Kestrel Group LtdKG
Kestrel Group Ltd Commitments Disclosure
Commitments, Contingencies and Guarantees
a) Concentrations of Credit Risk
At December 31, 2025, the Company’s assets where significant concentrations of credit risk may exist include investments, cash and cash equivalents, net loan receivable from related party, reinsurance balances receivable, reinsurance recoverable on unpaid losses and funds withheld receivable. Please refer to Note 8. Reinsurance for additional information regarding the Company's credit risk exposure on its reinsurance counterparties including the impact of the LPT/ADC Agreement effective January 1, 2019. The Company requires its reinsurers to have adequate financial strength.
As discussed in Note 3. Segment Information, the Company's Program Services segment consists of a cohesive suite of fronting services that are integrated and interdependent. For the years ended December 31, 2025 and 2024, this revenue stream is highly concentrated due to capacity distribution agreements with an individual customer.
The Company evaluates the financial condition of its reinsurers, program managers and MGAs and monitors its concentration of credit risk on an ongoing basis. Provisions are made for amounts considered potentially uncollectible. Reinsurance receivable and recoverable balances, net loan receivable from related party, and the funds withheld receivable are reviewed for expected credit losses on a quarterly basis and are presented net of an allowance for expected credit losses. Letters of credit are provided by its reinsurers for material amounts recoverable as discussed in "Note 8. Reinsurance".
The Company manages the concentration of credit risk in its investment portfolio through issuer and sector exposure limitations. The Company believes it bears minimal credit risk in its cash on deposit. The Company also monitors the credit risk related to the net loan receivable from related party, reinsurance balances receivable and funds withheld receivable, within which the largest balances are due from AmTrust. AmTrust has a financial strength/credit rating of A- (Excellent) from A.M. Best at December 31, 2025.
To mitigate credit risk, the Company generally has a contractual right of offset thereby allowing claims to be settled net of any premiums or loan receivable. The Company believes these balances as at December 31, 2025 will be fully collectible.
Please refer to Note 8. Reinsurance for additional information on the Company's credit loss allowance as at December 31, 2025 regarding reinsurance recoverable on unpaid losses that were recorded under Topic 326.
b) Concentrations of Revenue
During the year ended December 31, 2025, net premiums earned from AmTrust reinsurance agreements accounted for $4,908 or 38.7% of total net premiums earned.
During the year ended December 31, 2025, fee revenue from the Company's largest program services client accounted for $4,381 or 72.1% of total fee revenue earned (2024: $3,390 or 93.3%). This Program Services client is a large, diversified capacity provider and the Company's relationship with this client presently includes more than ten separate sub-programs (nine of which produced revenue for the year ended December 31, 2025. Fee revenue from the Company's second largest program services client accounted for $1,291 or 21.2% of total fee revenue earned (2024: $0).
c) Brokers
The Company formerly marketed its Diversified Reinsurance legacy business through third-party intermediaries as well as directly through its own marketing efforts. The majority of Diversified Reinsurance legacy business was marketed directly through our own internal efforts with no significant reliance on brokers for the year ended December 31, 2025.
d) Letters of Credit
At December 31, 2025, the Company had standby letters of credit outstanding of $37,118 (2024: $0) for collateral purposes in the Legacy Reinsurance Segment. These are secured by cash and fixed maturities with a fair value of $41,824 at December 31, 2025 (2024: $0). The standby letters of credit are principally used to support the reinsurance obligations of the operating subsidiaries and are subject to certain covenants, including the requirement to maintain sufficient collateral to cover all of the obligations in the Legacy Reinsurance Segment. Such obligations include contingent reimbursement obligations for outstanding letters of credit and related fees payable. In the event of default, the credit providers may exercise certain remedies, including the exercise of control over the pledged collateral and the termination of the availability of the standby credit facility to any or all of the operating subsidiaries. At December 31, 2025, the operating subsidiaries were in compliance with all standby letter of credit covenants.
e) Employment Agreements
The Company has entered into employment agreements with certain individuals. The employment agreements provide for executive benefits and severance payments under certain circumstances.
f) Operating Lease Commitments
The Company leases office spaces and equipment under various operating leases expiring in various years through 2034. The Company's leases are currently classified as operating leases and none of them have non-lease components. For operating leases with an original lease term of more than twelve months, and whose lease payments are above a certain threshold, the Company recognizes a lease liability and a right-of-use asset in the Consolidated Balance Sheets at the present value of the remaining lease payments until expiration. The Company has made an accounting policy election not to include renewal, termination, or purchase options that are not reasonably certain of exercise when determining the term of the borrowing.
11. Commitments, Contingencies and Guarantees (continued)
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company's weighted-average remaining lease term is 8.2 years at December 31, 2025.
Kestrel’s principal executive offices were located at 8333 Douglas Avenue, Suite 1360 in Dallas, Texas through January 31, 2026. The Dallas office was leased through Ledbetter Interests, Ltd., an entity affiliated with Terry Ledbetter, the Company's Executive Chairman, pursuant to a Lease Agreement dated October 23, 2019. Kestrel Service Corporation, Kestrel’s wholly owned subsidiary, reimbursed Terry Ledbetter via an expense reimbursement provision under his employment agreement for the use of this leased office space. This Lease Agreement expired January 31, 2026 and was not renewed. This lease did not meet the minimum threshold for lease liability recognition and therefore its rent payments were expensed as incurred.
Kestrel also leases office space for the corporate office in Austin, Texas, through Kestrel Service Corporation, that expires in December 2027. The Austin office is the principal executive office effective February 1, 2026. Lease payments have an escalating fee schedule, which range from a 3% to 4% increase each year. Termination of the lease is generally prohibited unless there is a violation under the lease agreement.
The Company leases office space in a building in New York City which Maiden has leased since April 2024; this created a right-of-use asset and lease liability upon completion of leasehold improvements for the ten-year operating lease. This lease comprises a majority of the lease liabilty and right-of-use asset on the Consolidated Balance Sheet at December 31, 2025.
As the lease contracts generally do not provide an implicit discount rate, the Company used the weighted-average discount rate of 7.2%, representing its secured incremental borrowing rate, in calculating the present value of the lease liability at lease inception. At December 31, 2025, the Company's future lease obligations of $2,054 (2024: $244) were calculated based on the present value of future annual rental commitments excluding taxes, insurance and other operating costs for non-cancellable operating leases discounted using its secured incremental borrowing rate. This amount has been recognized on the Consolidated Balance Sheets as a lease liability under with an equivalent amount for the right-of-use asset presented as part of . At December 31, 2025, the Company's right-of-use lease asset of $2,029 (December 31, 2024: $223).
Under Topic 842, Leases, the Company continues to recognize the related leasing expense on a straight-line basis over the lease term on the Consolidated Statements of Income. The Company's total lease expense for the year ended December 31, 2025 was $397 (2024: $236) recognized in general and administrative expenses consistent using the prior accounting treatment under Topic 840. At December 31, 2025, the scheduled maturity of the Company's operating lease liabilities is as follows:
| For the Year Ended December 31, | Total | |||||||
| 2026 | $ | 363 | ||||||
| 2027 | 366 | |||||||
| 2028 | 277 | |||||||
| 2029 | 284 | |||||||
| 2030 | 305 | |||||||
| Thereafter | 1,144 | |||||||
| Discount for present value | (685) | |||||||
| Total discounted operating lease liabilities | $ | 2,054 | ||||||
g) Investment Commitments and Related Financial Guarantees
The Company's total unfunded commitments on was $24,840 at December 31, 2025. The table below shows total unfunded commitments by type of investment as at December 31, 2025:
| December 31, | 2025 | |||||||||||||
| Fair Value | % of Total | |||||||||||||
| Total unfunded commitments on other investments | $ | 11,164 | 44.9 | % | ||||||||||
| Total unfunded commitments on equity method investments | 13,676 | 55.1 | % | |||||||||||
| Total unfunded commitments on alternative investments | $ | 24,840 | 100.0 | % | ||||||||||
Certain of the Company's investments in limited partnerships are related to real estate joint ventures with interests in multi-property projects with varying strategies ranging from the development of properties to the ownership of income-producing properties. In certain of these joint ventures, the Company has provided certain indemnities, guarantees and commitments to certain parties such that it may be required to make payments now or in the future.
11. Commitments, Contingencies and Guarantees (continued)
Any loss for which the Company could be liable would be contingent on the default of a loan by the real estate joint venture entity for which the Company provided a financial guarantee to a lender. While the Company has committed to aggregate limits as to the amount of guarantees it will provide as part of its limited partnerships, guarantees are only provided on an individual transaction basis and are subject to the terms and conditions of each transaction mutually agreed by the parties involved. The Company is not bound to such guarantees without its express authorization.
As discussed above, at December 31, 2025, guarantees of $73,170 were provided to lenders by the Company on behalf of real estate joint ventures, however, the likelihood of the Company incurring any losses pertaining to project level financing guarantees was determined to be remote. Therefore, no liability has been accrued under ASC 450-20.
Other Contingent Commitments
As a result of the Combination Agreement, the former equityholders of Kestrel LLC remain entitled to receive contingent consideration up to the lesser of (x) an aggregate number of Kestrel Group common shares equal to $45,000 divided by certain volume weighted average prices of such shares, subject to the achievement of certain EBITDA milestones by the businesses that Kestrel conducted immediately prior to closing and any extensions of such businesses or related or ancillary businesses existing thereafter, subject to other terms and conditions as set forth in the combination agreement and (y) 2,750,000 common shares of Kestrel Group. On December 31, 2025, the fair value of this contingent consideration was $0.
At December 31, 2025, the Company holds a contingent receivable in the insurance distribution industry. Pursuant to the terms of the asset purchase agreement, the Company will receive a series of distributions. The Company currently estimates that the net present value of these potential distributions is $9,955 which was classified as a receivable and reported in Other Assets on the Consolidated Balance Sheet at December 31, 2025. Under ASC 805, the earn out consideration for this receivable is adjusted to fair value at each reporting period with any changes in fair value reported immediately in net income.
h) Other Collateral
In the ordinary course of business, the Company enters into reinsurance agreements that may include terms which could require the Company to collateralize certain of its obligations as further discussed in Note 8. Reinsurance and Note 10. Related Party Transactions.
i) Deposit Insurance
The Company maintains cash and cash equivalents balances at financial institutions in the U.S., Bermuda and other international jurisdictions. In the U.S., the Federal Deposit Insurance Corporation secures accounts up to $250. In certain other international jurisdictions, there exist similar protections. Management monitors balances in excess of insured limits and believes they do not represent a significant credit risk to the Company.
j) Legal Proceedings
Except as noted below, the Company is not a party to any material legal proceedings. The Company may become involved in various claims and legal proceedings, including arbitrations, that arise in the normal course of its business. These legal proceedings generally relate to claims asserted by or against the Company in the ordinary course of its insurance or reinsurance operations. Based on the Company's opinion, the eventual outcome of these legal proceedings are not likely to have a material adverse effect on its financial condition or results of operations.
A putative class action complaint was filed against Maiden Holdings, Arturo M. Raschbaum, Karen L. Schmitt, and John M. Marshaleck in the United States District Court for the District of New Jersey on February 11, 2019. On February 19, 2020, the Court appointed lead plaintiffs, and on May 1, 2020, lead plaintiffs filed an amended class action complaint (the “Amended Complaint”). The Amended Complaint asserts violations of Section 10(b) of the Exchange Act and Rule 10b-5 (and Section 20(a) for control person liability) arising in large part from allegations that Maiden failed to take adequate loss reserves in connection with reinsurance provided to AmTrust. Plaintiffs further claim that certain of Maiden Holdings’ representations concerning its business, underwriting and financial statements were rendered false by the allegedly inadequate loss reserves, that these misrepresentations inflated the price of Maiden Holdings' common stock, and that when the truth about the misrepresentations was revealed, the Maiden’s stock price fell, causing Plaintiffs to incur losses. On September 11, 2020, a motion to dismiss was filed on behalf of all Defendants. On August 6, 2021, the Court issued an order denying, in part, Defendants’ motion to dismiss, ordering Plaintiffs to file a shorter amended complaint no later than August 20, 2021, and permitting discovery to proceed on a limited basis.
On February 7, 2023, the District Court denied Plaintiffs’ motion for reconsideration of the District Court’s decision denying Plaintiffs’ objection to the Magistrate Judge’s December 2021 ruling on discovery. On May 26, 2023, the Company filed a Renewed Motion to Dismiss the Second Amended Complaint or, in the Alternative, for Summary Judgment. On December 19, 2023, the U.S. District Court for the District of New Jersey granted summary judgment on plaintiffs’ claim for securities fraud under Section 10(b) of the Securities Exchange Act to Maiden Holdings, Ltd. and individual defendants Arturo Raschbaum, Karen Schmitt, and John Marshaleck. The Court held that the factual record failed to support, as a matter of law, plaintiffs’ allegations that the defendants had made false statements regarding the Maiden’s loss reserves. The Court also dismissed plaintiffs’ claims that the individual defendants were liable as control persons under Section 20(a) of the Securities Exchange Act for any such alleged false statements. Plaintiffs appealed to the United States Court of Appeals for the Third Circuit.
11. Commitments, Contingencies and Guarantees (continued)
On August 20, 2025, the United States Court of Appeals for the Third Circuit vacated the U.S. District Court for the District of New Jersey’s order granting summary judgment to Maiden and individual defendants Arturo Raschbaum, Karen Schmitt, and John Marshaleck. The Third Circuit disagreed with the District Court’s holding that the current case record required judgment for Maiden, as a matter of law, on the issue of whether Maiden’s loss reserves were misleading. The Court explained further that it was not issuing a ruling on the element of scienter. The Third Circuit therefore vacated the opinion of the District Court and remanded the case to the District Court with instructions to permit plaintiffs to pursue discovery with respect to their claims for securities fraud under Section 10(b) of the Securities Exchange Act. The Third Circuit denied defendants' petition for rehearing on September 16, 2025. Discovery is now proceeding in the action. Maiden believes it has procedural and substantive defenses to the asserted claims, and it intends to oppose and defend against these claims.
On December 26, 2024, WUSO Holding Corporation and 683 Capital Partners filed a lawsuit against Maiden NA and Maiden Holdings in the Supreme Court of the State of New York, County of New York, captioned WUSO Holding Corporation and 683 Capital Partners, LP v. Maiden Holdings North America, Ltd. and Maiden Holdings, Ltd., Index No. 659861/2024. The complaint alleges that Maiden’s sale of Maiden Reinsurance North America, Inc., which closed approximately six years before the date of the complaint, breached a sole provision of Maiden’s indenture governing its 7.75% 2013 Senior Notes. Plaintiffs allege that principal and interest payable under the 7.75% 2013 Senior Notes are due currently, rather than upon the stated maturity date of the 2013 Senior Notes. On June 17, 2025, the Supreme Court of the State of New York, County of New York, considered and granted Maiden’s motion to dismiss the complaint in its entirety. On August 6, 2025, plaintiffs filed a notice of appeal, triggering a six month deadline to perfect their appeal in the First Judicial Department of the New York Appellate Division. Plaintiffs subsequently requested extensions to perfect their appeal, which the court granted, and the current deadline is April 8, 2026. To the extent that plaintiffs do perfect and pursue their appeal of this decision, Maiden will oppose any such action.
In addition to filing the notice of appeal, on August 12, 2025, plaintiffs filed a separate complaint against Maiden in the Supreme Court of the State of New York, County of New York. In the new complaint, plaintiffs allege that they have standing and authorization to bring suit, contending that they satisfied the no-action clause in the indenture because, on June 10, 2025, they requested, on behalf of holders of at least 25% of the outstanding 2013 Senior Notes, that the indenture trustee commence a related action, accompanied by an offer to indemnify, and the indenture trustee did not institute such proceedings within 60 days of the request. On October 6, 2025, Maiden filed a motion to dismiss which is now fully briefed. Oral argument has not yet been scheduled and we cannot predict when the Court will issue a decision on the motion. Maiden believes it has substantial procedural and substantive defenses to the asserted claims, and it intends to vigorously defend against these claims.
We believe all of the above claims are without merit and we intend to vigorously defend ourselves. It is possible that additional lawsuits will be filed against the Company, its subsidiaries and its respective officers due to the diminution in value of our securities as a result of our operating results and financial condition. It is currently uncertain as to the effect of such litigation on our business, operating results and financial condition.
Arbitration Proceedings
On November 26, 2025, the Company reported that a subsidiary of GLS, pursuant to the terms of the underlying reinsurance contract, demanded and participated in an arbitration with one of its ceding companies. Under the subject reinsurance agreement, GLS provides the ceding company in question with (i) reinsurance premium protection (“RPP”) coverage with aggregate limits of approximately $25,000, and (ii) adverse development coverage (“ADC”) with remaining aggregate limits of $25,500.
GLS is asserting that the cedant has committed multiple breaches of the reinsurance agreement, along with other material misrepresentations. Based on these assertions, GLS is seeking full rescission of the reinsurance agreement and related relief, including the ability to recoup losses previously paid, and has denied payment of certain invoices for contractual performance pending the outcome of this arbitration. GLS has previously paid net losses of $10,805 related to the RPP coverage. GLS has not paid any losses subject to the ADC coverage of the reinsurance agreement in question. As of December 31, 2025, GLS has liabilities of $3,984 subject to the RPP coverage and $7,500 in for the ADC coverage. GLS received premiums totaling $9,734 and $9,800 for the RPP and ADC coverages, respectively.
GLS is vigorously pursuing its claims for rescission and recovery of amounts previously paid. The matter is currently proceeding in arbitration, and an arbitration hearing has now been completed with a decision likely in the first quarter of 2026. The cedant disputes GLS assertions, denying that it breached the agreement, and seeks to continue the contract in full force.
The outcome of the arbitration is inherently uncertain. If GLS is successful, it may be entitled to recover up to $10,000 in losses previously paid and may be relieved of its remaining obligations under the reinsurance agreement in addition to other requested relief. If GLS is unsuccessful, GLS may be required to continue performing under the contract, including potentially paying additional amounts under the RPP coverage, subject to a cap, and being liable for additional amounts under the ADC coverage. The Company's subsidiary Maiden Reinsurance Ltd. has provided a parental guarantee to guarantee the performance and obligations of GLS as finally determined in connection with the arbitration.
At this time, the Company cannot reasonably estimate the amount or range of any gain or loss that may result from this matter. Accordingly, no accrual or gain contingency has been recorded in the Company’s reserves and other liabilities. An adverse outcome could be material to the Company’s results of operations or cash flows for a particular period.
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.