Commitments and Contingencies
Concentrations of Credit Risks
Credit risk arises out of the failure of a counterparty to perform according to the terms of the contract. Instruments which potentially subject the Company to concentration of credit risk consist primarily of fixed maturity and short-term investments, cash and cash equivalents, premiums receivable and reinsurance balances recoverable. The Company limits the amount of credit exposure to any one financial institution and, except for the securities of the U.S. Government and U.S. Government related entities, none of the Company’s fixed maturity and short-term investments exceeded 10% of shareholders’ equity at December 31, 2025. The Company evaluates the financial condition of its reinsurers, who primarily consist of highly rated reinsurers and may require collateralization of those recoverable balances. See Note 2g, Credit Loss Provisions and Note 7, Reinsurance, for further details.
Operating Leases
The Company leases office space under operating leases in Bermuda, the United States, the United Kingdom, and Ireland. These leases expire at various dates through 2030, with a weighted average lease term of 2.0 years. In accordance with ASU 2016-02 Leases, the Company's balance sheet reflects a $6.7 million and $9.1 million right of use asset in "Other assets" and a discounted lease liability of $7.1 million and $9.2 million in "Accounts payable and accrued expenses", as at December 31, 2025 and 2024, respectively. The discounted lease liability was calculated with reference to weighted average discount rates of 5.38% and 5.30% as at December 31, 2025 and 2024, respectively. Leases including renewal options are recorded on the balance sheet when management is reasonably certain the options will be exercised. Operating lease expense for the years ended December 31, 2025, 2024 and 2023 was $3.5 million, $3.4 million and $3.8 million, respectively.
Future minimum lease payments under the leases are expected to be as follows:
| | | | | | | | |
($ in thousands) | | Minimum Lease Payments |
| Year ended December 31, | |
| 2026 | | $ | 3,110 | |
| 2027 | | 2,815 | |
| 2028 | | 1,299 | |
| 2029 | | 670 | |
| 2030 | | 118 | |
| Thereafter | | — | |
| Total undiscounted lease liabilities | | 8,012 | |
| Less: present value discount | | (871) | |
| Total recorded lease liability at present value | | $ | 7,141 | |
Lloyd's Capital Requirements
Lloyd’s bases the capital funding requirements of the Company's corporate member, Hamilton Corporate Member Limited ("HCML"), on their latest approved Economic Capital Assessments which are determined by reference to their business plans, internal capital models, and actual performance, among other factors, as well as any other relevant corporate member obligations or receivables. Capital is in the form of Funds at Lloyd's ("FAL") which is generally available to settle the obligations of the corporate members.
Syndicate 4000 is solely supported by HCML. The Company's operations consist of a managing agent, Hamilton Managing Agency Limited, which manages the affairs of Syndicate 4000 on behalf of HCML.
The total available capital in support of the capital requirements for Syndicate 4000 is comprised of the following FAL:
| | | | | |
($ in thousands) | December 31,
2025 |
| Unsecured LOC capacity | $ | 260,000 | |
| Fixed income securities | 263,135 | |
| Cash | 1,422 | |
| Total | $ | 524,557 | |
Indemnifications
In the ordinary course of its business, the Company may enter into contracts or agreements that contain indemnifications. Future events could occur that lead to the execution of these provisions against the Company. Management currently believes that the likelihood of such an event is remote.
Litigation and Regulatory Matters
The Company is subject to legal and regulatory investigations in the ordinary course of business. As at December 31, 2025, the Company was not a party to any material legal proceeding or investigation which is expected to have a material adverse effect on our results of operations, financial condition or liquidity.