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Reserves for Unpaid Losses and Loss Adjustment Expenses | 12 Months Ended
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Dec. 31, 2025
Insurance [Abstract] |
Reserves for Unpaid Losses and Loss Adjustment Expenses | 15 — Reserves for Unpaid Losses and Loss Adjustment Expenses The following table presents reserves for unpaid losses and loss adjustment expenses as of December 31, 2025 and 2024:
| December 31,
| 2025 |  | 2024
| in thousands
Case reserves | $ | 90,992 |  |  | $ | 94,489 |
IBNR | 72,215 |  |  | 68,234 |
Net reserves for unpaid losses and loss adjustment expenses | 163,207 |  |  | 162,723 |
Reinsurance recoverable on unpaid losses and loss adjustment expenses | 5,644 |  |  | 5,769 |
Gross reserves for unpaid losses and loss adjustment expenses | $ | 168,851 |  |  | $ | 168,492 |
The following table presents a reconciliation of the beginning and ending reserves for unpaid losses and loss adjustment expenses, net of amounts recoverable from various reinsurers:
|  | Year ended December 31,
|  | 2025 |  | 2024 |  | 2023
|  | in thousands
Gross reserves for unpaid losses and loss adjustment expenses, beginning | $ | 168,492 |  |  | $ | 136,507 |  |  | $ | 111,741 |
Less: Reinsurance recoverable on unpaid losses and loss adjustment expenses | 5,769 |  |  | 2,235 |  |  | 843 |
Net reserves for unpaid losses and loss adjustment expenses, beginning | 162,723 |  |  | 134,272 |  |  | 110,898 |
Incurred losses and loss adjustment expenses: |  |  |  |  |
Current accident year | 295,481 |  |  | 299,918 |  |  | 228,358 |
Prior accident years | (10,087) |  |  | (1,325) |  |  | (7,700) |
Total incurred losses and loss adjustment expenses | 285,394 |  |  | 298,593 |  |  | 220,658 |
Payments: |  |  |  |  |
Current accident year | 190,881 |  |  | 186,267 |  |  | 138,263 |
Prior accident years | 94,244 |  |  | 83,660 |  |  | 59,128 |
Total payments | 285,125 |  |  | 269,927 |  |  | 197,391 |
Effect of foreign currency rate changes | 215 |  |  | (215) |  |  | 107 |
Net reserves for unpaid losses and loss adjustment expenses, ending | 163,207 |  |  | 162,723 |  |  | 134,272 |
Reinsurance recoverable on unpaid losses and loss adjustment expenses | 5,644 |  |  | 5,769 |  |  | 2,235 |
Gross reserves for unpaid losses and loss adjustment expenses, ending | $ | 168,851 |  |  | $ | 168,492 |  |  | $ | 136,507 |
During the year ended December 31, 2025, loss experience developed favorably, driven by reductions in severity of U.S. auto liability claims, and lower frequency of claims, which is in-part driven by lower catastrophe losses as compared to previous years. In addition, in 2025, accident year 2024 developed favorably by $13.6 million due to favorable loss development in severity of both U.S. auto physical damage and liability claims. This favorable development was partially offset by $3.1 million of unfavorable development which was spread across accident years prior to 2024. During the year ended December 31, 2024, losses and loss adjustment expenses include $23.0 million of pre-tax losses related to Hurricane Helene and $3.7 million of pre-tax losses related to Hurricane Milton. However, in 2024, accident years 2017 through 2022 developed favorably by $4.3 million primarily due to better than expected loss development in U.S. auto physical damage claims. This favorable development was partially offset by $3.0 million of adverse development for the 2023 accident year due to the reevaluation and adjustment of certain actuarial assumptions based on observed trends. Reserving Methodology The Company records an estimate of quarterly losses and loss adjustment expenses in the Consolidated Statements of Operations using an annual loss ratio, which is based on statistical analysis performed by the Company's internal and external actuarial teams that consider several factors, including projected levels of catastrophe events. The annual loss ratio is reviewed throughout the year and adjusted, as necessary. Management believes this approach provides a more consistent view of loss experience over the year given the seasonality of the Company's business. The reserves for unpaid losses and loss adjustment expenses recorded on the Consolidated Balance Sheets represents (i) the difference between management's estimate of the ultimate cost of losses and loss adjustment expenses incurred by the Company; and (ii) the amount of paid losses as of the reporting date. These reserves reflect management's best estimate of unpaid losses related to reported claims and IBNR claims and also include management's best estimate of all expenses associated with processing and settling reported and unreported claims. Reserves are reviewed by management quarterly and periodically throughout the year by combining historical results and current actual results. Claims are analyzed and reported based on the year in which the loss occurred (i.e., on an accident year basis). Accident year data is classified and utilized within actuarial models to prepare estimates of required reserves for payments to be made in the future. When estimating reserves, the Company utilizes several actuarial reserving methods which consider historical claim reporting patterns, claim cycle time, claim frequency and severity, claims settlement practices, adequacy of case reserves over time, seasonality, and current economic conditions. Reserve estimates produced by various actuarial reserving methods are further analyzed to determine the actuarial central estimate which represents the expected value over the range of reasonably possible outcomes. The factors considered by management in estimating the provision for unpaid losses and loss adjustment expenses as of December 31, 2025 and 2024 include the following: •the views of the Company's actuaries; •historical trends in claim frequency and severity, including the impacts of adverse weather-related events; •changes in claim cycle time and claim settlement practices; •observed industry trends; •the changing mix of business, predominantly due to the large growth in modern collectible cars which carry a different risk profile than the risks associated with collector cars; •inflation or deflation; •retention limits under current catastrophe and treaty reinsurance programs; and •legislative and judicial changes in the jurisdictions in which the Company operates. The following factors are relevant to the additional information included in the tables below: •Table organization: The tables are organized by accident year and include policies written on an occurrence basis. •Groupings: Reserves for losses and loss adjustment expenses are grouped by line of business. The Company believes that losses included in each line of business have homogenous risk characteristics with similar development patterns and would generally be subject to similar trends. •Claim counts: The Company considers a reported claim to be one claim for each claimant for each loss occurrence. •Limitations: There are limitations that should be considered on the reported claim count data in the tables below, including that claim counts are presented only on a reported (not an ultimate) basis. The following table presents a summary of total reserves for losses and loss adjustment expenses by line of business for the periods specified below:
| December 31,
| 2025 |  | 2024
| in thousands
Gross reserves for unpaid losses and loss adjustment expenses |  |  |
Auto | $ | 168,522 |  |  | $ | 168,433 |
Marine | 329 |  |  | 59 |
Total gross reserves for unpaid losses and loss adjustment expenses | $ | 168,851 |  |  | $ | 168,492 |
Reinsurance recoverable on unpaid losses and loss adjustment expenses |  |  |
Auto | $ | 5,644 |  |  | $ | 5,769 |
Marine | — |  |  | — |
Total reinsurance recoverable on unpaid losses and loss adjustment expenses | $ | 5,644 |  |  | $ | 5,769 |
Net reserves for unpaid losses and loss adjustment expenses |  |  |
Auto | $ | 162,878 |  |  | $ | 162,664 |
Marine | 329 |  |  | 59 |
Total net reserves for unpaid losses and loss adjustment expenses | $ | 163,207 |  |  | $ | 162,723 |
The following table presents auto insurance incurred losses and loss adjustment expenses, by accident year, undiscounted and net of reinsurance recoveries:
|  |  |  |  |  |  |  |  |  | Reserves for Losses and Loss Adjustment Expenses Incurred But Not Reported |  | Cumulative Number of Reported Claims
|  | Reporting Years Ended December 31, |  |
Accident Year |  | 2021* |  | 2022* |  | 2023* |  | 2024* |  | 2025 |  | As of December 31, 2025
|  | dollars in thousands |  |
2021 |  | $ | 131,643 |  |  | $ | 129,259 |  |  | $ | 125,634 |  |  | $ | 125,434 |  |  | $ | 125,834 |  |  | $ | 683 |  |  | 35,529 |
2022 |  |  |  | 186,073 |  |  | 182,783 |  |  | 179,096 |  |  | 180,218 |  |  | 2,379 |  |  | 39,488 |
2023 |  |  |  |  |  | 228,071 |  |  | 231,209 |  |  | 232,748 |  |  | 5,205 |  |  | 42,459 |
2024 |  |  |  |  |  |  |  | 299,766 |  |  | 286,194 |  |  | 15,098 |  |  | 43,735 |
2025 |  |  |  |  |  |  |  |  |  | 295,130 |  |  | 47,149 |  |  | 39,860 |
Total |  |  |  |  |  |  |  |  |  | 1,120,124 |  |  | 70,514 |  |  | 201,071 |
Cumulative paid losses and loss adjustment expenses from the table below |  | (959,584) |  |  | — |  |  |
Reserves for losses and loss adjustment expenses before 2021, net of reinsurance |  | 2,247 |  |  | 1,478 |  |  |
Cumulative effect of foreign currency rate changes |  | 91 |  |  | — |  |  |
Reserves for losses and loss adjustment expenses, undiscounted and net of reinsurance |  | $ | 162,878 |  |  | $ | 71,992 |  |  |
* Unaudited required supplemental information. The following table presents auto insurance cumulative paid losses and loss adjustment expenses by accident year:
|  |  | As of December 31,
Accident Year |  |  | 2021* |  | 2022* |  | 2023* |  | 2024* |  | 2025
|  |  | in thousands
2021 |  |  | $ | 75,933 |  |  | $ | 105,475 |  |  | $ | 114,884 |  |  | $ | 120,094 |  |  | $ | 123,029 |
2022 |  |  |  |  | 109,255 |  |  | 155,157 |  |  | 167,200 |  |  | 174,400 |
2023 |  |  |  |  |  |  | 138,102 |  |  | 202,501 |  |  | 219,217 |
2024 |  |  |  |  |  |  |  |  | 186,165 |  |  | 252,153 |
2025 |  |  |  |  |  |  |  |  |  |  | 190,785 |
Total |  |  |  |  |  |  |  |  |  |  | $ | 959,584 |
* Unaudited required supplemental information. The following table presents supplementary information about average historical claims duration as of December 31, 2025 based on the cumulative incurred and paid losses and allocated loss adjustment expenses presented above:
| Average Annual Percentage of Payout of Incurred Claims by Age (in Years), Net of Reinsurance (Unaudited)
Years | Year 1 |  | Year 2 |  | Year 3 |  | Year 4 |  | Year 5
Auto Insurance | 62.0 | % |  | 24.3 | % |  | 6.5 | % |  | 3.4 | % |  | 1.7 | %
17 — Statutory Capital and Surplus Hagerty Re Dividend Restrictions —Under Bermuda law, Hagerty Re is prohibited from declaring or issuing a dividend if it fails to meet its minimum solvency margin or minimum liquidity ratio. Prior approval from the Bermuda Monetary Authority ("BMA") is also required if Hagerty Re's proposed dividend payments would exceed 25% of its prior year-end total statutory capital and surplus. The amount of dividends which could be paid in 2026 without prior BMA approval is $95.4 million; however, the amount that Hagerty Re can pay in dividends is further limited by the amount of unrestricted cash and liquid investments held outside of restricted accounts, which totaled $65.6 million as of December 31, 2025. Capital Restrictions —In Bermuda, Hagerty Re is subject to the Bermuda Solvency Capital Requirement ("BSCR"), which is administered by the BMA. No regulatory action is taken by the BMA if an insurer's capital and surplus is equal to or in excess of its enhanced capital requirement, as determined by the BSCR model. In addition, the BMA has established a target capital level for each insurer, which is 120% of the enhanced capital requirement. Hagerty Re maintained sufficient statutory capital and surplus to comply with the BCSR as of December 31, 2025. Statutory Financial Information —Hagerty Re prepares its statutory financial statements in conformity with the accounting principles set forth in the Bermuda Insurance Act 1978, amendments thereto and related regulations. As of December 31, 2025 and 2024, the general business statutory capital and surplus of Hagerty Re was $381.6 million and $271.5 million, respectively. Statutory capital and surplus as of December 31, 2025 and 2024 included $24.5 million of "Other Fixed Capital" represented by the State Farm Term Loan to Hagerty Re (as defined in Note 18 — Debt). The general business statutory Net income of Hagerty Re was $110.1 million, $53.1 million, and $62.3 million for the years ended December 31, 2025, 2024, and 2023, respectively. Drivers Edge Dividend Restrictions — Drivers Edge is subject to the dividend restrictions set forth by the Colorado Division of Insurance (the "CDOI"). The CDOI limits the distribution of dividends to stockholders by property and casualty insurance companies in any year, without prior regulatory approval, to the lessor of (i) 10% of policyholders' surplus of the previous year-end; or (ii) net income for the prior year, minus realized capital gains, and minus any extraordinary dividends paid in the preceding twelve months. The amount of dividends which could be paid in 2026 without prior CDOI approval is $0.3 million. Capital Restrictions — Drivers Edge is subject to National Association of Insurance Commissioners ("NAIC") Risk-Based Capital ("RBC") requirements, as adopted by the CDOI. The RBC requirements impose minimum statutory capital levels on insurance companies to ensure solvency for their policyholders. As of December 31, 2025, Drivers Edge exceeded its minimum statutory capital levels by $5.4 million. Statutory Financial Information — In the U.S., state insurance laws and regulations prescribe accounting practices for determining statutory Net Income and Capital and Surplus for insurance companies. The CDOI has adopted the NAIC accounting practices as the basis of its Statutory Accounting Practices ("SAP"). No differences exist between the CDOI and NAIC guidance. Drivers Edge's statutory capital and surplus was $7.4 million and $7.1 million for the years ended December 31, 2025 and 2024, respectively. Statutory net income was $0.3 million and Statutory net loss was $3.0 million for the years ended December 31, 2025 and 2024, respectively.

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