Fidelis Insurance Holdings Ltd. (FIHL) Risk Analysis

In each of the jurisdictions in which the Group operates and in which the Group will operate, it has to comply with laws and regulations applicable to regulated (re)insurers. The Group's primary supervisory authority is the Bermuda Monetary Authority (the "BMA"). FIBL is a registered Bermuda Class 4 insurer pursuant to the Insurance Act 1978 of Bermuda, as amended (the "Bermuda Insurance Act"), and as such, it is subject to regulation and supervision in Bermuda by the BMA. FIID operates from the Republic of Ireland and is authorized and regulated by the Central Bank of Ireland (the "CBI") to carry on certain classes of non-life insurance business. On the basis of its CBI authorization, FIID is able to offer its insurance services into certain European Economic Area ("EEA," which is a free trade area including the 27 member states of the E.U. together with Iceland, Liechtenstein, and Norway) jurisdictions on a cross-border basis without the need for separate authorizations in such jurisdictions. FUL operates from the U.K. and is authorized by the Prudential Regulation Authority (the "PRA") and regulated by the PRA and the Financial Conduct Authority (the "FCA") with permission to underwrite certain classes of general insurance. Fidelis IG Corporate Member is a Corporate Member at Lloyd's and subject to regulation and direction from Lloyd's. Each aspect of the regulatory environment in which the Group operates and in which the Group will operate is subject to change, which may be retrospective. Specifically, the Group may face new regulatory costs and challenges as a result of various recent changes to the U.K. and E.U. insurance regulatory regimes. The U.K. and the E.U. insurance prudential regimes have, until recently, been broadly identical as both are derived from the Solvency II Directive. However, the laws and regulations of the U.K. and the E.U. have recently begun to diverge, and will continue to do so in the near future. Complying, or failing to comply, with existing and new regulations could result in additional costs or resources for the Group, which could have an adverse effect (including to a material extent) on the financial condition or results of operations of the Group. Further, the U.K. revoked all U.K. insurance legislation derived from EU law (referred to as Solvency II ‘assimilated law') with effect from December 31, 2024, and broadly reinstated it via additional rules in the PRA Rulebook and secondary PRA regulatory publications (which take the form of Statements of Policy and Supervisory Statements). This new body of U.K. insurance regulation is known as "Solvency UK." Similarly, the E.U.'s legislative bodies have undertaken their own review of the Solvency II Directive, and have adopted an amending directive containing a number of revisions to the current Solvency II text. E.U. member states have until January 2027 to implement these amendments into their respective domestic legislation. Bermuda, E.U. and U.K. insurance statutes and the regulations and policies of the BMA, the CBI, the PRA and the FCA may require FIBL, FIID and FUL to, among other things: - maintain a minimum level of capital, surplus and liquidity;- satisfy solvency standards;- obtain prior approval of ownership and transfer of shares;- maintain a principal office and appoint and maintain a principal representative in Bermuda (for FIBL), the Republic of Ireland (for FIID) and the U.K. (for FUL), respectively;- maintain a head office; and - comply with legal and regulatory restrictions with respect to their ability to pay dividends and make capital distributions upon which the Group is reliant to provide cash flow required for debt service and dividends to FIHL's shareholders. These statutes, regulations and policies may affect the Group's ability to write insurance and reinsurance policies, to distribute funds around the Group and to shareholders, and to pursue its investment strategy. The Group does not presently intend that it will create a physical presence in any jurisdiction in the U.S. The Group is not licensed to write insurance on an admitted basis in any state in the U.S. but, as an alien insurer and certified reinsurer, FIBL and FUL are eligible to write surplus lines business. However, there can be no assurance that insurance regulators in the U.S. or elsewhere will not review the activities of the Group or related companies or its agents and assert that the Group is subject to such jurisdiction's licensing requirements. If any such assertion is successful and the Group is required to obtain a license, it may be subject to taxation in such jurisdiction. In addition, the Group is subject to indirect regulatory requirements imposed by jurisdictions that may limit its ability to provide insurance or reinsurance. For example, the Group's ability to write insurance may be subject, in certain cases, to arrangements satisfactory to applicable regulatory bodies. Proposed legislation and regulations may have the effect of imposing additional requirements upon, or restricting the market for, alien insurers or reinsurers with whom U.S. companies place business. Bermuda, E.U. and U.K. insurance statutes and regulations applicable to the Group may be different in scope from those that would be applicable if FIBL, FUL and/or FIID were licensed in and governed by the laws of any state in the U.S. In the past, there have been U.S. congressional and other initiatives in the U.S. regarding proposals to supervise and regulate insurers domiciled outside the U.S. If in the future the Group becomes increasingly subject to any insurance laws of the U.S. or any state thereof or of any other jurisdiction, the Group cannot be certain that it would be in compliance with those laws or that coming into compliance with those laws would not have a significant and negative effect on its business. The process of obtaining licenses in the U.S. and elsewhere is time-consuming and costly, and FIBL, FUL or FIID may not be able to become licensed in a jurisdiction other than Bermuda, the Republic of Ireland or the U.K. should they choose to do so. The modification of the conduct of the Group's business resulting from FIBL, FUL or FIID becoming licensed in certain jurisdictions could significantly and negatively affect its business. In addition, the Group's inability to comply with insurance and reinsurance statutes and regulations could significantly and adversely affect its business by limiting its ability to conduct business as well as subjecting the Group to penalties and fines and having adverse reputational consequences for the Group.

The Framework Agreement, the Delegated Underwriting Authority Agreements and the Inter-Group Services Agreement are regarded as "material outsourcing agreements" or "outsourcing of critical or important operational functions or activities" under the laws and regulation in each of the United Kingdom and the European Union. See Item 4.B. Business Overview "Regulatory Matters" for further information on material outsourcing agreements and outsourcing of critical or important operational functions or activities. Accordingly, the Group may incur additional operating costs in establishing the systems and controls required to appropriately oversee and monitor the effective performance of these agreements by TFP. In addition, pursuant to the Insurance Act, FIBL shall not take any steps to effect a material change, including (i) outsourcing all or substantially all of its actuarial, risk management, compliance or internal audit functions, (ii) outsourcing all or a material part of its underwriting activity, and (iii) outsourcing of an officer role, unless it has first served notice on the BMA that it intends to effect such a material change and before the end of 30 days, either the BMA has notified FIBL in writing that it has no objection to such change or that the period has elapsed without the BMA having issued a notice of objection. There is a risk that the BMA may not grant its no-objection to certain new or material changes to the existing outsourcing arrangements that FIBL may propose in the future, including in relation to the TFP Framework. Further, there has been an increased level of regulatory scrutiny of material outsourcing agreements in each jurisdiction generally, which could result in a greater risk of regulatory intervention in respect of these agreements. Such regulatory intervention may include the regulators' use of their investigative powers (such as requiring reports to be prepared by senior individuals), the exercise of audit rights against any Group company or requests for documents and information relating to the performance of the agreements. These regulatory interventions could be disruptive for the Group's business operations, and may result in the Group being required to make further changes to its systems and controls, such as increased reporting to company boards, improving data storage facilities and implementing additional oversight of TFP. It is possible that, as a corollary, the Group will incur increased operational costs. The Group could also experience an adverse effect on its business if the regulatory interventions impede the effective operation of the TFP Framework. See Item 4.B. Business Overview "Regulatory Matters-United Kingdom Insurance Regulation."

FIHL and FIBL (both incorporated in Bermuda), FUL and Fidelis IG Corporate Member (incorporated in England and Wales) and FIID (incorporated in the Republic of Ireland) may be subject to changes of law or regulation in these jurisdictions which may have an adverse impact on their operations, including the imposition of tax liabilities or increased regulatory supervision. The Group is also exposed to changes in accounting standards, some of which may be significant. In addition, FIHL, FIBL, FUL, Fidelis IG Corporate Member and FIID will be exposed to changes in the political environment in Bermuda, the E.U., the Republic of Ireland and the U.K. The Bermuda insurance and reinsurance regulatory framework continues to be subject to increased scrutiny in many jurisdictions, including in Europe and the U.S. and in various states within the U.S. The Group's ability to conduct insurance and reinsurance business in different countries generally requires the holding and maintenance of certain licenses, permissions or authorizations, and compliance with rules and regulations promulgated from time to time in these jurisdictions. A principal exception to this is with respect to cross-border reinsurance in the U.S. and other countries. The Group is not licensed to write insurance on an admitted basis in any state in the U.S. but, as an alien insurer, FIBL and FUL are eligible to write surplus lines business in all 50 U.S. states, the District of Columbia and other U.S. jurisdictions based on its listing in the Quarterly Listing of Alien Insurers of the International Insurers Department ("IID") of the National Association of Insurance Commissioners ("NAIC"). Pursuant to IID requirements, the Group established U.S. surplus lines trust funds with a U.S. bank to secure U.S. surplus lines policies. The Group accepts business only through U.S. licensed surplus lines brokers and does not market directly to the public. Failure to maintain its IID listing could have a material adverse effect on the Group's ability to write surplus and excess lines of business in the U.S. For reinsurance, as of December 31, 2025, there are no U.S. licenses required because the Group operates outside the U.S. In common with other non-U.S. reinsurers, the Group holds certified and/or reciprocal reinsurance licenses in certain states. Where required, the entities collateralize and post letters of credit or establish other security in order to enable U.S. cedants to take financial statement credit for liabilities ceded to members of the Group. See Item 4.B. Business Overview "Regulatory Matters" for a more detailed discussion of the regulatory environment in which FIBL and FUL write surplus lines business in the U.S. and reinsure U.S. cedants, including in relation to the Group's obligations to post reduced collateral pursuant to certified and reciprocal jurisdiction reinsurer status. A failure to comply with rules and regulations in a jurisdiction could lead to disciplinary action, the imposition of fines or the revocation of the license, permission or authorization necessary to conduct the Group's business in that jurisdiction, which could have a material adverse effect on the continued conduct of business and also adverse reputational consequences for the Group. In particular, during 2023 the Irish Government introduced a new "Individual Accountability Framework" that is intended to improve governance, performance, and accountability of firms, particularly by increasing individual accountability. The final aspects of the framework were brought into force on July 1, 2025. Failure to properly implement this framework could lead to the imposition of penalties including fines, the suspension or revocation of authorization, and the disqualification or restriction of senior executives. These penalties could have a material adverse effect on the continued conduct of business and also adverse reputational consequences for the Group. It is possible that insurance regulators in the U.S. or elsewhere may review the activities of FIHL, FIBL, FUL and FIID and assert that they are subject to such jurisdiction's licensing requirements and require that FIHL, FIBL, FUL and/or FIID comply with additional regulatory obligations. Having to meet such requirements, however, could have a material adverse effect on the results of operations of the Group, FIBL, FUL and/or FIID. Alternatively, or in addition, any necessary changes to operations could subject FIHL, FIBL, FUL and/or FIID to taxation in the U.S. or elsewhere. In recent years, regulation of the insurance and reinsurance industry in the U.S., the U.K., Bermuda, the E.U. and other markets in which the Group operates has been subject to significant review. These reviews have led to changes in certain legal and regulatory provisions which govern the operations of the Group, and it can be expected that further reviews and changes to applicable laws and regulations will occur in the future. The Group cannot predict the effect that any proposed or future law or regulation may have on the financial condition or results of operations of the Group. Changes in applicable laws or regulations or in their interpretation or enforcement could have a material adverse effect on the Group's business, prospects, financial condition or results of operations. In particular, changes in regulatory capital requirements in the U.S., the U.K., the E.U. or Bermuda may impact upon the level of capital reserves required to be maintained by individual Group entities or by the Group as a whole.

In recent years, there has been an increased focus from shareholders, business partners, cedants, regulators, politicians, and the public in general on ESG matters, including greenhouse gas emissions, carbon footprint and climate-related risks, renewable energy, fossil fuels, diversity, equity and inclusion, responsible sourcing and supply chain, human rights, and social responsibility. The Group has established certain ESG-related goals, commitments, and targets. Such goals, commitments, and targets reflect the Group's current plans and aspirations and do not guarantee that the Group will be able to achieve them. Evolving shareholder and cedant expectations, regulatory obligations or political pressures and the Group's efforts to manage, report on and accomplish set goals present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which could have a material adverse impact on the Group's reputation, business, prospects, financial condition or results of operations. The Group may be unable to satisfactorily meet evolving expectations, standards, regulations and disclosure requirements related to ESG. Such matters can affect the willingness or ability of investors to make an investment in FIHL, as well as the Group's ability to meet its regulatory obligations, including compliance with any rules related to carbon footprint and greenhouse gas emissions. Negative perceptions regarding the scope or sufficiency and transparency of the Group's commitment to and reporting on ESG matters and events that give rise to actual, potential, or perceived compliance with social responsibility matters could hurt the Group's reputation and cause cedants to seek alternative business partners. Such loss of reputation could make it difficult and costly for the Group to regain the confidence of its business partners resulting in an adverse effect on the Group's business, prospects, financial condition or results of operations. Further, the Group's potential failure or perceived failure to satisfy various reporting standards and regulations on a timely basis, or at all, could have similar negative impacts or expose it to government enforcement actions and private litigation.

The NYSE's corporate governance rules require listed companies to comply with a number of corporate governance standards. As a foreign private issuer, FIHL is permitted, and it intends, to follow certain home country corporate governance practices that differ significantly from the NYSE corporate governance listing standards, provided FIHL discloses the requirements it is not following and describes the corporate governance practices of Bermuda that it is following. These practices may afford less protection to shareholders than they would enjoy if FIHL complied fully with NYSE's corporate governance listing standards. For example, as long as FIHL relies on the foreign private issuer exemptions under NYSE rules, shareholder approval is not required for equity compensation plans or material amendments to such plans, nor for share issuances that would otherwise require approval for domestic issuers, such as (i) issuances exceeding 1% of FIHL's outstanding common shares (including derivative securities) in number or voting power in connection with equity compensation arrangements, or (ii) issuances of 20% or more of FIHL's outstanding common shares (including derivative securities) in number or voting power in other contexts, including capital-raising transactions, or for issuances that would result in a change of control. FIHL may in the future elect to follow home country practices with regard to other matters. As a result, FIHL's shareholders may not have the same protections afforded to shareholders of companies that are subject to all NYSE corporate governance requirements. See also Item 16.G. Corporate Governance.

As a result of increased innovation and technology in the insurance sector, insurance regulators are focused on the use of "big data" techniques, such as the use of AI, machine learning and automated decision-making. The Group cannot predict what, if any, changes to laws and regulations may be enacted with regard to innovation and technology in the insurance sector. Further, the Group cannot predict whether other potentially applicable AI-related regulation or legislation will be enacted, or what impact, if any, such regulation or legislation may have on its business practices, results of operations or financial condition. The EU has developed a standalone law to govern the offering and use of AI systems in the EU (the "AI Act") which entered into force on August 1, 2024. The AI Act applies in phases depending on the regulatory requirement in question from February 2025 to August 2027, when all provisions of the AI Act will apply. The AI Act imposes regulatory requirements onto AI system providers, importers, distributors, and deployers, in accordance with the level of risk involved with the AI system ("unacceptable", "high", "limited", and "minimal" risk). General-purpose AI systems have also been made subject to a number of requirements – mostly akin to the requirements that apply to high-risk AI systems under the AI Act. Non-compliance with the AI Act may be subject to regulatory fines of up to 7% of annual worldwide turnover or €35 million. In parallel, on October 10, 2024, the E.U. adopted the E.U. Product Liability Directive to regulate non-contractual and non-fault based liability for defective products, including digital products and AI, facilitating consumer redress for defective AI and digital products. The U.K. has not, to date, adopted a dedicated AI legislation instead looking to rely on a principles-based, sector-specific approach to AI regulation. We are assessing the scope of application, impact, and risk of these AI and cyber developments in the E.U. and the U.K. on our business and will continue to assess this moving forward. Compliance with these new AI and cyber laws and regulations may require substantial amendments to our procedures and policies and the changes could adversely impact our business by increasing operational and compliance costs or impact business practices. Further, there is a risk that the amended policies and procedures will not be implemented correctly or that individuals within the business will not be fully compliant with the new procedures. If there are breaches of these measures, we could face significant litigation, government investigations, administrative and monetary sanctions as well as, reputational damage which may have a material adverse effect on our operations, financial condition and prospects.

FIHL is a "foreign private issuer," as defined in the SEC's rules and regulations and, consequently, it is not subject to all of the disclosure requirements applicable to public companies organized within the U.S. For example, FIHL is exempt from certain rules under the Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules under Section 14 of the Exchange Act. In addition, FIHL's senior management and directors are exempt from the "short-swing" profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of common shares or FIHL's other securities. Moreover, FIHL is not required to file quarterly reports on Form 10-Q containing unaudited financial and other specified information with the SEC. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. As a result of all of the above, you may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.

For so long as FIHL qualifies as a foreign private issuer, it is not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic issuers. In order to maintain its current status as a foreign private issuer, either (a) a majority of common shares must be either directly or indirectly owned of record by non-residents of the U.S. or (b)(i) a majority of FIHL's senior managers or directors cannot be U.S. citizens or residents, (ii) more than 50% of FIHL's assets must be located outside the U.S. and (iii) FIHL's business must be administered principally outside the U.S. If FIHL loses its status as a foreign private issuer, it would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which, as discussed above, are more detailed and extensive than the requirements for foreign private issuers. FIHL may also be required to make changes in its corporate governance practices in accordance with various SEC and NYSE rules. For example, the annual report on Form 10-K requires domestic issuers to disclose executive compensation information on an individual basis with specific disclosure regarding the domestic compensation philosophy, objectives, annual total compensation (base salary, bonus, and equity compensation) and potential payments in connection with change in control, retirement, death or disability, while the annual report on Form 20-F permits foreign private issuers to disclose compensation information on an aggregate basis. FIHL would also have to mandatorily comply with U.S. federal proxy requirements, and its officers, directors, and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. The regulatory and compliance costs to the Group under U.S. securities laws if FIHL were required to comply with the reporting requirements applicable to a U.S. domestic issuer may be higher than the cost the Group would incur if FIHL remains a foreign private issuer. As a result, we expect that a loss of foreign private issuer status would increase the Group's legal and financial compliance costs and is likely to make some activities highly time consuming and costly.

Changes in laws or regulations relating to certain perils for which the Group writes insurance or reinsurance may materially affect the Group's ability to respond to such events, including the manner and timeframe for processing claims, the development of claim severity or the interpretation of underlying policies. For example, in response to recent wildfire events in California, the state enacted insurance consumer protection laws for California policyholders, with effect from January 2019, requiring insurers to provide additional policy protections to California insureds for future wildfire events. Similar changes in law or regulatory practice relating to other perils could increase the Group's exposure or alter its policy obligations. Any such developments may have a material adverse effect on the Group's business, prospects, financial condition or results of operations.

In general, a non-U.S. corporation will be a passive foreign investment company ("PFIC") during a given year if (i) 75% or more of its gross income constitutes "passive income" (the "75% test") or (ii) 50% or more of its assets produce (or are held for the production of) passive income (the "50% test"). If FIHL were characterized as a PFIC during a given year, each U.S. Holder generally would be subject to a penalty tax at the time of the taxable disposition at a gain of, or receipt of an "excess distribution" with respect to, their shares, unless such person is a 10% U.S. Shareholder (as defined below) subject to tax under the controlled foreign corporation ("CFC") rules or such person made a "qualified electing fund" ("QEF") election or, if the common shares are treated as "marketable stock" in such year, such person made a mark-to-market election. In addition, if FIHL were considered a PFIC, upon the death of any U.S. individual owning shares such individual's heirs or estate would not be entitled to a "step-up" in the basis of the shares that might otherwise be available under U.S. federal income tax laws. In addition, a distribution paid by FIHL to U.S. Holders that is characterized as a dividend and is not characterized as an excess distribution would not be eligible for reduced rates of tax as qualified dividend income if FIHL were considered a PFIC in the taxable year in which such dividend is paid or in the preceding taxable year. A U.S. Person that is a shareholder in a PFIC may also be subject to additional information reporting requirements, including the filing of an IRS Form 8621. For the above purposes, passive income generally includes interest, dividends, annuities and other investment income. The PFIC rules provide that income derived in the active conduct of an insurance business by a qualifying insurance corporation is not treated as passive income (the "insurance income exception"). The PFIC provisions also contain a look-through rule under which a foreign corporation will be treated, for purposes of determining whether it is a PFIC, 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 value of the stock (the "look-through rule"). Under the look-through rule, FIHL should be deemed to own its proportionate share of the assets and to have received its proportionate share of the income of its non-U.S. insurance subsidiaries for purposes of the 75% test and the 50% test. For purposes of the insurance income exception, a non-U.S. insurance company is a qualifying insurance corporation for a taxable year if it would be taxable as an insurance company if it were a U.S. corporation and its applicable insurance liabilities constitute more than 25% of its total assets (the "25% Test") (or, with respect to a U.S. Person who makes a valid election, maintains insurance liabilities that equal or exceed 10% of its assets, is predominantly engaged in an insurance business and satisfies a facts-and-circumstances test that requires a showing that the failure to exceed the 25% threshold is due to runoff-related or rating-related circumstances (the "10% Test," together with the 25% Test, the "Reserve Test")). The Group believes that FIBL has met this Reserve Test and will continue to do so in the foreseeable future, in which case FIHL would not be expected to be a PFIC, although no assurance may be given that FIBL will satisfy the Reserve Test in future years. Further, the Treasury Department has issued final and proposed regulations intended to clarify the application of the insurance income exception (the "2021 Regulations"). The 2021 Regulations set forth in proposed form certain requirements that must be met to satisfy the "active conduct of an insurance business" test, including providing that a non-U.S. insurer with no or a nominal number of employees that relies exclusively or almost exclusively upon independent contractors (other than related entities) to perform its core functions will not be treated as engaged in the active conduct of an insurance business. Further, the 2021 Regulations: (i) generally limit the rating-related circumstances exception to a non-U.S. corporation: (a) if more than half of the net written premiums for the applicable period are derived from insuring catastrophic risk, or (b) that provides certain other insurance coverage that the Group is not expected to engage in, and (ii) under the proposed 2021 Regulations, reduce a corporation's insurance liabilities by the amount of any reinsurance recoverable relating to such liability. The Group believes that, based on the implementation of its business plan and the application of the look-through rule and the exceptions set out under Section 1297 of the Code, none of the income and assets of FIBL should be treated as passive pursuant to the 10% Test, and thus FIHL should not be characterized as a PFIC under current law for the current taxable year or for foreseeable future years to the extent a shareholder makes an election to apply the 10% Test, but because of the legal uncertainties as well as factual uncertainties with respect to the Group's planned operations, there is a risk that FIHL will be characterized as a PFIC for U.S. federal income tax purposes. In addition, because of the legal uncertainties relating to how the 2021 Regulations will be interpreted and the form in which the proposed 2021 Regulations may be finalized, no assurance can be given that FIHL will not qualify as a PFIC under final IRS guidance or any future regulatory proposal or interpretation that may be subsequently introduced and promulgated. If FIHL is considered a PFIC, it could have material adverse tax consequences for an investor that is subject to U.S. federal income taxation. Prospective investors should consult their tax advisors as to the effects of the PFIC rules. As noted above, the 10% Test will only apply if a U.S. Holder makes a valid election. A U.S. Holder seeking to elect the application of the 10% Test to FIBL may do so if the Group provides the holder with, or otherwise makes publicly available, a statement or other disclosure that FIBL meet the requirements of the 10% Test (and contains certain other relevant information). The Group intends to either provide each U.S. investor with such a statement or otherwise make such a statement publicly available. A U.S. Holder may generally make an election to apply the 10% Test by completing a Form 8621 and attaching it to its original or, if a reasonable cause exception is met, amended U.S. federal income tax return for the taxable year to which the election relates. Investors owning a de minimis amount of FIHL stock may be deemed to have made the election automatically. U.S. Holders are urged to consult their tax advisors regarding electing to apply the 10% Test to FIBL. U.S. Holders are also urged to consult with their tax advisors and to consider making a "protective" QEF election with respect to FIHL and each of FIHL's non-U.S. subsidiaries to preserve the possibility of making a retroactive QEF election. If the Group determines that FIHL is a PFIC, the Group intends to use commercially reasonable efforts to provide the information necessary to make a QEF election for FIHL and each non-U.S. subsidiary of FIHL that is a PFIC. A U.S. Person that makes a QEF election with respect to a PFIC is currently taxable on its pro rata share of the ordinary earnings and net capital gain of such company during the years it is a PFIC (at ordinary income and capital gain rates, respectively), regardless of whether or not distributions were received. In addition, any of the PFIC's losses for a taxable year will not be available to U.S. Persons and may not be carried back or forward in computing the PFIC's ordinary earnings and net capital gain in other taxable years. U.S. Holders are also urged to consult with their tax advisors regarding the availability and consequences of making a mark-to-market election with respect to FIHL, although there can be no assurance that such election will be available, and such election likely would not be available for any subsidiary of FIHL also treated as a PFIC. In general, if a U.S. Holder were to make a timely and effective mark-to-market election, such holder would include as ordinary income each year the excess, if any, of the fair market value of the holder's common shares at the end of the taxable year over its adjusted basis in the common shares. Any gain recognized by such holder on the sale or other disposition of the common shares would be ordinary income, and any loss would be an ordinary loss to the extent of the net amount of previously included income as a result of the mark-to-market election and, thereafter, a capital loss. U.S. Holders considering a mark-to-market election for FIHL should consult with their tax advisors regarding making a QEF election for any non-U.S. subsidiary of FIHL treated as a PFIC.

FIHL is not incorporated in the U.K. but has filed returns for U.K. corporation tax on the basis that it is resident in the U.K. and has been since August 2015. FIHL and the U.K.-incorporated companies within the Group are subject to U.K. tax in respect of their worldwide income and gains (subject to any applicable exemptions), which represent a material portion of the Group's income and operations. The directors of FIHL intend to manage its affairs so that it remains resident in the U.K. for U.K. tax purposes. Any change in FIHL's tax status or any change in U.K. tax laws could materially affect the Group's business, prospects, financial condition or results of operations or ability to provide returns to shareholders.

In line with the OECD's Pillar Two framework (see "-Risks Relating to Taxation-International Tax Risks"), the U.K. introduced a MTT and DTT, pursuant to the Finance (No. 2) Act 2023 and Finance Act 2024, with application for accounting periods beginning on or after December 31, 2023. Broadly, if the Group meets the threshold for consolidated revenue, it may result in a charge under the MTT (or DTT, if applicable) to the extent that its effective tax rate is below fifteen percent. The rules relating to the MTT (and DTT) are broad in scope and FIHL is continuing to monitor the impact of these rules on its operations and results. FIHL is the responsible member of a qualifying multinational group for the purposes of the MTT and this has resulted in additional tax charged to the Group in the year ended December 31, 2024 and 2025.

Under Irish tax law, a company which is incorporated in Ireland is automatically resident for tax purposes in Ireland. The one exception is that an Irish-incorporated company will not be resident for tax purposes in Ireland if it is treated as resident for tax purposes in another jurisdiction under the terms of a double tax treaty which has the force of law. FIID is incorporated in Ireland. As a result, FIID is automatically resident for tax purposes in Ireland, unless it is treated as resident elsewhere under the terms of a double tax treaty. The directors of FIID carry on (and intend to continue to carry on) FIID's business in a manner which ensures that it is resident for tax purposes solely in Ireland. For example, a majority of FIID's directors are resident in Ireland and FIID's board meetings are convened in Ireland, with a majority of such directors in physical attendance. Nevertheless, there can be no guarantee that another jurisdiction will not assert that FIID is tax-resident in their jurisdiction. If FIID were treated as being resident for tax purposes in another jurisdiction, its profits may be subject to comprehensive taxation in that other jurisdiction and the results of the Group's operations could be materially adversely affected. FIID's directors also carry on (and intend to continue to carry on) FIID's business in a manner which ensures that it does not have a permanent establishment in any jurisdiction and its profits are only subject to tax in Ireland as a result. It is possible that non-Irish agents or brokers distributing insurance underwritten by FIID could create permanent establishments outside of Ireland if they were not considered agents who are independent of FIID from a legal and economic perspective. The treatment of any agents as dependent agents may result in the creation of permanent establishments outside of Ireland to which FIID must allocate profits for tax purposes, resulting in such profits being subject to comprehensive taxation in that other jurisdiction and the results of the Group's operations being materially adversely affected.

The reinsurance arrangements between FIBL and FIID are subject to the Irish transfer pricing regime and consequently, if the reinsurance pursuant to these agreements (or any other intra-group services) is found not to be on arm's-length terms and, as a result, an Irish tax advantage is being obtained, an adjustment will be required to compute Irish taxable profits for FIID as if the reinsurance or provision of marketing services were on arm's-length terms.

There may be changes in tax laws, tax practices, tax rates, treaties and regulations in one or more jurisdictions in or through which the Group operates or invests, or interpretations of such tax laws, practices, treaties and regulations (in each case, potentially with retroactive effect) that are adverse to the Group. For example, there has been significant legislative policy change in recent years in the taxation objectives with respect to the income of multinational corporations as a result of policy debate and proposals in many countries and in the current Base Erosion and Profit Shifting ("BEPS") project of the Organisation for Economic Co-operation and Development ("OECD") – see below for further information on BEPS, Pillar One and Pillar Two.

FIBL and FIID are not incorporated in the U.K. and, accordingly, should not be treated as being resident in the U.K. for corporation tax purposes unless its central management and control is exercised in the U.K. The concept of central management and control is defined in U.K. case law as being indicative of the highest level of control of a company, which is wholly a question of fact. The directors of FIBL and FIID each intend to manage its affairs so that it is not resident in the U.K. for U.K. tax purposes as a result of the central management and control of FIBL and FIID being outside of the U.K. A company that is not resident in the U.K. for corporation tax purposes can nevertheless be subject to U.K. corporation tax if it carries on a trade through a permanent establishment in the U.K., but, in that situation, the charge to U.K. corporation tax is limited to profits (both revenue profits and capital gains) attributable directly or indirectly to such permanent establishment. The directors of FIBL and FIID each intend to operate FIBL and FIID (as applicable) in such a manner that FIBL and FIID do not carry on a trade through a permanent establishment in the U.K. Nevertheless, because neither U.K. case law nor statute provide a clear definition as to the activities that constitute trading in the U.K. through a permanent establishment, His Majesty's Revenue and Customs ("HMRC") might contend successfully that FIBL and FIID are trading in the U.K. through a permanent establishment. The U.K. has no comprehensive double taxation treaty with Bermuda. There are circumstances in which companies that are neither resident in the U.K. nor entitled to the protection afforded by a double tax treaty between the U.K. and the jurisdiction in which they are resident may be exposed U.K. tax on income, profits and gains (other than by deduction or withholding) with respect to a trade carried on in the U.K. even if that trade is not carried on through a permanent establishment. However, the directors of FIBL intend to operate FIBL in such a manner that FIBL will not fall within the charge to tax on income, profits and gains in the U.K. (other than by deduction or withholding). If FIBL and/or FIID were treated as being resident in the U.K. for U.K. corporation tax purposes, or as carrying on a trade in the U.K., the results of the Group's operations could be materially adversely affected.

The Group may be subject to a variety of tax reporting regimes depending on the jurisdiction(s) in which the Group operates. For example, FIID will be subject to the EU's Sixth Directive on Administrative Cooperation (commonly known as "DAC 6") and FIHL will be subject to the UK Mandatory Disclosure Rules, both of which provide for mandatory disclosure of relevant cross-border transactions and arrangements which satisfy certain hallmarks. These tax reporting regimes may require the Group or persons associated with them to enter into discussions with and provide information to tax authorities which may involve disclosure of the structure of the Group and the identity and certain other information pertaining to the Group's shareholders. Each prospective shareholder should be aware that such discussions and disclosure may take place and that shareholders may be required to provide further information to the relevant Group entity in order to facilitate such discussions or information disclosure. Any such discussions may give rise to adverse tax or other consequences, and there is no guarantee that the outcome of any discussions with tax authorities will achieve their intended results.

The EU maintains a list of jurisdictions which it considers to be "non-cooperative" for tax purposes (the "EU Tax List"). The EU Tax List includes those jurisdictions which the Council of the European Union (the "Council") has identified as (i) not having engaged in a constructive dialogue with the EU in relation to tax governance, or (ii) having failed to deliver on their commitments to implement reforms to comply with the EU's criteria within a specified time period. The Council generally updates the EU Tax List twice a year, at which time jurisdictions may be removed from the EU Tax List if they are considered by the Council to have rectified the previously identified deficiencies, or added if new deficiencies are identified. There can be no guarantee that (i) certain jurisdictions which have been removed from the EU Tax List will not be reinstated or (ii) new jurisdictions will not be added to the EU Tax List. If a jurisdiction considered relevant to the Group features on the EU Tax List, the immediate impact for the Group may be limited. The Group and persons associated therewith may be subject to some increased audit and monitoring risk in certain EU jurisdictions, and certain investors may be subject to increased constraints on their ability to invest through jurisdictions which appear on the EU Tax List. However, there are currently limited direct tax consequences under the current law of individual EU member states of a jurisdiction relevant to the Group featuring on the EU Tax List. Individual EU member states were encouraged to adopt various "defensive" tax measures on or before January 1, 2021. Such measures include the denial of tax deductions or additional withholding taxes on payments made to or through a jurisdiction which is included on the EU Tax List, additional "controlled foreign company" inclusions or denial of domestic participation exemptions for shareholders of companies which are established in such a jurisdiction. If a jurisdiction relevant to the Group is included on the EU Tax List at a time when such "defensive" tax measures have been introduced by relevant EU member states, the Group could ultimately suffer additional tax costs relating to its activities. For more detail on the application of the EU Tax List to the Group, please see below the "Risks Relating to Taxation-Bermuda Tax Risks".

All intra-group services provided to or by FIHL or any of the U.K.-incorporated companies, including in particular the reinsurance arrangements between FIBL and FUL, are subject to the U.K. transfer pricing regime. Consequently, if the reinsurance pursuant to these agreements (or any other intra-group services) is found not to be on arm's-length terms and, as a result, a U.K. tax advantage is being obtained, an adjustment will be required to compute U.K. taxable profits for FUL, as if the reinsurance or provision of marketing services were on arm's-length terms. Pursuant to rules in the U.K. targeting avoidance schemes involving the transfer of corporate profits, where any payment between group companies is, in substance, a payment of all or a significant part of the profits of the business of the payer company, and the main purpose or one of the main purposes is to secure a tax advantage for any person, the payer's profits are calculated for U.K. corporation tax purposes as if the profit transfer had not occurred. According to the Technical Note published by HMRC on March 19, 2014 (the "HMRC Technical Note"), where a company has entered into reinsurance arrangements within a group (for example quota share reinsurance) as part of ordinary commercial arrangements, this would not normally fall within the scope of this measure. This includes cases where the profitability of the ceding company is a factor taken into account in arriving at the premium to be paid. Any transfer pricing adjustment, or the denial (in whole or in part) on any other basis, of a U.K. tax deduction for premiums paid pursuant to a reinsurance contract between companies in the Group, including as a result of any change to the HMRC Technical Note, could adversely impact the Group's U.K. corporation tax liability.

The U.K. diverted profits tax ("DPT") is currently separate from U.K. corporation tax and is charged at a higher rate of 6% higher than the standard rate of corporate tax (therefore being 31%) (subject to certain limited exceptions). The DPT is (broadly) an anti-avoidance measure aimed at protecting the U.K. tax base against the artificial diversion of profits that are being earned by activities carried out in the U.K. but which are not otherwise being taxed in the U.K., in particular as a result of arrangements amongst companies in the same multinational group. The U.K.'s network of double tax treaties does not currently offer protection from a DPT charge. In the event that the rules apply, then upfront payment of HMRC's estimate of the deemed tax liability may be required. The application of the DPT to the Group could adversely impact the Group's U.K. corporation tax liability. Shareholders should note that the DPT regime is the subject of an ongoing reform proposal. HMRC's response to the June 19, 2023 consultation to reform U.K. law in relation to transfer pricing, permanent establishment, and DPT, published on January 16, 2024, proposed to remove DPT's status as a separate tax and bring in an equivalent charge to U.K. corporation tax. Broadly, that reform would be intended to clarify the relationship between DPT and transfer pricing and provide access to treaty benefits for DPT. Draft legislation was published on April 28, 2025 for the technical consultation phase, and is subject to change. Finance Bill No. 2 2024-26 contains legislation which replaces the DPT by bringing such transactions under the Unassessed Transfer Pricing Profits regime. This has not been enacted as at 31 December 2025.

Under the U.K. controlled foreign company ("U.K. CFC") regime, the income profits of non-U.K. resident companies may in certain circumstances be attributed to controlling U.K.-resident shareholders for U.K. corporation tax purposes. The directors of each of FIHL's non-U.K. resident subsidiaries intend to operate those subsidiaries in such a manner that its profits are not taxed on FIHL under the U.K. CFC regime. Any change in the way in which each of the non-U.K. subsidiaries operate or any change in the U.K. CFC regime, resulting in an attribution of any of their income profits to FIHL for U.K. corporation tax purposes, could materially adversely affect the Group's financial condition.

The VAT exemption applicable to insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents, has been the subject of a number of decisions of The Court of Justice of the European Union (the "CJEU") which may be interpreted as having clarified a narrower scope of such exemption as it applies to the supply of core insurance services, and related services by insurance brokers and insurance agents, including whereby prospective insurance clients are introduced to the insurer. In addition, the application of VAT exemption to insurance and reinsurance transactions is currently the subject of a review by the European Commission which may result in material amendments to the application of VAT to such services. Therefore, to the extent that FIID relies on such exemptions, in particular for the receipt or supply of such related or ancillary services, there is a risk that the application and scope of such exemptions may be amended and this could potentially give rise to material additional irrecoverable VAT costs in the structure. However, in circumstances where any entity in the structure is deemed to be carrying out activities which are subject to VAT (rather than exempt from VAT), such entity should be entitled to deduct any attributable input VAT. In addition, at present FIID may rely upon the existence of an Irish VAT group to result in no Irish VAT arising on supplies received by FIID from establishments outside Ireland of other Irish VAT group members. The Irish Revenue Commissioners have recently confirmed a significant change to their prior interpretation that when an entity joins an Irish VAT group, the entire entity is deemed to be part of the Irish VAT group, which includes overseas establishments. Now it has been confirmed that, in line with recent decisions of the CJEU, overseas establishments cannot form part of an Irish VAT group and that such Irish VAT groups are limited in effect to supplies between establishments of VAT group members within Ireland. This change will take effect for VAT groups which were in existence prior to November 19, 2025 from January 1, 2027. It automatically applies to any VAT groups formed after November 19, 2025. Where FIID does rely upon an Irish VAT group which existed prior to November 19, 2025, services provided by overseas establishments of any members of FIID's Irish VAT group to other parties in the VAT group should now be considered in detail as they may give rise to additional irrecoverable Irish VAT costs in the structure where no VAT exemption applies to such services post January 1, 2027. It should also be noted that in a related change in practice, any Irish entity or Irish establishment of a foreign entity should be treated separately for VAT purposes from any other EU establishment of the same entity where such other EU establishment is a member of a VAT group in another EU Member State. Where this applies to FIID, it will similarly need to potentially consider the VAT treatment of any supplies made between those establishments (which historically would likely have been treated as not giving rise to a supply for Irish VAT purposes).

In response to the OECD Pillar Two initiative, Bermuda enacted the Corporate Income Tax Act 2023 ("Bermuda CIT Act") which is fully effective for tax years beginning on or after January 1, 2025. Entities subject to tax under the Bermuda CIT Act are the Bermuda Constituent Entities (as defined in the Bermuda CIT Act) 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 multi­national 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). In July 2024, the Bermuda Government passed the Corporate Income Tax Agency Act which, among other things, establishes the Bermuda Corporate Income Tax Agency (the "Agency"). The Agency is responsible for the administration of the Bermuda CIT Act and the collection of tax receipts. This responsibility includes without limitation administering the processes and procedures for the filing of tax returns and the calculation of taxes owed. The Corporate Income Tax (Administrative) Regulations 2025, which came into force on June 2, 2025, provide further detail on how the Bermuda CIT Act is administered, including filing and registration requirements, payments of tax, and the inquiry and dispute processes. FIHL and/or FIBL may be subject to tax under the Bermuda CIT Act to the extent such entities satisfy the definition of a Bermuda Constituent Entity under the Bermuda CIT Act. However, the full extent of the Bermuda CIT Act and its related legislation to FIHL and/or FIBL will depend on the practical application of the technical detail, which is still emerging. Accordingly, the impact on FIHL's and/or FIBL's economic performance in the future remains uncertain. It is also expected that any Bermuda constituent entity's liability for tax under the Bermuda CIT Act will apply notwithstanding the prior issue of any assurances by the Bermuda Minister of Finance. Further, if the Bermuda corporate income tax is not treated as a "covered tax" in accordance with the OECD's model rules, or if the corporate income tax does not otherwise achieve a minimum effective tax rate of 15% (as calculated in accordance with the OECD's model rules), additional material top-up taxes may be payable by the Group's Irish and U.K. tax-resident companies in future.

Under Bermuda law, only Bermudians, spouses of Bermudians, holders of Permanent Residents' Certificates, naturalized British Overseas Territory Citizens, and persons exempt pursuant to the Incentives for Job Makers Act 2011 may engage in any gainful occupation in Bermuda without a valid government work permit. Work-permit positions generally must be advertised publicly unless the role qualifies for an automatic waiver (such as Chief Executive Officer and certain other senior executive roles, or director positions supported by an organizational chart), or a waiver is otherwise granted (for example, where the applicant has unique qualifications). A permit may be issued or renewed only if no suitably qualified Bermudian, Bermudian spouse, British Overseas Territory Citizen, or Permanent Residents' Certificate holder applies. Work permits are time-limited (up to five years), and there is no guarantee that they will be granted or renewed. If key Bermuda-based employees cannot obtain or renew permits, the Group could lose their services, potentially harming its business and delaying or preventing the execution of its strategy. The Group closely monitors actual and potential changes to Bermuda's immigration laws and the impact these may have on its employment practices and policies.

The underwriting of (re)insurance risks is, inherently uncertain and can produce volatile earnings. The Group's underwriting is generally focused on low-frequency, high-severity losses worldwide, though the frequency and unpredictability of such losses has increased in recent years due to, among other factors, changing climate conditions as well as macroeconomic conditions including any escalation of the ongoing conflict in Ukraine (the "Ukraine Conflict"), the recent military actions in Iran by the U.S. and Israel and other conflicts in the Middle East, or the risk of increased tensions between China and Taiwan, any related sanctions and other geopolitical events globally. As a result, the Group may experience unpredictable losses, including multiple large events occurring in close succession or simultaneously, which could materially affect its net profit or capital position. Short-term underwriting trends or returns are difficult to forecast across the global (re)insurance industry, including in the Bermuda, London and Europe insurance and reinsurance markets in which the Group operates. Even when broader industry results are profitable in such markets, insurers (such as the Group or any of its peers) or business lines of such insurers may incur losses. Historical market results, as well as the results of the Group's own performance, may not be indicative of future prospects. Underwriting risks and reserving for losses are based on probabilities, assumptions and related modeling, involve significant uncertainties and may materially impact the Group's business, prospects, financial condition or results of operations. Underwriting requires significant judgment, including the use of assumptions regarding inherently unpredictable events. Catastrophic or other large-scale losses may exceed the Group's modeled expectations, which could have a material adverse effect on the Group's business, prospects, financial condition or results of operations. A single event may generate claims (and therefore result in significant losses) across multiple classes of the Group's business. The Group relies on non-probabilistic modeling and aggregate exposure analyses to estimate potential losses from certain risks. Uncertainties in these models, limitations in available data, or incorrect application or interpretation may leave the Group exposed to unanticipated risks relating to certain perils or geographic regions, which could have a material adverse effect on the Group's business, prospects, financial condition or results of operations. See Item 3.D. Risk Factors "The Group's catastrophe and other analytical models may be inaccurate or incomplete and actual losses could differ materially from model outputs, adversely affecting its operating results, financial condition, profitability or cash flows."

The Group maintains various retrocessional reinsurance contracts protecting its business segments, including excess of loss and aggregate protections, some of which include reinstatement provisions. The Group also seeks outward retrocessional protection by accessing the capital markets through catastrophe bond structures, which provide multi-year collateralized retrocessional coverage. If several large losses occur or if losses develop adversely, the Group may exhaust portions of its retrocession program. The Group cannot be sure that additional retrocessional coverage will continue to be available to it on acceptable terms from appropriately rated or fully collateralized counterparties, or at all. Market conditions, including those following major catastrophe events, may reduce available capacity or significantly increase pricing, potentially requiring the Group to retain more risk than intended or to utilize alternative risk-transfer structures that may not provide equivalent protection. In addition, complex coverage terms or disputes regarding the interpretation of policy provisions may impede the Group's ability to collect recoveries it believes are due. The Group is also exposed to the creditworthiness and claims-paying ability of its retrocessionaires, and adverse developments affecting a retrocessionaire's financial strength, including insolvency or delay in payment, could materially impact the Group. Concentration of retrocessional coverage with a limited number of counterparties or increasing consolidation within the reinsurance sector may exacerbate these credit and availability risks. Any exhaustion of the Group's retrocession program, inability to obtain replacement coverage, or failure of retrocessional protections to respond as intended could materially increase the Group's retained losses, reduce risk diversification, restrict underwriting capacity, and adversely affect the Group's business, financial condition or results of operations.

Steps taken by governments throughout the world in response to the recent economic and geopolitical climate, expansionary monetary policies and other factors have led to an inflationary environment in recent years. In operating its business, the Group experiences the effects of inflation, including increased labor and construction costs. Furthermore, the Group's operations, like those of other insurers and reinsurers, are susceptible to the effects of inflation because premiums are established before the ultimate amounts of losses and loss adjustment expenses are known. Although the Group considers the potential effects of inflation when setting premium rates, premiums may not fully offset the effects of inflation and thereby may result in underpricing of the risks insured and reinsured by the Group. Loss reserves include assumptions about future payments for settlement of claims and claims-handling expenses, such as the cost of replacing property, associated labor costs for the property business the Group writes and litigation costs. To the extent economic or social inflation (such as through outsized court awards, particularly in the United States) causes costs to increase above loss reserves established for claims, the Group will be required to increase loss reserves with a corresponding reduction in net income in the period in which the deficiency is identified, which could have a material adverse effect on the Group's business, prospects, financial condition or results of operations. Unanticipated higher inflation could also lead to higher interest rates, which would negatively impact the value of the Group's fixed-maturity securities and potentially its other investments, and could reduce the real (inflation-adjusted) returns on those investments.

The Group's functional currency is the U.S. dollar. However, because the Group's business strategy includes insuring and reinsuring obligations created or incurred outside the U.S., the Group writes a portion of its business and receives premiums in currencies other than the U.S. dollar. As a result, the Group is subject to currency transaction risk arising from mismatches between cash flows, and translation risk because the Group reports in U.S. dollars while certain premiums, reserves and expenses are denominated in other currencies. The Group determines whether and to what extent to hedge its foreign currency exposures monthly. To the extent these exposures are not hedged or are insufficiently hedged, the Group may experience exchange losses, which could materially and negatively affect its business, prospects, financial condition or results of operations.