Accelerant HoldingsARX
Accelerant Holdings Income Taxes Disclosure
10. Income taxes
In March 2025, the Board of Directors of Accelerant Holdings and certain intermediary holding companies (together, the "Holding Companies") approved a change in the Holding Companies' tax residency from the Cayman Islands to the UK. Upon becoming UK tax residents, the Holding Companies began to benefit from operational efficiencies including, but not limited to, lower withholding tax rates applicable to dividend distributions from certain US subsidiaries under the US-UK tax treaty. In addition, the aggregate income (loss) of the Holding Companies became subject to UK income tax effective as of the March 2025 date of change to UK tax residency. To the extent that the Holding Companies have incremental income it will generate additional UK tax expense and, conversely, to the extent that there are any incremental losses, income tax benefits will be generated to the extent that there is current or projected taxable income available in our UK operations. As a result of this change, incremental tax benefits were realized due to the Holding Companies’ taxable losses and, therefore, our effective tax rate for the year ended December 31, 2025 was below those reported in previous years when such expenses were incurred in the Cayman Islands (a zero tax rate jurisdiction).
We and our subsidiaries operate businesses in Bermuda, Belgium, the Cayman Islands, Canada, France, Greece, Italy, Ireland, Malta, Puerto Rico, Spain, UK, and US. Under current law of the Cayman Islands, we are not subject to any corporate income taxes in this country; however, because the Holding Companies are UK tax residents, the income or loss from these entities are subject to UK tax expense or benefit. We still operate certain entities in the Cayman Islands (other than the Holding Companies) that are not UK tax residents.
We are incorporated as an exempted company in the Cayman Islands and (as noted above) are a tax resident in the UK as of March 2025. The US, UK and EU are the most significant regions contributing to our overall taxation for the years ended December 31, 2025, 2024 and 2023.
The components of income taxes attributable to operations by jurisdiction were as follows:
| Years Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Income (loss) before income taxes: | |||||||||||||||||
| US | $ | 76.4 | $ | 71.2 | $ | 13.3 | |||||||||||
| UK and EU | (1,411.0) | 45.9 | (17.0) | ||||||||||||||
| Other | 12.7 | (85.1) | (40.2) | ||||||||||||||
| Income (loss) before income taxes | $ | (1,321.9) | $ | 32.0 | $ | (43.9) | |||||||||||
| Current income tax expense: | |||||||||||||||||
| US | $ | 38.2 | $ | 36.1 | $ | 6.6 | |||||||||||
| UK and EU | 11.9 | 13.1 | 13.2 | ||||||||||||||
| Other | 5.2 | 0.8 | 0.1 | ||||||||||||||
| Total current income tax expense | 55.3 | 50.0 | 19.9 | ||||||||||||||
| Deferred income tax (benefit) expense: | |||||||||||||||||
| US | $ | (26.7) | $ | (23.9) | $ | 1.2 | |||||||||||
| UK and EU | (3.8) | (16.6) | (0.9) | ||||||||||||||
| Other | (1.5) | (0.4) | — | ||||||||||||||
| Total deferred income tax (benefit) expense | (32.0) | (40.9) | 0.3 | ||||||||||||||
| Income tax expense | $ | 23.3 | $ | 9.1 | $ | 20.2 | |||||||||||
Our expected income tax expense (benefit) has been computed as the sum of the income (loss) before income taxes in each jurisdiction, multiplied by the jurisdiction's applicable statutory tax rate. The applicable statutory tax rates by jurisdiction were as follows: Bermuda (15.0%), Belgium (25.0%), the Cayman Islands (—%), Canada (26.5%), France (25.0%), Greece (22.0%), Italy (27.9%), Ireland (12.5%), Malta (35.0%), Puerto Rico (4.0%), Spain (25.0%), UK (25.0%), and US (21.0%).
As referenced in Note 2, we adopted ASU 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" on a prospective basis beginning with the year ended December 31, 2025. The following table presents required disclosure pursuant to ASU 2023-09 and reconciles the United Kingdom statutory tax amount and rate (given our UK tax residency described above) to our actual global effective income tax amount and rate for the year ended December 31, 2025:
| Year Ended December 31, 2025 | |||||||||||
| (in millions) | Income tax expense (benefit) | Percent | |||||||||
| United Kingdom federal statutory tax | $ | (330.5) | 25.0 | % | |||||||
| Foreign tax effects | (7.8) | 0.6 | % | ||||||||
| Effect of cross-border tax laws: | |||||||||||
| Pillar II top-up tax | 3.0 | (0.2) | % | ||||||||
| Changes in valuation allowances | (0.4) | — | % | ||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Profits interest expense | 344.9 | (26.1) | % | ||||||||
| Other | 14.9 | (1.2) | % | ||||||||
| Other adjustments | (0.8) | 0.1 | % | ||||||||
| Global effective tax | $ | 23.3 | (1.8) | % | |||||||
Our actual income tax expense (benefit) for the years ended December 31, 2024 and 2023 differs from each jurisdiction's statutory tax rate applied to the applicable income (loss) before income taxes in each jurisdiction due to the tax effects of the following:
| Years Ended December 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (in millions) | Income before income taxes | Income tax expense (benefit) | Loss before income taxes | Income tax expense (benefit) | |||||||||||||||||||
| Income tax expense (benefit) computed at statutory tax rate applied to the subcomponents of income (loss) by jurisdiction | $ | 32.0 | $ | 24.0 | $ | (43.9) | $ | (0.1) | |||||||||||||||
| Tax effects of: | |||||||||||||||||||||||
| Change in valuation allowance | (9.7) | 16.4 | |||||||||||||||||||||
| Provision to return adjustment | (2.0) | (0.7) | |||||||||||||||||||||
| Non-deductible expenses | 1.9 | 2.2 | |||||||||||||||||||||
| Non-taxable income | (2.6) | (0.8) | |||||||||||||||||||||
| US state income taxes | 1.5 | 1.6 | |||||||||||||||||||||
| Change in entity tax status | (5.2) | — | |||||||||||||||||||||
| Taxable gain on intercompany transfer | 1.0 | 2.3 | |||||||||||||||||||||
| Other | 0.2 | (0.7) | |||||||||||||||||||||
| Total | $ | 32.0 | $ | 9.1 | $ | (43.9) | $ | 20.2 | |||||||||||||||
The relationship of our income tax expense to pre-tax income (loss) is atypical because our taxable income has predominately been generated in the US, UK, Ireland, and Puerto Rico resulting in income tax expense in those jurisdictions (entities in such jurisdictions are referred to as “tax-paying entities”).
Meanwhile, we have incurred operating losses in zero tax rate jurisdictions (such as in our corporate and reinsurance entities in the Cayman Islands) resulting in no income tax benefit (although as noted above, the Holding Companies are subject to UK income taxes). We have also incurred pre-tax operating losses in Belgium and other jurisdictions where we have generated cumulative operating losses; however, in each of those cases, a valuation allowance has been recorded against the corresponding deferred tax assets (entities in these two types of jurisdictions are referred to as “non-tax paying entities”).
Taxable losses in one jurisdiction generally cannot be applied to offset earnings in another. In certain other jurisdictions, losses in one entity may not be used to offset taxable income generated by another entity in that same jurisdiction.
The composition of our effective tax rates among our tax-paying and non-tax paying entities that demonstrates the non-tax paying entities' effect on the total effective tax rate were as follows:
| Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | Tax-paying entities | Nondeductible profits interests and termination fee expenses | Non-tax paying entities | Total | Tax-paying entities | Non-tax paying entities | Total | Tax-paying entities | Non-tax paying entities | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes | $ | 124.4 | $ | (1,404.7) | $ | (41.6) | $ | (1,321.9) | $ | 142.3 | $ | (110.3) | $ | 32.0 | $ | 90.3 | $ | (134.2) | $ | (43.9) | ||||||||||||||||||||||||||||||||||||||||||
| Income tax expense | 23.3 | — | — | 23.3 | 9.1 | — | 9.1 | 20.2 | — | 20.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effective tax rate | 18.7 | % | — | — | (1.8) | % | 6.4 | % | — | 28.4 | % | 22.4 | % | — | (46.0) | % | ||||||||||||||||||||||||||||||||||||||||||||||
Deferred taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Our ability to realize deferred tax assets depends on our ability to generate sufficient taxable income of the same character, within the carryback and carryforward periods permitted within each tax jurisdiction. In assessing future taxable income, we considered all sources of taxable income available to realize our deferred assets, including the future reversal of existing temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards, taxable income in carry back years and prudent and feasible tax-planning strategies.
We concluded that a valuation allowance of $45.9 million is required as of December 31, 2025. For territories where no valuation allowance is required as of December 31, 2025, we are of the opinion that it is more-likely-than-not that sufficient taxable income will be earned for which the deferred tax assets can be utilized. The valuation allowances were primarily related to operating losses and net deferred tax assets in jurisdictions that we are unable to recognize benefits from due to a history of recurring losses.
As noted in the rate reconciliations above, there were $0.4 million of net tax benefits, $9.7 million of net tax benefits and $16.4 million of net tax expenses for valuation allowance changes for the years ended December 31, 2025, 2024 and 2023, respectively, based on changes in our estimates regarding recoverability of deferred tax assets in the various tax jurisdictions.
If changes occur in the assumptions underlying our tax planning strategies or in the scheduling of the reversal of our deferred tax liabilities, the valuation allowance may need to be adjusted in the future.
The net deferred tax asset comprises the tax effects of temporary differences related to the following:
| December 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss | $ | 43.7 | $ | 32.9 | |||||||
| Deferred ceding commission | 67.3 | 49.2 | |||||||||
| Unearned premiums | 4.8 | 2.6 | |||||||||
| Accrued compensation | 10.5 | 2.0 | |||||||||
| Accrued commissions | 14.2 | — | |||||||||
| Intangible assets | — | 4.4 | |||||||||
| Outside basis difference in partnership investments | 12.1 | 7.4 | |||||||||
| Other | 4.4 | 4.3 | |||||||||
| Deferred tax assets before valuation allowance | 157.0 | 102.8 | |||||||||
| Valuation allowance | (45.9) | (45.4) | |||||||||
| Deferred tax assets net of valuation allowance | 111.1 | 57.4 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Deferred acquisition costs | (14.1) | (7.2) | |||||||||
| Unrealized gain on investments | (10.3) | — | |||||||||
| Intangible assets | (3.2) | — | |||||||||
| Other | (5.7) | — | |||||||||
| Total deferred tax liabilities | (33.3) | $ | (7.2) | ||||||||
| Net deferred tax assets | $ | 77.8 | $ | 50.2 | |||||||
The amount and timing of realizing the benefits of our net operating loss carryforwards depend on future taxable income and limitations imposed by tax laws. As of December 31, 2025, our net operating loss carryforwards were as follows:
| (in millions) | December 31, 2025 | Deferred tax assets on net operating loss | |||||||||
| Net operating loss carryforwards by jurisdiction: | |||||||||||
Belgium (1) | $ | 125.2 | $ | 31.3 | |||||||
US (2) | 22.4 | 4.7 | |||||||||
Malta (1) | 4.7 | 1.7 | |||||||||
| UK | 17.1 | 4.3 | |||||||||
| Puerto Rico | 20.0 | 0.8 | |||||||||
| All other | 6.3 | 0.9 | |||||||||
| Total deferred tax asset on net operating losses | $ | 43.7 | |||||||||
(1) Jurisdictions where the net operating loss has a full valuation allowance.
(2) The US NOLs relate to the Mission US group, which has historically filed a U.S. federal income tax return separate from the Accelerant US tax group. These NOLs are not currently able to be utilized to offset the taxable income generated by the Accelerant US tax group.
We did not incur any interest and penalties related to uncertain tax positions for the years ended December 31, 2025, 2024 and 2023. We did not have any accruals for uncertain tax positions nor any unrecognized uncertain tax benefits as of December 31, 2025 or 2024.
We and our subsidiaries file income tax returns in their respective jurisdictions. We are not currently under audit for income taxes in any jurisdiction. The statute of limitations remains open in various jurisdictions from 2019 and forward.
For the year ended December 31, 2025, we consider our earnings within each jurisdiction to be indefinitely reinvested, and as such, no deferred taxes are required on the undistributed earnings of subsidiaries subject to tax. Should the subsidiaries distribute current or accumulated earnings and profits in the form of dividends or otherwise, we may be subject to withholding taxes in certain jurisdictions. The cumulative amount that would be subject to withholding tax, if distributed, is not practicable to compute.
Under the Organization for Economic Co-operation and Development ("OECD") / G20 Inclusive Framework, 140 countries agreed to enact a two-pillar solution to address the digitalization of the economy. The OECD’s Pillar Two Model Rules introduce global changes to the international tax framework. Large multinational businesses with greater than €750 million total revenue are required to pay a minimum effective tax rate under Pillar Two of 15% on income arising in each jurisdiction where they operate. The proposed rules took effect for tax years beginning on January 1, 2024 in many jurisdictions. We are subject to these rules given our gross earned premiums are more than €750 million and the minimum tax is treated as a period cost. The Pillar Two minimum tax expense for the years ended December 31, 2025 and 2024 was $4.5 million and $0.7 million, respectively.
Cash Taxes Paid
We adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025 and have included the following table as a result of our adoption, which presents income taxes paid (net of refunds received) for the year ended December 31, 2025:
| (in millions) | December 31, 2025 | ||||
| UK taxes | $ | 8.9 | |||
| Foreign taxes: | |||||
| Ireland | 3.9 | ||||
| US - Federal | 33.4 | ||||
| US - State | 8.8 | ||||
| Other foreign jurisdictions | 4.1 | ||||
| Total cash taxes paid | $ | 59.1 | |||
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.