected as incurred
losses. When the estimated profit margin is implicit, the
margin is reflected as an offset to paid losses and any
adverse financial results on such contracts are reflected as
incurred losses. Additional judgments are required when
applying the accounting guidance with respect to the
revenue recognition criteria for contracts deemed to
transfer only significant underwriting risk. For those
contracts that contain only significant timing risk, an
accretion rate is established at inception of the contract
based on actuarial estimates whereby the deposit
accounting liability is increased to the estimated amount
payable over the contract term. The accretion on the deposit
is based on the expected rate of return required to fund the
expected future payment obligations. Periodically the
Company reassesses the estimated ultimate liability and the
related expected rate of return. The accretion of the deposit
accounting liability as well as changes to the estimated
ultimate liability and the accretion rate would be reflected
as part of interest expense in the Company’s results of
operations. Any negative accretion in a deposit accounting
liability is shown in other underwriting income in the
Company’s results of operations.
Under some of these contracts, the ceding company retains
the related assets on a funds held basis. Such amounts are
included in “Other assets” on the Company’s balance sheet.
Interest income produced by those assets are recorded as
part of net investment income in the Company's results of
operations.
(d) Retroactive Reinsurance
Retroactive reinsurance reimburses a ceding company for
liabilities incurred as a result of past insurable events
covered by the underlying policies reinsured. In certain
instances, reinsurance contracts cover losses both on a
prospective basis and on a retroactive basis and,
accordingly, the Company bifurcates the prospective and
retrospective elements of these reinsurance contracts and
accounts for each element separately where practical.
Underwriting income generated in connection with
retroactive reinsurance contracts is deferred and amortized
into income over the settlement period while losses are
charged to income immediately. Subsequent changes in
estimated amount or timing of cash flows under such
retroactive reinsurance contracts are accounted for by
adjusting the previously deferred amount to the balance
that would have existed had the revised estimate been
available at the inception of the reinsurance transaction,
with a corresponding charge or credit to income.
(e) Reinsurance Ceded
In the normal course of business, the Company purchases
reinsurance to increase capacity and to limit the impact of
individual losses and events on its underwriting results by
reinsuring certain levels of risk with other insurance
enterprises or reinsurers. The Company uses pro rata, excess
of loss and facultative reinsurance contracts. Reinsurance
ceding commissions that represent a recovery of acquisition
costs are recognized as a reduction to acquisition costs while
the remaining portion is deferred. The accompanying
consolidated statement of income reflects premiums and
losses and loss adjustment expenses and acquisition costs,
net of reinsurance ceded. See note 8, for information on the
Company's reinsurance usage. Reinsurance premiums ceded
and unpaid losses and loss adjustment expenses recoverable
are estimated in a manner consistent with that of the
original policies issued and the terms of the reinsurance
contracts. If the reinsurers are unable to satisfy their
obligations under the agreements, the Company’s insurance
or reinsurance subsidiaries would be liable for such
defaulted amounts.
Reinsurance recoverables are recorded as assets, predicated
on the reinsurers’ ability to meet their obligations under the
reinsurance agreements. In certain instances, the Company
obtains collateral, including letters of credit and trust
accounts to further reduce the credit exposure on its
reinsurance
recoverables.
The
Company
reports
its
reinsurance recoverables net of an allowance for expected
credit loss. The allowance is based upon the Company’s
ongoing review of amounts outstanding, the financial
condition of its reinsurers, amounts and form of collateral
obtained and other relevant factors. A ratings based
probability-of-default and loss-given-default methodology is
used to estimate the allowance for expected credit loss. Any
allowance for credit losses is charged to net realized gains
(losses) in the period the recoverable is recorded and
revised in subsequent periods to reflect changes in the
Company’s estimate of expected credit losses. See note 7,
for additional information.
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(f) Cash
Cash includes cash equivalents, which are investments with
original maturities of three months or less which are not
part of the investment portfolio.
(g) Restricted Cash
Restricted cash represents amounts held for the benefit of
third parties or is legally or contractually restricted as to
withdrawal or usage by the Company. Such amounts are
included in “Other assets” on the Company’s balance sheet.
(h) Investments
The Company currently classifies substantially all of its fixed
maturity investments and short-term investments as
“available for sale” and, accordingly, they are carried at
estimated fair value (also known as fair value) with the
changes in fair value recorded as an unrealized gain or loss
component of accumulated other comprehensive income in
shareholders’ equity. The fair value of fixed maturity
securities and equity securities is generally determined from
quotations received from nationally recognized pricing
services, or when such prices are not available, by reference
to broker or underwriter bid indications. Short-term
investments comprise securities due to mature within one
year of the date of issue. Short-term investments include
certain cash equivalents which are part of investment
portfolios under the management of external and internal
investment managers.
The Company’s investment portfolio includes certain funds
that, due to their ownership structure, are accounted for by
the Company using the equity method. In applying the
equity method, these investments are initially recorded at
cost and are subsequently adjusted based on the Company’s
proportionate share of the net income or loss of the funds
(which include changes in the fair value of the underlying
securities in the funds). Such investments are generally
recorded on a one to three month lag based on the
availability of reports from the investment funds. Changes in
the carrying value of such investments are recorded in net
income as “Equity in net income (loss) of investments
accounted for using the equity method.” As such,
fluctuations in the carrying value of the investments
accounted for using the equity method may increase the
volatility of the Company’s reported results of operations.
The Company’s investment portfolio includes equity
securities that are accounted for at fair value. Such holdings
primarily include publicly traded common stocks. Dividend
income on equities is reflected in net investment income.
Changes in fair value on equity securities are included in
“Net realized gains (losses)” in the consolidated statement
of income.
The Company elected to carry certain fixed maturity
securities, equity securities, short-term investments and
other investments at fair value under the fair value option
afforded by accounting guidance regarding the fair value
option for financial assets and liabilities. The fair value for
certain of the Company’s other investments are determined
using net asset values (“NAVs”) as advised by external fund
managers. The NAV is based on the fund manager’s
valuation of the underlying holdings in accordance with the
fund’s governing documents.
Changes in fair value of investments accounted for using the
fair value option are included in “Net realized gains (losses).”
The primary reasons for electing the fair value option were
to address simplification and cost-benefit considerations.
The Company invests in reverse repurchase agreements that
are
generally
treated
as
collateralized
receivables.
Receivables for reverse repurchase agreements are reflected
in “Other investments” or “Short-term investments” in the
Company's consolidated balance sheet depending on their
terms. These agreements are recorded at their contracted
resale amount plus accrued interest, other than those that
are accounted for at fair value. In reverse repurchase
transactions, the Company obtains an interest in the
purchased assets that are received as collateral.
The Company invests in limited partner interests and shares
of limited liability companies. Such amounts are included in
investments accounted for using the equity method and
other investments. These investments can often have
characteristics of a variable interest entity (“VIE”). A VIE
refers to entities that have characteristics such as (i)
insufficient equity at risk to allow the entity to finance its
activities without additional financial support or (ii)
instances where the equity investors, as a group, do not
have the characteristic of a controlling financial interest. If
the Company is determined to be the primary beneficiary, it
is required to consolidate the VIE. The primary beneficiary is
defined as the variable interest holder that is determined to
have the controlling financial interest as a result of having
both (i) the power to direct the activities of a VIE that most
significantly impact the economic performance of the VIE
and (ii) the obligation to absorb losses or right to receive
benefits from the VIE that could potentially be significant to
the VIE. At inception of the VIE as well as on an ongoing
basis, the Company determines whether it is the primary
beneficiary based on an analysis of the Company’s level of
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involvement in the VIE, the contractual terms, and the
overall structure of the VIE. The Company's maximum
exposure to loss with respect to these investments is limited
to the investment carrying amounts reported in the
Company's consolidated balance sheet and any unfunded
commitment.
The Company conducts a periodic review to identify and
evaluate credit based impairments related to the Company’s
available for sale investments. The Company derives
estimated credit losses by comparing expected future cash
flows to be collected to the amortized cost of the security.
Estimates of expected future cash flows consider among
other things, macroeconomic conditions as well as the
financial condition, near-term and long-term prospects for
the issuer, and the likelihood of the recoverability of
principal and interest. Effective January 1, 2020, credit losses
are recognized through an allowance account subject to
reversal, rather than a reduction in amortized cost. Declines
in value attributable to factors other than credit are
reported as an unrealized loss in other comprehensive
income while the allowance for credit loss is charged to net
realized gains (losses) in the consolidated statement of
income.
For available for sale investments that the Company intends
to sell or for which it is more likely than not that the
Company would be required to sell before an anticipated
recovery in value, the full amount of the impairment is
included in net realized gains (losses). The new cost basis of
the investment is the previous amortized cost basis reduced
by the impairment recognized in net realized gains (losses).
The new cost basis is not adjusted for any subsequent
recoveries in fair value.
The Company reports accrued investment income separately
from investment balances and has elected not to measure
an allowance for credit losses for accrued investment
income. Any uncollectible accrued interest income is written
off in the period it is deemed uncollectible.
Net investment income includes interest and dividend
income together with amortization of market premiums and
discounts and is net of investment management and custody
fees. Anticipated prepayments and expected maturities are
used in applying the interest method for certain investments
such as mortgage and other asset-backed securities. When
actual prepayments differ significantly from anticipated
prepayments, the effective yield is recalculated to reflect
actual payments to date and anticipated future payments.
The net investment in such securities is adjusted to the
amount that would have existed had the new effective yield
been applied since the acquisition of the security. Such
adjustments, if any, are included in net investment income
when determined.
Investment gains or losses realized on the sale of
investments, except for certain fund investments, are
determined on a first-in, first-out basis and are reflected in
net income. Investment gains or losses realized on the sale
of certain fund investments are determined on an average
cost basis. Unrealized appreciation or decline in the value of
available for sale securities, which are carried at fair value, is
excluded from net income and recorded as a separate
component of accumulated other comprehensive income,
net of applicable deferred income tax.
(i) Derivative Instruments
The Company recognizes all derivative instruments,
including embedded derivative instruments, at fair value in
its consolidated balance sheets. The Company employs the
use of derivative instruments within its operations to
mitigate risks arising from assets and liabilities held in
foreign currencies as well as part of its overall investment
strategy. For such instruments, changes in assets and
liabilities measured at fair value are recorded as “Net
realized gains (losses)” in the consolidated statements of
income. In addition, the Company’s derivative instruments
include amounts related to underwriting activities where an
insurance or reinsurance contract meets the accounting
definition of a derivative instrument. For such contracts,
changes in fair value are reflected in “Other underwriting
income” in the consolidated statements of income as the
underlying
contract
originates
from
the
Company’s
underwriting operations. For the periods ended 2025, 2024,
and 2023, the Company did not designate any derivative
instruments as hedges under the relevant accounting
guidance. See note 11, for additional information.
(j) Reserves for Losses and Loss Adjustment Expenses
Insurance and Reinsurance. The reserve for losses and loss
adjustment expenses consists of estimates of unpaid
reported losses and loss adjustment expenses and estimates
for losses incurred but not reported. The reserve for unpaid
reported losses and loss adjustment expenses, established
by management based on reports from ceding companies
and claims from insureds, excludes estimates of amounts
related to losses under high deductible policies, and
represents the estimated ultimate cost of events or
conditions that have been reported to or specifically
identified by the Company. Such reserves are supplemented
by management’s estimates of reserves for losses incurred
for which reports or claims have not been received. The
Company’s reserves are based on a combination of reserving
methods, incorporating both Company and industry loss
development patterns. The Company selects the initial
expected loss and loss adjustment expense ratios based on
information derived by its underwriters and actuaries during
the initial pricing of the business, supplemented by industry
data where appropriate. Such ratios consider, among other
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things, rate changes and changes in terms and conditions
that have been observed in the market. These estimates are
reviewed regularly and, as experience develops and new
information becomes known, the reserves are adjusted as
necessary. Such adjustments, if any, are reflected in income
in the period in which they are determined. As actual loss
information has been reported, the Company has developed
its own loss experience and its reserving methods include
other actuarial techniques. Over time, such techniques have
been given further weight in its reserving process based on
the continuing maturation of the Company’s reserves.
Inherent in the estimates of ultimate losses and loss
adjustment expenses are expected trends in claims severity
and frequency and other factors which may vary significantly
as claims are settled. Accordingly, ultimate losses and loss
adjustment expenses may differ materially from the
amounts recorded in the accompanying consolidated
financial statements. Losses and loss adjustment expenses
are recorded on an undiscounted basis, except for excess
workers’ compensation and employers’ liability business
written by the Company’s insurance operations.
Mortgage. The reserves for mortgage guaranty insurance
losses and loss adjustment expenses are the estimated claim
settlement costs on notices of delinquency that have been
received by the Company, as well as loan delinquencies that
have been incurred but have not been reported by the
lenders. Consistent with primary mortgage insurance
industry accounting practice, the Company does not
establish loss reserves for future claims on insured loans
that are not currently delinquent (defined as two or more
payments in arrears). The Company establishes loss reserves
on a case-by-case basis when insured loans are reported
delinquent using estimated claim rates and average claim
sizes for each cohort, net of any salvage recoverable. The
Company also reserves for delinquencies that have occurred
but have not yet been reported to the Company prior to the
close of an accounting period. To determine this reserve, the
Company estimates the number of delinquencies not yet
reported using historical information regarding late reported
delinquencies and applies estimated claim rates and claim
sizes for the estimated delinquencies not yet reported.
The establishment of reserves across the Company’s
segments is an inherently uncertain process, are necessarily
based on estimates, and the ultimate net cost may vary from
such estimates. The methods for making such estimates and
for establishing the resulting liability are reviewed and
updated using the most current information available. Any
resulting adjustments, which may be material, are reflected
in current operations.
(k) Contractholder Receivables and Payables and Collateral
Held for Insured Obligations
Certain insurance policies written by the Company’s U.S.
insurance operations feature large deductibles, primarily in
its construction and national accounts line of business.
Under such contracts, the Company is obligated to pay the
claimant for the full amount of the claim. The Company is
subsequently reimbursed by the policy holder for the
deductible amount. These amounts are included on a gross
basis in the consolidated balance sheet as contractholder
payables and contractholder receivables. In the event that
the Company is unable to collect from the policyholder, the
Company would be liable for such defaulted amounts.
Collateral, primarily in the form of letters of credit, cash and
trusts, is obtained from the policyholder to mitigate the
Company’s credit risk. In the instances where the Company
receives collateral in the form of cash, the Company reflects
it in “Collateral held for insured obligations.”
Contractholder receivables are reported net of an allowance
for expected credit losses. The allowance is based upon the
Company’s ongoing review of amounts outstanding, changes
in policyholder credit standing, amounts and form of
collateral obtained, and other relevant factors. A ratings
based
probability-of-default
and
loss-given-default
methodology is used to estimate the allowance for expected
credit losses. Any allowance for credit losses is charged to
net realized gains (losses) in the period the receivable is
recorded and revised in subsequent periods to reflect
changes in the Company’s estimate of expected credit
losses. See note 7, for additional information.
(l) Foreign Exchange
Assets and liabilities of foreign operations whose functional
currency is not the U.S. Dollar are translated at the
prevailing exchange rates at each balance sheet date.
Revenues and expenses of such foreign operations are
translated at average exchange rates during the year. The
net effect of the translation adjustments for foreign
operations is included in accumulated other comprehensive
income, net of applicable deferred income tax. Monetary
assets and liabilities, such as premiums receivable and the
reserve
for
losses
and
loss
adjustment
expenses,
denominated in foreign currencies are revalued at the
exchange rate in effect at the balance sheet date with the
resulting foreign exchange gains and losses included in net
income. Accounts that are classified as non-monetary, such
as deferred acquisition costs and the unearned premium
reserves, are not revalued. In the case of foreign currency
denominated fixed maturity securities which are classified as
“available for sale,” the change in exchange rates between
the local currency in which the investments are
denominated and the Company’s functional currency at
each balance sheet date is included in unrealized
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appreciation or decline in value of securities, a component
of accumulated other comprehensive income, net of
applicable deferred income tax.
(m) Income Taxes
Deferred income taxes reflect the expected future tax
consequences of temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and amounts used for income tax
purposes. A valuation allowance is recorded if it is more
likely than not that some or all of a deferred income tax
asset may not be realized. The Company considers future
taxable income and feasible tax planning strategies in
assessing the need for a valuation allowance. In the event
the Company determines that it will not be able to realize all
or part of its deferred income tax assets in the future, an
adjustment to the deferred income tax assets would be
charged to income in the period in which such
determination is made. In addition, if the Company
subsequently assesses that the valuation allowance is no
longer needed, a benefit would be recorded to income in
the period in which such determination is made. See note
15, for additional information.
The Company recognizes a tax benefit where it concludes
that it is more likely than not that the tax benefit will be
sustained on audit by the taxing authority based solely on
the technical merits of the associated tax position. If the
recognition threshold is met, the Company recognizes a tax
benefit measured at the largest amount of the tax benefit
that, in the Company’s judgment, is greater than 50% likely
to be realized. The Company records interest and penalties
related to unrecognized tax benefits in the provision for
income taxes.
(n) Share-Based Payment Arrangements
The Company applies a fair value based measurement
method in accounting for its share-based payment
arrangements with eligible employees and directors.
Compensation expense is estimated based on the fair value
of the award at the grant date and is recognized in net
income
over
the
requisite
service
period
with
a
corresponding increase in shareholders’ equity. No value is
attributed to awards that employees forfeit because they
fail to satisfy vesting conditions. The Company’s (i) time-
based awards generally vest over a three year period with
one-third vesting on the first, second and third anniversaries
of the grant date and (ii) performance-based awards cliff
vest after each three year performance period based on
achievement of the specified performance criteria. The
share-based compensation expense associated with awards
that have graded vesting features and vest based on service
conditions only is calculated on a straight-line basis over the
requisite service period for the entire award. Compensation
expense recognized in connection with performance awards
is based on the achievement of the specified performance
and service conditions. The final measure of compensation
expense recognized over the requisite service period reflects
the final performance outcome. During the recognition
period compensation expense is accrued based on the
performance condition that is probable of achievement. For
awards granted to retirement-eligible employees where no
service is required for the employee to retain the award, the
grant date fair value is immediately recognized as
compensation expense at the grant date because the
employee is able to retain the award without continuing to
provide service. For employees near retirement eligibility,
attribution of compensation cost is over the period from the
grant date to the retirement eligibility date. These charges
had no impact on the Company’s cash flows or total
shareholders’ equity. See note 22, for information relating to
the Company’s share-based payment awards.
(o) Guaranty Fund and Other Related Assessments
Liabilities for guaranty fund and other related assessments
in the Company’s insurance and reinsurance operations are
accrued when the Company receives notice that an amount
is payable, or earlier if a reasonable estimate of the
assessment can be made.
(p) Treasury Shares
Treasury shares are common shares purchased by the
Company and not subsequently canceled. These shares are
recorded at cost and result in a reduction of the Company’s
shareholders’ equity in its Consolidated Balance Sheets.
(q) Goodwill and Intangible Assets
Goodwill represents the excess of the purchase price of
business combination over the fair value of the net assets
acquired and is assigned to the applicable reporting unit at
acquisition. The annual goodwill impairment test was
performed as of October 1, 2025. Impairment tests may be
performed more frequently if the facts and circumstances
indicate a possible impairment. In performing impairment
tests, the Company may first assess qualitative factors to
determine whether it is more likely than not (that is, more
than a 50% probability) that the fair value of a reporting unit
exceeds its carrying amount as a basis for determining
whether it is necessary to perform goodwill impairment test
described in the accounting guidance.
Indefinite-lived intangible assets, such as insurance licenses
are evaluated for impairment similar to goodwill. Finite-lived
intangible assets and liabilities include the value of acquired
insurance and reinsurance contracts, which are estimated
based on the present value of future expected cash flows
and amortized in proportion to the estimated profits
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expected to be realized. Other finite-lived intangible assets,
including customer lists, trade name and IT platforms, are
amortized over their useful lives. Finite-lived intangible
assets and liabilities are periodically reviewed for indicators
of impairment. An impairment is recognized when the
carrying amount is not recoverable from its undiscounted
cash flows and is measured as the difference between the
carrying amount and fair value.
If goodwill or intangible assets are impaired, such assets are
written down to their fair values with the related expense
recorded in the Company’s results of operations.
(r) Investment in Operating Affiliates
Investment in operating affiliates primarily represent the
Company’s investments in which it has significant influence
and which are accounted for under the equity method of
accounting. In applying the equity method of accounting,
investments in operating affiliates are initially recorded at
cost and are subsequently adjusted based on the Company’s
proportionate share of net income or loss of the operating
affiliate. The Company records its proportionate share of
other comprehensive income or loss of the operating
affiliate as a component of other comprehensive income.
Adjustments are based on the most recently available
financial information from the operating affiliate. Changes in
the carrying value of these investments are recorded in
income (loss) from operating affiliates.
(s) Funds Held Arrangements
Funds held arrangements are agreements with a third party
reinsurance company, where the reinsured retains the
related assets on a funds held basis. Such amounts are
included in “Other assets” on the Company’s balance sheet.
Investment returns produced by those assets are recorded
as part of net investment income and net realized gains
(losses) in the Company's consolidated results of operations.
Funds held as collateral by the Company are included in
“Other liabilities” and changes to the funds held liability are
reflected as part of interest expense in the Company’s
consolidated results of operations.
(t) Government Grants
The Company claims substance-based government grants
and refundable tax credits based on eligible expenditures in
the jurisdictions in which it operates. Such amounts are
recognized as reductions to the related expenses from which
they are derived in the period where it is probable, the
conditions for receiving the grant or refundable tax credits
are satisfied. Government grants and refundable tax credits
receivable are included in ‘Other assets’ and the benefit is
primarily reflected as a reduction to ‘other operating
expenses’ and ‘corporate expenses’ in the Company’s
consolidated results of operations.
(u) Recent Accounting Pronouncements
Recently Issued Accounting Standards Adopted
The Company adopted ASU 2023-09, “Improvements to
Income Tax Disclosures,” which was issued in December
2023 with the stated purpose of enhancing the transparency
and decision usefulness of income tax disclosures. The
amendments in ASU 2023-09 address investor requests for
enhanced income tax information primarily through changes
to the rate reconciliation and income taxes paid information.
The Company adopted this ASU on a prospective basis. The
adoption of this ASU did not have any effect on the
Company’s consolidated financial statements.
Recently Issued Accounting Standards Not Yet Adopted
ASU 2024-03, “Disaggregation of Income Statement
Expenses” was issued in November 2024, which requires
disaggregated disclosure of income statement expenses for
public business entities. The ASU does not change the
expense captions an entity presents on the face of the
income statement; rather, it requires disaggregation of
certain expense captions into specified categories in
disclosures within the footnotes to the financial statements.
The ASU is effective for annual reporting periods beginning
after December 15, 2026, and interim reporting periods
within annual reporting periods beginning after December
15, 2027. The requirements will be applied prospectively
with the option for retrospective application. Early adoption
is permitted. The Company is currently evaluating the
impact of this standard on the Company’s consolidated
financial statements and related disclosures.
ASU 2025-06, “Intangibles – Goodwill and Other – Internal-
Use Software (Subtopic 350-40): Targeted Improvements to
the Accounting for Internal-Use Software,” was issued in
September 2025. The new guidance amends the accounting
for the internal-use software by eliminating references to
software development project stages. Under the revised
standard, entities must capitalize software costs when (i)
management has authorized and committed funding for the
project, and (ii) it is probable that the project will be
completed and the software will function as intended. The
update also clarifies that both internal and external training
costs, as well as maintenance costs, must be expensed as
incurred. The ASU is effective for annual reporting periods
beginning after December 15, 2027 and interim reporting
periods within those annual reporting periods. The
requirements may be applied prospectively, with options for
modified retrospective or full retrospective application. The
Company plans to early adopt this ASU on a prospective
basis beginning January 1, 2026, consistent with the
permitted early adoption rules. The Company does not
expect this ASU to have a material impact on the Company’s
consolidated financial statements and related disclosures.
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ASU 2025-10, “Accounting for Government Grants Received
by Business Entities”, was issued in December 2025. The
ASU establishes authoritative guidance for the recognition,
measurement, and presentation of government grants. The
amendments in this ASU are effective for public business
entities for annual reporting periods beginning after
December 15, 2028, and interim periods within those annual
reporting periods. Early adoption is permitted. The Company
is currently evaluating the impact of this standard on its
consolidated financial statements and related disclosures.
4.
Segment Information
The Company classifies its businesses into three segments:
insurance, reinsurance and mortgage. The Company
determined its segments using the management approach
described in accounting guidance regarding disclosures
about segments of an enterprise and related information.
The accounting policies of the segments are the same as
those used for the preparation of the Company’s
consolidated financial statements. Intersegment business is
allocated to the segment accountable for the underwriting
results.
The Company’s insurance, reinsurance and mortgage
segments each have managers who are responsible for the
overall profitability of their respective segments and who
are directly accountable to the Company’s chief operating
decision-makers (“CODMs”): the Chief Executive Officer of
Arch Capital and the Chief Financial Officer and Treasurer of
Arch Capital. The CODMs do not assess performance,
measure return on equity or make resource allocation
decisions on a line of business basis. Management measures
segment performance for its three segments based on
underwriting income or loss. The Company does not manage
its assets by segment, with the exception of goodwill and
intangible assets and accordingly investment income is not
allocated to each underwriting segment.
The Company’s insurance segment primarily consists of
commercial insurance lines of business, with a focus on
specialty insurance products. These products are mainly
offered in North America, Bermuda, the United Kingdom,
continental Europe and Australia. Products offered in North
America include: commercial automobile; commercial
multiperil; other liability—claims made, which includes
financial and professional lines; other liability—occurrence,
which includes admitted and excess and surplus casualty
lines;
property
and
short-tail
specialty;
workers
compensation; and other. Products offered across the
Company’s International units include: property and short-
tail specialty; and casualty and other.
The Company’s reinsurance segment offers reinsurance
products on a worldwide basis. Product lines of business
include: casualty; marine and aviation; specialty; property
catastrophe; property excluding property catastrophe; and
other.
The Company’s mortgage segment consists of U.S. primary
mortgage insurance business written predominantly on
loans sold to the Federal National Mortgage Association
(“Fannie Mae”) and the Federal Home Loan Mortgage
Corporation (“Freddie Mac”), each a government sponsored
entity (“GSE”) and also through non-GSE approved entities
(combined “Arch MI U.S.”); reinsurance and underwriting
services related to U.S. credit-risk transfer (“CRT”) business
which are predominately with the GSEs and other U.S.
mortgage reinsurance transactions; and international
mortgage insurance and reinsurance business covering loans
primarily in Australia and Europe.
The Company’s results also include net investment income,
net realized gains or losses (which includes, but is not
limited to, realized and unrealized changes in the fair value
of equity securities and assets accounted for using the fair
value option, realized and unrealized gains or losses on
derivative instruments, changes in the allowance for credit
losses on financial assets and gains or losses realized from
the acquisition or disposition of subsidiaries), equity in net
income or loss of investment funds accounted for using the
equity method, other income (loss), corporate expenses,
transaction costs and other, amortization of intangible
assets, interest expense, net foreign exchange gains or
losses, income tax items, income or loss from operating
affiliates and items related to the Company’s non-
cumulative preferred shares.
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2025 FORM 10-K
The following tables summarize the Company’s underwriting income or loss by segment, together with a reconciliation of
underwriting income or loss to net income available to Arch common shareholders, summary information regarding net
premiums written and earned by major line of business and net premiums written by location:
Year Ended December 31, 2025
Insurance
Reinsurance
Mortgage
Total
Gross premiums written (1)
$
10,435
$
11,149
$
1,305
$
22,878
Premiums ceded (1)
(2,637)
(3,531)
(245)
(6,402)
Net premiums written
7,798
7,618
1,060
16,476
Change in unearned premiums
(27)
504
112
589
Net premiums earned
7,771
8,122
1,172
17,065
Other underwriting income (2)
36
159
22
217
Losses and loss adjustment expenses
(4,764)
(4,610)
4
(9,370)
Acquisition expenses
(1,496)
(1,644)
(13)
(3,153)
Other operating expenses (3)
(1,172)
(469)
(185)
(1,826)
Underwriting income
$
375
$
1,558
$
1,000
2,933
Net investment income
1,625
Net realized gains (losses)
464
Equity in net income (loss) of investments accounted for using the equity method
504
Other income (loss)
54
Corporate expenses (4)
(57)
Transaction costs and other (4)
(75)
Amortization of intangible assets
(193)
Interest expense
(148)
Net foreign exchange gains (losses)
(128)
Income (loss) before income taxes and income (loss) from operating affiliates
4,979
Income tax (expense) benefit
(760)
Income (loss) from operating affiliates
180
Net income (loss)
4,399
Amounts attributable to redeemable noncontrolling interests
—
Net income (loss) available to Arch
4,399
Preferred dividends
(40)
Net income (loss) available to Arch common shareholders
$
4,359
Underwriting Ratios
Loss ratio
61.3 %
56.8 %
-0.4 %
54.9 %
Acquisition expense ratio
19.3 %
20.2 %
1.1 %
18.5 %
Other operating expense ratio (5)
14.6 %
3.8 %
13.9 %
9.4 %
Combined ratio
95.2 %
80.8 %
14.6 %
82.8 %
Goodwill and intangible assets
$
793
$
98
$
331
$
1,222
Total investable assets
$
47,369
Total assets
79,241
Total liabilities
55,035
(1)
Certain assumed and ceded amounts related to intersegment transactions are included in individual segment results. Accordingly, the sum of such
transactions for each segment does not agree to the total due to eliminations.
(2)
‘Other underwriting income’ includes revenue earned from underwriting-related activities covered under existing service contracts.
(3)
Other operating expenses primarily include expenses that are related to compensation and employee benefits, information technology and professional
fees, reduced in part by substance based credits. See note 3(u).
(4)
Certain expenses have been excluded from ‘Corporate expenses’ and reflected in ‘Transaction costs and other.’ See note 3(u).
(5)
The ‘Other operating expense ratio’ for the 2025 period includes ‘Other underwriting income.’
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Year Ended December 31, 2024
Insurance
Reinsurance
Mortgage
Total
Gross premiums written (1)
$
9,053
$
11,112
$
1,351
$
21,511
Premiums ceded (1)
(2,179)
(3,366)
(239)
(5,779)
Net premiums written
6,874
7,746
1,112
15,732
Change in unearned premiums
(247)
(504)
119
(632)
Net premiums earned
6,627
7,242
1,231
15,100
Other underwriting income
—
9
17
26
Losses and loss adjustment expenses
(4,070)
(4,327)
55
(8,342)
Acquisition expenses
(1,217)
(1,432)
(2)
(2,651)
Other operating expenses (2)
(995)
(270)
(207)
(1,472)
Underwriting income (loss)
$
345
$
1,222
$
1,094
2,661
Net investment income
1,495
Net realized gains (losses)
197
Equity in net income (loss) of investments accounted for using the equity method
580
Other income (loss)
42
Corporate expenses (3)
(119)
Transaction costs and other (3)
(81)
Amortization of intangible assets
(235)
Interest expense
(141)
Net foreign exchange gains (losses)
75
Income (loss) before income taxes and income (loss) from operating affiliates
4,474
Income tax (expense) benefit
(362)
Income (loss) from operating affiliates
200
Net income (loss)
4,312
Amounts attributable to redeemable noncontrolling interests
—
Net income (loss) available to Arch
4,312
Preferred dividends
(40)
Net income (loss) available to Arch common shareholders
$
4,272
Underwriting Ratios
Loss ratio
61.4 %
59.7 %
-4.4 %
55.2 %
Acquisition expense ratio
18.4 %
19.8 %
0.2 %
17.6 %
Other operating expense ratio
15.0 %
3.7 %
16.8 %
9.7 %
Combined ratio
94.8 %
83.2 %
12.6 %
82.5 %
Goodwill and intangible assets
$
916
$
102
$
333
$
1,351
Total investable assets
$
41,388
Total assets
70,906
Total liabilities
50,086
(1)
Certain assumed and ceded amounts related to intersegment transactions are included in individual segment results. Accordingly, the sum of such
transactions for each segment does not agree to the total due to eliminations.
(2)
Other operating expenses primarily include expenses that are related to compensation and employee benefits, information technology and professional
fees.
(3)
Certain expenses have been excluded from ‘Corporate expenses’ and reflected in ‘Transaction costs and other.’
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Year Ended December 31, 2023
Insurance
Reinsurance
Mortgage
Total
Gross premiums written (1)
$
7,911
$
9,113
$
1,387
$
18,403
Premiums ceded (1)
(2,049)
(2,559)
(335)
(4,935)
Net premiums written
5,862
6,554
1,052
13,468
Change in unearned premiums
(416)
(718)
106
(1,028)
Net premiums earned
5,446
5,836
1,158
12,440
Other underwriting income
—
17
14
31
Losses and loss adjustment expenses
(3,122)
(3,227)
103
(6,246)
Acquisition expenses
(1,055)
(1,240)
(17)
(2,312)
Other operating expenses (2)
(819)
(288)
(194)
(1,301)
Underwriting income (loss)
$
450
$
1,098
$
1,064
2,612
Net investment income
1,023
Net realized gains (losses)
(165)
Equity in net income (loss) of investments accounted for using the equity method
278
Other income (loss)
27
Corporate expenses (3)
(96)
Transaction costs and other (3)
(6)
Amortization of intangible assets
(95)
Interest expense
(133)
Net foreign exchange gains (losses)
(60)
Income (loss) before income taxes and income (loss) from operating affiliates
3,385
Income tax (expense) benefit
873
Income (loss) from operating affiliates
184
Net income
4,442
Amounts attributable to redeemable noncontrolling interests
1
Net income (loss) available to Arch
4,443
Preferred dividends
(40)
Net income (loss) available to Arch common shareholders
$
4,403
Underwriting Ratios
Loss ratio
57.3 %
55.3 %
-8.9 %
50.2 %
Acquisition expense ratio
19.4 %
21.2 %
1.4 %
18.6 %
Other operating expense ratio
15.0 %
4.9 %
16.8 %
10.5 %
Combined ratio
91.7 %
81.4 %
9.3 %
79.3 %
Goodwill and intangible assets
$
224
$
130
$
377
$
731
Total investable assets
$
34,589
Total assets
58,906
Total liabilities
40,551
(1)
Certain assumed and ceded amounts related to intersegment transactions are included in individual segment results. Accordingly, the sum of such
transactions for each segment does not agree to the total due to eliminations.
(2)
Other operating expenses primarily include expenses that are related to compensation and employee benefits, information technology and professional
fees.
(3)
Certain expenses have been excluded from ‘Corporate expenses’ and reflected in ‘Transaction costs and other.’
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The following tables provide summary information regarding net premiums earned by major line of business and net
premiums written by underwriting location:
INSURANCE SEGMENT
Year Ended December 31,
2025
2024
2023
Net premiums earned
North America
Property and short-tail specialty
$
1,373
$
1,165
$
976
Other liability - occurrence
1,321
942
618
Other liability - claims made
786
843
866
Commercial multi-peril
792
435
193
Commercial automobile
581
459
343
Workers compensation
591
549
495
Other
291
309
290
Total North America
5,735
4,702
3,781
International
Property and short-tail specialty
$
1,099
$
1,061
$
885
Casualty and other
937
864
780
Total International
2,036
1,925
1,665
Total
$
7,771
$
6,627
$
5,446
Net premiums written by underwriting location
North America
$
5,724
$
4,869
$
3,995
International
2,074
2,005
1,867
Total
$
7,798
$
6,874
$
5,862
REINSURANCE SEGMENT
Year Ended December 31,
2025
2024
2023
Net premiums earned
Specialty
$
2,906
$
2,619
$
2,097
Property excluding property catastrophe
2,252
2,148
1,645
Casualty
1,432
1,088
1,005
Property catastrophe
1,065
959
742
Marine and aviation
317
276
229
Other
150
152
118
Total
$
8,122
$
7,242
$
5,836
Net premiums written by underwriting location
Bermuda
$
3,672
$
3,425
$
3,288
United States
1,798
2,135
1,756
Europe and other
2,148
2,186
1,510
Total
$
7,618
$
7,746
$
6,554
MORTGAGE SEGMENT
Year Ended December 31,
2025
2024
2023
Net premiums earned
U.S. primary mortgage insurance
$
802
$
845
$
759
U.S. credit risk transfer (CRT) and other
207
213
220
International mortgage insurance/reinsurance
163
173
179
Total
$
1,172
$
1,231
$
1,158
Net premiums written by underwriting location
United States
$
780
$
823
$
743
Other
280
289
309
Total
$
1,060
$
1,112
$
1,052
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5.
Reserve for Losses and Loss Adjustment Expenses
The following table represents an analysis of losses and loss adjustment expenses and a reconciliation of the beginning and
ending reserve for losses and loss adjustment expenses:
Year Ended December 31,
2025
2024
2023
Reserve for losses and loss adjustment expenses at beginning of year
$
29,369
$
22,752
$
20,032
Unpaid losses and loss adjustment expenses recoverable
7,821
6,690
6,280
Net reserve for losses and loss adjustment expenses at beginning of year
21,548
16,062
13,752
Net incurred losses and loss adjustment expenses relating to losses occurring in:
Current year
9,970
8,849
6,784
Prior years
(600)
(507)
(538)
Total net incurred losses and loss adjustment expenses
9,370
8,342
6,246
Net losses and loss adjustment expense reserves of acquired business (1)
50
2,477
—
Foreign exchange (gains) losses and other
550
(260)
157
Net paid losses and loss adjustment expenses relating to losses occurring in:
Current year
(1,862)
(1,176)
(1,081)
Prior years
(5,163)
(3,897)
(3,012)
Total net paid losses and loss adjustment expenses
(7,025)
(5,073)
(4,093)
Net reserve for losses and loss adjustment expenses at end of year
24,493
21,548
16,062
Unpaid losses and loss adjustment expenses recoverable
9,054
7,821
6,690
Reserve for losses and loss adjustment expenses at end of year
$
33,547
$
29,369
$
22,752
(1) Activity in the 2025 and 2024 periods primarily related to the MCE Acquisition (see note 2).
Prior year development (“PYD”) arises from changes in loss estimates during the current period related to events occurring in
prior calendar years. Long-tailed lines include lines of business that typically take many years for claims to settle such as third
party liability; short-tailed lines are those that settle more quickly such as property. The table below summarizes (favorable)
and adverse net PYD by segment and tail length:
(Favorable) Adverse
Year Ended December 31,
2025
Short-tailed
Long-tailed
Total
Insurance
$
(61) $
18
$
(43)
Reinsurance
(386)
64
(322)
Mortgage
(235)
—
(235)
Total
$
(682) $
82
$
(600)
2024
Insurance
$
(53) $
16
$
(37)
Reinsurance
(232)
44
(188)
Mortgage
(282)
—
(282)
Total
$
(567) $
60
$
(507)
2023
Insurance
$
(85) $
43
$
(42)
Reinsurance
(202)
50
(152)
Mortgage
(344)
—
(344)
Total
$
(631) $
93
$
(538)
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Year Ended December 31, 2025
The insurance segment’s short-tailed lines included
$26 million of favorable development in travel and accident,
primarily from the 2023 and 2024 accident years, (i.e., the
year in which a loss occurred), and $21 million of favorable
development in property, energy, marine and aviation,
primarily from the 2023 and 2024 accident years. Net
adverse development in long-tailed lines included adverse
development in programs, mainly from the 2021 to 2023
accident years.
The reinsurance segment’s short-tailed lines included
$178 million of favorable development from property other
than property catastrophe, primarily from the 2023 and
2024 underwriting years (i.e., all premiums and losses
attributable to contracts having an inception or renewal
date within the given 12 month period), and $141 million of
favorable development from property catastrophe, primarily
from the 2023 and 2024 underwriting years. Long-tailed
lines included $64 million of adverse development in
casualty, primarily from the 2021, 2023 and 2024
underwriting years.
The mortgage segment’s favorable development was driven
by reserve releases associated with the U.S. first lien
portfolio from the 2023 and 2024 accident years. The
Company’s credit risk transfer and international businesses
also contributed to the favorable development.
Year Ended December 31, 2024
The insurance segment’s short-tailed lines included
$32 million of favorable development in travel and accident,
primarily from the 2023 accident year, and $31 million of
favorable development in surety, primarily from the 2007,
2022 and 2023 accident years. Net adverse development in
long-tailed lines included adverse development in programs,
mainly from the 2023 accident year.
The reinsurance segment’s short-tailed lines included
$99 million of favorable development from property other
than property catastrophe, primarily from the 2022 and
2023 underwriting years, $74 million of favorable
development from specialty lines, primarily from the 2015 to
2022 underwriting years, and $64 million of favorable
development from property catastrophe, primarily from the
2020 to 2023 underwriting years. Long-tailed lines included
$44 million of adverse development in casualty, primarily
from the 2016, 2017 and 2020 underwriting years.
The mortgage segment’s favorable development was driven
by reserve releases associated with the U.S. first lien
portfolio from the 2022 and 2023 accident years. The
Company’s credit risk transfer and international businesses
also contributed to the favorable development.
Year Ended December 31, 2023
The insurance segment’s short-tailed lines included
$43 million of favorable development in property, energy
marine and aviation, primarily from the 2021 and 2022
accident years, $22 million of favorable development in
warranty and lenders solutions, primarily from the 2022
accident year, and $15 million of favorable development in
travel and accident, primarily from the 2022 accident year.
Long-tailed
lines
included
$50
million
of
adverse
development in professional liability, primarily from the
2017 to 2020 accident years.
The reinsurance segment’s short-tailed lines included
$93 million of favorable development in property other than
property catastrophe, primarily from the 2020 to 2022
underwriting years, $51 million of favorable development in
property catastrophe, primarily from the 2019 to 2022
underwriting years, and $35 million from specialty lines,
primarily from the 2021 underwriting year. Long-tailed lines
included $45 million of adverse development in casualty
business, primarily from the 2013 to 2020 underwriting
years.
The mortgage segment’s favorable development was driven
by reserve releases associated with the U.S. first lien
portfolio from the 2020 to 2022 accident years. The
Company’s credit risk transfer and international businesses
also contributed to the favorable development.
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6.
Short Duration Contracts
The Company’s reserves for losses and loss adjustment
expenses primarily relate to short-duration contracts with
various characteristics (e.g., type of coverage, geography,
claims duration). The Company considered such information
in determining the level of disaggregation for disclosures
related to its short-duration contracts, as detailed in the
table below:
Reportable
segment
Level of
disaggregation
Included lines of business
Insurance
Property energy,
marine and aviation
Property energy, marine and
aviation
Third party
occurrence business
Excess and surplus casualty
(excluding contract binding);
construction and national
accounts; and other (including
alternative market risks, excess
workers’ compensation and
employer’s liability insurance
coverages)
Third party claims-
made business
Professional lines
Multi-line and other
specialty
Programs; contract binding (part
of excess and surplus casualty);
travel, accident and health;
warranty and lenders solutions;
and other (contract and
commercial surety coverages);
MCE business1
Reinsurance
Casualty
Casualty
Property catastrophe
Property catastrophe
Property excluding
property catastrophe
Property excluding property
catastrophe
Marine and aviation
Marine and aviation
Specialty
Specialty
Mortgage
Direct mortgage
insurance in the U.S.
Mortgage insurance on U.S.
primary exposures
(1) Includes business underwritten under a new business reinsurance
agreement related to the MCE Acquisition. See note 2.
The Company determined the following to be insignificant
for disclosure purposes: (i) certain mortgage business,
including non-U.S. primary business, second lien and student
loan
exposures,
global
mortgage
reinsurance
and
participation in various GSE credit risk-sharing products and
(ii) certain reinsurance business, including casualty clash and
non-traditional lines. Such amounts are included as
reconciling items.
The Company is required to establish reserves for losses and
loss adjustment expenses (“Loss Reserves”) that arise from
the business the Company underwrites. Loss Reserves for
the insurance, reinsurance and mortgage segments
represent estimates of future amounts required to pay
losses and loss adjustment expenses for insured or reinsured
events which have occurred at or before the balance sheet
date. Loss Reserves do not reflect contingency reserve
allowances to account for future loss occurrences. Losses
arising from future events will be estimated and recognized
at the time the losses are incurred and could be substantial.
Insurance Segment
Loss Reserves for the insurance segment are comprised of
estimated amounts for (1) reported losses (“case reserves”)
and (2) incurred but not reported losses (“IBNR reserves”).
Generally, claims personnel determine whether to establish
a case reserve for the estimated amount of the ultimate
settlement of individual claims. The estimate reflects the
judgment of claims personnel based on general corporate
reserving practices, the experience and knowledge of such
personnel regarding the nature and value of the specific
type of claim and, where appropriate, advice of counsel. The
Company also contracts with a number of outside third party
administrators in the claims process who, in certain cases,
have limited authority to establish case reserves. The work
of such administrators is reviewed and monitored by our
claims personnel. Loss Reserves are also established to
provide for loss adjustment expenses and represent the
estimated expense of settling claims, including legal and
other fees and the general expenses of administering the
claims adjustment process. Periodically, adjustments to the
case reserves may be made as additional information is
reported or payments are made. IBNR reserves are
established to provide for incurred claims which have not
yet been reported at the balance sheet date as well as to
adjust for any projected variance in case reserving. Actuaries
estimate ultimate losses and loss adjustment expenses using
various generally accepted actuarial methods applied to
known losses and other relevant information. Like case
reserves, IBNR reserves are adjusted as additional
information becomes known or payments are made. The
process of estimating reserves involves a considerable
degree of judgment by management and, as of any given
date, is inherently uncertain.
Ultimate losses and loss adjustment expenses are generally
determined by projection of claim emergence and
settlement patterns observed in the past that can
reasonably be expected to persist into the future. In
forecasting ultimate losses and loss adjustment expenses
with respect to any line of business, past experience with
respect to that line of business is the primary resource,
developed through both industry and company experience,
but cannot be relied upon in isolation. Uncertainties in
estimating ultimate losses and loss adjustment expenses are
magnified by the length of the time lag between when a
claim actually occurs and when it is reported and settled.
This time lag is sometimes referred to as the “claim-tail.”
During this period additional facts regarding coverages
written in prior accident years, as well as about actual claims
and trends, may become known and, as a result, may lead to
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adjustments of the related Loss Reserves. If the Company
determines that an adjustment is appropriate, the
adjustment is recorded in the accounting period in which
such determination is made. Accordingly, should Loss
Reserves need to be increased or decreased in the future
from amounts currently established, future results of
operations would be negatively or positively impacted
respectively. The Company authorizes managing general
agents, general agents and other producers to write
program business on the Company’s behalf within
prescribed
underwriting
authorities.
This
delegated
authority process introduces additional complexity to the
actuarial determination of unpaid future losses and loss
adjustment expenses. In order to monitor adherence to the
underwriting guidelines given to such parties, the Company
periodically performs underwriting and claims due diligence
reviews.
In determining ultimate losses and loss adjustment
expenses, the cost to indemnify claimants, provide needed
legal defense and other services for insureds and administer
the investigation and adjustment of claims are considered.
These claim costs are influenced by many factors that
change over time, such as expanded coverage definitions as
a result of new court decisions, inflation in costs to repair or
replace damaged property, inflation in the cost of medical
services and legislated changes in statutory benefits, as well
as by the particular, unique facts that pertain to each claim.
As a result, the rate at which claims arose in the past and the
costs to settle them may not always be representative of
what will occur in the future. The factors influencing changes
in claim costs are often difficult to isolate or quantify and
developments in paid and incurred losses from historical
trends are frequently subject to multiple and conflicting
interpretations. Changes in coverage terms or claims
handling practices may also cause future experience and/or
development patterns to vary from the past. A key objective
of actuaries in developing estimates of ultimate losses and
loss adjustment expenses, and resulting IBNR reserves, is to
identify aberrations and systemic changes occurring within
historical experience and adjust for them so that the future
can be projected more reliably. Because of the factors
previously discussed, this process requires the substantial
use of informed judgment and is inherently uncertain.
Although Loss Reserves are initially determined based on
underwriting and pricing analyses, the Company’s insurance
segment applies several generally accepted actuarial
methods, as discussed below, on a quarterly basis to
evaluate the Loss Reserves, in addition to the expected loss
method, in particular for Loss Reserves from more mature
accident years (the year in which a loss occurred). Each
quarter, as part of the reserving process, the segments’
actuaries reaffirm that the assumptions used in the
reserving process continue to form a sound basis for the
projection of liabilities. If actual loss activity differs
substantially
from
expectations
based
on
historical
information, an adjustment to Loss Reserves may be
supported. The Company places more or less reliance on a
particular actuarial method based on the facts and
circumstances at the time the estimates of Loss Reserves are
made.
These methods generally fall into one of the following
categories or are hybrids of one or more of the following
categories:
•
Expected loss methods - these methods are based on
the
assumption
that
ultimate
losses
vary
proportionately with premiums. Expected loss and loss
adjustment expense ratios are typically developed
based upon the information derived by underwriters
and actuaries during the initial pricing of the business,
supplemented
by
industry
data
available
from
organizations, such as statistical bureaus and consulting
firms, where appropriate. These ratios consider, among
other things, rate increases and changes in terms and
conditions that have been observed in the market.
Expected loss methods are useful for estimating
ultimate losses and loss adjustment expenses in the
early years of long-tailed lines of business, when little or
no paid or incurred loss information is available, and is
commonly applied when limited loss experience exists
for a company.
•
Historical incurred loss development methods - these
methods assume that the ratio of losses in one period
to losses in an earlier period will remain constant in the
future. These methods use incurred losses (i.e., the sum
of cumulative historical loss payments plus outstanding
case reserves) over discrete periods of time to estimate
future losses. Historical incurred loss development
methods may be preferable to historical paid loss
development methods because they explicitly take into
account open cases and the claims adjusters’
evaluations of the cost to settle all known claims.
However, historical incurred loss development methods
necessarily assume that case reserving practices are
consistently applied over time. Therefore, when there
have been significant changes in how case reserves are
established, using incurred loss data to project ultimate
losses may be less reliable than other methods.
•
Historical paid loss development methods - these
methods, like historical incurred loss development
methods, assume that the ratio of losses in one period
to losses in an earlier period will remain constant. These
methods use historical loss payments over discrete
periods of time to estimate future losses and necessarily
assume that factors that have affected paid losses in the
past, such as inflation or the effects of litigation, will
remain constant in the future. Because historical paid
loss development methods do not use incurred losses to
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estimate ultimate losses, they may be more reliable
than the other methods that use incurred losses in
situations where there are significant changes in how
incurred losses are established by a company’s claims
adjusters. However, historical paid loss development
methods are more leveraged (meaning that small
changes in payments have a larger impact on estimates
of ultimate losses) than actuarial methods that use
incurred losses because cumulative loss payments take
much longer to equal the expected ultimate losses than
cumulative incurred amounts. In addition, and for
similar reasons, historical paid loss development
methods are often slow to react to situations when new
or different factors arise than those that have affected
paid losses in the past.
•
Adjusted historical paid and incurred loss development
methods - these methods take traditional historical paid
and incurred loss development methods and adjust
them for the estimated impact of changes from the past
in factors such as inflation, the speed of claim payments
or the adequacy of case reserves. Adjusted historical
paid and incurred loss development methods are often
more reliable methods of predicting ultimate losses in
periods of significant change, provided the actuaries can
develop methods to reasonably quantify the impact of
changes. As such, these methods utilize more judgment
than historical paid and incurred loss development
methods.
•
Bornhuetter-Ferguson (“B-F”) paid and incurred loss
methods - these methods utilize actual paid and
incurred losses and expected patterns of paid and
incurred losses, taking the initial expected ultimate
losses into account to determine an estimate of
expected ultimate losses. The B-F paid and incurred loss
methods are useful when there are few reported claims
and a relatively less stable pattern of reported losses.
•
Frequency-Severity methods - These methods utilize
actual paid and incurred claim experience, but break the
data down into its component pieces: claim counts,
often expressed as a ratio to exposure or premium
(frequency), and average claim size (severity). The
component pieces are projected to an ultimate level
and multiplied together to result in an estimate of
ultimate loss. These methods are especially useful when
the severity of claims can be confined to a relatively
stable range of estimated ultimate average claim value.
•
Additional analyses - other methodologies are often
used in the reserving process for specific types of claims
or events, such as catastrophic or other specific major
events. These include vendor catastrophe models,
which are typically used in the estimation of Loss
Reserves at the early stage of known catastrophic
events before information has been reported to an
insurer or reinsurer.
In the initial reserving process for short-tail insurance lines
(consisting of property, energy, marine and aviation and
other exposures including travel, accident and health, and
warranty and lenders solutions), the Company relies on a
combination of the reserving methods discussed above. For
catastrophe-exposed business, the reserving process also
includes the usage of catastrophe models for known events
and a heavy reliance on analysis of individual catastrophic
events and management judgment. The development of
losses on short-tail business can be unstable, especially for
policies characterized by high severity, low frequency losses.
As time passes, for a given accident year, additional weight
is given to the paid and incurred B-F loss development
methods and eventually to the historical paid and incurred
loss development methods in the reserving process. The
Company makes a number of key assumptions in their
reserving process, including that historical paid and reported
development patterns are stable, catastrophe models
provide useful information about our exposure to
catastrophic events that have occurred and underwriters’
judgment as to potential loss exposures can be relied on.
The expected loss ratios used in the initial reserving process
for short-tail business have varied over time due to changes
in pricing, reinsurance structure, estimates of catastrophe
losses, policy changes (such as attachment points, class and
limits) and geographical distribution. As losses in short-tail
lines are reported relatively quickly, expected loss ratios are
selected for the current accident year based upon actual
attritional loss ratios for earlier accident years, adjusted for
rate changes, inflation, changes in reinsurance programs and
expected attritional losses based on modeling. Furthermore,
ultimate losses for short-tail business are known in a
reasonably short period of time.
In the initial reserving process for long-tail insurance lines
(consisting of third party occurrence business, third party
claims made business, and other exposures including surety,
programs and contract binding exposures), the Company
primarily relies on the expected loss method. The
development of the Company’s long-tail business may be
unstable, especially if there are high severity major events,
as a portion of the Company’s casualty business is in high
excess layers. As time passes, for a given accident year,
additional weight is given to the paid and incurred B-F loss
development methods and historical paid and incurred loss
development methods in the reserving process. The
Company makes a number of key assumptions in reserving
for long-tail lines, including that the pricing loss ratio is the
best estimate of the ultimate loss ratio at the time the policy
is entered into, that the loss development patterns, which
are based on a combination of company and industry loss
development patterns and adjusted to reflect differences in
the insurance segment’s mix of business, are reasonable and
that claims personnel and underwriters analyses of our
exposure to major events are assumed to be the best
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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130
2025 FORM 10-K
estimate of exposure to the known claims on those events.
The expected loss ratios used in the initial reserving process
for long-tail business for recent accident years have varied
over time, in some cases significantly, from earlier accident
years. As the credibility of historical experience for earlier
accident years increases, the experience from these accident
years will be given a greater weighting in the actuarial
analysis to determine future accident year expected loss
ratios, adjusted for changes in pricing, loss trends, terms and
conditions and reinsurance structure.
From time to time, the Company enters into loss portfolio
transfer and adverse development cover reinsurance
agreements accounted for as retroactive reinsurance. These
agreements transfer Loss Reserves and future favorable or
adverse development on certain runoff programs and
certain third party occurrence business, within multi-line
and other specialty business (the “Covered Lines”). As
incurred losses and allocated loss adjustment expenses for
the Covered Lines are ceded to the reinsurer, the Company
is not exposed to changes in the amount, timing and
uncertainty of cash flows arising from the Covered Lines. To
avoid distortion, the incurred losses and allocated loss
adjustment expenses and cumulative paid losses and loss
adjustment expenses for the Covered Lines are excluded
entirely from the tables below. Unpaid loss and loss
adjustment expenses recoverable at December 31, 2025
included $121 million related to such reinsurance
agreements.
The following tables present information on the insurance segment’s short-duration insurance contracts:
Property, energy, marine and aviation (in millions except claim count)
Incurred losses and allocated loss adjustment expenses, net of reinsurance
December 31, 2025
Total of IBNR
liabilities plus
expected
development
on reported
claims
Cumulative
number of
reported
claims
Year ended December 31,
Accident
year
2016
unaudited
2017
unaudited
2018
unaudited
2019
unaudited
2020
unaudited
2021
unaudited
2022
unaudited
2023
unaudited
2024
unaudited
2025
2016
$
104
$
101
$
105
$
100
$
96
$
92
$
87
$
87
$
86
$
86
$
—
6,189
2017
281
246
236
230
231
225
225
224
225
—
6,512
2018
181
186
174
170
170
172
170
171
—
5,091
2019
179
179
165
161
159
156
156
(2)
7,518
2020
359
329
336
333
337
335
1
8,558
2021
427
429
423
421
420
12
10,380
2022
522
495
576
679
91
16,853
2023
571
510
483
48
22,016
2024
703
607
142
25,054
2025
693
327
21,693
Total
$
3,855
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2016
$
25
$
83
$
98
$
97
$
94
$
91
$
87
$
87
$
86
$
86
2017
30
140
195
212
216
218
220
221
223
2018
30
102
135
143
150
154
157
162
2019
26
105
134
139
148
153
155
2020
56
194
251
293
306
317
2021
90
268
343
365
396
2022
100
276
337
547
2023
146
271
378
2024
195
363
2025
267
Total
2,894
All outstanding liabilities before 2016, net of reinsurance
14
Liabilities for losses and loss adjustment expenses, net of reinsurance
$
975
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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2025 FORM 10-K
Third party occurrence business (in millions except claim count)
Incurred losses and allocated loss adjustment expenses, net of reinsurance
December 31, 2025
Total of IBNR
liabilities plus
expected
development
on reported
claims
Cumulative
number of
reported
claims
Year ended December 31,
Accident
year
2016
unaudited
2017
unaudited
2018
unaudited
2019
unaudited
2020
unaudited
2021
unaudited
2022
unaudited
2023
unaudited
2024
unaudited
2025
2016
$
389
$
394
$
406
$
399
$
375
$
367
$
363
$
352
$
345
$
331
$
49
78,399
2017
417
417
422
412
407
406
404
408
398
72
84,591
2018
430
453
450
451
459
461
448
435
84
79,101
2019
456
487
480
471
470
451
439
80
87,700
2020
606
616
640
632
606
594
91
92,035
2021
622
662
659
671
688
66
94,124
2022
687
726
735
737
300
95,570
2023
877
936
936
482
100,702
2024
1,001
1,038
756
103,711
2025
1,153
1,022
79,110
Total
$
6,749
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2016
$
12
$
42
$
87
$
137
$
164
$
195
$
215
$
230
$
246
$
252
2017
13
52
100
135
165
221
247
271
289
2018
17
64
115
154
200
247
271
289
2019
18
73
122
173
214
255
282
2020
24
76
155
235
318
374
2021
26
91
174
323
444
2022
24
85
186
294
2023
32
156
264
2024
37
136
2025
46
Total
2,670
All outstanding liabilities before 2016, net of reinsurance
375
Liabilities for losses and loss adjustment expenses, net of reinsurance
$
4,454
Third party claims-made business (in millions except claim count)
Incurred losses and allocated loss adjustment expenses, net of reinsurance
December 31, 2025
Total of IBNR
liabilities plus
expected
development
on reported
claims
Cumulative
number of
reported
claims
Year ended December 31,
Accident
year
2016
unaudited
2017
unaudited
2018
unaudited
2019
unaudited
2020
unaudited
2021
unaudited
2022
unaudited
2023
unaudited
2024
unaudited
2025
2016
$
275
$
291
$
308
$
314
$
322
$
327
$
329
$
327
$
329
$
325
$
8
15,135
2017
270
285
311
308
323
316
337
339
326
23
15,712
2018
272
314
319
335
347
366
366
362
22
17,304
2019
288
317
317
321
329
329
326
34
17,428
2020
383
412
423
445
432
419
54
17,580
2021
514
517
498
461
446
119
19,120
2022
668
654
589
570
186
21,348
2023
809
895
901
375
26,037
2024
736
777
432
29,857
2025
882
736
29,188
Total
$
5,334
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2016
$
11
$
68
$
127
$
158
$
205
$
242
$
257
$
295
$
296
$
304
2017
9
67
113
143
196
232
257
276
284
2018
12
68
118
158
208
258
285
305
2019
12
65
122
154
196
235
254
2020
17
87
151
214
265
309
2021
23
90
162
223
269
2022
25
100
218
307
2023
64
200
332
2024
56
196
2025
49
Total
2,609
All outstanding liabilities before 2016, net of reinsurance
89
Liabilities for losses and loss adjustment expenses, net of reinsurance
$
2,814
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
132
2025 FORM 10-K
Multi-line and other specialty (in millions except claim count)
Incurred losses and allocated loss adjustment expenses, net of reinsurance
December 31, 2025
Total of IBNR
liabilities plus
expected
development
on reported
claims
Cumulative
number of
reported
claims
Year ended December 31,
Accident
year
2016
unaudited
2017
unaudited
2018
unaudited
2019
unaudited
2020
unaudited
2021
unaudited
2022
unaudited
2023
unaudited
2024
unaudited
2025
2016
$
408
$
430
$
427
$
416
$
410
$
408
$
408
$
406
$
404
$
403
$
3
196,531
2017
482
500
491
500
504
512
515
514
516
4
235,002
2018
512
564
562
564
564
564
564
566
6
265,421
2019
566
611
639
650
656
670
666
8
247,961
2020
616
567
513
515
519
519
22
170,515
2021
634
618
613
634
643
33
137,791
2022
677
640
639
624
64
156,572
2023
815
809
823
133
176,315
2024
1,419
1,442
508
200,279
2025
1,987
1,195
140,332
Total
$
8,189
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2016
$
176
$
304
$
341
$
362
$
379
$
385
$
390
$
391
$
396
$
397
2017
181
342
380
423
446
472
479
493
499
2018
211
388
442
479
508
526
543
550
2019
212
385
486
548
576
611
629
2020
171
308
358
405
450
469
2021
157
334
427
511
557
2022
177
370
439
491
2023
253
489
588
2024
336
727
2025
493
Total
5,400
All outstanding liabilities before 2016, net of reinsurance
38
Liabilities for losses and loss adjustment expenses, net of reinsurance
$
2,827
The following table presents the average annual percentage payout of incurred losses and allocated loss adjustment expenses
by age, net of reinsurance, as of December 31, 2025:
Average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Property, energy, marine and aviation
23.0 %
41.4 %
18.2 %
8.9 %
3.3 %
1.0 %
— %
1.1 %
(0.1) %
0.1 %
Third party occurrence business
3.7 %
10.1 %
12.4 %
13.4 %
11.3 %
10.5 %
6.1 %
5.0 %
4.6 %
2.0 %
Third party claims-made business
4.7 %
16.1 %
16.3 %
12.0 %
13.3 %
11.8 %
6.4 %
7.7 %
1.3 %
2.4 %
Multi-line and other specialty
31.2 %
29.0 %
11.0 %
8.5 %
5.6 %
3.7 %
2.1 %
1.4 %
1.1 %
0.4 %
Reinsurance Segment
Loss Reserves for the Company’s reinsurance segment are
comprised of (1) case reserves, (2) additional case reserves
(“ACRs”) and (3) IBNR reserves. The Company receives
reports of claims notices from ceding companies and records
case reserves based upon the amount of reserves
recommended by the ceding company. Case reserves may
be supplemented by ACRs, which may be estimated by the
Company’s claims personnel ahead of official notification
from the ceding company, or when judgment regarding the
size or severity of the known event differs from the ceding
company. In certain instances, the Company establishes
ACRs even when the ceding company does not report any
liability on a known event. In addition, specific claim
information reported by ceding companies or obtained
through claim audits can alert the Company to emerging
trends such as changing legal interpretations of coverage
and liability, claims from unexpected sources or classes of
business, and significant changes in the frequency or
severity of individual claims. Such information is often used
in the process of estimating IBNR reserves. IBNR reserves are
established to provide for incurred claims which have not
yet been reported at the balance sheet date as well as to
adjust for any projected variance in case reserving. Actuaries
estimate ultimate losses and loss adjustment expenses using
various generally accepted actuarial methods applied to
known losses and other relevant information. Like case
reserves, IBNR reserves are adjusted as additional
information becomes known or payments are made. The
process of estimating Loss Reserves involves a considerable
degree of judgment by management and, as of any given
date, is inherently uncertain.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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133
2025 FORM 10-K
The estimation of Loss Reserves for the reinsurance segment
is subject to the same risk factors as the estimation of Loss
Reserves for the insurance segment. In addition, the
inherent uncertainties of estimating such reserves are even
greater for reinsurers, due primarily to the following factors:
(1) the claim-tail for reinsurers is generally longer because
claims are first reported to the ceding company and then to
the reinsurer through one or more intermediaries, (2) the
reliance on premium estimates, where reports have not
been received from the ceding company, in the reserving
process, (3) the potential for writing a number of
reinsurance contracts with different ceding companies with
the same exposure to a single loss event, (4) the diversity of
loss development patterns among different types of
reinsurance contracts, (5) the necessary reliance on the
ceding companies for information regarding reported claims
and (6) the differing reserving practices among ceding
companies.
Ultimate losses and loss adjustment expenses are generally
determined by projection of claim emergence and
settlement patterns observed in the past that can
reasonably be expected to persist into the future. As with
the insurance segment, the process of estimating Loss
Reserves
for
the
reinsurance
segment
involves
a
considerable degree of judgment by management and, as of
any given date, is inherently uncertain. As discussed above,
such uncertainty is greater for reinsurers compared to
insurers. As a result, our reinsurance operations obtain
information from numerous sources to assist in the process.
Pricing actuaries from the reinsurance segment devote
considerable effort to understanding and analyzing a ceding
company’s operations and loss history during the
underwriting of the business, using a combination of ceding
company and industry statistics. Such statistics normally
include historical premium and loss data by class of business,
individual claim information for larger claims, distributions
of insurance limits provided, loss reporting and payment
patterns, and rate change history. This analysis is used to
project expected loss ratios for each treaty during the
upcoming contract period.
As mentioned above, there can be a considerable time lag
from the time a claim is reported to a ceding company to the
time it is reported to the reinsurer. The lag can be several
years in some cases and may be attributed to a number of
reasons, including the time it takes to investigate a claim,
delays
associated
with
the
litigation
process,
the
deterioration in a claimant’s physical condition many years
after an accident occurs, the case reserving approach of the
ceding company, etc. In the reserving process, the Company
assumes that such lags are predictable, on average, over
time and therefore the lags are contemplated in the loss
reporting patterns used in their actuarial methods. This
means that the reinsurance segment must rely on estimates
for a longer period of time than does an insurance company.
Backlogs in the recording of assumed reinsurance can also
complicate the accuracy of loss reserve estimation. As of
December 31, 2025 there were no significant backlogs
related to the processing of assumed reinsurance
information at our reinsurance operations.
The reinsurance segment relies heavily on information
reported by ceding companies, as discussed above. In order
to determine the accuracy and completeness of such
information, underwriters, actuaries, and claims personnel
often perform audits of ceding companies and regularly
review information received from ceding companies for
unusual or unexpected results. Material findings are usually
discussed with the ceding companies. The Company
sometimes encounters situations where they determine that
a claim presentation from a ceding company is not in
accordance with contract terms. In these situations, the
Company attempts to resolve the dispute with the ceding
company. Most situations are resolved amicably and
without the need for litigation or arbitration. However, in
the infrequent situations where a resolution is not possible,
the Company will vigorously defend its position in such
disputes.
Although Loss Reserves are initially determined based on
underwriting and pricing analysis, the Company applies
several generally accepted actuarial methods, as discussed
above, on a quarterly basis to evaluate its Loss Reserves in
addition to the expected loss method, in particular for
reserves from more mature underwriting years (the year in
which business is underwritten). Each quarter, as part of the
reserving process, the Company’s actuaries reaffirm that the
assumptions used in the reserving process continue to form
a sound basis for projection of liabilities. If actual loss
activity differs substantially from expectations based on
historical information, an adjustment to Loss Reserves may
be supported. Estimated Loss Reserves for more mature
underwriting years are now based more on actual loss
activity and historical patterns than on the initial
assumptions based on pricing indications. More recent
underwriting years rely more heavily on internal pricing
assumptions. The Company places more or less reliance on a
particular actuarial method based on the facts and
circumstances at the time the estimates of Loss Reserves are
made.
In the initial reserving process for short-tail reinsurance lines
(consisting of property excluding property catastrophe and
property catastrophe exposures), the Company relies on a
combination of the reserving methods discussed above. For
known catastrophic events, the reserving process also
includes the usage of catastrophe models and a heavy
reliance on analysis which includes ceding company inquiries
and management judgment. The development of property
losses may be unstable, especially where there is high
catastrophic exposure, may be characterized by high
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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134
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severity, low frequency losses for excess and catastrophe-
exposed business and may be highly correlated across
contracts. As time passes, for a given underwriting year,
additional weight is given to the paid and incurred B-F loss
development methods and historical paid and incurred loss
development methods in the reserving process. The
Company makes a number of key assumptions in reserving
for short-tail lines, including that historical paid and
reported development patterns are stable, catastrophe
models provide useful information about our exposure to
catastrophic
events
that
have
occurred
and
our
underwriters’ judgment and guidance received from ceding
companies as to potential loss exposures may be relied on.
The expected loss ratios used in the initial reserving process
for property exposures have varied over time due to
changes in pricing, reinsurance structure, estimates of
catastrophe losses, terms and conditions and geographical
distribution. As losses in property lines are reported
relatively quickly, expected loss ratios are selected for the
current underwriting year incorporating the experience for
earlier underwriting years, adjusted for rate changes,
inflation, changes in reinsurance programs, expectations
about present and future market conditions and expected
attritional losses based on modeling. Due to the short-tail
nature of property business, reported loss experience
emerges quickly and ultimate losses are known in a
reasonably short period of time.
In the initial reserving process for long-tail reinsurance lines
(consisting of casualty, specialty, marine and aviation and
other exposures), the Company primarily relies on the
expected loss method. The development of long-tail
business may be unstable, especially if there are high
severity major events, with business written on an excess of
loss basis typically having a longer tail than business written
on a pro rata basis. As time passes, for a given underwriting
year, additional weight is given to the paid and incurred B-F
loss development methods and eventually to the historical
paid and incurred loss development methods in the
reserving process. Our reinsurance operations make a
number of key assumptions in reserving for long-tail lines,
including that the pricing loss ratio is the best estimate of
the ultimate loss ratio at the time the contract is entered
into, historical paid and reported development patterns are
stable and claims personnel and underwriters’ analyses of
our exposure to major events are our best estimate of our
exposure to the known claims on those events. The
expected loss ratios used in our reinsurance operations’
initial reserving process for long-tail contracts have varied
over time due to changes in pricing, terms and conditions
and reinsurance structure. As the credibility of historical
experience for earlier underwriting years increases, the
experience from these underwriting years is used in the
actuarial analysis to determine future underwriting year
expected loss ratios, adjusted for changes in pricing, loss
trends, terms and conditions and reinsurance structure.
Table of Contents
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
135
2025 FORM 10-K
The following tables present information on the reinsurance segment’s short-duration insurance contracts:
Casualty (in millions)
Incurred losses and allocated loss adjustment expenses, net of reinsurance
December 31, 2025
Total of IBNR
liabilities plus
expected
development
on reported
claims
Cumulative
number of
reported
claims
Year ended December 31,
Accident
year
2016
unaudited
2017
unaudited
2018
unaudited
2019
unaudited
2020
unaudited
2021
unaudited
2022
unaudited
2023
unaudited
2024
unaudited
2025
2016
$
216
$
228
$
252
$
267
$
274
$
273
$
277
$
285
$
287
$
289
$
45
N/A
2017
271
258
274
302
314
321
336
343
346
55
N/A
2018
281
295
286
291
304
314
328
332
53
N/A
2019
336
346
372
384
406
405
402
65
N/A
2020
389
377
360
379
399
365
108
N/A
2021
444
438
428
428
464
163
N/A
2022
552
533
546
539
241
N/A
2023
664
669
695
385
N/A
2024
734
776
624
N/A
2025
1,002
928
N/A
Total
$
5,210
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2016
$
6
$
26
$
52
$
87
$
114
$
133
$
158
$
174
$
188
$
197
2017
6
30
64
113
138
165
190
224
239
2018
8
31
107
129
155
183
207
224
2019
16
58
97
131
220
258
287
2020
18
51
90
132
178
202
2021
15
54
103
191
236
2022
18
62
114
182
2023
19
88
173
2024
14
66
2025
25
Total
1,831
All outstanding liabilities before 2016, net of reinsurance
406
Liabilities for losses and loss adjustment expenses, net of reinsurance
$
3,785
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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136
2025 FORM 10-K
Property catastrophe (in millions)
Incurred losses and allocated loss adjustment expenses, net of reinsurance
December 31, 2025
Total of IBNR
liabilities plus
expected
development
on reported
claims
Cumulative
number of
reported
claims
Year ended December 31,
Accident
year
2016
unaudited
2017
unaudited
2018
unaudited
2019
unaudited
2020
unaudited
2021
unaudited
2022
unaudited
2023
unaudited
2024
unaudited
2025
2016
$
23
$
16
$
12
$
9
$
6
$
6
$
5
$
4
$
4
$
4
$
—
N/A
2017
86
54
50
36
24
21
21
21
20
—
N/A
2018
69
44
25
12
3
—
(2)
(4)
—
N/A
2019
12
4
4
(4)
(11)
(7)
(8)
1
N/A
2020
272
337
341
330
319
321
5
N/A
2021
323
318
305
307
302
11
N/A
2022
306
298
273
262
30
N/A
2023
272
272
227
18
N/A
2024
512
441
67
N/A
2025
415
84
N/A
Total
$
1,980
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2016
$
(7)
$
2
$
2
$
3
$
2
$
2
$
2
$
2
$
2
$
3
2017
31
32
37
27
14
16
17
17
17
2018
27
2
12
(17)
(14)
(13)
(11)
(12)
2019
4
4
8
(17)
(16)
(25)
(26)
2020
57
158
208
251
262
271
2021
66
177
230
239
243
2022
70
169
211
219
2023
8
84
120
2024
60
145
2025
82
Total
1,062
All outstanding liabilities before 2016, net of reinsurance
2
Liabilities for losses and loss adjustment expenses, net of reinsurance
$
920
Property excluding property catastrophe (in millions)
Incurred losses and allocated loss adjustment expenses, net of reinsurance
December 31, 2025
Total of IBNR
liabilities plus
expected
development
on reported
claims
Cumulative
number of
reported
claims
Year ended December 31,
Accident
year
2016
unaudited
2017
unaudited
2018
unaudited
2019
unaudited
2020
unaudited
2021
unaudited
2022
unaudited
2023
unaudited
2024
unaudited
2025
2016
$
174
$
144
$
136
$
135
$
138
$
135
$
129
$
130
$
127
$
124
$
3
N/A
2017
267
250
237
230
213
205
202
201
197
6
N/A
2018
223
239
235
212
202
203
203
197
3
N/A
2019
216
206
195
190
190
196
193
11
N/A
2020
368
339
319
320
322
313
(1)
N/A
2021
546
497
491
499
500
14
N/A
2022
745
670
660
656
70
N/A
2023
839
740
744
117
N/A
2024
1,212
1,056
325
N/A
2025
1,170
648
N/A
Total
$
5,150
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2016
$
33
$
94
$
98
$
103
$
111
$
113
$
114
$
114
$
117
$
116
2017
28
124
155
164
178
182
186
186
186
2018
30
107
151
167
175
177
177
181
2019
43
124
150
162
169
170
174
2020
101
207
243
266
280
291
2021
136
269
363
424
457
2022
142
360
468
526
2023
151
382
489
2024
144
445
2025
190
Total
3,055
All outstanding liabilities before 2016, net of reinsurance
8
Liabilities for losses and loss adjustment expenses, net of reinsurance
$
2,103
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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137
2025 FORM 10-K
Marine and aviation (in millions)
Incurred losses and allocated loss adjustment expenses, net of reinsurance
December 31, 2025
Total of IBNR
liabilities plus
expected
development
on reported
claims
Cumulative
number of
reported
claims
Year ended December 31,
Accident
year
2016
unaudited
2017
unaudited
2018
unaudited
2019
unaudited
2020
unaudited
2021
unaudited
2022
unaudited
2023
unaudited
2024
unaudited
2025
2016
$
27
$
23
$
23
$
19
$
17
$
15
$
12
$
11
$
11
$
10
$
2
N/A
2017
29
26
24
21
20
17
15
15
15
2
N/A
2018
27
25
24
24
21
21
20
19
2
N/A
2019
48
55
60
61
62
63
60
6
N/A
2020
83
76
80
80
82
81
4
N/A
2021
110
96
82
79
86
8
N/A
2022
126
138
134
167
38
N/A
2023
161
170
156
44
N/A
2024
233
220
100
N/A
2025
227
172
N/A
Total
$
1,041
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2016
$
(7)
$
(2)
$
—
$
3
$
6
$
7
$
7
$
7
$
7
$
8
2017
2
7
9
11
12
12
12
12
12
2018
2
7
11
13
14
15
16
16
2019
11
22
29
35
43
49
49
2020
9
26
42
60
66
71
2021
8
24
45
53
68
2022
12
37
63
86
2023
13
43
77
2024
18
44
2025
16
Total
447
All outstanding liabilities before 2016, net of reinsurance
18
Liabilities for losses and loss adjustment expenses, net of reinsurance
$
612
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
138
2025 FORM 10-K
Specialty (in millions)
Incurred losses and allocated loss adjustment expenses, net of reinsurance
December 31, 2025
Total of IBNR
liabilities plus
expected
development
on reported
claims
Cumulative
number of
reported
claims
Year ended December 31,
Accident
year
2016
unaudited
2017
unaudited
2018
unaudited
2019
unaudited
2020
unaudited
2021
unaudited
2022
unaudited
2023
unaudited
2024
unaudited
2025
2016
$
338
$
335
$
328
$
319
$
326
$
321
$
318
$
319
$
312
$
315
$
6
N/A
2017
412
405
385
386
384
379
376
372
378
11
N/A
2018
431
423
417
442
438
438
431
425
16
N/A
2019
441
418
412
408
418
413
398
25
N/A
2020
607
536
531
551
543
532
36
N/A
2021
628
629
630
637
638
33
N/A
2022
962
942
991
950
108
N/A
2023
1,303
1,230
1,321
330
N/A
2024
1,696
1,647
623
N/A
2025
1,960
1,275
N/A
Total
$
8,564
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2016
$
113
$
213
$
251
$
271
$
288
$
295
$
301
$
305
$
304
$
305
2017
141
266
309
325
339
350
360
361
362
2018
135
286
326
348
366
389
393
392
2019
126
217
286
313
335
355
354
2020
138
299
377
413
453
471
2021
156
319
443
508
546
2022
186
465
627
698
2023
207
502
714
2024
331
705
2025
383
Total
4,930
All outstanding liabilities before 2016, net of reinsurance
35
Liabilities for losses and loss adjustment expenses, net of reinsurance
$
3,669
The following table presents the average annual percentage payout of incurred losses and allocated loss adjustment expenses
by age, net of reinsurance, as of December 31, 2025:
Average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Casualty
2.9 %
8.2 %
11.8 %
12.1 %
11.5 %
7.8 %
7.6 %
6.8 %
4.7 %
3.0 %
Property catastrophe
(62.4) %
110.1 %
(23.8) %
138.8 %
(24.8) %
17.4 %
(4.8) %
1.0 %
2.2 %
5.7 %
Property excluding property catastrophe
20.9 %
37.0 %
14.5 %
7.3 %
5.4 %
1.8 %
1.2 %
0.7 %
1.1 %
(0.7) %
Marine and aviation
1.8 %
24.3 %
19.8 %
15.0 %
12.2 %
6.4 %
2.0 %
1.1 %
1.1 %
6.2 %
Specialty
26.2 %
28.2 %
14.6 %
6.7 %
5.4 %
3.8 %
1.2 %
0.5 %
— %
0.1 %
Mortgage Segment
The Company’s mortgage segment includes (1) U.S. primary
mortgage insurance (2) U.S. credit risk transfer and other,
and (3) international mortgage insurance and reinsurance.
The latter two categories along with second lien and student
loan exposures are excluded on the basis of insignificance
for the purposes of presenting disclosures related to short
duration contracts.
For primary mortgage insurance business, the Company
establishes case reserves for loans that have been reported
as delinquent by loan servicers as well as those that are
delinquent but not reported (IBNR reserves). The Company
also reserves for the expenses of adjusting claims related to
these delinquencies. The trigger that creates a case reserve
estimate is that an insured loan is reported to us as being
two payments in arrears. The actuarial reviews and
documentation created in the reserving process are
completed in accordance with generally accepted actuarial
standards. The selected assumptions reflect actuarial
judgment based on the analysis of historical data and
experience combined with information concerning current
underwriting, economic, judicial, regulatory and other
influences on ultimate claim settlements.
Because the reserving process requires the Company to
forecast future conditions, it is inherently uncertain and
requires significant judgment and estimation. The use of
different estimates would result in the establishment of
different reserve levels. Additionally, changes in estimates
are likely to occur from period to period as economic
conditions change, and the ultimate liability may vary
significantly from the estimates used. Major risk factors
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
139
2025 FORM 10-K
include (but are not limited to) changes in home prices and
borrower equity, which can limit the borrower’s ability to
sell the property and satisfy the outstanding loan balance,
and changes in unemployment, which can affect the
borrower’s income and ability to make mortgage payments.
The lead actuarial methodology used by the Company is a
frequency-severity method based on the inventory of
pending delinquencies. Each month the loan servicers report
the delinquency status of each insured loan. Using the
frequency-severity method allows the Company to take
advantage of its knowledge of the number of delinquent
loans and the coverage provided (“risk size”) on those loans
by directly relating the reserves to these amounts. The
delinquencies are grouped into homogeneous cohorts for
analysis, reflecting the age of delinquency. A claim rate is
then developed for each cohort which represents the
frequency with which the delinquencies become claims. The
claim frequency rates are based on an analysis of the
patterns of emerging cure counts and claim counts, the
foreclosure status of the pending delinquencies, the product
and geographical mix of the delinquencies and our view of
future economic and claim conditions, which include trends
in home prices and unemployment. Claim rates can vary
materially by age of delinquency, depending on the mix of
delinquencies and economic conditions.
Claim size severity estimates are determined by examining
the risk sizes on the delinquent loans and estimating the
portion of risk that will be paid, as well as any expenses. This
is done based on a review of historical development
patterns, an assessment of economic conditions and the
level of equity the borrowers may have in their homes, as
well as considering economic conditions and loss mitigation
opportunities. Mortgage insurance is generally not subject
to large claim sizes, as with some other lines of insurance. A
claim size over $250,000 is rare, and this helps reduce the
volatility of claim size estimates.
The claim rate and claim size assumptions generate case
reserves for the population of reported delinquencies. The
reserve for unreported delinquencies (included in IBNR
reserves) is estimated by looking at historical patterns of
reporting. Claim rates and claim sizes can then be assigned
to estimated unreported delinquencies using assumptions
made in the establishment of case reserves.
Mortgage insurance Loss Reserves are short-tail, in the
sense that the vast majority of delinquencies are resolved
within two years of being reported. While reserves are
initially analyzed by reserve cohort, as described above, they
are also rolled up by underwriting year to ensure that
reserve assumptions are consistent with the performance of
the underwriting year. The accuracy of prior reserve
assumptions is also checked in hindsight to determine if
adjustments to the assumptions are needed.
Loss Reserves for the Company’s mortgage reinsurance
business and GSE credit risk sharing transactions are
comprised of case reserves and IBNR reserves. The
Company’s mortgage reinsurance operations receive reports
of delinquent loans and claims notices from ceding
companies and record case reserves based upon the amount
of reserves recommended by the ceding company. In
addition, specific claim and delinquency information
reported by ceding companies is used in the process of
estimating IBNR reserves.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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140
2025 FORM 10-K
The following table presents information on the mortgage segment’s short-duration insurance contracts:
U.S. primary mortgage insurance (in millions except claim count)
Incurred losses and allocated loss adjustment expenses, net of reinsurance
December 31, 2025
Total of IBNR
liabilities plus
expected
development
on reported
claims
Cumulative
number of
paid claims
Year ended December 31,
Accident
year
2016
unaudited
2017
unaudited
2018
unaudited
2019
unaudited
2020
unaudited
2021
unaudited
2022
unaudited
2023
unaudited
2024
unaudited
2025
2016
$
184
$
171
$
149
$
141
$
142
$
142
$
137
$
136
$
136
$
136
—
3,564
2017
179
132
107
108
109
102
99
99
97
—
2,723
2018
132
96
89
88
72
69
69
66
—
1,990
2019
108
119
110
63
51
52
48
—
1,491
2020
420
374
78
33
31
26
—
904
2021
144
77
20
17
13
—
443
2022
173
55
30
22
—
604
2023
182
71
36
—
727
2024
180
86
—
509
2025
191
1
87
Total
$
721
Cumulative paid losses and allocated loss adjustment expenses, net of reinsurance
2016
11
72
113
127
131
132
132
133
134
135
2017
9
48
79
87
90
92
93
95
95
2018
4
31
50
56
59
60
63
64
2019
3
20
29
34
39
42
44
2020
1
4
8
13
19
21
2021
—
2
5
8
10
2022
—
3
10
14
2023
—
7
18
2024
1
16
2025
2
Total
419
All outstanding liabilities before 2016, net of reinsurance
9
Liabilities for losses and loss adjustment expenses, net of reinsurance
$
311
The following table presents the average annual percentage payout of incurred losses and allocated loss adjustment expenses
by age, net of reinsurance, as of December 31, 2025:
Average annual percentage payout of incurred losses and allocated loss adjustment expenses by age, net of reinsurance
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
U.S. Primary
4.1 %
26.0 %
26.0 %
14.3 %
9.6 %
4.2 %
2.6 %
1.3 %
0.7 %
0.5 %
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
141
2025 FORM 10-K
The following table represents a reconciliation of the
disclosures of net incurred and paid loss development tables
to the reserve for losses and loss adjustment expenses at
December 31, 2025:
December 31,
2025
Net outstanding liabilities
Insurance
Property, energy, marine and aviation
$
975
Third party occurrence business
4,454
Third party claims-made business
2,814
Multi-line and other specialty
2,827
Reinsurance
Casualty
3,785
Property catastrophe
920
Property excluding property catastrophe
2,103
Marine and aviation
612
Specialty
3,669
Mortgage
U.S. primary
311
Other short duration lines not included in disclosures (1)
1,436
Total for short duration lines
23,906
Unpaid losses and loss adjustment expenses recoverable
Insurance
Property, energy, marine and aviation
456
Third party occurrence business
2,893
Third party claims-made business
907
Multi-line and other specialty
436
Reinsurance
Casualty
861
Property catastrophe
911
Property excluding property catastrophe
362
Marine and aviation
549
Specialty
1,386
Mortgage
U.S. primary
42
Other short duration lines not included in disclosures (2)
271
Intercompany eliminations
(20)
Total for short duration lines
9,054
Lines other than short duration
136
Discounting
(78)
Unallocated claims adjustment expenses
529
587
Reserve for losses and loss adjustment expenses
$
33,547
(1)
Includes amounts primarily associated with the loss portfolio
reinsurance agreement related to the MCE Acquisition. See note 2.
(2)
Includes unpaid loss and loss adjustment expenses recoverable of
$121 million related to the loss portfolio transfer reinsurance
agreements.
7.
Allowance for Expected Credit Losses
Premiums Receivable
The following table provides a roll forward of the allowance
for expected credit losses of the Company’s premium
receivables:
Year Ended December 31, 2025
Premium
Receivables,
Net of
Allowance
Allowance for
Expected Credit
Losses
Balance at beginning of period
$
5,634
$
45
Change for provision of expected
credit losses (1)
(2)
Balance at end of period
$
5,723
$
43
Year Ended December 31, 2024
Balance at beginning of period
$
4,644
$
34
Provision on business acquired (2)
16
Change for provision of expected
credit losses (1)
(5)
Balance at end of period
$
5,634
$
45
(1) Amounts deemed uncollectible are written-off in operating expenses.
For the 2025 and 2024 periods, amounts written off totaled $3 million and
$3 million, respectively.
(2) Reflects provision for current expected credit losses on premiums
receivable related to the MCE Acquisition. See note 2.
Reinsurance Recoverables
The Company monitors the financial condition of its
reinsurers and attempts to place coverages only with
substantial, financially sound carriers. Although the
Company has not experienced any material credit losses to
date, an inability of its reinsurers or retrocessionaires to
meet their obligations to it over the relevant exposure
periods for any reason could have a material adverse effect
on its financial condition and results of operations.
The following table provides a roll forward of the allowance
for expected credit losses of the Company’s reinsurance
recoverables:
Year Ended December 31, 2025
Reinsurance
Recoverables,
Net of
Allowance
Allowance for
Expected Credit
Losses
Balance at beginning of period
$
8,260
$
17
Change for provision of expected
credit losses
—
Balance at end of period
$
9,526
$
17
Year Ended December 31, 2024
Balance at beginning of period
$
7,064
$
21
Change for provision of expected
credit losses
(4)
Balance at end of period
8,260
$
17
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142
2025 FORM 10-K
The following table summarizes the Company’s reinsurance
recoverables on paid and unpaid losses (not including ceded
unearned premiums) at December 31, 2025 and 2024:
December 31,
2025
2024
Reinsurance recoverable on unpaid and
paid losses and loss adjustment expenses
$
9,526
$
8,260
% due from carriers with A.M. Best rating
of “A-” or better
62.1 %
63.8 %
% due from all other carriers with no A.M.
Best rating (1)
37.9 %
36.2 %
Largest balance due from any one carrier
as % of total shareholders’ equity
8.1 %
7.8 %
(1)
At December 31, 2025 and 2024 period, over 96% of such amounts
were collateralized through reinsurance trusts, funds withheld
arrangements, letters of credit or other.
Contractholder Receivables
The following table provides a roll forward of the allowance
for expected credit losses of the Company’s contractholder
receivables:
Year Ended December 31, 2025
Contractholder
Receivables,
Net of
Allowance
Allowance for
Expected Credit
Losses
Balance at beginning of period
$
2,161
$
5
Change for provision of expected
credit losses
2
Balance at end of period
$
2,270
$
7
Year Ended December 31, 2024
Balance at beginning of period
$
1,814
$
3
Change for provision of expected
credit losses
2
Balance at end of period
2,161
$
5
8.
Reinsurance
In the normal course of business, the Company’s insurance
subsidiaries cede a portion of their premium through pro
rata and excess of loss reinsurance agreements on a treaty
or facultative basis to third parties. The Company’s
reinsurance subsidiaries participate in “common account”
retrocessional arrangements for certain pro rata treaties.
Such arrangements reduce the effect of individual or
aggregate losses to all companies participating on such
treaties, including the reinsurers, such as the Company’s
reinsurance subsidiaries, and the ceding company. In
addition, the Company’s reinsurance subsidiaries may
purchase retrocessional coverage as part of their risk
management
program.
The
Company’s
mortgage
subsidiaries cede a portion of their premium through quota
share arrangements and enter into various aggregate excess
of loss mortgage reinsurance agreements with various
special
purpose
reinsurance
companies.
Reinsurance
recoverables are recorded as assets, predicated on the
reinsurers’ ability to meet their obligations under the
reinsurance agreements. If the reinsurers are unable to
satisfy their obligations under the agreements, the
Company’s insurance or reinsurance subsidiaries would be
liable for such defaulted amounts.
The effects of reinsurance on the Company’s written and
earned premiums and losses and loss adjustment expenses
with unaffiliated reinsurers were as follows:
Year Ended December 31,
2025
2024
2023
Premiums Written
Direct
$
10,250
$
10,056
$
9,652
Assumed
12,628
11,455
8,751
Ceded
(6,402)
(5,779)
(4,935)
Net
$
16,476
$
15,732
$
13,468
Premiums Earned
Direct
$
10,200
$
9,721
$
9,131
Assumed
13,089
10,880
7,890
Ceded
(6,224)
(5,501)
(4,581)
Net
$
17,065
$
15,100
$
12,440
Losses and Loss
Adjustment Expenses
Direct
$
5,975
$
5,676
$
4,739
Assumed
7,260
6,137
3,975
Ceded
(3,865)
(3,471)
(2,468)
Net
$
9,370
$
8,342
$
6,246
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
143
2025 FORM 10-K
Bellemeade Re
The Company has entered into various aggregate excess of
loss mortgage reinsurance agreements with various special
purpose reinsurance companies domiciled in Bermuda (the
“Bellemeade Agreements”). For the respective coverage
periods, the Company will retain the first layer of the
respective aggregate losses and the special purpose
reinsurance companies will provide second layer coverage
up to the outstanding coverage amount. The Company will
then retain losses in excess of the outstanding coverage
limit. The aggregate excess of loss reinsurance coverage
decreases over a ten-year period as the underlying covered
mortgages amortize. See note 12.
The following table summarizes the respective coverages
and retentions at December 31, 2025:
Bellemeade Entities
(Issue Date)
Initial
Coverage at
Issuance
Current
Coverage
Remaining
Retention, Net
2021-3 Ltd. (1)
$
639
$
35
$
130
2022-1 Ltd. (2)
317
54
135
2022-2 Ltd. (3)
327
134
187
2023-1 Ltd. (4)
233
186
164
2024-1 Ltd. (5)
204
163
170
2025-1 Ltd. (6)
249
239
166
Total
$
1,969
$
811
$
952
(1)
Issued in September 2021, covering in-force policies issued between
April 1, 2021 and June 30, 2021. $508 million was directly funded by
Bellemeade Re 2021-3 Ltd. via insurance-linked notes, with an
additional $131 million capacity provided directly to Arch MI U.S. by a
separate panel of reinsurers.
(2)
Issued in January 2022, covering in-force policies issued between July
1, 2021 and November 30, 2021. $284 million was directly funded by
Bellemeade Re 2022-1 Ltd. via insurance-linked notes, with an
additional $33 million capacity provided directly to Arch MI U.S. by a
separate panel of reinsurers.
(3)
Issued in September 2022, covering in-force policies issued between
November 1, 2021 and June 30, 2022. $201 million was directly
funded by Bellemeade Re 2022-2 Ltd. via insurance-linked notes, with
an additional $126 million capacity provided directly to Arch MI U.S.
by a separate panel of reinsurers.
(4)
Issued in October 2023, covering in-force policies issued between
January 1, 2023 and September 30, 2023. $186 million was directly
funded by Bellemeade Re 2023-1 Ltd. via insurance-linked notes, with
an additional $47 million capacity provided directly to Arch MI U.S. by
a separate panel of reinsurers.
(5)
Issued in August 2024, covering in-force policies issued between
September 1, 2023 and July 31, 2024. $163 million was directly funded
by Bellemeade Re 2024-1 Ltd. via insurance-linked notes, with an
additional $41 million capacity provided directly to Arch MI U.S. by a
separate panel of reinsurers.
(6)
Issued in November 2025, covering in-force policies issued between
July 1, 2024 and September 30, 2025. $199 million was directly funded
by Bellemeade Re 2025-1 Ltd. via insurance-linked notes, with an
additional $50 million capacity provided directly to Arch MI U.S. by a
separate panel of reinsurers.
Table of Contents
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
144
2025 FORM 10-K
9.
Investment Information
Available For Sale Investments
The following table summarizes the fair value and cost or amortized cost of the Company’s securities classified as available for
sale:
Estimated
Fair
Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance for
Expected Credit
Losses
Cost or
Amortized
Cost
December 31, 2025
Fixed maturities:
Corporate bonds
$
14,058
$
265
$
(142) $
(10) $
13,945
U.S. government and government agencies
7,445
23
(21)
—
7,443
Asset backed securities
3,574
20
(15)
(8)
3,577
Non-U.S. government securities
3,270
53
(81)
(1)
3,299
Residential mortgage backed securities
2,705
34
(21)
—
2,692
Commercial mortgage backed securities
1,212
11
(5)
(1)
1,207
Municipal bonds
162
—
(4)
—
166
Total
32,426
406
(289)
(20)
32,329
Short-term investments
2,625
2
(1)
—
2,624
Total
$
35,051
$
408
$
(290) $
(20) $
34,953
December 31, 2024
Fixed maturities:
Corporate bonds
$
12,487
$
110
$
(346) $
(12) $
12,735
U.S. government and government agencies
6,710
8
(149)
—
6,851
Asset backed securities
2,900
19
(32)
(8)
2,921
Non-U.S. government securities
2,538
30
(107)
(1)
2,616
Residential mortgage backed securities
1,079
6
(31)
—
1,104
Commercial mortgage backed securities
1,058
6
(11)
(1)
1,064
Municipal bonds
263
—
(16)
—
279
Total
27,035
179
(692)
(22)
27,570
Short-term investments
2,784
2
(2)
—
2,784
Total
$
29,819
$
181
$
(694) $
(22) $
30,354
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
145
2025 FORM 10-K
The following table summarizes, for all available for sale securities in an unrealized loss position, the fair value and gross
unrealized loss by length of time the security has been in a continual unrealized loss position:
Less than 12 Months
12 Months or More
Total
Estimated Fair
Value
Gross
Unrealized
Losses
Estimated Fair
Value
Gross
Unrealized
Losses
Estimated Fair
Value
Gross
Unrealized
Losses
December 31, 2025
Fixed maturities:
Corporate bonds
$
2,972
$
(64)
$
1,364
$
(78)
$
4,336
$
(142)
U.S. government and government agencies
3,092
(15)
274
(6)
3,366
(21)
Non-U.S. government securities
2,087
(35)
432
(46)
2,519
(81)
Residential mortgage backed securities
312
(3)
178
(18)
490
(21)
Asset backed securities
806
(2)
332
(13)
1,138
(15)
Commercial mortgage backed securities
239
(1)
48
(4)
287
(5)
Municipal bonds
6
—
137
(4)
143
(4)
Total
9,514
(120)
2,765
(169)
12,279
(289)
Short-term investments
614
(1)
—
—
614
(1)
Total
$
10,128
$
(121)
$
2,765
$
(169)
$
12,893
$
(290)
December 31, 2024
Fixed maturities:
Corporate bonds
$
4,582
$
(114)
$
2,924
$
(232)
$
7,506
$
(346)
U.S. government and government agencies
5,130
(100)
516
(49)
5,646
(149)
Non-U.S. government securities
1,650
(58)
418
(49)
2,068
(107)
Residential mortgage backed securities
571
(6)
186
(25)
757
(31)
Asset backed securities
236
(8)
426
(24)
662
(32)
Commercial mortgage backed securities
180
(1)
434
(10)
614
(11)
Municipal bonds
48
(1)
176
(15)
224
(16)
Total
12,397
(288)
5,080
(404)
17,477
(692)
Short-term investments
97
(2)
—
—
97
(2)
Total
$
12,494
$
(290)
$
5,080
$
(404)
$
17,574
$
(694)
At December 31, 2025, on a lot level basis, approximately 7,240 security lots out of a total of approximately 25,330 security
lots were in an unrealized loss position and the largest single unrealized loss from a single lot in the Company’s fixed maturity
portfolio was $4 million. The Company believes that such securities were temporarily impaired at December 31, 2025. At
December 31, 2024, on a lot level basis, approximately 9,980 security lots out of a total of approximately 20,930 security lots
were in an unrealized loss position and the largest single unrealized loss from a single lot in the Company’s fixed maturity
portfolio was $8 million.
The contractual maturities of the Company’s fixed maturities are shown in the following table. Expected maturities, which are
management’s best estimates, will differ from contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
December 31, 2025
December 31, 2024
Maturity
Estimated
Fair Value
Amortized
Cost
Estimated
Fair Value
Amortized
Cost
Due in one year or less
$
370
$
366
$
438
$
451
Due after one year through five years
17,053
16,989
15,364
15,590
Due after five years through 10 years
6,893
6,877
5,811
6,039
Due after 10 years
619
621
385
401
24,935
24,853
21,998
22,481
Mortgage backed securities
2,705
2,692
1,079
1,104
Commercial mortgage backed securities
1,212
1,207
1,058
1,064
Asset backed securities
3,574
3,577
2,900
2,921
Total
$
32,426
$
32,329
$
27,035
$
27,570
Table of Contents
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
146
2025 FORM 10-K
Equity Securities, at Fair Value
At December 31, 2025, the Company held $1.9 billion of
equity securities, at fair value, compared to $1.7 billion at
December 31, 2024.
Net Investment Income
The components of net investment income were derived
from the following sources:
Year Ended December 31,
2025
2024
2023
Fixed maturities
$
1,465
$
1,266
$
917
Short-term investments
102
144
68
Equity securities (dividends)
41
40
22
Other (1)
109
136
93
Gross investment income
1,717
1,586
1,100
Investment expenses
(92)
(91)
(77)
Net investment income
$
1,625
$
1,495
$
1,023
(1)
Amounts include dividends and other distributions on investment
funds, term loan investments, funds held balances, cash balances and
other items.
Net Realized Gains (Losses)
Net realized gains (losses) were as follows:
Year Ended December 31,
2025
2024
2023
Available for sale securities:
Gross gains on investment
sales
$
296
$
259
$
116
Gross losses on investment
sales
(271)
(354)
(547)
Change in fair value of assets
and liabilities accounted for
using the fair value option:
Fixed maturities
29
3
18
Other investments
38
(144)
27
Equity securities
—
(1)
1
Short-term investments
3
—
—
Equity securities, at fair value :
Net realized gains (losses) on
securities sold
84
62
61
Net unrealized gains (losses)
on equity securities still held
at reporting date
130
108
88
Allowance for credit losses:
Investments related
(6)
—
3
Underwriting related
3
5
(1)
Derivative instruments (1)
327
8
59
Other (2)
(169)
251
10
Net realized gains (losses)
$
464
$
197
$
(165)
(1)
See note 11, for information on the Company’s derivative
instruments.
(2)
Amounts in the 2025 periods primarily include losses related to the
sale of certain alternative investments accounted for under the equity
method, while amounts in the 2024 period include benefits from the
sale of Castel Underwriting Agencies Limited and the acquisition of
RMIC Companies, Inc.
Other Investments, at Fair Value
The following table summarizes the Company’s assets and
liabilities which are accounted for using the fair value
option:
December 31,
2025
2024
Other investments
$
1,957
$
2,135
Fixed maturities
1,110
854
Equity securities
5
7
Short-term investments
64
70
Total other investments
$
3,136
$
3,066
The following table summarizes the Company’s other
investments, as detailed in the previous table, by strategy:
December 31,
2025
2024
Investment grade fixed income
1,225
1,055
Private equity
250
229
Lending
220
303
Term loan investments
173
430
Credit related funds
87
99
Energy
2
19
Total
$
1,957
$
2,135
Limited Partnership Interests
In the normal course of its activities, the Company invests in
limited partnerships as part of its overall investment
strategy. Such amounts are included in ‘investments
accounted for using the equity method’ and ‘investments
accounted for using the fair value option.’ The Company
determined that these limited partnership interests
represented variable interests in the funds. The Company’s
maximum exposure to loss with respect to these
investments is limited to the investment carrying amounts
reported in the Company’s consolidated balance sheet and
any unfunded commitment.
The following table summarizes investments in limited
partnership interests where the Company has a variable
interest by balance sheet item:
December 31,
2025
2024
Investments accounted for using the
equity method (1)
$
6,453
$
5,980
Investments accounted for using the fair
value option (2)
—
48
Total
$
6,453
$
6,028
(1) Aggregate unfunded commitments were $3.6 billion at December 31,
2025, compared to $4.3 billion at December 31, 2024.
(2)
Aggregate unfunded commitments were $65 million at December 31,
2025, compared to $21 million at December 31, 2024.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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147
2025 FORM 10-K
Investments Accounted For Using the Equity Method
The following table summarizes the Company’s investments
accounted for using the equity method, by strategy:
December 31,
2025
2024
Private equity
$
2,397
$
1,915
Credit related funds
1,616
1,487
Real estate
767
869
Lending
558
616
Fixed income
501
384
Infrastructure
346
425
Equities
231
217
Energy
37
67
Total
$
6,453
$
5,980
In applying the equity method, investments are initially
recorded at cost and are subsequently adjusted based on
the Company’s proportionate share of the net income or
loss of the funds (which include changes in the fair value of
the underlying securities in the funds). Such investments are
generally recorded on a one to three month lag based on
the availability of reports from the investment funds.
Equity in Net Income (Loss) of Investments Accounted For
Using the Equity Method
The Company recorded equity in net income related to
investments accounted for using the equity method of $504
million for 2025, compared to $580 million for 2024 and
$278 million for 2023. In applying the equity method,
investments are initially recorded at cost and are
subsequently
adjusted
based
on
the
Company’s
proportionate share of the net income or loss of the funds
(which include changes in the market value of the underlying
securities in the funds).
A summary of aggregated financial information for the
Company’s investment funds and operating affiliates
accounted for using the equity method is as follows:
December 31,
2025
2024
Invested assets
$
139,175
$
113,977
Total assets
156,736
132,647
Total liabilities
37,031
36,614
Net assets
$
119,705
$
96,033
Year Ended December 31,
2025
2024
2023
Total revenues
$
21,594
$
19,160
$
7,766
Total expenses
8,643
7,269
7,174
Net income (loss)
$
12,951
$
11,891
$
592
Certain
of
the
Company’s
other
investments
and
investments accounted for using the equity method are in
investment funds for which the Company has the option to
redeem at agreed upon values as described in each
investment fund’s subscription agreement. Depending on
the terms of the various subscription agreements,
investments in investment funds may be redeemed daily,
monthly, quarterly or on other terms. Two common
redemption restrictions which may impact the Company’s
ability to redeem these investment funds are gates and
lockups. A gate is a suspension of redemptions which may
be implemented by the general partner or investment
manager of the fund in order to defer, in whole or in part,
the redemption request in the event the aggregate amount
of
redemption
requests
exceeds
a
predetermined
percentage of the investment fund's net assets which may
otherwise hinder the general partner or investment
manager's ability to liquidate holdings in an orderly fashion
in order to generate the cash necessary to fund
extraordinarily large redemption payouts. A lockup period is
the initial amount of time an investor is contractually
required to hold the security before having the ability to
redeem. If the investment funds are eligible to be
redeemed, the time to redeem such fund can take weeks or
months following the notification.
Investments in Operating Affiliates
Investments in which the Company has significant influence
over the operating and financial policies are classified as
‘investments in operating affiliates’ on the Company’s
balance sheets and are accounted for under the equity
method. Such investments primarily include the Company’s
investment in Coface SA (“Coface”), Greysbridge Holdings
Ltd., (“Greysbridge”) and Premia Holdings Ltd. (“Premia”).
Investments in Coface and Premia are generally recorded on
a three month lag, while the Company’s investment in
Greysbridge is not recorded on a lag.
In 2021, the Company completed the share purchase
agreement with Natixis to purchase 29.5% of the common
equity of Coface, a France-based leader in the global trade
credit insurance market. The consideration paid was €9.95
per share, or an aggregate €453 million (approximately
$546 million) including related fees. As of December 31,
2025, the Company owned approximately 29.9% of the
issued shares of Coface, or 30% excluding treasury shares,
with a carrying value of $707 million, compared to
$592 million at December 31, 2024.
In 2021, the Company’s investment in Somers Group
Holdings Ltd. and its wholly owned subsidiaries (collectively,
“Somers”) was acquired by Greysbridge for a cash purchase
price of $35.00 per common share. As of December 31,
2025, the Company owns 30% of Greysbridge, compared to
40% at December 31, 2024, with the remaining interests
held by third party investors. At December 31, 2025 the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
148
2025 FORM 10-K
Company’s carrying value in Greysbridge was $486 million,
compared to $523 million at December 31, 2024. See note
16.
The Company recorded income from operating affiliates of
$180 million for 2025, compared to $200 million for 2024
and $184 million for 2023.
Allowance for Expected Credit Losses
The following table provides a roll forward of the allowance for expected credit losses of the Company’s securities classified as
available for sale:
Year Ended December 31, 2025
Structured
Securities (1)
Non-U.S.
Government
Securities
Corporate
Bonds
Total
Balance at beginning of period
$
9
$
1
$
12
$
22
Additions for current-period provision for expected credit losses
3
—
2
5
Additions (reductions) for previously recognized expected credit losses
(3)
—
3
—
Reductions due to disposals
—
—
(7)
(7)
Balance at end of period
$
9
$
1
$
10
$
20
Year Ended December 31, 2024
Balance at beginning of period
$
7
$
1
$
20
$
28
Additions for current-period provision for expected credit losses
—
—
—
—
Additions (reductions) for previously recognized expected credit losses
3
—
(3)
—
Reductions due to disposals
(1)
—
(5)
(6)
Balance at end of period
$
9
$
1
$
12
$
22
(1)
Includes asset backed securities, mortgage backed securities and commercial mortgage backed securities.
Restricted Assets
The Company is required to maintain assets on deposit,
which primarily consist of fixed maturities, with various
regulatory
authorities
to
support
its
underwriting
operations. The Company’s subsidiaries maintain assets in
trust accounts as collateral for transactions with affiliated
companies and also have investments in segregated
portfolios primarily to provide collateral or guarantees for
letters of credit to third parties
The following table details the value of the Company’s
restricted assets:
December 31,
2025
2024
Assets used for collateral or guarantees:
Affiliated transactions
$
5,323
$
4,730
Third party agreements
6,784
5,999
Deposits with U.S. regulatory authorities
948
882
Other (1)
1,898
1,437
Total restricted assets
$
14,953
$
13,048
(1) Primarily includes Funds at Lloyd’s, deposits with non-U.S. regulatory
authorities and other restricted assets.
Reconciliation of Cash and Restricted Cash
The following table details reconciliation of cash and
restricted cash within the Consolidated Balance Sheets:
December 31,
2025
2024
2023
Cash
$
993
$
979
$
917
Restricted cash (included in
‘other assets’)
1,074
781
581
Cash and restricted cash
$
2,067
$
1,760
$
1,498
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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149
2025 FORM 10-K
10. Fair Value
Accounting guidance regarding fair value measurements
addresses how companies should measure fair value when
they are required to use a fair value measure for recognition
or disclosure purposes under GAAP and provides a common
definition of fair value to be used throughout GAAP. It
defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly fashion
between market participants at the measurement date. In
addition, it establishes a three-level valuation hierarchy for
the disclosure of fair value measurements. The valuation
hierarchy is based upon the transparency of inputs to the
valuation of an asset or liability as of the measurement date.
The level in the hierarchy within which a given fair value
measurement falls is determined based on the lowest level
input that is significant to the measurement (Level 1 being
the highest priority and Level 3 being the lowest priority).
The levels in the hierarchy are defined as follows:
Level 1:
Inputs to the valuation methodology are
observable inputs that reflect quoted prices
(unadjusted) for identical assets or liabilities in
active markets
Level 2:
Inputs to the valuation methodology include
quoted prices for similar assets and liabilities in
active markets, and inputs that are observable
for the asset or liability, either directly or
indirectly, for substantially the full term of the
financial instrument
Level 3:
Inputs to the valuation methodology are
unobservable and significant to the fair value
Following is a description of the valuation methodologies
used for securities measured at fair value, as well as the
general classification of such securities pursuant to the
valuation hierarchy. The Company reviews its securities
measured at fair value and discusses the proper
classification of such investments with investment advisers
and others.
The Company determines the existence of an active market
based on its judgment as to whether transactions for the
financial instrument occur in such market with sufficient
frequency
and
volume
to
provide
reliable
pricing
information. The independent pricing sources obtain market
quotations and actual transaction prices for securities that
have quoted prices in active markets. The Company uses
quoted values and other data provided by nationally
recognized independent pricing sources as inputs into its
process for determining fair values of its fixed maturity
investments. To validate the techniques or models used by
pricing sources, the Company's review process includes, but
is not limited to: (i) quantitative analysis (e.g., comparing the
quarterly return for each managed portfolio to its target
benchmark, with significant differences identified and
investigated); (ii) a review of the prices obtained in the
pricing process and the range of resulting fair values; (iii)
initial and ongoing evaluation of methodologies used by
outside parties to calculate fair value; (iv) a comparison of
the fair value estimates to the Company’s knowledge of the
current market; (v) a comparison of the pricing services' fair
values to other pricing services' fair values for the same
investments; and (vi) periodic back-testing, which includes
randomly selecting purchased or sold securities and
comparing the executed prices to the fair value estimates
from the pricing service. A price source hierarchy was
maintained in order to determine which price source would
be used (i.e., a price obtained from a pricing service with
more seniority in the hierarchy will be used over a less
senior one in all cases). The hierarchy prioritizes pricing
services based on availability and reliability and assigns the
highest priority to index providers. Based on the above
review, the Company will challenge any prices for a security
or portfolio which are considered not to be representative of
fair value.
In certain circumstances, when fair values are unavailable
from these independent pricing sources, quotes are
obtained directly from broker-dealers who are active in the
corresponding markets. Such quotes are subject to the
validation procedures noted above. Of the $40.3 billion of
financial assets and liabilities measured at fair value at
December 31, 2025, approximately $278 million, or 0.7%,
were priced using non-binding broker-dealer quotes. Of the
$35.0 billion of financial assets and liabilities measured at
fair value at December 31, 2024, approximately $185
million, or 0.5%, were priced using non-binding broker-
dealer quotes.
Fixed maturities
The Company uses the market approach valuation technique
to estimate the fair value of its fixed maturity securities,
when possible. The market approach includes obtaining
prices from independent pricing services, such as index
providers and pricing vendors, as well as to a lesser extent
quotes from broker-dealers. The independent pricing
sources obtain market quotations and actual transaction
prices for securities that have quoted prices in active
markets. Each source has its own proprietary method for
determining the fair value of securities that are not actively
traded. In general, these methods involve the use of “matrix
pricing” in which the independent pricing source uses
observable market inputs including, but not limited to,
investment yields, credit risks and spreads, benchmarking of
like securities, broker-dealer quotes, reported trades and
sector groupings to determine a reasonable fair value. The
following describes the significant inputs generally used to
determine the fair value of the Company’s fixed maturity
securities by asset class:
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2025 FORM 10-K
U.S. government and government agencies – valuations
provided by independent pricing services, with all prices
provided through index providers and pricing vendors. The
Company determined that all U.S. Treasuries would be
classified as Level 1 securities due to observed levels of
trading activity, the high number of strongly correlated
pricing quotes received on U.S. Treasuries and other factors.
The fair values of U.S. government agency securities are
generally 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. government agency securities are
classified within Level 2.
Corporate bonds – valuations provided by independent
pricing services, substantially all through index providers and
pricing vendors with a small amount through broker-dealers.
The fair values of these securities are generally determined
using the spread above the risk-free yield curve. These
spreads are generally obtained from the new issue market,
secondary trading and from broker-dealers who trade in the
relevant security market. As the significant inputs used in
the pricing process for corporate bonds are observable
market inputs, the fair value of these securities are classified
within Level 2. A small number of securities are included in
Level 3 due to the lack of an available independent price
source for such securities. As the significant inputs used to
price these securities are unobservable, the fair value of
such securities are classified as Level 3.
Residential
mortgage-backed
securities
–
valuations
provided by independent pricing services, substantially all
through pricing vendors and index providers with a small
amount through broker-dealers. The fair values of these
securities are generally determined through the use of
pricing models (including Option Adjusted Spread) which use
spreads to determine the expected average life of the
securities. These spreads are generally obtained from the
new issue market, secondary trading and from broker-
dealers who trade in the relevant security market. The
pricing services also review prepayment speeds and other
indicators, when applicable. As the significant inputs used in
the pricing process for mortgage-backed securities are
observable market inputs, the fair value of these securities
are classified within Level 2.
Municipal bonds – valuations provided by independent
pricing services, with all prices provided through index
providers and pricing vendors. The fair values of these
securities are generally determined using spreads obtained
from broker-dealers who trade in the relevant security
market, trade prices and the new issue market. As the
significant inputs used in the pricing process for municipal
bonds are observable market inputs, the fair value of these
securities are classified within Level 2.
Commercial
mortgage-backed
securities
–
valuations
provided by independent pricing services, substantially all
through index providers and pricing vendors with a small
amount through broker-dealers. The fair values of these
securities are generally determined through the use of
pricing models which use spreads to determine the
appropriate average life of the securities. These spreads are
generally obtained from the new issue market, secondary
trading and from broker-dealers who trade in the relevant
security market. As the significant inputs used in the pricing
process for commercial mortgage-backed securities are
observable market inputs, the fair value of these securities
are classified within Level 2.
Non-U.S. government securities – valuations provided by
independent pricing services, with all prices provided
through index providers and pricing vendors. The fair values
of these securities are generally based on international
indices or valuation models which include daily observed
yield curves, cross-currency basis index spreads and country
credit spreads. As the significant inputs used in the pricing
process for non-U.S. government securities are observable
market inputs, the fair value of these securities are classified
within Level 2.
Asset-backed
securities
–
valuations
provided
by
independent pricing services, substantially all through index
providers and pricing vendors with a small amount through
broker-dealers. The fair values of these securities are
generally determined through the use of pricing models
(including Option Adjusted Spread) which use spreads to
determine the appropriate average life of the securities.
These spreads are generally obtained from the new issue
market, secondary trading and from broker-dealers who
trade in the relevant security market. As the significant
inputs used in the pricing process for asset-backed securities
are observable market inputs, the fair value of these
securities are classified within Level 2. A small number of
securities are included in Level 3 due to a low level of
transparency on the inputs used in the pricing process.
Equity securities
The Company determined that exchange-traded equity
securities would be included in Level 1 as their fair values
are based on quoted market prices in active markets. Other
equity securities are included in Level 2 of the valuation
hierarchy. A small number of securities are included in Level
3 due to the lack of an available independent price source
for such securities. As the significant inputs used to price
these securities are unobservable, the fair value of such
securities are classified as Level 3.
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Other investments
The
Company
determined
that
exchange-traded
investments would be included in Level 1 as their fair values
are based on quoted market prices in active markets. Other
investments also include term loan investments for which
fair values are estimated by using quoted prices of term loan
investments with similar characteristics, pricing models or
matrix pricing. Such investments are generally classified
within Level 2. A small number of securities are included in
Level 3 due to the lack of an available independent price
source for such securities.
Derivative instruments
The Company’s futures contracts, foreign currency forward
contracts, interest rate swaps and other derivatives trade in
the over-the-counter derivative market. The Company uses
the market approach valuation technique to estimate the
fair value for these derivatives based on significant
observable market inputs from third party pricing vendors,
non-binding broker-dealer quotes and/or recent trading
activity. As the significant inputs used in the pricing process
for these derivative instruments are observable market
inputs, the fair value of these securities are classified within
Level 2.
Short-term investments
The Company determined that certain of its short-term
investments held in highly liquid money market-type funds,
Treasury bills and commercial paper would be included in
Level 1 as their fair values are based on quoted market
prices in active markets. The fair values of certain short-term
investments are generally determined using the spread
above the risk-free yield curve and are classified within Level
2. Other short-term investments are included in Level 3 due
to the lack of an available independent price source for such
securities. As the significant inputs used to price these short-
term securities are unobservable, the fair value of such
securities are classified as Level 3.
Residential mortgage loans
The Company’s residential mortgage loans (included in
‘other assets’ in the consolidated balance sheets) include
amounts related to the Company’s whole mortgage loan
purchase and sell program. Fair values of residential
mortgage loans are generally determined based on market
prices. As significant inputs used in pricing process for these
residential mortgage loans are observable market inputs,
the fair value of these securities are classified within Level 2.
Other liabilities
The Company’s other liabilities include contingent and
deferred consideration liabilities related to the Company’s
acquisitions.
Contingent
consideration
liabilities
are
remeasured at fair value at each balance sheet date with
changes in fair value recognized in ‘net realized gains
(losses).’ To determine the fair value of contingent
consideration liabilities, the Company estimates the future
payments using an income approach based on modeled
inputs which include a weighted average cost of capital.
Deferred consideration liabilities are measured at fair value
on the transaction date. The Company determined that
contingent and deferred consideration liabilities would be
included within Level 3.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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152
2025 FORM 10-K
The following table presents the Company’s financial assets and liabilities measured at fair value by level at December 31,
2025:
Fair Value Measurement Using:
Estimated
Fair Value
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets measured at fair value:
Available for sale securities:
Fixed maturities:
Corporate bonds
$
14,058
$
—
$
13,930
$
128
U.S. government and government agencies
7,445
7,445
—
—
Asset backed securities
3,574
—
3,557
17
Non-U.S. government securities
3,270
—
3,270
—
Residential mortgage backed securities
2,705
—
2,705
—
Commercial mortgage backed securities
1,212
—
1,212
—
Municipal bonds
162
—
162
—
Total
32,426
7,445
24,836
145
Short-term investments
2,625
2,326
299
—
Equity securities, at fair value
1,864
1,829
26
9
Derivative instruments (1)
180
—
180
—
Residential mortgage loans
24
—
24
—
Fair value option:
Corporate bonds
1,102
—
1,102
—
Non-U.S. government bonds
3
—
3
—
Asset backed securities
—
—
—
—
U.S. government and government agencies
5
5
—
—
Short-term investments
64
2
22
40
Equity securities
5
—
—
5
Other investments
398
—
166
232
Other investments measured at net asset value (2)
1,559
Total
3,136
7
1,293
277
Total assets measured at fair value
$
40,255
$
11,607
$
26,658
$
431
Liabilities measured at fair value:
Other liabilities
$
(18) $
—
$
—
$
(18)
Derivative instruments (1)
(72)
—
(72)
—
Total liabilities measured at fair value
$
(90) $
—
$
(72) $
(18)
(1)
See note 11.
(2)
In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its
equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to
permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
153
2025 FORM 10-K
The following table presents the Company’s financial assets and liabilities measured at fair value by level at December 31,
2024:
Fair Value Measurement Using:
Estimated
Fair Value
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets measured at fair value:
Available for sale securities:
Fixed maturities:
Corporate bonds
$
12,487
$
—
$
12,390
$
97
U.S. government and government agencies
6,710
6,709
1
—
Asset backed securities
2,900
—
2,900
—
Non-U.S. government securities
2,538
—
2,538
—
Residential mortgage backed securities
1,079
—
1,079
—
Commercial mortgage backed securities
1,058
—
1,058
—
Municipal bonds
263
—
263
—
Total
27,035
6,709
20,229
97
Equity securities, at fair value
1,675
1,640
28
7
Short-term investments
2,784
2,704
80
—
Derivative instruments (1)
206
—
206
—
Residential mortgage loans
15
—
15
—
Fair value option:
Corporate bonds
832
—
832
—
Non-U.S. government bonds
8
—
8
—
Asset backed securities
—
—
—
—
U.S. government and government agencies
14
14
—
—
Short-term investments
70
—
37
33
Equity securities
6
2
—
4
Other investments
752
—
563
189
Other investments measured at net asset value (2)
1,383
Total
3,065
16
1,440
226
Total assets measured at fair value
$
34,780
$
11,069
$
21,998
$
330
Liabilities measured at fair value:
Other liabilities
$
(73) $
—
$
—
$
(73)
Derivative instruments (1)
(115)
—
(115)
—
Total liabilities measured at fair value
$
(188) $
—
$
(115) $
(73)
(1)
See note 11.
(2)
In accordance with applicable accounting guidance, certain investments that are measured at fair value using the net asset value per share (or its
equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to
permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
154
2025 FORM 10-K
The following table presents a reconciliation of the beginning and ending balances for all financial assets and liabilities
measured at fair value on a recurring basis using Level 3 inputs for 2025 and 2024:
Assets
Liabilities
Available For Sale
Fair Value Option
Fair Value
Structured
Securities (1)
Corporate
Bonds
Short-term
Investments
Other
Investments
Short-term
Investments
Equity
Securities
Equity
Securities
Other
Liabilities
Year Ended December 31, 2025
Balance at beginning of year
$
— $
97 $
—
$
189 $
33 $
4
$
7
$
(73)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)
—
1
—
—
—
1
—
2
income
—
1
—
—
—
—
—
(2)
Purchases, issuances, sales and
Purchases
14
1
—
190
67
—
2
—
Issuances
—
—
—
—
—
—
—
—
Sales
—
—
—
(5)
—
—
—
—
Settlements
(2)
(60)
—
(146)
(60)
—
—
55
Transfers in and/or out of Level 3
5
88
—
4
—
—
—
—
Balance at end of year
$
17 $
128 $
—
$
232 $
40 $
5
$
9
$
(18)
Year Ended December 31, 2024
Balance at beginning of year
$
— $
147 $
84
$
106 $
10 $
4
$
5
$
(22)
Total gains or (losses) (realized/unrealized)
Included in earnings (2)
—
1
—
(5)
—
—
—
10
income
—
2
1
—
—
—
—
1
Purchases, issuances, sales and
Purchases
—
100
12
148
41
—
2
—
Issuances
—
—
—
—
—
—
—
(64)
Sales
—
—
—
(5)
—
—
—
—
Settlements
—
(153)
(97)
(70)
(18)
—
—
2
Transfers in and/or out of Level 3
—
—
—
15
—
—
—
—
Balance at end of year
$
— $
97 $
—
$
189 $
33 $
4
$
7
$
(73)
(1) Includes asset backed securities, mortgage backed securities and commercial mortgage backed securities.
(2) Gains or losses were included in net realized gains (losses).
Financial Instruments Disclosed, But Not Carried, At Fair
Value
The Company uses various financial instruments in the
normal course of its business. The carrying values of cash,
accrued investment income, receivable for securities sold,
certain other assets, payable for securities purchased and
certain other liabilities approximated their fair values at
December 31, 2025, due to their respective short maturities.
As these financial instruments are not actively traded, their
respective fair values are classified within Level 2.
At December 31, 2025, the Company’s senior notes were
carried at their cost, net of debt issuance costs, of $2.7
billion and had a fair value of $2.5 billion. At December 31,
2024, the Company’s senior notes were carried at their cost,
net of debt issuance costs, of $2.7 billion and had a fair value
of $2.4 billion. The fair values of the senior notes were
obtained from a third party pricing service and are based on
observable market inputs. As such, the fair value of the
senior notes is classified within Level 2.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
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2025 FORM 10-K
Fair Value Measurements on a Non-Recurring Basis
The Company measures the fair value of certain assets on a
non-recurring basis, generally quarterly, annually, or when
events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable.
These assets include investments accounted for using the
equity method, certain other investments, goodwill and
intangible assets, and long-lived assets. The Company uses a
variety of techniques to measure the fair value of these
assets when appropriate, as described below:
Investments accounted for using the equity method. When
the Company determines that the carrying value of these
assets may not be recoverable, the Company records the
assets at fair value with the loss recognized in income. In
such cases, the Company measures the fair value of these
assets using the techniques discussed above in “—Fair Value
Measurements on a Recurring Basis.”
Goodwill and Intangible Assets. The Company tests goodwill
and intangible assets annually for impairment or whenever
events or changes in circumstances indicate the carrying
amount may not be recoverable. When the Company
determines goodwill and intangible assets may be impaired,
the Company uses techniques including discounted expected
future cash flows, to measure fair value.
Long-Lived Assets. The Company tests its long-lived assets
for
impairment
whenever
events
or
changes
in
circumstances indicate the carrying amount of a long-lived
asset may not be recoverable.
11. Derivative Instruments
The Company’s investment strategy allows for the use of
derivative
instruments.
The
Company’s
derivative
instruments are recorded on its consolidated balance sheets
at fair value. The Company utilizes exchange traded U.S.
Treasury note, Eurodollar and other futures contracts and
commodity futures to manage portfolio duration or replicate
investment positions in its portfolios and the Company
routinely utilizes foreign currency forward contracts,
currency options, index futures contracts and other
derivatives as part of its total return objective. In addition,
certain of the Company’s investments are managed in
portfolios which incorporate the use of foreign currency
forward contracts which are intended to provide an
economic hedge against foreign currency movements.
The following table summarizes information on the fair
values and notional values of the Company’s derivative
instruments:
Estimated Fair Value
Asset
Derivatives (1)
Liability
Derivatives (1)
Notional
Value (2)
December 31, 2025
Futures contracts
$
81
$
(19) $
8,022
Foreign currency
forward contracts
75
(38)
2,458
Other (3)
24
(15)
161
Total
$
180
$
(72)
December 31, 2024
Futures contracts
$
78
$
(46) $
4,781
Foreign currency
forward contracts
90
(48)
1,698
Other (3)
38
(21)
236
Total
$
206
$
(115)
(1)
The fair value of asset derivatives are included in ‘other assets’ and
the fair value of liability derivatives are included in ‘other liabilities.’
(2)
Represents the absolute notional value of all outstanding contracts,
consisting of long and short positions.
(3)
Includes swaps, options and other derivatives contracts.
The Company did not hold any derivatives which were
designated as hedging instruments at December 31, 2025 or
2024.
The Company’s derivative instruments can be traded under
master netting agreements, which establish terms that apply
to all derivative transactions with a counterparty. In the
event of a bankruptcy or other stipulated event of default,
such agreements provide that the non-defaulting party may
elect to terminate all outstanding derivative transactions, in
which case all individual derivative positions (loss or gain)
with a counterparty are closed out and netted and replaced
with a single amount, usually referred to as the termination
amount, which is expressed in a single currency. The
resulting single net amount, where positive, is payable to
the party “in-the-money” regardless of whether or not it is
the defaulting party, unless the parties have agreed that
only the non-defaulting party is entitled to receive a
termination payment where the net amount is positive and
is in its favor.
At December 31, 2025, $180 million and $72 million,
respectively, of asset derivatives and liability derivatives
were subject to a master netting agreement compared to
$206 million and $115 million, respectively, at December 31,
2024. The remaining derivatives included in the table above
were not subject to a master netting agreement.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
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2025 FORM 10-K
Realized and unrealized contract gains and losses on the
Company’s derivative instruments are reflected in ‘net
realized gains (losses)’ in the consolidated statements of
income, as summarized in the following table:
Derivatives not designated as
hedging instruments
Year Ended December 31,
2025
2024
2023
Net realized gains (losses):
Futures contracts
$
211
$
4
$
49
Foreign currency forward
contracts
65
(6)
21
Other (1)
51
10
(11)
Total
$
327
$
8
$
59
(1) Includes realized gains or losses on swaps, options and other derivatives
contracts.
12. Variable Interest Entities
Bellemeade Re
The Company has entered into aggregate excess of loss
mortgage reinsurance agreements with various special
purpose reinsurance companies domiciled in Bermuda (the
“Bellemeade Agreements”). At the time the Bellemeade
Agreements were entered into, the applicability of the
accounting guidance that addresses VIEs was evaluated. As a
result of the evaluation of the Bellemeade Agreements, the
Company concluded that these entities are VIEs. However,
given that the ceding insurers do not have the unilateral
power to direct those activities that are significant to their
economic performance, the Company does not consolidate
such entities in its consolidated financial statements. The
reinsurance premium paid in regard to the Bellemeade
Agreements is calculated by multiplying the outstanding
reinsurance coverage amount at the beginning of the period
by the coupon rate, which is the SOFR plus a contractual risk
margin, less the actual investment income collected during
the preceding month on the assets included in the
underlying reinsurance trusts. In the event the assets
included in the underlying reinsurance trusts became
severely impaired or worthless and the special purpose
reinsurance companies were unable to meet their future
obligations, the Company’s mortgage insurance subsidiaries
would be liable to fulfill claim payments to policyholders.
The Company’s maximum exposure to loss associated with
these VIEs is determined as the amount of mortgage
insurance claim payments on the insured policies, net of
aggregate reinsurance payments previously received, up to
the full aggregate excess of loss reinsurance coverage
amounts.
The following table summarizes the total assets of the
Bellemeade entities:
December 31, 2025
December 31, 2024
Bellemeade Entities
(Issue Date)
Total VIE
Assets
Coverage
Remaining
from
Reinsurers (1)
Total VIE Assets
2021-3 Ltd. (Sep-21)
$
21
$
14
$
363
2022-1 Ltd. (Jan-22)
42
12
202
2022-2 Ltd. (Sep-22)
43
91
180
2023-1 Ltd. (Oct-23)
149
37
186
2024-1 Ltd. (Aug-24)
130
33
163
2025-1 Ltd. (Nov-25)
191
48
—
Total
$
576
$
235
$
1,094
(1) Coverage from a separate panel of reinsurers remaining at
December 31, 2025.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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157
2025 FORM 10-K
13. Other Comprehensive Income (Loss)
The following table presents the changes in each component of AOCI, net of noncontrolling interests:
Unrealized
Appreciation on
Available-For-Sale
Investments
Foreign Currency
Translation
Adjustments
Total
Year Ended December 31, 2025
Beginning balance
$
(507) $
(213) $
(720)
Other comprehensive income (loss) before reclassifications
661
84
745
Amounts reclassified from accumulated other comprehensive income
(20)
—
(20)
Net current period other comprehensive income (loss)
641
84
725
Ending balance
$
134
$
(129) $
5
Year Ended December 31, 2024
Beginning balance
$
(565) $
(111) $
(676)
Other comprehensive income (loss) before reclassifications
(23)
(102)
(125)
Amounts reclassified from accumulated other comprehensive income
81
—
81
Net current period other comprehensive income (loss)
58
(102)
(44)
Ending balance
$
(507) $
(213) $
(720)
Year Ended December 31, 2023
Beginning balance
$
(1,512) $
(134) $
(1,646)
Other comprehensive income (loss) before reclassifications
547
23
570
Amounts reclassified from accumulated other comprehensive income
400
—
400
Net current period other comprehensive income (loss)
947
23
970
Ending balance
$
(565) $
(111) $
(676)
The following tables present details about amounts reclassified from accumulated other comprehensive income and the tax
effects allocated to each component of other comprehensive income (loss):
Consolidated Statement of Income
Amounts Reclassified from AOCI
Details About
Line Item That Includes
Year Ended December 31,
AOCI Components
Reclassification
2025
2024
2023
Unrealized appreciation on available-for-sale investments
Net realized gains (losses)
$
25
$
(95) $
(431)
Provision for credit losses
(6)
—
3
Total before tax
19
(95)
(428)
Income tax (expense) benefit
1
14
28
Net of tax
$
20
$
(81) $
(400)
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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
158
2025 FORM 10-K
Following are the related tax effects allocated to each component of other comprehensive income (loss):
Before Tax
Tax Expense
Net of Tax
Amount
(Benefit)
Amount
Year Ended December 31, 2025
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period
$
707
$
46
$
661
Less reclassification of net realized gains (losses) included in net income
19
(1)
20
Foreign currency translation adjustments
86
2
84
Other comprehensive income (loss)
$
774
$
49
$
725
Year Ended December 31, 2024
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period
$
(23)
$
—
$
(23)
Less reclassification of net realized gains (losses) included in net income
(95)
(14)
(81)
Foreign currency translation adjustments
(105)
(3)
(102)
Other comprehensive income (loss)
$
(33)
$
11
$
(44)
Year Ended December 31, 2023
Unrealized appreciation (decline) in value of investments:
Unrealized holding gains (losses) arising during period
$
617
$
70
$
547
Less reclassification of net realized gains (losses) included in net income
(428)
(28)
(400)
Foreign currency translation adjustments
23
—
23
Other comprehensive income (loss)
$
1,068
$
98
$
970
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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
159
2025 FORM 10-K
14. Earnings Per Common Share
The calculation of basic earnings per common share is computed by dividing income available to Arch common shareholders
by the weighted average number of Common Shares and common share equivalents outstanding. The following table sets
forth the computation of basic and diluted earnings per common share:
Year Ended December 31,
2025
2024
2023
Numerator:
Net income
$
4,399
$
4,312
$
4,442
Amounts attributable to noncontrolling interests
—
—
1
Net income available to Arch
4,399
4,312
4,443
Preferred dividends
(40)
(40)
(40)
Net income available to Arch common shareholders
$
4,359
$
4,272
$
4,403
Denominator:
Weighted average common shares outstanding
368.4
372.5
368.7
Effect of dilutive common share equivalents:
Nonvested restricted shares
1.6
2.1
2.5
Stock options (1)
5.9
7.2
7.6
Weighted average common shares and common share equivalents outstanding – diluted
375.9
381.8
378.8
Earnings per common share:
Basic
$
11.83
$
11.47
$
11.94
Diluted
$
11.60
$
11.19
$
11.62
(1)
Certain stock options were not included in the computation of diluted earnings per share where the exercise price of the stock options exceeded the
average market price and would have been anti-dilutive or where, when applying the treasury stock method to in-the-money options, the sum of the
proceeds, including unrecognized compensation, exceeded the average market price and would have been anti-dilutive. For 2025, 2024 and 2023, the
number of stock options excluded were 2.4 million, 2.2 million and 0.5 million, respectively.
15. Income Taxes
Arch Capital is incorporated under the laws of Bermuda and,
under Bermuda law in effect prior to 2025, was not
obligated to pay taxes on income or capital gains in
Bermuda. Upon its formation in 2000, the Company received
a written undertaking from the Minister of Finance in
Bermuda under the Exempted Undertakings Tax Protection
Act 1966 assuring that, in the event that any legislation is
enacted in Bermuda imposing any tax computed on profits,
income, gain or appreciation on any capital asset, or any tax
in the nature of estate duty or inheritance tax, such tax will
not be applicable to Arch Capital or any of its operations
until March 31, 2035. However, on December 27, 2023, the
Government of Bermuda enacted the Bermuda Corporate
Income Tax Act (“Bermuda CIT Act”), imposing a 15% tax on
certain Bermuda constituent entities of multi-national
groups for tax years beginning on or after January 1, 2025.
The Bermuda CIT Act was drafted to supersede the
Company’s previously granted tax assurance, resulting in the
Company becoming subject to Bermuda corporate income
tax starting in 2025.
The Bermuda CIT Act and amendments, together with the
widespread adoption of the OECD Pillar II minimum tax
proposal, has resulted in an increase to the minimum
effective tax rate to approximately 15% in most jurisdictions
in which Arch operates.
Arch Capital has subsidiaries and branches that operate in
various jurisdictions around the world. The significant
jurisdictions in which Arch Capital’s subsidiaries and
branches are subject to tax are the United States, Bermuda,
United Kingdom, Ireland, Switzerland, Australia, Canada, and
Gibraltar.
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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
160
2025 FORM 10-K
The components of income taxes attributable to operations
were as follows:
Year Ended December 31,
2025
2024
2023
Current expense (benefit):
Federal - Bermuda
$
211
$
1
$
7
Foreign - United States
270
332
251
Foreign - Other
105
64
30
586
397
288
Deferred expense (benefit):
Federal - Bermuda
100
12
(1,179)
Foreign - United States
60
(21)
(20)
Foreign - Other
14
(26)
38
174
(35)
(1,161)
Income tax expense (benefit)
$
760
$
362
$
(873)
The Company’s income or loss before income taxes was
earned in the following jurisdictions:
Year Ended December 31,
2025
2024
2023
Income (Loss) Before Income Taxes:
Domestic - Bermuda
$
3,121
$
2,611
$
2,099
Foreign - United States
1,660
1,438
1,239
Foreign - Other
378
625
232
Total
$
5,159
$
4,674
$
3,570
The expected tax provision computed on pre-tax income or
loss at the weighted average tax rate has been calculated as
the sum of the pre-tax income in each jurisdiction multiplied
by that jurisdiction’s applicable statutory tax rate. The 2025
applicable statutory tax rates by jurisdiction were as follows:
Australia (30.0%), Canada (25.7%) United Kingdom (25.0%),
United States (21.0%), Switzerland (19.6%), Bermuda
(15.0%), Gibraltar (15.0%) and Ireland (12.5%).
The following table presents a reconciliation of the
difference between the provision for income taxes and the
expected tax provision at the Bermuda statutory income tax
rate:
Year Ended December 31,
2025
Impact
Bermuda Federal Statutory Tax Rate
$
774
15.0 %
Foreign tax effects
United States
Tax rate differential
99
1.9 %
Other
(17)
(0.3) %
Bermuda
Foreign tax credits
(56)
(1.1) %
Other
20
0.4 %
United Kingdom
Effect of cross-border tax laws
45
0.9 %
Other
9
0.2 %
Other foreign taxes
7
0.1 %
Effect of changes in tax laws or rates
enacted in the current period
(65)
(1.3) %
Nontaxable or nondeductible items / other
Investment income
(54)
(1.0) %
Other
(22)
(0.4) %
Other
20
0.3 %
Total
$
760
14.7 %
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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
161
2025 FORM 10-K
A reconciliation of the difference between the provision for
income taxes and the expected tax provision at the weighted
average tax rate follows:
Year Ended December 31,
2024
2023
Expected income tax expense (benefit)
computed on pre-tax income at weighted
average income tax rate
$
424
$
300
Addition (reduction) in income tax expense
(benefit) resulting from:
Sale of subsidiaries/Bargain purchase option
(45)
—
Investment income
(39)
(14)
Change in tax rate
12
(1,179)
Share based compensation
(11)
(13)
Tax credits
(5)
(3)
Base eroding tax/Alternative minimum tax
5
9
State taxes, net of U.S. federal tax benefit
4
6
Change in valuation allowance
3
4
Uncertain tax position
3
—
Dividend withholding taxes
3
9
Other
8
8
Income tax expense (benefit)
$
362
$
(873)
The effect of a change in tax laws or rates on deferred
income tax assets and liabilities is recognized in income in
the period in which such change is enacted.
Deferred income tax assets and liabilities reflect temporary
differences based on enacted tax rates between the carrying
amounts of assets and liabilities for financial reporting and
income tax purposes.
Significant components of the Company’s deferred income
tax assets and liabilities were as follows:
December 31,
2025
2024
Deferred income tax assets:
Net operating loss
$
72
$
77
Discounting of net loss reserves
116
203
Net unearned premium reserve
243
190
Compensation liabilities
99
75
Foreign tax credit carryforward
54
22
Goodwill and intangible assets
835
1,034
Bad debt reserves
18
15
Depreciation and amortization
137
151
Lease liability
31
32
Net unrealized decline of investments
41
77
Fair value adjustment to senior notes
47
41
Advance claim payments
59
—
Other, net
10
—
Deferred income tax assets before valuation
allowance
1,762
1,917
Valuation allowance
(46)
(18)
Deferred income tax assets net of valuation allowance
1,716
1,899
Deferred income tax liabilities:
Lloyds year of account deferral
(18)
(19)
Contingency reserve
(104)
(27)
Deferred policy acquisition costs
(77)
(143)
Investment related
(78)
(43)
Right-of-use asset
(23)
(25)
Other
—
(6)
Total deferred income tax liabilities
(300)
(263)
Net deferred income tax assets
$ 1,416
$ 1,636
The Company provides a valuation allowance to reduce the
net value of certain deferred income tax assets to an
amount which management expects to more likely than not
be realized. As of December 31, 2025, the Company’s
valuation allowance was $46 million, compared to $18
million at December 31, 2024. The valuation allowance at
December 31, 2025, was primarily attributable to Foreign
Tax Credits generated by the Company’s branch in
Switzerland, and Net Operating Losses related to the
Company’s operations in Australia, Gibraltar and Hong Kong.
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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
162
2025 FORM 10-K
At December 31, 2025, the Company’s net operating loss
carryforwards and tax credits were as follows:
Year Ended December 31,
2025
Expiration
Operating Loss Carryforwards
United Kingdom
$
118
No expiration
United States (1)
70
2029 - 2038
Australia
44
No expiration
Hong Kong
39
No expiration
Gibraltar
31
No expiration
Ireland
30
No expiration
Cyprus
1
No expiration
Netherlands
1
No expiration
Tax Credits
Ireland foreign tax credits
27
No expiration
U.K. foreign tax credits
20
No expiration
U.S. foreign tax credits
9
2031 - 2035
(1) The Company’s U.S. operations have recorded $70 million of net
operating loss (“NOL”) carryforwards that are subject to annual usage
limitations under Section 382 of the Internal Revenue Code (“the Code”).
The Company’s U.S. mortgage operations are eligible for a
tax deduction, subject to certain limitations, under Section
832(e) of the Code for amounts required by state law or
regulation to be set aside in statutory contingency reserves.
The deduction is allowed only to the extent that the
Company purchases non-interest bearing U.S. Mortgage
Guaranty Tax and Loss Bonds (“T&L Bonds”) issued by the
U.S. Treasury Department in an amount equal to the tax
benefit derived from deducting any portion of the statutory
contingency reserves. T&L Bonds are reflected in ‘other
assets’ on the Company’s balance sheet and totaled
approximately $107 million at December 31, 2025,
compared to $47 million at December 31, 2024.
Deferred income tax liabilities have not been accrued with
respect to the undistributed earnings of the Company's U.S.,
U.K.,
Ireland,
and
Canadian
subsidiaries
because
Management has concluded that all such earnings will either
be indefinitely reinvested or can be distributed in a tax-free
manner. Earnings that can be distributed free of tax will not
attract dividend withholding taxes in the paying jurisdiction,
nor will the dividend receipts be taxable in the recipient
jurisdiction. Potential tax implications of repatriation from
the Company’s unremitted earnings that are indefinitely
reinvested are driven by facts at the time of distribution.
Therefore, it is not practicable to estimate the income tax
liabilities that might be incurred if such earnings were
remitted.
The Company recognizes interest and penalties relating to
unrecognized tax benefits in the provision for income taxes.
As of December 31, 2025, the Company’s total unrecognized
tax benefits, including interest and penalties, were $6
million. If recognized, the full amount of the unrecognized
tax benefit would impact the consolidated effective tax rate.
A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows:
December 31,
2025
2024
Balance at beginning of year
$
5
$
2
Additions based on tax positions related to the
current year
1
1
Additions for tax positions of prior years
—
2
Reductions for tax positions of prior years
—
—
Settlements
—
—
Balance at end of year
$
6
$
5
The Company, its subsidiaries and branches file income tax
returns in various federal, state and local jurisdictions. The
following table details open tax years that are potentially
subject to examination by local tax authorities, in the
following major jurisdictions:
Jurisdiction
Tax Years
United States
2019-2025
United Kingdom
2022-2025
Ireland
2021-2025
Switzerland
2021-2025
Australia
2020-2025
Canada
2021-2025
Gibraltar
2020-2025
As of December 31, 2025, the Company’s current income tax
payable (included in “Other liabilities”) was $75 million. The
Company’s taxes paid by jurisdiction were as follows:
December 31,
2025
Federal Bermuda taxes paid
$
131
Foreign taxes paid
United States - federal taxes paid
227
United States - other taxes paid
19
Australia
26
Other
55
Total Foreign taxes paid
327
Total
$
458
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ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
163
2025 FORM 10-K
16. Transactions with Related Parties
In 2017, the Company acquired approximately 25% of
Premia. Premia is the parent of Premia Reinsurance Ltd., a
multi-line Bermuda reinsurance company. Premia’s strategy
is to reinsure or acquire companies or reserve portfolios in
the non-life property and casualty insurance and reinsurance
run-off market. Arch Re Bermuda and certain Arch co-
investors invested $100 million and acquired approximately
25% of Premia as well as warrants to purchase additional
common equity. Arch has appointed two directors to serve
on the seven person board of directors of Premia. Arch Re
Bermuda is providing a quota share reinsurance treaty on
certain business written by Premia, and subsidiaries of Arch
Capital are providing certain administrative and support
services to Premia, in each case pursuant to separate multi-
year agreements. During the 2025 and 2024 periods, the
Company did not enter into any new reinsurance
transactions with Premia. At December 31, 2025, the
Company recorded a funds held asset from Premia of
$124 million, compared to $137 million at December 31,
2024.
Somers is wholly owned by Greysbridge, and Greysbridge is
owned 30% by the Company with the remaining interests
held by third party investors. The Company entered into
certain reinsurance transactions with Somers. During 2025,
2024 and 2023 periods, the Company’s net premiums
written was reduced by $705 million, $738 million and
$574 million, respectively. In addition, Somers paid certain
acquisition costs and administrative fees to the Company. At
December 31, 2025, the Company recorded a reinsurance
recoverable on unpaid and paid losses from Somers of
$2.0 billion and a reinsurance balance payable to Somers of
$550
million.
At
December
31,
2024,
reinsurance
recoverable on unpaid and paid losses from Somers was
$1.6 billion, with a reinsurance balance payable to Somers of
$489 million.
Pursuant to the terms of the Greysbridge shareholder
agreement, as amended, following the expiration of a
specified period, Arch Capital has a call right (but not the
obligation) and certain third party investors have put rights
(but not the obligation) to purchase or sell, as applicable, a
specified amount of each such investor’s initial common
shares on an annual basis at Greysbridge’s year-end book
value per share. Obligations under put/call option notices
are recognized on the Company’s balance sheet in both
other assets and other liabilities. At December 31, 2025, the
Company’s balance sheet included $162 million in both
other assets and other liabilities for such put notices.
Transactions related to the put shares are expected to close
in the 2026 calendar year, subject to any regulatory
approval.
During the 2024 period, the Company completed the
acquisition of Watford Insurance Company from Somers for
a total consideration paid of $35 million.
As of December 31, 2025, the Company owned $35 million
in aggregate principal amount of Somers 6.5% senior notes,
due July 2, 2029.
17. Leases
In the ordinary course of business, the Company renews and
enters into new leases for office property and equipment. At
the lease inception date, the Company determines whether
a contract contains a lease and its classification as a finance
or operating lease. Primarily all of the Company’s leases are
classified as operating leases. The Company’s operating
leases have remaining lease terms of up to 12 years, some of
which include options to extend the lease term. The
Company considers these options when determining the
lease term and measuring its lease liability and right-of-use
asset. In addition, the Company’s lease agreements do not
contain any material residual value guarantees or material
restrictive covenants.
Short-term operating leases with an initial term of twelve
months or less were excluded on the Company's
consolidated
balance
sheet
and
represent
an
inconsequential amount of operating lease expense.
As most leases do not provide an implicit rate, the Company
uses its incremental borrowing rate based on the
information available at the lease commencement date in
determining the present value of lease payments.
Additional information regarding the Company’s operating
leases is as follows:
December 31,
2025
2024
Operating lease costs
$
32
$
34
Sublease income (1)
$
(2)
$
(2)
Cash payments included in the
measurement of lease liabilities
reported in operating cash flows
$
31
$
30
Right-of-use assets obtained in
exchange for new lease liabilities
$
13
$
30
Right-of-use assets (2)
$
120
$
129
Operating lease liability (2)
$
156
$
163
Weighted average discount rate
5.0 %
4.9 %
Weighted average remaining lease
term
7.1 years
7.2 years
(1)
The sublease income primarily relates to office property in Raleigh,
North Carolina.
(2)
The right-of-use assets are included in ‘other assets’ while the
operating lease liability is included in ‘other liabilities.’
Table of Contents
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
164
2025 FORM 10-K
The following table presents the contractual maturities of
the Company's operating lease liabilities at December 31,
2025:
Years Ending December 31,
2026
$
33
2027
31
2028
27
2029
21
2030
19
2032 and thereafter
56
Total undiscounted lease liability
$
187
Less: present value adjustment
(31)
Operating lease liability
$
156
Rental expense was approximately $36 million, $35 million
and $38 million for 2025, 2024 and 2023, respectively.
18.
Commitments and Contingencies
Concentrations of Credit Risk
The creditworthiness of a counterparty is evaluated by the
Company, taking into account credit ratings assigned by
independent agencies. The credit approval process involves
an assessment of factors, including, among others, the
counterparty, country and industry credit exposure limits.
Collateral may be required, at the discretion of the
Company,
on
certain
transactions
based
on
the
creditworthiness of the counterparty.
The areas where significant concentrations of credit risk may
exist include unpaid losses and loss adjustment expenses
recoverable, contractholder receivables, ceded unearned
premiums, paid losses and loss adjustment expenses
recoverable
net
of
reinsurance
balances
payable,
investments and cash and cash equivalent balances. A credit
exposure exists with respect to reinsurance recoverables as
they may become uncollectible. The Company manages its
credit risk in its reinsurance relationships by transacting with
reinsurers that it considers financially sound and, if
necessary, the Company may hold collateral in the form of
funds, trust accounts and/or irrevocable letters of credit.
This collateral can be drawn on for amounts that remain
unpaid beyond specified time periods on an individual
reinsurer basis. In addition, certain insurance policies
written by the Company’s insurance operations feature large
deductibles, primarily in its construction and national
accounts lines of business. Under such contracts, the
Company is obligated to pay the claimant for the full amount
of the claim. The Company is subsequently reimbursed by
the policyholder for the deductible amount. These amounts
are included on a gross basis in the consolidated balance
sheet in contractholder payables and contractholder
receivables, respectively. In the event that the Company is
unable to collect from the policyholder, the Company would
be liable for such defaulted amounts. Collateral, primarily in
the form of letters of credit, cash and trusts, is obtained
from the policyholder to mitigate the Company’s credit risk.
In the instances where the company receives collateral in
the form of cash, the Company records a related liability in
“Collateral held for insured obligations.”
In addition, the Company underwrites a significant amount
of its business through brokers and a credit risk exists should
any of these brokers be unable to fulfill their contractual
obligations with respect to the payments of insurance and
reinsurance balances owed to the Company. The following
table summarizes the percentage of the Company’s gross
premiums written generated from or placed by the largest
brokers:
Broker
Year Ended December 31,
2025
2024
2023
Marsh & McLennan Companies
and its subsidiaries
16.6 %
18.6 %
19.0 %
Aon Corporation and its
subsidiaries
14.6 %
14.5 %
13.9 %
No other broker and no one insured or reinsured accounted
for more than 10% of gross premiums written for 2025, 2024
and 2023.
The Company’s available for sale investment portfolio is
managed in accordance with guidelines that have been
tailored to meet specific investment strategies, including
standards of diversification, which limit the allowable
holdings of any single issue. There were no investments in
any entity in excess of 10% of the Company’s shareholders’
equity at December 31, 2025 other than investments issued
or guaranteed by the United States government or its
agencies.
Investment Commitments
The Company’s investment commitments, which are
primarily related to agreements entered into by the
Company to invest in funds and separately managed
accounts when called upon, were approximately $3.7 billion
and $4.4 billion at December 31, 2025 and 2024,
respectively.
Purchase Obligations
The Company has also entered into certain agreements
which commit the Company to purchase goods or services,
primarily related to software and computerized systems.
Such purchase obligations were approximately $307 million
and $260 million at December 31, 2025 and 2024,
respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
165
2025 FORM 10-K
Employment and Other Arrangements
At December 31, 2025, the Company has entered into
employment agreements with certain of its executive
officers. Such employment arrangements provide for
compensation in the form of base salary, annual bonus,
share-based awards, participation in the Company’s
employee benefit programs and the reimbursements of
expenses.
19. Debt and Financing Arrangements
The Company’s senior notes payable at December 31, 2025
and 2024 were as follows:
Carrying Amount at
Interest
Principal
December 31,
(Fixed)
Amount
2025
2024
2034 notes (1)
7.350 %
$
300
$
298
$
298
2043 notes (2)
5.144 %
500
496
496
2026 notes (3)
4.011 %
500
499
499
2046 notes (4)
5.031 %
450
446
446
2050 notes (5)
3.635 %
1,000
990
989
$
2,750
$
2,729
$
2,728
(1) Senior notes of Arch Capital issued on May 4, 2004 and due May 1, 2034
(“2034 notes”).
(2) Senior notes of Arch-U.S., a wholly-owned subsidiary of Arch Capital,
issued on December 13, 2013 and due November 1, 2043 (“2043 notes”),
fully and unconditionally guaranteed by Arch Capital.
(3) Senior notes of Arch Capital Finance LLC (“Arch Finance”), a wholly-
owned finance subsidiary of Arch Capital, issued on December 8, 2016 and
due December 15, 2026 (“2026 notes”), fully and unconditionally
guaranteed by Arch Capital.
(4) Senior notes of Arch Finance issued on December 8, 2016 and due
December 15, 2046 (“2046 notes”), fully and unconditionally guaranteed by
Arch Capital
(5) Senior notes of Arch Capital issued on June 30, 2020 and due June 30,
2050 (“2050 notes”).
The 2034 notes are Arch Capital’s senior unsecured
obligations and rank equally with all of its existing and future
senior unsecured indebtedness. Interest payments on the
2034 notes are due on May 1st and November 1st of each
year. Arch Capital may redeem the 2034 notes at any time
and from time to time, in whole or in part, at a “make-
whole” redemption price.
The 2043 notes are unsecured and unsubordinated
obligations of Arch-U.S. and Arch Capital, respectively, and
rank equally and ratably with the other unsecured and
unsubordinated indebtedness of Arch-U.S. and Arch Capital,
respectively. Interest payments on the 2043 notes are due
on May 1st and November 1st of each year. Arch-U.S. may
redeem the 2043 notes at any time and from time to time, in
whole or in part, at a “make-whole” redemption price.
The 2026 notes are unsecured and unsubordinated
obligations of Arch Finance and Arch Capital, respectively,
and rank equally and ratably with the other unsecured and
unsubordinated indebtedness of Arch Finance and Arch
Capital, respectively. Interest payments on the 2026 notes
are due on June 15th and December 15th of each year. Arch
Finance may redeem the 2026 notes at any time and from
time to time, in whole or in part, at a “make-whole”
redemption price.
The 2046 notes are unsecured and unsubordinated
obligations of Arch Finance and Arch Capital, respectively,
and rank equally and ratably with the other unsecured and
unsubordinated indebtedness of Arch Finance and Arch
Capital, respectively. Interest payments on the 2046 notes
are due on June 15th and December 15th of each year. Arch
Finance may redeem the 2046 notes at any time and from
time to time, in whole or in part, at a “make-whole”
redemption price.
The 2050 notes are Arch Capital’s senior unsecured
obligations and rank equally with all of its existing and future
senior unsecured indebtedness. Interest payments on the
2050 notes are due on June 30 and December 30 of each
year. Arch Capital may redeem the 2050 notes at any time
and from time to time, in whole or in part, at a “make-
whole” redemption price.
Letter of Credit and Revolving Credit Facilities
In the normal course of its operations, the Company enters
into agreements with financial institutions that provide
access to secured and unsecured credit facilities.
Group Credit Facility
Arch Capital and certain of its subsidiaries have access to a
credit facility with a syndicate of financial institutions (the
“Group Credit Facility”) that expires on August 23, 2028. The
Group Credit Facility consists of a $425 million secured
facility for letters of credit (the “Secured Facility”) and a
$500 million unsecured facility for revolving loans and letters
of credit (the “Unsecured Facility”). At December 31, 2025,
the Secured Facility had $224 million of letters of credit
outstanding and remaining capacity of $201 million, and the
Unsecured Facility had no outstanding revolving loans or
letters of credit, with remaining capacity of $500 million.
The Group Credit Facility contains certain restrictive and
maintenance covenants customary for facilities of this type,
including
restrictions
on
indebtedness,
minimum
consolidated tangible net worth, maximum leverage levels
and minimum financial strength ratings. Arch Capital and its
subsidiaries which are party to the agreement were in
compliance with all covenants contained therein at
December 31, 2025.
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Obligations of each borrower for letters of credit under the
Secured Facility are secured by cash and eligible securities of
such
borrower
and
held
in
collateral
accounts.
Commitments under the Group Credit Facility may be
increased up to, but not exceeding, an aggregate of
$1.5 billion. Arch Capital has a one-time option to convert
any or all outstanding revolving loans of Arch Capital and/or
Arch-U.S. to term loans with the same terms as the revolving
loans except that any prepayments may not be re-borrowed.
Borrowings of revolving loans may be made at a variable
rate based on Secured Overnight Financing Rate (“SOFR”).
Secured letters of credit are available for issuance on behalf
of certain Arch Capital subsidiaries. Arch Capital guarantees
the obligations of Arch-U.S. and Arch U.S. MI Holdings Inc.,
Arch-U.S. guarantees the obligations of Arch Capital, and
Arch Capital Finance LLC guarantees the obligations of Arch
Capital and Arch-U.S.
Other Credit Facilities
Arch Re Bermuda, a wholly-owned subsidiary of Arch
Capital, has access to a $175 million unsecured letter of
credit facility with Lloyds Bank Corporate Markets plc.,
which expires on September 27, 2026. At December 31,
2025, this credit facility had $129 million of letters of credit
outstanding and remaining capacity of $46 million.
Arch Re Bermuda also has access to a letter of credit facility
with a syndicate of financial institutions, which expires on
December 31, 2029. Such credit facility provides for a
$700 million facility for letters of credit in respect of Tier 2
Funds at Lloyd’s. As of December 31, 2025, $700 million face
amount of letters of credit had been issued under this
facility.
In addition, Arch Re Bermuda had outstanding secured
letters of credit through other facilities in the amount of
$52 million, which were issued in the normal course of
business (“LOC Facilities”). The principal purpose of the LOC
Facilities is to issue, as required, evergreen standby letters of
credit in favor of primary insurance or reinsurance
counterparties with which certain of Arch Capital’s
subsidiaries has entered into reinsurance arrangements.
When issued, all secured letters of credit are backed by a
portion of the investment portfolio and cash. At
December 31, 2025, these letters of credit were secured by
investments and cash with a fair value of $498 million. The
Company had no outstanding revolving credit agreement
borrowings at December 31, 2025 and 2024.
Federal Home Loan Bank Membership
Certain subsidiaries of the Company are members of Federal
Home Loan Banks (“FHLBs”). Members may borrow from the
FHLBs at competitive rates subject to certain conditions.
Conditions include maintaining sufficient collateral deposits
for funding and a requirement to hold stock in the FHLBs
related to both membership and outstanding advances. At
December 31, 2025 and 2024, the Company had no
advances outstanding under the FHLB program.
20. Goodwill and Intangible Assets
The following table shows an analysis of goodwill and
intangible assets:
Goodwill
Intangible
assets
(indefinite
life)
Intangible
assets
(finite life)
Total
Net balance at
December 31, 2023
$
345
$
70
$
316
$
731
Acquisitions (1)
246
9
637
892
Amortization
—
—
(235)
(235)
Foreign currency
movements and
other adjustments (2)
(20)
—
(17)
(37)
Net balance at
December 31, 2024
571
79
701
1,351
Acquisitions (1)
30
—
2
32
Amortization
—
—
(193)
(193)
Foreign currency
movements and
other adjustments
6
2
24
32
Net balance at
December 31, 2025
$
607
$
81
$
534
$ 1,222
Gross balance at
December 31, 2025
$
606
$
80
$
1,726
$ 2,412
Accumulated
amortization
—
—
(1,171) (1,171)
Foreign currency
movements and
other adjustments
1
1
(21)
(19)
Net balance at
December 31, 2025
$
607
$
81
$
534
$ 1,222
(1) See note 2.
(2) Amount primarily related to the sale of Castel Underwriting Agencies
Limited.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
167
2025 FORM 10-K
The following table presents the components of goodwill
and intangible assets:
Gross
Balance
Accumulated
Amortization
Foreign
Currency
Translation
Adjustment
and Other
Net
Balance
December 31, 2025
Acquired
insurance
contracts
$
620
$
(619) $
—
$
1
Operating
platform
117
(78)
—
39
Distribution
relationships
865
(427)
(21)
417
Goodwill
606
—
1
607
Insurance
licenses
58
—
—
58
Syndicate
capacity
22
—
1
23
Unfavorable
service
contract
(10)
10
—
—
Other
134
(57)
—
77
Total
$
2,412
$
(1,171) $
(19) $
1,222
December 31, 2024
Acquired
insurance
contracts
$
620
$
(562) $
1
$
59
Operating
platform
117
(63)
—
54
Distribution
relationships
865
(358)
(30)
477
Goodwill
576
—
(5)
571
Insurance
licenses
58
—
—
58
Syndicate
capacity
22
—
(1)
21
Unfavorable
service
contract
(10)
10
—
—
Other
132
(21)
—
111
Total
$
2,380
$
(994) $
(35) $
1,351
The estimated remaining amortization expense for the
Company’s intangible assets with finite lives is as follows:
2026
$
119
2027
93
2028
78
2029
65
2030
51
2031 and thereafter
128
Total
$
534
The estimated remaining useful lives of these assets range
from one to eleven years at December 31, 2025.
21. Shareholders’ Equity
Authorized and Issued
The authorized share capital of Arch Capital consists of 1.8
billion Common Shares, par value of $0.0011 per share, and
50 million Preferred Shares, par value of $0.01 per share.
Common Shares
The following table presents a roll-forward of changes in
Arch Capital’s issued and outstanding Common Shares:
Year Ended December 31,
2025
2024
2023
Common Shares:
Shares issued and
outstanding, beginning
of year
595.6
591.9
588.3
Shares issued (1)
3.1
2.5
2.8
Restricted shares issued,
net of cancellations
1.1
1.2
0.8
Shares issued and
outstanding, end of year
599.8
595.6
591.9
Common shares in
treasury, end of year
(240.8)
(219.2)
(218.5)
Shares issued and
outstanding, end of year
359.0
376.4
373.4
(1)
Includes shares issued from the exercise of stock options and stock
appreciation rights, the vesting of restricted share units and shares
issued from the employee share purchase plan.
Special Cash Dividend
In 2024, the Board of Directors of Arch Capital (the “Board”)
has declared and paid a special cash dividend of $1.9 billion
to
common
shareholders,
representing
$5.00
per
outstanding common share.
Share Repurchase Program
The Board has authorized the investment in Arch Capital’s
common shares through a share repurchase program. At
December 31, 2025, $1.1 billion of share repurchases were
available under the program. Repurchases under the
program may be effected from time to time in open market.
The timing and amount of the repurchase transactions
under this program will depend on a variety of factors,
including market conditions and corporate and regulatory
considerations. From January 1 through February 24, 2026,
the Company repurchased approximately 4.3 million
common shares for an aggregate purchase price of
$405 million. At February 24, 2026, approximately
$702 million of repurchases were available under the
Company’s share repurchase program.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARCH CAPITAL
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2025 FORM 10-K
Repurchases of Arch Capital’s common shares in connection
with the share repurchase plan and other share-based
transactions were held in the treasury under the cost
method, and the cost of the common shares acquired is
included in ‘Common shares held in treasury, at cost.’ At
December 31, 2025, Arch Capital held 240.8 million shares
for an aggregate cost of $6.4 billion in treasury, at cost.
The Company’s repurchases under the share repurchase
program were as follows:
Year Ended December 31,
2025
2024
2023
Aggregate cost of shares
repurchased
$
1,889.8
$
23.5
$
—
Shares repurchased
21.2
0.3
—
Average price per share
repurchased
$
89.26
$
89.63
$
—
Since the inception of the share repurchase program
through December 31, 2025, Arch Capital has repurchased
approximately 455.0 million common shares for an
aggregate purchase price of $7.8 billion.
Series G Preferred Shares
In June 2021, Arch Capital completed a $500 million
underwritten public offering of 20.0 million depositary
shares (the “Depositary Shares”), each of which represents a
1/1,000th interest in a share of its 4.55% Non-Cumulative
Preferred Shares, Series G, $0.01 par value and $25,000
liquidation preference per share (equivalent to $25
liquidation preference per Depositary Share) (the “Series G
Preferred Shares”). Each Depositary Share, evidenced by a
depositary receipt, entitles the holder, through the
depositary, to a proportional fractional interest in all rights
and preferences of the Series G Preferred Shares
represented thereby (including any dividend, liquidation,
redemption and voting rights).
Holders of Series G Preferred Shares will be entitled to
receive dividend payments only when, as and if declared by
the Board or a duly authorized committee of the Board. Any
such dividends will be payable from, and including, the date
of original issue on a noncumulative basis, quarterly in
arrears on the last day of March, June, September and
December of each year, at an annual rate of 4.55%.
Dividends on the Series G Preferred Shares are not
cumulative. The Company will be restricted from paying
dividends on or repurchasing its common shares unless
certain dividend payments are made on the Series G
Preferred Shares. The Company may not declare or pay a
dividend on the Series G Preferred Shares under certain
circumstances, including if the Company is or, after giving
effect to such payment, would be in breach of applicable
individual or group solvency and liquidity requirements or
applicable
individual
or
group
enhanced
capital
requirements (“ECR”). The Series G Preferred Shares may
not be redeemed at any time if the ECR would be breached
immediately before or after giving effect to such
redemption, unless the Company replaces the capital
represented by preference shares to be redeemed with
capital having equal or better capital treatment.
Except in specified circumstances relating to certain tax or
corporate events, the Series G Preferred Shares are not
redeemable prior to June 11, 2026. On and after that date,
the Series G Preferred Shares will be redeemable at the
Company’s option, in whole or in part, at a redemption price
of $25,000 per share of the Series G Preferred Shares
(equivalent to $25 per depositary share), plus any declared
and unpaid dividends, without accumulation of any
undeclared dividends to, but excluding, the redemption
date. The Depositary Shares will be redeemed if and to the
extent the related Series G Preferred Shares are redeemed
by the Company. Neither the Depositary Shares nor the
Series G Preferred Shares have a stated maturity, nor will
they be subject to any sinking fund or mandatory
redemption. The Series G Preferred Shares are not
convertible into any other securities. The Series G Preferred
Shares do not have voting rights, except under limited
circumstances.
Series F Preferred Shares
In August 2017 and November 2017, Arch Capital completed
combined $330 million of underwritten public offerings
($230 million in August 2017 and $100 million in November
2017) of 13.2 million depositary shares (the “Series F
Depositary Shares”), each of which represents a 1/1,000th
interest in a share of its 5.45% Non-Cumulative Preferred
Shares, Series F, with a $0.01 par value and $25,000
liquidation preference per share (equivalent to $25
liquidation preference per Series F Depositary Share) (the
“Series F Preferred Shares”). Each Series F Depositary Share,
evidenced by a depositary receipt, entitles the holder,
through the depositary, to a proportional fractional interest
in all rights and preferences of the Series F Preferred Shares
represented thereby (including any dividend, liquidation,
redemption and voting rights).
Holders of Series F Preferred Shares will be entitled to
receive dividend payments only when, as and if declared by
the Board or a duly authorized committee of the board. Any
such dividends will be payable from, and including, the date
of original issue on a noncumulative basis, quarterly in
arrears on the last day of March, June, September and
December of each year, at an annual rate of 5.45%.
Dividends on the Series F Preferred Shares are not
cumulative. The Company will be restricted from paying
dividends on or repurchasing its common shares unless
certain dividend payments are made on the Series F
Preferred Shares.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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Except in specified circumstances relating to certain tax or
corporate events, the Series F Preferred Shares are not
redeemable prior to August 17, 2022 (the fifth anniversary
of the issue date). On and after that date, the Series F
Preferred Shares will be redeemable at the Company’s
option, in whole or in part, at a redemption price of $25,000
per share of the Series F Preferred Shares (equivalent to $25
per depositary share), plus any declared and unpaid
dividends, without accumulation of any undeclared
dividends to, but excluding, the redemption date. The Series
F Depositary Shares will be redeemed if and to the extent
the related Series F Preferred Shares are redeemed by the
Company. Neither the Series F Depositary Shares nor the
Series F Preferred Shares have a stated maturity, nor will
they be subject to any sinking fund or mandatory
redemption. The Series F Preferred Shares are not
convertible into any other securities. The Series F Preferred
Shares will not have voting rights, except under limited
circumstances.
22. Share-Based Compensation
Long Term Incentive and Share Award Plans
The Company utilizes share-based compensation plans for
officers, other employees and directors of Arch Capital and
its subsidiaries to provide competitive compensation
opportunities, to encourage long-term service, to recognize
individual contributions and reward achievement of
performance goals and to promote the creation of long-term
value for shareholders by aligning the interests of such
persons with those of shareholders.
The 2022 Long-Term Incentive and Share Award Plan (“the
2022 Plan”) became effective as of May 4, 2022 following
approval by shareholders of the Company. The 2022 Plan
provides for the issuance of stock options, stock
appreciation rights, restricted shares, restricted share units
payable in common shares or cash, dividend equivalents,
performance shares and performance units and other share-
based awards to Arch Capital’s eligible employees and
directors. The number of common shares reserved for grants
under the 2022 Plan, subject to anti-dilution adjustments in
the event of certain changes in Arch Capital’s capital
structure, is 9.0 million; provided that no more than 6.0
million common shares may be issued as incentive stock
options under Section 422 of the Code. The 2022 Plan will
terminate as to future awards on February 25, 2032. At
December 31, 2025, 5.6 million shares are available for
future issuance.
The 2018 Long-Term Incentive and Share Award Plan (the
“2018 Plan”) became effective as of May 9, 2018 following
approval by shareholders of the Company. The 2018 Plan
provides for the issuance of restricted stock units,
performance units, restricted shares, performance shares,
stock options and stock appreciation rights and other equity-
based awards to our eligible employees and directors. The
2018 Plan authorizes the issuance of 34.5 million common
shares; provided that no more than 6.0 million common
shares may be issued as incentive stock options under
Section 422 of the Code. The 2018 Plan will terminate as to
future awards on February 28, 2028. At December 31, 2025,
2.3 million shares are available for future issuance.
Upon shareholder approval on May 4, 2023, the Amended
and Restated Arch Capital Group Ltd. 2007 Employee Share
Purchase Plan (the “ESPP”) became effective. The total
common shares that may be purchased under the ESPP was
increased by 3.0 million shares for a total of 12.75 million
shares authorized. The purpose of the ESPP is to give
employees of the Company an opportunity to purchase
common shares through payroll deductions, thereby
encouraging employees to share in the economic growth
and success of the Company. The ESPP is designed to qualify
as an “employee share purchase plan” under Section 423 of
the Internal Revenue Code of 1986, as amended. At
December 31, 2025, 2.8 million shares remain available for
issuance.
Stock Options and Stock Appreciation Rights
The Company generally issues stock options and SARs to
eligible employees, with exercise prices equal to the fair
market values of the Company’s Common Shares on the
grant dates (adjusted for special dividends). Such grants
generally vest over a three year period with one-third
vesting on the first, second and third anniversaries of the
grant date. In connection with the Company’s leadership
transition in November 2024, the Compensation and Human
Capital Committee approved the grant of equity awards,
which consist of 1.75 million premium-priced stock options
to eligible employees. The premium-priced stock options
have an exercise price equal to 1.685 times the closing price
of the Company's common shares on the grant date (or
$161.24 per share) and will vest in full on the third
anniversary of the grant date.
The grant date fair value is determined using the Black-
Scholes option valuation model. The expected life
assumption is based on an expected term analysis, which
incorporates the Company’s historical exercise experience.
Expected volatility is based on the Company’s daily historical
trading data of its common shares. The table below
summarizes the assumptions used:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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2025 FORM 10-K
Year Ended December 31,
2025
2024
2023
Dividend yield
— %
— %
— %
Expected volatility (1)
26.8 %
26.5 %
25.1 %
Risk free interest rate (1)
4.1 %
4.4 %
4.1 %
Expected option life (1)
6.0 years
9.0 years
6.0 years
(1) The 2024 period includes an expected volatility, risk free interest rate
and expected option life of 26.65%, 4.39% and 10 years, respectively,
related to the grant of 1.75 million premium-priced stock options.
A summary of stock option and SAR activity under the
Company’s Long Term Incentive and Share Award Plans
during 2025 is presented below:
Year Ended December 31, 2025
Number of
Options /
SARs
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Term
Aggregate
Intrinsic
Value
Outstanding,
beginning of
year
12,429,034
$
48.54
Granted
426,623
$
91.91
Exercised
(2,654,091) $
23.84
Forfeited or
expired
(12,660) $
82.94
Outstanding,
end of year
10,188,906
$
56.74
4.42
$
514
Exercisable,
end of year
7,587,153
$
29.84
2.94
$
501
The aggregate intrinsic value of stock options and SARs
exercised represents the difference between the exercise
price of the stock options and SARs and the closing market
price of the Company’s common shares on the exercise
dates. During 2025, the Company received proceeds of $54
million from the exercise of stock options and recognized a
tax benefit of $28 million from the exercise of stock options
and SARs.
Year Ended December 31,
2025
2024
2023
Weighted average grant date fair
value
$
32.47
$
29.03
$
23.50
Aggregate intrinsic value of Options/
SARs exercised (in millions)
$
180
$
153
$
116
Restricted Common Shares and Restricted Units
The Company also issues restricted share and unit awards to
eligible employees and directors, for which the fair value is
equal to the fair market values of the Company’s Common
Shares on the grant dates. Restricted share and unit awards
generally vest over a three year period with one-third
vesting on the first, second and third anniversaries of the
grant date.
A summary of restricted share and restricted unit activity
under the Company’s Long Term Incentive and Share Award
Plans for 2025 is presented below:
Number of
Restricted
Common
Shares
Number of
Restricted
Unit
Awards
Unvested Shares:
Unvested balance, beginning of year
1,528,541
281,093
Granted
659,548
165,222
Vested
(730,148)
(141,933)
Forfeited
(47,457)
(14,329)
Unvested balance, end of year
1,410,484
290,053
Weighted Average Grant Date Fair
Value:
Unvested balance, beginning of year
$
76.34
$
73.58
Granted
$
91.87
$
91.82
Vested
$
69.63
$
65.98
Forfeited
$
85.55
$
85.17
Unvested balance, end of year
$
86.77
$
87.12
The following table presents the weighted average grant
date fair value of restricted shares and restricted unit
awards granted and the aggregate fair value of restricted
shares and unit awards vesting in each year.
Year Ended December 31,
2025
2024
2023
Number of restricted shares and
restricted unit awards granted
824,770
982,339
825,191
Weighted average grant date fair value
$ 91.86
$ 89.86
$ 69.42
Aggregate fair value of vested
restricted share and unit awards (in
millions)
$
79
$
85
$
122
The aggregate intrinsic value of restricted units outstanding
at December 31, 2025 was $28 million.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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2025 FORM 10-K
Performance Awards
The Company also issues performance share and unit
awards (“performance awards”) to eligible employees,
which are earned based on the achievement of pre-
established threshold, target and maximum goals over
three-year performance periods. Final payouts depend on
the level of achievement along with each employees
continued service through the vest date, and can vary
between 0% and 200%. The grant date fair value of the
performance awards is measured using a Monte Carlo
simulation model, which incorporated the assumptions
summarized in the table below. Expected volatility is based
on the Company’s daily historical trading data of its common
shares. The cumulative compensation expense recognized
and unrecognized as of any reporting period date represents
the adjusted estimate of performance shares and units that
will ultimately be awarded, valued at their original grant
date fair values.
Year Ended December 31,
2025
2024
2023
Expected volatility
25.5 %
25.3 %
30.4 %
Risk free interest rate
3.9 %
4.5 %
4.6 %
Number of
Performance
Shares
Number of
Performance
Units
Unvested Shares:
Unvested balance, beginning of
year
1,679,376
52,937
Granted
468,452
16,723
Performance adjustment (1) (2)
—
20,009
Vested
(656,616)
(40,018)
Forfeited
(14,794)
(1,596)
Unvested balance, end of year
1,476,418
48,055
Weighted Average Grant Date Fair
Value:
Unvested balance, beginning of
year
$
70.07
$
70.57
Granted
$
93.26
$
93.26
Performance adjustment (1) (2)
$
0.00
$
49.91
Vested
$
49.91
$
49.91
Forfeited
$
85.70
$
85.61
Unvested balance, end of year
$
86.24
$
86.57
(1)
The performance adjustment represents the difference between the
number of performance shares granted and earned, which vested
following the end of the performance period. The performance
shares were granted at the maximum level of achievement.
(2)
The performance adjustment represents the change in PSUs, which
vested following the end of the performance period. The
performance units were granted at the target level of achievement.
The following table presents the weighted average grant
date fair values of performance awards granted.
Year Ended December 31,
2025
2024
2023
Number of performance awards
485,175
492,634
568,576
Weighted average grant date fair
value
$ 93.26
$ 93.28
$ 74.09
Aggregate fair value of vested
performance share and unit awards (in
millions)
$
64
$
61
$
14
The aggregate intrinsic value of performance units
outstanding at December 31, 2025 was $5 million.
The issuance of share-based awards and amortization
thereon has no effect on the Company’s consolidated
shareholders’ equity.
Share-Based Compensation Expense
The following tables present pre-tax and after-tax share-
based compensation expense recognized as well as the
unrecognized compensation cost associated with unvested
awards and the weighted average period over which it is
expected to be recognized:
Year Ended December 31,
2025
2024
2023
Pre-Tax
Stock options and SARs
$
30
$
15
$
11
Restricted share and unit awards
71
57
54
Performance awards
41
55
23
ESPP
6
6
4
Total
$
148
$
133
$
92
After-Tax
Stock options and SARs
$
25
$
13
$
10
Restricted share and unit awards
57
48
45
Performance awards
34
50
21
ESPP
6
5
4
Total
$
122
$
116
$
80
December 31, 2025
Stock
Options and
SARs (1)
Restricted
Common
Shares and
Units (1)
Performance
Common
Shares and
Units
Unrecognized compensation
cost related to unvested
awards
$
38
$
70
$
11
Weighted average
recognition period (years)
1.49
1.13
0.37
(1) Includes awards granted in connection with 1.75 million premium-priced
stock options and 0.3 million time-vested restricted shares granted in
November 2024.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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23. Retirement Plans
For purposes of providing employees with retirement
benefits, the Company maintains defined contribution
retirement
plans.
Contributions
are
based
on
the
participants’ eligible compensation. For 2025, 2024 and
2023, the Company expensed $94 million, $86 million and
$77 million, respectively, related to these retirement plans.
24. Legal Proceedings
The Company, in common with the insurance industry in
general, is subject to litigation and arbitration in the normal
course of its business. As of December 31, 2025, the
Company was not a party to any litigation or arbitration
which is expected by management to have a material
adverse effect on the Company’s results of operations and
financial condition and liquidity.
25. Statutory Information
The Company’s insurance and reinsurance subsidiaries are
subject to insurance and/or reinsurance laws and
regulations in the jurisdictions in which they operate. These
regulations include certain restrictions on the amount of
dividends or other distributions available to shareholders
without prior approval of the insurance regulatory
authorities.
The actual and required statutory capital and surplus for the
Company’s principal operating subsidiaries at December 31,
2025 and 2024:
December 31,
2025
2024
Actual capital and surplus (1):
Bermuda
$
30,908
$
28,422
Ireland
1,780
1,476
United States
8,722
7,547
United Kingdom
1,487
1,585
Canada
93
83
Australia
372
377
Required capital and surplus:
Bermuda
$
9,323
$
8,344
Ireland
1,408
1,142
United States
2,331
2,152
United Kingdom
1,399
1,302
Canada
68
57
Australia
115
143
(1)
Such amounts include ownership interests in affiliated insurance and
reinsurance subsidiaries.
There were no state-prescribed or permitted regulatory
accounting practices for any of the Company’s insurance or
reinsurance entities that resulted in reported statutory
surplus that differed from that which would have been
reported under the prescribed practices of the respective
regulatory authorities, including the National Association of
Insurance
Commissioners.
The
differences
between
statutory financial statements and statements prepared in
accordance with GAAP vary by jurisdiction, however, with
the primary differences being that statutory financial
statements may not reflect deferred acquisition costs,
certain net deferred income tax assets, goodwill and
intangible assets, unrealized appreciation or depreciation on
debt securities and certain unauthorized reinsurance
recoverables and include contingency reserves.
The statutory net income (loss) for the Company’s principal
operating subsidiaries for 2025, 2024 and 2023 was as
follows:
Year Ended December 31,
2025
2024
2023
Statutory net income (loss):
Bermuda
$
4,648
$
4,750
$
3,519
Ireland
103
62
53
United States
1,249
918
592
United Kingdom
24
41
72
Canada
4
6
6
Australia
48
54
68
Bermuda
The Company’s Bermuda insurance and reinsurance
subsidiaries are subject to the Bermuda Insurance Act 1978
and related regulations, each as amended (the “Insurance
Act”).
Arch
Re
Bermuda,
the
Company’s
principal
reinsurance and insurance subsidiary, is dual licensed as a
Class 4 general business insurer and a Class C long-term
insurer while Arch Group Reinsurance Ltd. (“AGRL”) is
registered as a Class 3A general business insurer and
provides affiliated quota share reinsurance covering certain
U.S. business. The Insurance Act requires that both entities
maintain minimum statutory capital and surplus equal to the
greater of a minimum solvency margin and the enhanced
capital requirement (“ECR”) as determined by the Bermuda
Monetary Authority (“BMA”). The ECR is calculated based on
the Bermuda Solvency Capital Requirement model, a risk-
based model that takes into account the risk characteristics
of
different
aspects
of
the
company’s
business.
At December 31, 2025 and 2024, the actual and required
capital and surplus were based on the economic balance
sheet requirements.
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Under the Insurance Act, Arch Re Bermuda and AGRL are
restricted with respect to the payment of dividends. Each
entity is prohibited from declaring or paying in any financial
year dividends of more than 25% of its total statutory capital
and surplus (as shown on its previous financial year’s
statutory balance sheet) unless it files, at least seven days
before payment of such dividends, with the BMA an affidavit
stating that it will continue to meet the required margins
following the declaration of those dividends. Accordingly,
Arch Re Bermuda can pay approximately $6.4 billion to Arch
Capital during 2026 without providing an affidavit to the
BMA. Dividends or distributions, if any, made by AGRL would
result in an increase in available capital at Arch-U.S.
Ireland
The Company has three Irish subsidiaries: Arch Re Europe,
an authorized life and non-life reinsurer, Arch Insurance
(EU), an authorized non-life insurer and Arch Underwriting
Europe,
a
registered
insurance
and
reinsurance
intermediary. Irish authorized reinsurers and insurers, such
as Arch Re Europe, Arch Insurance (EU) and Irish
intermediaries, and Arch Underwriters Europe, are subject
to the general body of Irish laws and regulations including
the provisions of the Companies Act 2014. As part of the
Company’s Brexit plan, Arch Insurance (EU) received
approval from the Central Bank of Ireland (“CBI”) to expand
the nature of its business in 2019 and commenced writing
insurance lines in the European Economic Area in 2020, and
the Part VII Transfer was completed at the end of December
2020. Arch Re Europe, Arch Insurance (EU) and Arch
Underwriters Europe are subject to the supervision of the
CBI and must comply with Irish insurance acts and
regulations as well as with directions and guidance issued by
the CBI. Arch Re Europe and Arch Insurance (EU) are
required to maintain a minimum level of capital. At
December 31, 2025 and 2024, these requirements were
met.
The amount of dividends these subsidiaries are permitted to
declare is limited to accumulated, realized profits, so far as
not previously utilized by distribution or capitalization, less
its accumulated, realized losses, so far as not previously
written off in a reduction or reorganization of capital duly
made. The solvency and capital requirements must still be
met following any distribution. Dividends or distributions, if
any, made by Arch Re Europe would result in an increase in
available capital at Arch Re Bermuda.
United States
The Company’s U.S. insurance and reinsurance subsidiaries
are subject to insurance laws and regulations in the
jurisdictions in which they operate. The ability of the
Company’s regulated insurance subsidiaries to pay dividends
or make distributions is dependent on their ability to meet
applicable regulatory standards. These regulations include
restrictions that limit the amount of dividends or other
distributions, such as loans or cash advances, available to
shareholders without prior approval of the insurance
regulatory authorities.
Dividends or distributions, if any, made by Arch Re U.S.
would result in an increase in available capital at Arch-U.S.,
the Company’s U.S. holding company. Arch Re U.S. can
declare a maximum of approximately $523 million of
dividends during 2026 subject to the approval of the
Commissioner of the Delaware Department of Insurance.
AMIC and UGRIC are approved as eligible mortgage insurers
by Fannie Mae and Freddie Mac, subject to their
comprehensive requirements, known as the Private
Mortgage Insurer Eligibility Requirements or “PMIERs.” In
August 2024, the GSEs updated PMIERs to incorporate new
deductions to the definition of available assets for
investment risk. This update became effective March 31,
2025, but the impact will be phased in through September
30, 2026. Further, the amount of assets required to satisfy
the revised financial requirements of the PMIERs may be
affected by many factors, including macroeconomic
conditions, the size and composition of our mortgage
insurance portfolio, and the amount of risk ceded to
reinsurers that may be deducted in our calculation of
“minimum required assets.”
The Company’s U.S. mortgage insurance subsidiaries are also
subject to regulation by their respective domiciliary and
primary regulators, which include the Wisconsin Office of
the Commissioner of Insurance (“Wisconsin OCI”) and the
North Carolina Department of Insurance (“NC DOI”), as well
as the state insurance departments in each state in which
they are licensed. As mandated by state insurance laws,
mortgage insurers are generally mono-line companies. Each
company is subject to the statutory requirements of their
domiciliary regulator as to payment of dividends and return
of capital; the GSEs may also impart limitations on dividends
with respect to the Company’s eligible mortgage insurers,
such as if available assets fall below the required minimum
assets. Under respective state law, the Company’s U.S.
mortgage
subsidiaries
can
declare
a
maximum
of
approximately $295 million of ordinary dividends in 2026,
however, dividend capacity is limited by the respective
companies unassigned surplus amounts. Such dividends
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would increase the available capital at Arch U.S. MI Holdings
Inc., a subsidiary of Arch-U.S.
Mortgage insurance companies licensed in Wisconsin or
North Carolina are required to establish contingency loss
reserves for purposes of statutory accounting in an amount
equal to at least 50% of net earned premiums. These
amounts generally cannot be withdrawn for a period of 10
years and are separate liabilities for statutory accounting
purposes, which affects the ability to pay dividends.
However, with prior regulatory approval, a mortgage
insurance company may make early withdrawals from the
contingency reserve when incurred losses exceed 35% of net
premiums earned in a calendar year.
Under Wisconsin and North Carolina law, as well as that of
14 other states, a mortgage insurer must maintain a
minimum amount of statutory capital relative to its risk in
force in order for the mortgage insurer to continue to write
new business. While formulations of minimum capital vary
in certain jurisdictions, the most common measure applied
allows for a maximum risk-to-capital ratio of 25 to 1.
Wisconsin and North Carolina require mortgage insurers to
maintain a “minimum policyholder position” calculated in
accordance with their respective regulations. Policyholders'
position consists primarily of statutory policyholders' surplus
plus the contingency loss reserves.
United Kingdom
The Prudential Regulation Authority (“PRA”) and the
Financial Conduct Authority (“FCA”) regulate insurance and
reinsurance companies and the FCA regulates firms carrying
on insurance mediation activities operating in the U.K., both
under the Financial Services and Markets Act 2000. In May
2004, Arch Insurance (U.K.) was granted the relevant
permissions for the classes of insurance business which it
underwrites in the U.K. AMAL currently manages our Lloyd’s
Syndicates pursuant to its authorizations by the U.K.
regulators and Lloyd’s. All U.K. companies are also subject to
a range of statutory provisions, including the laws and
regulations of the Companies Act 2006 (as amended) (the
“U.K. Companies Act”).
Arch Insurance (U.K.) and AMAL must maintain a margin of
solvency at all times under the Solvency II Directive from the
European Insurance and Occupational Pensions Authority.
The regulations stipulate that insurers are required to
maintain the minimum capital requirement and solvency
capital requirement at all times. At December 31, 2025 and
2024, these requirements were met.
As corporate members of Lloyd’s, AMAL (as managing agent
of the Company’s Lloyd’s Syndicates) and each syndicate’s
respective corporate members are subject to the oversight
of the Council of Lloyd’s. The capital required to support a
Syndicate’s underwriting capacity, or funds at Lloyd’s, is
assessed annually and is determined by Lloyd’s in
accordance with the capital adequacy rules established by
the PRA. The Company has provided capital to support the
underwriting of our Lloyd’s Syndicates in the form of
pledged assets and letters of credit provided by Arch Re
Bermuda. The amount which the Company provides as funds
at Lloyd’s is not available for distribution to the Company for
the payment of dividends. Lloyd’s is supervised by the PRA
and required to implement certain rules prescribed by the
PRA under the Lloyd’s Act of 1982 regarding the operation of
the Lloyd’s market. With respect to managing agents and
corporate members, Lloyd’s prescribes certain minimum
standards relating to management and control, solvency and
other requirements and monitors managing agents’
compliance with such standards.
Under U.K. law, all U.K. companies are restricted from
declaring a dividend to their shareholders unless they have
“profits available for distribution.” The calculation as to
whether a company has sufficient profits is based on its
accumulated realized profits minus its accumulated realized
losses. U.K. insurance regulatory laws do not prohibit the
payment of dividends, but the PRA or FCA, as applicable,
requires
that
insurance
companies
and
insurance
intermediaries maintain certain solvency margins and may
restrict the payment of a dividend by Arch Insurance (U.K.)
and AMAL.
Canada
Arch Insurance Canada and the Canadian branch of Arch Re
U.S. (“Arch Re Canada”) are subject to federal, as well as
provincial and territorial, regulation in Canada. The Office of
the Superintendent of Financial Institutions (“OSFI”) is the
federal regulatory body that, under the Insurance
Companies Act (Canada), regulates federal Canadian and
non-Canadian insurance companies operating in Canada.
Arch Insurance Canada and Arch Re Canada are subject to
regulation in the provinces and territories in which they
underwrite insurance/reinsurance, and the primary goal of
insurance/reinsurance regulation at the provincial and
territorial levels is to govern the market conduct of
insurance/reinsurance companies. Arch Insurance Canada is
licensed to carry on insurance business by OSFI and in each
province and territory. Arch Re Canada is licensed to carry-
on reinsurance business by OSFI and in the provinces of
Ontario and Quebec.
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Under the Insurance Companies Act (Canada), Arch
Insurance Canada is required to maintain an adequate
amount of capital in Canada, calculated in accordance with a
test promulgated by OSFI called the Minimum Capital Test
(“MCT”), and Arch Re Canada is required to maintain an
adequate margin of assets over liabilities in Canada,
calculated in accordance with a test promulgated by OSFI
called the Branch Adequacy of Assets Test. Under the
Insurance Companies Act (Canada), approval of the Minister
of Finance (Canada) is required in connection with certain
acquisitions of shares of, or control of, Canadian insurance
companies such as Arch Insurance Canada, and notice to
and/or approval of OSFI is required in connection with the
payment of dividends by or redemption of shares by
Canadian insurance companies such as Arch Insurance
Canada.
Australia
The Australian Prudential Regulation Authority (“APRA”) is
an
independent
statutory
authority
responsible
for
prudential supervision of institutions across banking,
insurance and superannuation and promotes financial
stability in Australia. Arch Indemnity has been authorized to
conduct monoline lenders’ mortgage insurance business in
Australia since June 2002 and was acquired by Arch Capital
on August 30, 2021 and since that date is the primary
provider of lenders’ mortgage insurance for the group. Arch
Indemnity has also been licensed by the Australian Securities
and Investments Commission (“ASIC”) since March 2011 to
engage in credit activities in Australia. Arch LMI Pty Ltd.
(“Arch LMI”) was formerly authorized by APRA in January
2019 to conduct monoline lenders’ mortgage insurance
business in Australia; however, in 2022, we converted Arch
LMI to a services company for our Australian lenders
mortgage
insurance
operations
and
the
company
relinquished its APRA authorization. Major regulatory
requirements that are applicable to Arch Indemnity in
general as an insurance provider and financial institution in
Australia include requirements and compliance with
minimum
capital
levels;
risk
management
strategy;
corporate governance standards, privacy legislation on the
collection, use and storage of personal information; cyber
security obligations imposed by APRA and ASIC; modern
slavery legislation; anti-money laundering and counter-
terrorism legislation. At December 31, 2025 and 2024, these
requirements were met.
Arch Capital also conducts property and casualty insurance
business in Australia through the Company’s Lloyd’s
platform. This insurance business is managed by and
distributed through local coverholders and is subject to
Lloyd’s Supervision. In addition, the business is subject to
local Australian prudential regulatory oversight by APRA,
and additional separate financial services market conduct
regulation by the Australian Securities and Investments
Commission.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
In connection with the filing of this Form 10-K, our
management, with the participation of the Chief Executive
Officer and Chief Financial Officer, conducted an evaluation
of our disclosure controls and procedures, as of
December 31, 2025, for the purposes set forth in the
applicable rules under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Disclosure controls and
procedures are the controls and other procedures designed
to ensure that information required to be disclosed in the
reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, and that
such information is accumulated and communicated to
management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions
regarding required disclosure. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded
that, as of December 31, 2025, the Company’s disclosure
controls and procedures were effective.
Management’s Annual Report on Internal Control Over
Financial Reporting
Our management is responsible for establishing and
maintaining adequate internal control over financial
reporting, as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act. Our management assessed the
effectiveness of our internal control over financial reporting
as of December 31, 2025. In making this assessment,
management used the criteria set forth by the Committee of
Sponsoring Organizations (“COSO”) of the Treadway
Commission in Internal Control-Integrated Framework
(2013).
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect all
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in
conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Based on our assessment, management determined that, as
of December 31, 2025, our internal control over financial
reporting was effective. The effectiveness of our internal
control over financial reporting as of December 31, 2025 has
been
audited
by
PricewaterhouseCoopers
LLP,
an
independent registered public accounting firm, as stated in
their report included in Item 8.
Changes in Internal Control Over Financial Reporting
There have been no changes in internal control over
financial reporting that occurred during the quarter ended
December 31, 2025, that have materially affected, or are
reasonably likely to materially affect, our internal control
over financial reporting.
ITEM 9B. OTHER INFORMATION
During the three months ended December 31, 2025, none of the Company’s directors or officers (as defined in Rule 16a-1(f)
of the Securities Exchange Act of 1934) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading
arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933).
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by
reference from the information to be included in our
definitive proxy statement (“Proxy Statement”) for our
annual meeting of shareholders to be held in 2026, which we
intend to file with the SEC pursuant to Regulation 14A no
later than 120 days after the end of the Company’s fiscal
year which ended on December 31, 2025. Copies of our code
of ethics applicable to our chief executive officer, chief
financial officer and principal accounting officer or controller
are available free of charge to investors upon written
request addressed to the attention of Arch Capital’s
corporate secretary, Waterloo House, 100 Pitts Bay Road,
Pembroke HM 08, Bermuda. In addition, our code of ethics
and certain other basic corporate documents, including the
charters of our audit committee, compensation committee
and nominating committee are posted on our website
located at www.archgroup.com.
If any substantive amendments are made to the code of
ethics or if there is a grant of a waiver, including any implicit
waiver, we will disclose the nature of such amendment or
waiver on our website or in a report on Form 8-K, to the
extent required by applicable law or the rules and
regulations of any exchange applicable to us. Our website
address is intended to be an inactive, textual reference only
and none of the material on our website is incorporated by
reference into this report.
We have adopted an insider trading policy that establishes
the procedures directors, officers and employees of the
Company must follow to comply with U.S. regulations on
disclosure and insider trading. It is also the policy of the
Company to comply with all applicable securities laws when
transacting in its own securities. A copy of the Company’s
insider trading policy is included as Exhibit 19.1 in this Form
10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the information to be included in the Proxy
Statement which we intend to file pursuant to Regulation 14A with the SEC no later than 120 days after the end of the
Company’s fiscal year ended on December 31, 2025, which Proxy Statement is incorporated by reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Other than the information set forth below, the information required by this item is incorporated by reference from the
information to be included in the Proxy Statement which we intend to file pursuant to Regulation 14A with the SEC no later
than 120 days after the end of the Company’s fiscal year ended on December 31, 2025, which Proxy Statement is
incorporated by reference.
The following information is as of December 31, 2025:
Column A
Column B
Column C
Plan Category
Number of Securities to
be Issued Upon Exercise
of Outstanding Stock
Options(1), Warrants and
Rights
Weighted-Average
Exercise Price of
Outstanding
Stock Options(1),
Warrants and Rights ($)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column A)
Equity compensation plans approved by security holders
10.5
$
56.74
10.6
Equity compensation plans not approved by security holders
—
—
—
Total
10.5
$
56.74
10.6 (2)
________________________
(1)
Includes all vested and unvested stock options outstanding of 10.2 million and restricted and performance share units outstanding of 0.3 million. The
weighted average exercise price does not take into account restricted and performance share units. In addition, the weighted average remaining
contractual life of the Company's outstanding exercisable stock options and SARs at December 31, 2025 was 4.4 years.
(2)
Includes 2.8 million common shares remaining available for future issuance under our Employee Share Purchase Plan and 7.8 million common shares
remaining available for future issuance under our equity compensation plans. Shares available for future issuance under our equity compensation plans
may be issued in the form of stock options, SARs, restricted shares, restricted share units payable in common shares or cash, share awards in lieu of cash
awards, dividend equivalents, performance shares and performance units and other share-based awards. In addition, 6.2 million common shares, or
58.5% of the 10.6 million common shares remaining available for future issuance may be issued in connection with full value awards (i.e., awards other
than stock options or SARs).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference from the information to be included in the Proxy
Statement which we intend to file pursuant to Regulation 14A with the SEC no later than 120 days after the end of the
Company’s fiscal year ended on December 31, 2025, which Proxy Statement is incorporated by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference from the information to be included in our Proxy
Statement which we intend to file pursuant to Regulation 14A with the SEC no later than 120 days after the end of the
Company’s fiscal year ended on December 31, 2025, which Proxy Statement is incorporated by reference.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Financial Statements, Financial Statement Schedules and Exhibits.
1. Financial Statements
Included in Part II – see Item 8 of this report.
2. Financial Statement Schedules
Page No.
II. Condensed Financial Information of Registrant
As of December 31, 2025 and 2024, and for the years ended December 31, 2025, 2024 and 2023
184
III. Supplementary Insurance Information
For the years ended December 31, 2025, 2024 and 2023
187
IV. Reinsurance
For the years ended December 31, 2025, 2024 and 2023
188
VI. Supplementary Information for Property and Casualty Insurance Underwriters
For the years ended December 31, 2025, 2024 and 2023
189
Schedules other than those listed above are omitted for the reason that they are not applicable or the information is provided
in Item 8 of this report.
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3. Exhibits
Incorporated by Reference
Exhibit
Number
Exhibit Description
Form
Original
Number
Date Filed
Filed
Herewith
3.1
Memorandum of Association of ACGL
S-4
3.1
September 8, 2000
3.2
Bye-Laws of ACGL
10-Q
3
August 5, 2016
3.3
ACGL Certificate of Deposit of Memorandum of Increase of Share Capital
10-K
3.3
February 28, 2011
4.1
Indenture, dated as of May 4, 2004, between ACGL, as issuer, and The Bank of New
York Mellon, as successor trustee to JPMorgan Chase Bank, N.A. (formerly
JPMorgan Chase Bank) (“JPMCB”), as trustee
8-K
99.2
May 7, 2004
4.2
First Supplemental Indenture, dated as of May 4, 2004, between ACGL, as issuer,
and JPMCB, as trustee
8-K
99.3
May 7, 2004
4.3
Second Supplemental Indenture, dated as of June 30, 2020, by and between Arch
Capital Group Ltd. and The Bank of New York Mellon (including the form of Global
Notes for the Notes).
8-K
4.2
June 30, 2020
4.4.1
Indenture, dated as of December 13, 2013, among Arch Capital Group (U.S.) Inc.
(“Arch U.S.”), as issuer, ACGL, as guarantor, and The Bank of New York Mellon
(“BNYM”), as trustee
8-K
4.1
December 13, 2013
4.4.2
First Supplemental Indenture, dated as of December 13, 2013, among Arch U.S., as
issuer, ACGL, as guarantor, and BNYM, as trustee
8-K
4.2
December 13, 2013
4.4.3
Second Supplemental Indenture, dated as of May 10, 2018, among Arch Capital
Finance LLC, as issuer, ACGL, as guarantor, and BNYM, as trustee
8-K
4.1
May 15, 2018
4.5.1
Deposit Agreement, dated August 17, 2017, between ACGL, as issuer, and AST, as
depositary, registrar and transfer agent and as dividend disbursing agent and
redemption agent, and the holders from time to time of the depositary receipts
8-K
4.3
August 17, 2017
4.5.2
Deposit Agreement, dated June 11, 2021, between ACGL, as issuer, and AST, as
depositary, registrar and transfer agent and as dividend disbursing agent and
redemption agent, and the holders from time to time of the depositary receipts
8-K
4.3
June 11, 2021
4.6.1
Form of Depositary Receipt, dated August 17, 2017
8-K
4.4
August 17, 2017
4.6.2
Form of Depositary Receipt, dated June 11, 2021
8-K
4.4
June 11, 2021
4.7.1
Indenture, dated as of December 8, 2016, among Arch Capital Finance LLC, as
issuer, ACGL, as guarantor, and BNYM, as trustee
8-K
4.1
December 9, 2016
4.7.2
First Supplemental Indenture, dated as of December 8, 2016, among Arch Capital
Finance LLC, as issuer, ACGL, as guarantor, and BNYM, as trustee
8-K
4.2
December 9, 2016
4.8.1
Certificate of Designations of Series F Non-Cumulative Preferred Shares
8-K
4.1
August 17, 2017
4.8.2
Certificate of Designations of Series G Non-Cumulative Preferred Shares
8-K
4.1
June 11, 2021
4.8.3
Specimen Common Share Certificate
10-K
4.1
April 2, 2001
4.8.4
Specimen Series F Non-Cumulative Preferred Share Certificate
8-K
4.2
August 17, 2017
4.8.5
Specimen Series G Non-Cumulative Preferred Share Certificate
8-K
4.2
June 11, 2021
4.9
Description of Securities
10-K
4.8
February 25, 2022
10.1.1
Third Amended and Restated ACGL Incentive Compensation Plan†
10-Q
10.7
August 5, 2016
10.1.2
First Amendment to Third Amended and Restated ACGL Incentive Compensation
Plan†
10-Q
10.1
May 5, 2017
10.1.3
Second Amendment to Third Amended and Restated ACGL Incentive Compensation
Plan†
10-K
10.2.3
February 25, 2022
10.1.4
Third Amendment to Third Amended and Restated ACGL Incentive Compensation
Plan†
10-Q
10.1
May 4, 2023
10.2.1
ACGL 2018 Long Term Incentive and Share Award Plan†
DEF 14A
March 28, 2018
10.2.2
ACGL Amended and Restated 2018 Long Term Incentive and Share Award Plan†
10-Q
10.2
August 5, 2025
10.2.3
ACGL Amended and Restated 2007 Employee Share Purchase Plan†
DEF 14A
March 23, 2023
10.2.4
Second Amended and Restated ACGL 2007 Employee Share Purchase Plan†
10-Q
10.4
August 5, 2025
10.2.5
ACGL 2022 Long Term Incentive and Share Award Plan†
8-K
10.1
May 4, 2022
10.2.6
ACGL Amended and Restated 2022 Long Term Incentive and Share Award Plan†
10-Q
10.3
August 5, 2025
10.3.1
Form of Restricted Share Agreement for Named Executive Officers and certain
Executive Officers of ACGL and subsidiaries†
10-Q
10.3
August 8, 2018
10.3.2
Form of Restricted Share Agreement between ACGL and each of the Non-Employee
Directors of ACGL†
10-Q
10.1
August 5, 2025
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10.3.3
Form of Performance Restricted Share Agreement for Named Executive Officers and
certain Executive Officers of ACGL and subsidiaries†
10-Q
10.5
August 8, 2018
10.3.5
Form of Non-Qualified Stock Option Agreement, dated as of May 13, 2016, between
ACGL and each of Nicolas Papadopoulo, Maamoun Rajeh and Louis T. Petrillo†
10-Q
10.3
August 5, 2016
10.3.6
Form of Non-Qualified Stock Option Agreement, dated as of May 8, 2017, between
ACGL and each of Nicolas Papadopoulo, Maamoun Rajeh and Louis T. Petrillo†
10-Q
10.5
August 4, 2017
10.3.7
Non-Qualified Stock Option Agreement, dated as of September 19, 2017, between
ACGL and Maamoun Rajeh†
10-K
10.5.6
February 28, 2018
10.3.8
Non-Qualified Stock Option Agreement, dated as of September 19, 2017, between
ACGL and Nicolas Papadopoulo†
10-K
10.5.7
February 28, 2018
10.3.9
Form of Non-Qualified Stock Option Agreement for Named Executive Officers and
certain Executive Officers of ACGL and subsidiaries†
10-Q
10.4
August 8, 2018
10.4.1
Employment Agreement, dated as of October 27, 2008, between ACGL and John D.
Vollaro†
8-K
10.1
October 28, 2008
10.4.2
Amendment to Employment Agreement, dated February 27, 2015, between ACGL
and John D. Vollaro†
10-Q
10.1
May 8, 2015
10.4.3
Second Amendment to Employment Agreement, dated as of January 1, 2018,
between ACGL and John D. Vollaro†
10-Q
10.1
May 9, 2018
10.5.1
Employment Agreement, dated as of September 19, 2017 between ACGL and
Maamoun Rajeh†
10-Q
10.26
November 3, 2017
10.5.2
Amendment to Employment Agreement, dated as of November 7, 2024, between
Arch Capital Group Ltd. and Maamoun Rajeh †
8-K
10.2
November 8, 2024
10.6.1
Employment Agreement, dated as of September 19, 2017 between ACGL and
Nicholas Papadopoulo†
10-Q
10.27
November 3, 2017
10.6.2
Amendment to Employment Agreement, dated as of October 13, 2024, between
ACGL and Nicolas Papadopoulo †
10-Q
10.2
November 7, 2024
10.7
Employment Agreement, dated as of May 25, 2018, between ACGL and François
Morin†
8-K/A
10.1
July 26, 2018
10.8
Employment Agreement, dated as of November 13, 2018, between Arch Capital
Services Inc. and Louis Petrillo†
10-K
10.16
February 28, 2019
10.9.1
Employment Agreement dated as of October 1,2019 between Arch Capital Group
Ltd. and David Gansberg †
10-K
10.16
February 28, 2020
10.9.2
Amendment to Employment Agreement, dated as of November 7, 2024, between
Arch U.S. MI Services Inc. and David Gansberg †
8-K
10.1
November 8, 2024
10.9.3
Second Amendment to Employment Agreement, dated as of December 11, 2024,
between Arch Capital Group (U.S.) Inc. and David Gansberg†
10-K
10.24
February 27, 2025
10.10
Employment Agreement dated as of May 7, 2021 between Arch Capital Group Ltd.
and Christine Todd †
10-Q
10.1
August 5, 2021
10.11
Arch U.S. Executive Supplemental Non-Qualified Savings and Retirement Plan†
10-K
10.24
March 2, 2009
10.13.1
Fourth Amended and Restated Credit Agreement, dated as of August 23, 2023, by
and among Arch Capital Group Ltd., certain of its subsidiaries, Bank of America,
N.A., as Administrative Agent, and the lenders party thereto(1)
10-Q
10.1
November 9, 2023
10.13.2
Consent and First Amendment to Fourth Amended and Restated Credit Agreement,
dated as of August 1, 2025
10-Q
10.1
November 6, 2025
10.14
Letter of Credit Facility Agreement, dated as of September 27, 2023, by and
between Arch Reinsurance Ltd., as the borrower and Lloyds Bank Corporate
Markets plc, as the L/C Issuer
8-K
10.1
October 2, 2023
10.15.1
Amendment No. 3 and Joinder to Letter of Credit Facility Agreement, dated as of
October 25, 2023, by and between Arch Reinsurance Ltd., as the borrower and
Lloyds Bank Corporate Markets plc, as the Administrative Agent and L/C Agent.
8-K
10.1
October 30, 2023
10.15.2
Amendment No. 4 to Letter of Credit Facility Agreement dated as of October 30,
2024 by and between Arch Reinsurance Ltd., as the borrower and Lloyds Bank.
8-K
10.1
November 4, 2024
10.15.3
Amendment No. 5 to Letter of Credit Facility Agreement dated as of October 29,
2025 by and between Arch Reinsurance Ltd., as the borrower and Lloyds Bank
Corporate Markets plc as Administrative Agent and L/C Agent
8-K
10.1
November 3, 2025
10.16.1
Master Transaction Agreement, dated as of April 5, 2024, by and between Allianz
Global Risks US Insurance Company and Arch Capital Group Ltd.
8-K
10.1
April 5, 2024
10.16.2
Amendment No. 1 to Master Transaction Agreement, dated as of August 1, 2024, by
and among Arch Capital Group Ltd., Allianz Global Risks US Insurance.
8-K
2.2
August 1, 2024
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10.17
Form of Non-Qualified Stock Option Outperformance Award Agreement for Named
Executive Officers and certain Executive Officers of ACGL and subsidiaries†
10-K
10.21
February 27, 2025
10.18
Form of Restricted Share Outperformance Award Agreement between ACGL and
each of Nicolas Papadopoulo, Maamoun Rajeh and David Gansberg†
10-K
10.22
February 27, 2025
10.19
Form of Restricted Share Outperformance Award Agreement between ACGL and
each of François Morin, Christine Todd and certain other Executive Officers of
ACGL†
10-K
10.23
February 27, 2025
19.1
Policy Statement on Insider Trading and Confidential Information
10-K
19.1
February 27, 2025
21
Subsidiaries of Registrant
X
23
Consent of PricewaterhouseCoopers LLP
X
24
Power of Attorney
X
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
X
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
X
32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
X*
32.2
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
X*
97.1
Policy relating to recovery of erroneously awarded compensation, as required by
Nasdaq listing standards adopted pursuant to 17 CFR 240.10D.
10-K
97.1
February 23, 2024
101
The following financial information from ACGL’s Annual Report on Form 10-K for the
year ended December 31, 2025 formatted in Inline XBRL: (i) Consolidated Balance
Sheets at December 31, 2025 and 2024; (ii) Consolidated Statements of Income for
the years ended December 31, 2025, 2024 and 2023; (iii) Consolidated Statements
of Comprehensive Income for the years ended December 31, 2025, 2024 and 2023;
(iv) Consolidated Statements of Changes in Shareholders’ Equity for the years ended
December 31, 2025, 2024 and 2023; (v) Consolidated Statements of Cash Flows for
the years ended December 31, 2025, 2024 and 2023; and (vi) Notes to Consolidated
Financial Statements
X
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
†
Management contract or compensatory plan or arrangement.
*
Furnished herewith.
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SCHEDULE II
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(U.S. dollars in millions)
Balance Sheet
(Parent Company Only)
December 31,
2025
2024
Assets
Total investments
$
40
$
43
Cash
13
13
Investments in subsidiaries
25,275
22,035
Investment in operating affiliates
3
3
Due from subsidiaries and affiliates
16
6
Other assets
194
66
Total assets
$
25,541
$
22,166
Liabilities
Senior notes
$
1,288
$
1,287
Due to subsidiaries and affiliates
6
11
Other liabilities
41
48
Total liabilities
1,335
1,346
Shareholders' Equity
Non-cumulative preferred shares
830
830
Common shares ($0.0011 par, shares issued: 599.8 and 595.6)
1
1
Additional paid-in capital
2,735
2,510
Retained earnings
27,045
22,686
Accumulated other comprehensive income (loss), net of deferred income tax
5
(720)
Common shares held in treasury, at cost (shares: 240.8 and 219.2)
(6,410)
(4,487)
Total shareholders' equity
$
24,206
$
20,820
Total liabilities and shareholders' equity
$
25,541
$
22,166
The financial information for the parent company (Arch Capital Group Ltd.) should be read in conjunction with the Consolidated Financial Statements and
Notes thereto.
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SCHEDULE II
(continued)
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(U.S. dollars in millions)
Statement of Income
(Parent Company Only)
Year Ended
December 31,
2025
2024
2023
Revenues
Net investment income
$
3
$
5
$
2
Net realized gains (losses)
(10)
(4)
—
Total revenues
(7)
1
2
Expenses
Corporate expenses
57
116
93
Interest expense
59
59
59
Total expenses
116
175
152
Income (loss) before income taxes and income (loss) from operating affiliates
(123)
(174)
(150)
Income tax (expense) benefit
58
—
41
Income (loss) from operating affiliates
(1)
(1)
(1)
Income (loss) before equity in net income of subsidiaries
(66)
(175)
(110)
Equity in net income of subsidiaries
4,465
4,487
4,553
Net income available to Arch
4,399
4,312
4,443
Preferred dividends
(40)
(40)
(40)
Net income available to Arch common shareholders
$
4,359
$
4,272
$
4,403
The financial information for the parent company (Arch Capital Group Ltd.) should be read in conjunction with the Consolidated Financial Statements and
Notes thereto.
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SCHEDULE II
(continued)
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(U.S. dollars in millions)
Statement of Cash Flows
(Parent Company Only)
Year Ended
December 31,
2025
2024
2023
Operating Activities:
Net Cash Provided By Operating Activities
$
1,873
$
2,398
$
46
Investing Activities:
Net (purchases) sales of short-term investments
3
(26)
(8)
Acquisitions, net of cash
—
(450)
—
Other
10
5
1
Net Cash Used For Investing Activities
13
(471)
(7)
Financing Activities:
Purchases of common shares under share repurchase program
(1,889)
(24)
—
Proceeds from common shares issued, net
50
7
(2)
Common dividends paid
(7)
(1,866)
—
Preferred dividends paid
(40)
(40)
(40)
Net Cash Used For Financing Activities
(1,886)
(1,923)
(42)
Increase (decrease) in cash and restricted cash
—
4
(3)
Cash and restricted cash, beginning of year
13
9
12
Cash and restricted cash, end of period
$
13
$
13
$
9
The financial information for the parent company (Arch Capital Group Ltd.) should be read in conjunction with the Consolidated Financial Statements and
Notes thereto.
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SCHEDULE III
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
(U.S. dollars in millions)
Deferred
Acquisition
Costs
Reserves for
Losses and
Loss
Adjustment
Expenses
Unearned
Premiums
Net
Premiums
Earned
Net
Investment
Income (1)
Net Losses
and Loss
Adjustment
Expenses
Incurred
Amortization
of Deferred
Acquisition
Costs
Other
Operating
Expenses (2)
Net
Premiums
Written
December 31, 2025
Insurance
$788
$17,527
$5,199
$7,771
NM
$4,764
$1,496
$1,172
$7,798
Reinsurance
872
15,523
4,545
8,122
NM
4,610
1,644
469
7,618
Mortgage
57
497
356
1,172
NM
(4)
13
185
1,060
Total
$1,717
$33,547
$10,100
$17,065
NM
$9,370
$3,153
$1,826
$16,476
December 31, 2024
Insurance
$696
$16,277
$4,857
$6,627
NM
$4,070
$1,217
$995
$6,874
Reinsurance
981
12,567
4,891
7,242
NM
4,327
1,432
270
7,746
Mortgage
57
525
470
1,231
NM
(55)
2
207
1,112
Total
$1,734
$29,369
$10,218
$15,100
NM
$8,342
$2,651
$1,472
$15,732
December 31, 2023
Insurance
$566
$12,250
$3,917
$5,446
NM
$3,122
$1,055
$819
$5,862
Reinsurance
901
9,924
4,254
5,836
NM
3,227
1,240
288
6,554
Mortgage
64
578
637
1,158
NM
(103)
17
194
1,052
Total
$1,531
$22,752
$8,808
$12,440
NM
$6,246
$2,312
$1,301
$13,468
(1)
The Company does not manage its assets by segment and, accordingly, net investment income is not allocated to each underwriting segment.
(2)
Certain other operating expenses relate to the Company’s corporate items. Such amounts are not reflected in the table above. See note 4, “Segment
Information,” to our consolidated financial statements in Item 8 for information.
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SCHEDULE IV
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
REINSURANCE
(U.S. dollars in millions)
Gross Amount
Ceded to Other
Companies (1)
Assumed From
Other
Companies (1)
Net
Amount
Percentage of
Amount
Assumed to Net
Year Ended December 31, 2025
Premiums Written:
Insurance
$
8,268
$
(2,637) $
2,167
$
7,798
27.8 %
Reinsurance
895
(3,531)
10,254
7,618
134.6 %
Mortgage
1,087
(245)
218
1,060
20.6 %
Total
$
10,250
$
(6,402) $
12,628
$
16,476
76.6 %
Year Ended December 31, 2024
Premiums Written:
Insurance
$
7,970
$
(2,179) $
1,083
$
6,874
15.8 %
Reinsurance
956
(3,366)
10,156
7,746
131.1 %
Mortgage
1,130
(239)
221
1,112
19.9 %
Total
$
10,056
$
(5,779) $
11,455
$
15,732
72.8 %
Year Ended December 31, 2023
Premiums Written:
Insurance
$
7,865
$
(2,049) $
46
$
5,862
0.8 %
Reinsurance
626
(2,559)
8,487
6,554
129.5 %
Mortgage
1,161
(335)
226
1,052
21.5 %
Total
$
9,652
$
(4,935) $
8,751
$
13,468
65.0 %
(1)
Certain amounts included in the gross premiums written of each segment are related to intersegment transactions and are included in the gross
premiums written of each segment. Accordingly, the sum of gross premiums written for each segment does not agree to the total gross premiums
written as shown in the table above due to the elimination of intersegment transactions in the total.
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SCHEDULE VI
ARCH CAPITAL GROUP LTD. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION FOR PROPERTY AND CASUALTY INSURANCE UNDERWRITERS
(U.S. dollars in millions)
Column A
Column B
Column C
Column D
Column E
Column F
Column G
Column H
Column I
Column J
Column K
Affiliation
with
Registrant
Deferred
Acquisition
Costs
Reserves for
Losses and
Loss
Adjustment
Expenses
Discount, if
any,
deducted
in Column
C
Unearned
Premiums
Net
Premiums
Earned
Net
Investment
Income
Net Losses and Loss
Adjustment Expenses
Incurred Related to
Amortization
of Deferred
Acquisition
Costs
Net Paid
Losses and
Loss
Adjustment
Expenses
Net
Premiums
Written
(a) Current
Year
(b)
Prior
Years
Consolidated Subsidiaries
2025
$
1,717 $
33,547 $
78 $
10,100 $
17,065 $
1,625 $
9,970 $
(600) $
3,153 $
7,025 $
16,476
2024
1,734
29,369
68
10,218
15,100
1,495
8,849
(507)
2,651
5,073
15,732
2023
1,531
22,752
66
8,808
12,440
1,023
6,784
(538)
2,312
4,093
13,468
ITEM 16.
FORM 10-K SUMMARY
Not applicable.
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2025 FORM 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ARCH CAPITAL GROUP LTD.
(Registrant)
By:
/s/ Nicolas Papadopoulo
Name:
Nicolas Papadopoulo
Title:
Chief Executive Officer (Principal Executive Officer)
February 26, 2026
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Name
Title
Date
/s/ Nicolas Papadopoulo
Nicolas Papadopoulo
Chief Executive Officer (Principal Executive Officer)
February 26, 2026
/s/ François Morin
François Morin
Executive Vice President and Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer) and Treasurer
February 26, 2026
*
John M. Pasquesi
Chair of the Board
February 26, 2026
*
John L. Bunce, Jr.
Director
February 26, 2026
*
Francis Ebong
Director
February 26, 2026
*
Laurie S. Goodman
Director
February 26, 2026
*
Daniel J. Houston
Director
February 26, 2026
Table of Contents
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2025 FORM 10-K
Name
Title
Date
*
Moira Kilcoyne
Director
February 26, 2026
*
Eileen Mallesch
Director
February 26, 2026
*
Alexander Moczarski
Director
February 26, 2026
*
Brian S. Posner
Director
February 26, 2026
*
Neal Triplett
Director
February 26, 2026
*
John D. Vollaro
Director
February 26, 2026
___________________
*
By François Morin, as attorney-in-fact and agent, pursuant to a power of attorney, a copy of which has been filed with
the Securities and Exchange Commission as Exhibit 24 to this report.
/s/ François Morin
Name:
François Morin
Attorney-in-Fact
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Directors
John M. Pasquesi 3,4,6
Chair of the Board
Managing Member of Otter Capital LLC
John L. Bunce 3,4,5
Managing Director & Founder of Greyhawk Capital Management, LLC
and Managing Director and Founder of Steel Box, LLC
Francis Ebong 1,2,5
Chief Service Experience Officer at PayPal
Laurie S. Goodman 1,5,6
Institute Fellow at the Urban Institute and
Founder of its Housing Finance Policy Center
Daniel J. Houston 2,5
Former Chairman of the Principal Financial Group
Moira Kilcoyne 1,2,5
Former Managing Director, Co-Chief Information Officer
of Morgan Stanley
Eileen Mallesch 1,6
Former Senior Vice President and Chief Financial Officer
of Nationwide Property and Casualty Segment
Alexander Moczarski 2,6
Former Chairman of Marsh McLennan Companies, International
Brian S. Posner 2,4
Founder and President of Point Rider Group LLC
Neal Triplett 4,6
President and Chief Executive Officer
of the Duke University Management Company
John D. Vollaro 4,6
Senior Advisor and former Executive Vice President,
Chief Financial Officer and Treasurer, Arch Capital Group Ltd.
Officers
Nicolas Papadopoulo 3
Chief Executive Officer
Director
David E. Gansberg
President
Maamoun Rajeh
President
François Morin
Chief Financial Officer and Treasurer
Christine Todd
Chief Investment Officer
Jennifer Centrone
Chief Human Resources Officer
Jerome Halgan
President and Chief Underwriting Officer, Arch Reinsurance Group
Chris Hovey
Chief Operations Officer
Louis T. Petrillo
General Counsel
Jay Rajendra
Chief Strategy and Innovation Officer
Michael Schmeiser
President and Chief Executive Officer, Arch U.S. Mortgage
Matthew Shulman
Chief Executive Officer, Arch Insurance North America
1 Audit Committee
2 Compensation and Human Capital Committee
3 Executive Committee
4 Finance, Investment and Risk Committee
5 Nominating and Governance Committee
6 Underwriting Oversight Committee
Corporate Address
Waterloo House, Ground Floor
100 Pitts Bay Road
Pembroke HM 08, Bermuda
T: 441 278 9250
Market Information
The common shares of Arch Capital Group Ltd. are listed on the
NASDAQ Global Select Market under the symbol ACGL.
Transfer Agent
Equiniti Trust Company, LLC
28 Liberty Street, 53rd Floor
New York, NY 10005
Shareholder Inquiries
shareholderinfo@archgroup.com
SHAREHOLDER INFORMATION
©2026 Arch Capital Group Ltd. All rights reserved.
ARCH CAPITAL GROUP LTD.
archgroup.com
©2026 Arch Capital Group Ltd. All rights reserved. 00365