TWFG, Inc.
For the period ended Dec 31, 2025. Filed Mar 10, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 10, 2026
TWFG$28.11-2.9%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-27.
0001628280-25-015138
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-10.
0001628280-26-016162
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 282 previous paragraphs and 275 current paragraphs.
149 unchanged; 92 reworded; 33 added; 37 removed; 4 previous and 1 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (33)
Current report
Demand for P&C insurance generally correlates with household income, employment levels, corporate revenue, and asset values, and declines during economic downturns, which can reduce our commissions and fees. Insurance carrier losses from inflation, rising interest rates, or catastrophes may lower our contingent income, which depends on carrier underwriting results and premium volume. Softening of the insurance market, carrier insolvencies, or consolidations could adversely affect our ability to place business and reduce revenues. Additionally, economic deterioration or recessionary pressures may cause Clients to reduce coverage, cancel policies, or experience liquidity issues, impacting receivables, while E&O claims against us may increase. A prolonged decline in economic activity could materially adversely affect our business, financial condition, and results of operations.
Current report
Compliance with U.S. and foreign laws, including sanctions, anti-corruption, tax, data privacy, labor, and competition regulations, increases our operating costs and exposes us to risks. Despite our compliance policies, violations may occur and, in some cases, complying with one jurisdiction’s laws may conflict with another’s. Any violation could result in significant fines, penalties, operational restrictions, and reputational harm, and investigations and enforcement actions can be costly and divert management’s attention, materially adversely affecting our business.
Current report
Furthermore, a weakening U.S. dollar could reduce the cost savings from outsourcing certain services and adversely affect our business, financial condition, and results of operations. In addition, failure to effectively manage international operations and related risks could limit our future growth.
Current report
Our underwriting management and binding authority depend on contracts with insurance carriers that may be terminated with little advance notice or allowed to lapse at expiration, and carriers may seek to modify terms, including our underwriting authority or commission rates, which could reduce revenues. Termination or changes to these programs could adversely affect our business, operating results, and contingent commission opportunities.
Current report
U.S. privacy laws are rapidly evolving. The California Consumer Privacy Act (“CCPA”), effective January 2020, introduced new consumer rights and transparency requirements, and was later expanded by the California Privacy Rights Act (“CPRA”), effective January 2023, which added stricter obligations, new consumer rights, and created a dedicated enforcement agency. The CPRA also created the California Privacy Protection Agency, a California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. New or amended regulations under the CPRA may impose more specific requirements under the law. Multiple other states have enacted or proposed similar laws, creating a need for multi-state compliance. At the federal level, we are subject to the Gramm-Leach-Bliley Act (“GLBA”), which mandates privacy disclosures, opt-out rights, and robust information security programs, as well as Federal Trade Commission (“FTC”) regulations on data privacy and cybersecurity. Congress continues to consider comprehensive federal privacy legislation. Additionally, states and foreign jurisdictions are adopting cybersecurity regulations, such as New York’s 2023 amendment to the Department of Financial Services (NYDFS) Cybersecurity Regulation, which included rules imposing detailed security measures on covered entities. In addition, a number of states have also adopted laws covering data collected by insurance licensees that include security and breach notification requirements. These evolving and sometimes inconsistent requirements increase compliance costs, may divert resources, and could limit how we deliver data-driven services, potentially impacting our operations.
Current report
Our online privacy policy and website include statements regarding our data privacy and security practices. Any actual or perceived failure by us or our third-party vendors to comply with these policies, FTC requirements, or applicable privacy laws could result in regulatory actions, fines, lawsuits, reputational harm, and customer loss. Authorities continue to scrutinize web tracking technologies such as cookies, increasing compliance risks. Failure to address privacy or security concerns or comply with applicable laws could lead to additional costs, liabilities, and adverse effects on our business.
Current report
We collect and hold Client premiums, surplus lines taxes, and, in certain cases, remit claims or refunds on behalf of insurance carriers. These activities subject us to complex fiduciary and regulatory requirements governing the custody and investment of such funds and are subject to licensing and oversight of insurance intermediaries and the handling of trust funds. Any loss, theft, fraud, processing error, or unauthorized transaction could result in financial loss, legal claims, regulatory penalties, and reputational harm. Additionally, we may invest these funds in bank accounts at a limited number of depository institutions in amounts that are significantly in excess of the limits insured by the U.S. Federal Deposit Insurance Corporation (“FDIC”). If a bank becomes insolvent or illiquid or is taken over by the FDIC, we may lose access to Client funds, adversely affecting our financial condition and exposing us to further regulatory risk.
Current report
We may not be able to keep pace with new or emerging technological developments in our industry, including deployment and use of AI, and our use of AI or such other technologies may subject us to a number of risk and uncertainties.
Current report
Our industry is characterized by introduction of new products and services using new or emerging technologies. As others use or develop such technologies, we may be placed at a competitive disadvantage or may be forced by competitive pressures to implement such technologies at substantial costs. In addition, our competitors may have greater financial, technical and personnel resources that allow them to enjoy technological advantages and that may in the future allow them to implement Artificial Intelligence (“AI”) or other new or emerging technologies prior to us. We may not be able to respond to these competitive pressures or implement such technologies on a timely basis or at an acceptable cost. If one or more of the technologies we use now or in the future were to become obsolete, our business, financial condition or results of operations could be adversely affected.
Current report
AI presents risks and challenges that could impact our business, including potential breaches of privacy or security incidents related to the use of AI. We are in the early stages of integrating AI tools into our systems, and we expect our third-party service providers as well as our competitors will also develop or use such tools. Over time, AI may become more important to our operations and future growth.
Current report
We cannot provide assurance that we will realize any desired or anticipated benefits from AI, and we may face challenges in properly implementing this technology. We may face potentially significant costs associated with acquiring, deploying, maintaining and updating AI technologies. Additionally, we or our AI service providers may fail to meet existing or rapidly evolving regulatory or industry standards related to privacy and data protection, intellectual property, transparency and compliance, among others, which could inhibit our or our service providers’ ability to maintain an adequate level of functionality or service.
Current report
AI tools used by us or by our service providers could produce inaccurate or unexpected results or behaviors that could harm our business, customers or reputation. While AI systems may enhance productivity, they could also lead to the displacement of certain jobs or roles, which if true, could create social and organizational challenges. Our competitors or other third parties may incorporate AI in their business operations more quickly, at a lower cost or more successfully than we do, which may negatively impact our ability to compete effectively.
Current report
Additionally, the complex and rapidly evolving landscape around AI may expose us to claims, inquiries, demands and proceedings by private parties and global regulatory authorities and subject us to legal liability as well as reputational harm. New laws and regulations are being adopted in various jurisdictions globally, and existing laws and regulations may be interpreted in ways that would affect our business operations and the way in which we use AI. Any of these outcomes could impair our ability to compete effectively, damage our reputation, result in the loss of our or our Clients’ information and materially adversely affect our financial position, operating results or cash flows.
Current report
Technological advancements, including artificial intelligence and digital distribution platforms, may change the way insurance products are marketed, sold, and serviced, which could adversely affect our business if we are unable to adapt effectively.
Current report
The insurance distribution industry is undergoing rapid technological change, driven by increased use of artificial intelligence, automation, and digital platforms by insurance carriers, technology providers, and competitors. These technologies may alter how insurance products are marketed, quoted, bound, and serviced, and may reduce or replace certain manual processes traditionally performed by insurance agencies or brokers. In addition, insurance carriers and new market entrants may expand direct‑to‑consumer distribution models or develop technology‑driven platforms that reduce reliance on intermediaries.
Current report
Although we believe that our technology investments, platform capabilities, and agent network position us well to adapt to these developments, there can be no assurance that technological advancements will not shift customer preferences, reduce demand for traditional agency distribution models, intensify competition, or place pressure on commission rates or operating margins. Maintaining competitiveness may require continued investment in technology and systems modernization, and if we fail to adopt these tools effectively or if competitors do so more successfully our market position could suffer. If we are unable to continue investing in and effectively deploying technology—including artificial intelligence‑driven tools designed to enhance the efficiency and value of our distribution platform—our business, financial condition, and results of operations could be adversely affected.
Current report
Additionally, public speculation regarding AI related disruption in the insurance distribution industry may contribute to volatility in our stock price. Press reports, analyst commentary, or broader market sentiment, regardless of our underlying performance, could cause significant fluctuations in the trading price of our stock. If these risks materialize, our business, financial condition, operating results, and stock price could be materially adversely affected.
Current report
We rely on data from Clients, insurance carriers, and third parties for pricing and underwriting. Inaccurate or unavailable data could impair product functionality and disrupt our business. We also license technology, intellectual property, and proprietary information from third parties. Errors in, or loss of access to, these resources, or inability to renew licenses on reasonable terms, could require costly replacements, delay product delivery, limit features, and place us at a competitive disadvantage. Any of these results could harm our business, results of operations and financial condition.
Current report
We could also be adversely affected if we fail to attract and retain talent and foster a collaborative workplace throughout our organization. In addition, our industry has experienced competition for leading brokers and in the past we have lost key brokers and groups of brokers, along with their clients, business relationships and intellectual property directly to our competition. In 2024, the FTC adopted a rule to, among other things, prohibit and make unenforceable any post-employment non-compete arrangement that restricts an employee or individual independent contractor. Shortly after enactment, the rule was subject to various legal challenges and the rule was set aside by the U.S. District Court for the Northern District of Texas. While the rule has been vacated and is not currently in effect, the legal and regulatory landscape governing non-compete agreements continues to evolve - including through existing state-level restrictions in jurisdictions such as California, Minnesota, North Dakota and Oklahoma where such agreements are already significantly limited or unenforceable - and future legislative, regulatory or judicial developments could further restrict our ability to enforce such agreements. It is possible that additional similar legislation may be introduced in the future.
Current report
We depend on third-party service providers for critical functions, including technology, information security, data processing, fund transfers, and administrative support. Because we do not control these providers, their failures, delays, or noncompliance with contractual or regulatory obligations could disrupt our operations, cause reputational harm, and result in financial loss. Transitioning functions to third parties may also create service disruptions. These providers face their own operational and cybersecurity risks, and any significant failure, misuse of confidential information, or cessation of services could impair our ability to deliver products and services and expose us to liability. Negative publicity or failure to communicate strategic changes could erode confidence among stakeholders and materially adversely affect our business, financial condition, and results of operations.
Current report
Our ability to deliver services and maintain accurate client account reporting depends on reliable data processing systems and the capacity to store, retrieve, and manage significant databases. We must continue investing in new and enhanced information systems and integrating upgrades from third-party providers, which may present operational challenges and cybersecurity risks, including those associated with artificial intelligence. Interruptions in our information processing capabilities or failures to integrate new technologies could materially and adversely affect our business, financial condition, and results of operations.
Current report
In providing services, we electronically store and transmit sensitive personal information of Clients and their employees, including social security numbers and financial data. Despite implementing policies, procedures, and technological safeguards, we cannot eliminate the risk of unauthorized access, disclosure, or misuse of this information. Breaches in data security could result in operational disruptions, reputational harm, regulatory exposure, and significant remediation costs. Emerging technologies such as generative AI may increase these risks by enabling more advanced social engineering, phishing and AI-powered hacking attacks, identity fraud, misappropriation of funds and other malicious activities, which could require us to deploy additional resources and protective measures, or cause financial harm or loss of customer data or trust.
Current report
We also rely heavily on third-party service providers for critical business processes and cybersecurity protections. Service disruptions or termination of these arrangements without immediate alternatives could lead to prolonged operational interruptions and Client dissatisfaction. If such events occur, or if our systems or those of our vendors are infiltrated or damaged, Clients could experience data loss, financial harm, and business interruption, which could materially and adversely affect our business, financial condition, and results of operations.
Current report
Our information technology systems, whether managed internally or by third-party providers, are subject to risks of damage, disruption, or unauthorized access from cyberattacks, ransomware, malware, phishing, AI-driven schemes, insider threats, nation-state actors, natural disasters, hardware or software failures and other events. Attack methods are increasingly sophisticated and evolve rapidly, which may limit our ability to anticipate or prevent them. In August 2023, we experienced a cyber incident involving unauthorized access to our servers through a third-party provider. In response to this event, we promptly secured compromised servers, reassessed vendor relationships, and determined the event was not material; however, similar incidents could occur in the future and result in regulatory investigations, fines, litigation, reputational harm, and increased costs.
Current report
Future breaches involving our systems or those of Clients, vendors, or acquired businesses could lead to loss or misuse of confidential or personal data, theft of funds operational disruption, and diversion of management resources. Integration of acquired systems and adoption of AI tools may introduce additional vulnerabilities. Although we implement security measures and invest in cybersecurity and information technology infrastructure to maintain compliance and service reliability, no system is fully secure. Significant disruptions or breaches could adversely affect our operations, financial condition, reputation, and require substantial remediation costs and result in loss of clients. See also “—Improper disclosure of confidential, personal or proprietary data, whether due to human error, misuse of information by employees or vendors, or as a result of security breaches, cyberattacks or other similar incidents with respect to our or our vendors’ systems, could result in regulatory scrutiny, legal liability or reputational harm, and could have an adverse effect on our business or operations.”
Current report
Cybersecurity breaches could compromise our systems or those of our vendors, disrupt services, expose confidential or proprietary data including Client, employee, or Company information, and damage our reputation or competitive position, potentially causing significant business harm.
Current report
Bunch Holdings beneficially owns more than 50% of the voting power for the election of our directors. As a result, we are considered a “controlled company” under Nasdaq corporate governance standards and may elect not to comply with certain Nasdaq corporate governance requirements. We have established and maintain an audit committee comprised of all independent directors, in compliance with the applicable Nasdaq and SEC requirements, and have also established and maintain a compensation committee comprised of all independent directors. As a controlled company, however, we have elected to rely on the exemption from the Nasdaq requirements that allows us not to have director nominees approved by a majority of independent directors or a nominating committee. As a result, you do not have the same governance protections as stockholders of companies subject to all Nasdaq corporate governance requirements.
Current report
•changes in the insurance distribution market driven by technological advancements;
Current report
We have historically used, and may in the future use, shares of our Class A Common Stock as consideration for acquisitions or strategic investments. If our Class A Common Stock price is volatile of declines significantly, the use of our equity as an acquisition currency may be less attractive to potential targets, who may instead demand cash or a greater number of shares. Issuing additional shares under these circumstances would result in significant dilution to our existing stockholders. Furthermore, a depressed stock price may limit our ability to execute our growth strategy through M&A, as we may be unable to consummate transactions on terms that are favorable to us or accretive to our earnings.
Current report
Additionally, our ability to retain talent depends significantly on our use of equity-based compensation, including restricted stock units and performance stock units. If our stock price experiences significant volatility or a sustained decline, the retention value and perceived worth of these awards may decrease, potentially resulting in diminished employee morale and increased turnover. Such conditions may require us to offer more generous equity awards or increase cash compensation to remain competitive, which could increase our operating expenses and adversely affect our results of operations. If we are unable to effectively incentivize our workforce due to stock price fluctuations, our business, financial condition, and culture may be materially harmed.
Current report
We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long‑term stockholder value, and our Class A Common Stock has a comparably lower trading volume, which could amplify the program’s effects on market price and volatility.
Current report
Our Board has authorized a share repurchase program that does not obligate us to repurchase any specific number of shares and may be suspended, modified, or terminated at any time without notice. We cannot guarantee that we will repurchase shares at all, that the program will be fully consummated, or that any repurchases will enhance long‑term stockholder value. The timing and amount of repurchases, if any, will depend on a variety of factors, including the trading price of our Class A Common Stock, trading volume, working capital and other liquidity requirements, general market conditions, and alternative uses of capital. Any repurchases we do complete will reduce our cash and liquidity, and could limit our financial flexibility.
Current report
Our Class A Common Stock has a comparably lower trading volume, which could magnify the impact of our repurchase activity on the market price of the stock and increase its volatility. Low trading volume may also make it more difficult for stockholders to sell their shares without adversely affecting the market price. Share repurchases conducted in a lower trading volume market could contribute to short‑term increases in the trading price of our Class A Common Stock, which may not be sustainable. Conversely, any announcement of a suspension, reduction, or termination of the repurchase program could cause the market price of our Class A Common Stock to decline, particularly given the limited liquidity of our shares.
Removed paragraphs (37)
Previous report
The demand for P&C generally rises as the overall level of household income increases and generally falls as household income decreases, affecting both the commissions and fees generated by our business. The economic activity that impacts P&C is most closely correlated with employment levels, corporate revenue and asset values. Additionally, insurance carrier losses from inflation, rising interest rates and natural or man-made disasters could impact our contingent income, which is primarily driven by insurance carrier underwriting results and, to a lesser extent, the volume of business we place with them, as determined by the loss ratios determined by the insurance carriers. For example, carrier underwriting losses attributable to hurricanes, wildfires, and other catastrophes in 2024 may result in the Company receiving lower contingent income in the future. In addition, an increase in consumer preference for car- and ride-sharing services, as opposed to automobile ownership, may result in a long-term reduction in the number of vehicles per capita, and consequently the automobile insurance industry. Downward fluctuations in the year-over-year insurance premium charged by insurance carriers to protect against the same risk, referred to in the industry as softening of the insurance market, could adversely affect our business as a significant portion of the commissions and fees we earn is paid as a percentage of premium charged to our Clients. Insolvencies and consolidations associated with an economic downturn, especially insolvencies in the insurance industry, could adversely affect our brokerage business through the loss of Clients by hampering our ability to place insurance business. Also, some of our Clients may experience liquidity problems or other financial difficulties in the event of a prolonged deterioration in the economy, which could have an adverse effect on our collectability of receivables or our Clients may have less need for insurance coverage, cancel existing insurance policies, modify their coverage or not renew the policies they hold with us. In addition, E&O claims against us may increase in economic downturns, also adversely affecting our brokerage business. A decline in economic activity could have a material adverse effect on our business, financial condition and results of operations.
Previous report
As traditional risk-bearing insurance carriers continue to outsource the production of premium revenue to non-affiliated brokers or agents, those insurance carriers may seek to further minimize their expenses by reducing the commission rates payable to insurance agents or brokers. The reduction of these commission rates, along with general volatility or declines in premiums, may significantly affect our revenues and, therefore, our profitability.
Previous report
Because we do not determine the timing or extent of premium pricing changes, it is difficult to precisely forecast our commission revenues, including whether they will significantly decline. As a result, we may have to adjust our budgets for future acquisitions, capital expenditures, dividend payments, loan repayments and other expenditures to account for unexpected changes in revenues, and any decreases in premium rates may adversely affect our business, financial condition and results of operations.
Previous report
Compliance with U.S. and applicable foreign laws and regulations, such as economic sanctions, import and export controls, anti-corruption laws, tax laws, foreign exchange controls, data privacy and data localization requirements, labor laws, and anti-competition regulations, increases the costs of operating in foreign jurisdictions. We cannot predict how these laws or their interpretation, administration and enforcement will change over time. Although we have implemented policies and procedures to comply with these laws and regulations, a violation by our employees, labor sources, or vendors, or related to our operations, could nevertheless occur. In some cases, compliance with the laws and regulations of one country could violate the laws and regulations of another country. Violations of these laws and regulations could result in substantial fines, sanctions, civil and/or criminal penalties and curtailment of operations in certain jurisdictions, and could materially adversely affect our brand, growth efforts and business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management.
Previous report
Furthermore, if the U.S. dollar were to weaken in relation to the currencies used in these foreign countries, that may also reduce the savings achievable through our strategy of contracting out certain services and could have an adverse effect on our business, financial condition and results of operations. Our failure to successfully manage our international operations and the associated risks effectively could limit the future growth of our business.
Previous report
In the United States, the California Consumer Privacy Act (the “CCPA”) came into effect in January 2020 and introduced several new concepts to local privacy requirements, including increased transparency and rights such as access and deletion and an ability to opt out of the “sale” of personal information. Following the passage of the CCPA, multiple other U.S. states have introduced similar bills, some more comprehensive than the CCPA. This, along with a growing number of other U.S. states that are proposing new privacy laws, has created the need for multi-state compliance. We continue to monitor and adapt to this evolving privacy landscape. On November 3, 2020, Californians voted to approve Proposition 24, a ballot measure that creates the California Privacy Rights Act (“CPRA”). Most of the CPRA’s substantive provisions took effect on January 1, 2023. The CPRA amends and expands the rights and obligations under the CCPA and adds new requirements with which businesses must comply, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. The CPRA also created the California Privacy Protection Agency, a California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement. New regulations under the CPRA are expected to impose more specific requirements under the law.
Previous report
At the federal level, we are subject to, among other laws, rules and regulations, the Gramm-Leach-Bliley Act (“GLBA”), which requires financial institutions, including insurance carriers, to, among other things, periodically disclose their privacy policies and practices relating to sharing personal information and, in some cases, enables retail clients to opt out of the sharing of certain personal information with unaffiliated third parties. The GLBA also requires financial institutions to implement an information security program that includes administrative, technical and physical safeguards to ensure the security and confidentiality of client records and information. We are also subject to the rules and regulations promulgated under the authority of the Federal Trade Commission (“FTC”), which regulates unfair or deceptive acts or practices, including with respect to data privacy and cybersecurity. Moreover, the U.S. Congress has recently considered, and is currently considering, various proposals for more comprehensive data privacy and cybersecurity legislation, to which we may be subject if passed.
Previous report
Our acquisitions of new businesses and our continued operational changes and entry into new jurisdictions and new service offerings increase our legal and regulatory compliance complexity, as well as the type of governmental oversight to which we may be subject.
Previous report
Furthermore, our online privacy policy and website make certain statements regarding our privacy, information security, and data security practices with regard to information collected from participants. Failure to adhere to such practices may result in regulatory scrutiny, investigations and enforcement actions, complaints by affected participants or Clients, reputational damage and other harm to our business. Any failure, or perceived failure, by us or our third-party vendors to comply with posted privacy policies or with any FTC requirements or orders or other U.S. federal, state or international privacy or consumer protection-related laws, regulations or industry self-regulatory principles could result in claims, proceedings or actions against us by governmental entities or other third-parties, and could result in fines or other liabilities, which could adversely affect our business and reputation. In addition, a failure or perceived failure to comply with industry standards or with posted privacy policies and practices could result in a loss of customers and adversely affect our business and reputation. U.S. federal, state and international governmental authorities also continue to evaluate the privacy implications inherent in the use of web trackers, including the use of "cookies" for tracking and behavioral advertising. A failure by either us or the third-party service providers with whom we share personal information to address privacy or security concerns, even if unfounded, or to comply with applicable laws and regulations, could result in additional costs and liability, damage to our reputation, and harm to our business.
Previous report
In certain cases, within our Insurance Services offering, we collect premiums from Clients of all of our agencies and, after deducting our commissions and fees, remit the premiums to insurance carriers. We also collect surplus line taxes for remittance to state taxing authorities. Additionally, within TWFG MGA, we have agreements with certain insurance carriers whereby we remit claim payments or premium refunds to the Clients on behalf of the insurance carriers. Consequently, at any given time, we may hold funds of our Clients, insurance carriers and taxes, and we are subject to various laws and regulations governing the holding, management, and investing of these Client and tax funds. Any loss, theft or misappropriation of these funds, caused by employee or third-party fraud, execution of unauthorized transactions, errors relating to transaction processing, or other events could subject us, in addition to claims brought forth by Clients, insurance carriers and insurance intermediaries, to fines, penalties and reputational risk as a result of fiduciary breach and adversely affect our results of operations.
Previous report
While we are in possession of Client and insurance carrier premiums and surplus line taxes, we may invest those funds in interest-bearing demand deposit accounts with banks. If the bank with which they are held experiences any illiquidity or insolvency event, we may not be able to access Client funds timely, if at all, which could significantly affect our results of operations and financial condition and expose us to additional legal and regulatory fines or sanctions. See also “—We could incur substantial losses from our cash and investment accounts if one of the financial institutions that we use fails or is taken over by the U.S. Federal Deposit Insurance Corporation (“FDIC”).”
Previous report
Regulatory oversight generally also includes licensing of insurance brokers and agents, MGA or general underwriting operations, and the regulation of the handling and investment of Client, insurance carrier and tax funds held in trust.
Previous report
If we are unable to apply technology effectively in driving value for our Clients through technology-based solutions or gain internal efficiencies and effective internal controls through the application of technology and related tools, our operating results, Client relationships, growth and compliance programs could be adversely affected.
Previous report
In some cases, we depend on key vendors and other third parties to provide technology and other support for our strategic initiatives. If these third parties fail to perform their obligations or cease to work with us, our ability to execute on our strategic initiatives could be adversely affected.
Previous report
We use data, technology and intellectual property licensed from unaffiliated third parties in certain of our products, including insurance industry proprietary information that we license from third parties, and we may license additional third-party technology and intellectual property in the future. Any errors or defects in this third-party technology and intellectual property could result in errors that could harm our brand and business. In addition, licensed technology and intellectual property may not continue to be available on commercially reasonable terms, or at all. Also, should any third party refuse to license its proprietary information to us on the same terms that it offers to our competitors, we could be placed at a significant competitive disadvantage.
Previous report
Further, although we believe that there are currently adequate replacements for the third-party technology and intellectual property we presently use, the loss of our right to use any of this technology and intellectual property could result in delays in producing or delivering affected products until equivalent technology or intellectual property is identified, licensed or otherwise procured, and integrated. Our business would be disrupted if any technology and intellectual property we license from others or functional equivalents of this software were either no longer available to us or no longer offered to us on commercially reasonable terms. In either case, we would be required either to attempt to redesign our products to function with technology and intellectual property available from other parties or to develop these components ourselves, which would result in increased costs and could result in delays in product sales and the release of new product offerings. Alternatively, we might be forced to limit the features available in affected products. Any of these results could harm our business, results of operations and financial condition.
Previous report
We could incur substantial losses from our cash and investment accounts if one of the financial institutions that we use fails or is taken over by the U.S. Federal Deposit Insurance Corporation (“FDIC”).
Previous report
We maintain cash and investment balances, including funds held in trust, at a limited number of depository institutions in amounts that are significantly in excess of the limits insured by the FDIC. If one or more of the depository institutions with which we maintain significant cash balances were to fail or be taken over by the FDIC, our ability to access these funds might be temporarily or permanently limited, and we could face material liquidity problems and potential material financial loss.
Previous report
We could also be adversely affected if we fail to attract and retain talent and foster a collaborative workplace throughout our organization. Competition for talent is intense in many areas of our business. In addition, our industry has experienced competition for leading brokers and in the past we have lost key brokers and groups of brokers, along with their clients, business relationships and intellectual property directly to our competition. We enter into agreements with our Branches, which prohibit them from disclosing confidential information or soliciting our Clients, prospects and employees upon termination of the Branch agreement. Although we pursue legal actions for alleged breaches of non-compete or other restrictive covenants, theft of trade secrets, breaches of fiduciary duties, intellectual property infringement and related causes of action, such legal actions may not be effective in preventing such breaches, theft or infringement. In addition, the FTC has adopted new rules to, among other things, prohibit and make unenforceable any post-employment non-compete arrangement that restricts an employee or individual independent contractor, unless such arrangement was entered into in connection with an acquisition and meets certain conditions. While these rules have been challenged judicially and their implementation has been stayed, if the rules are ultimately upheld, or if we fail to adequately address any of the issues referred to above, we could experience a material adverse effect on our business, operating results and financial condition.
Previous report
We rely on third parties, and in some cases subcontractors, to provide services, data and information such as technology, information security, funds transfers, data processing, support functions and administration that are critical to the operations of our business. These third parties include correspondents, agents and other brokerage and intermediaries, insurance markets, data providers, plan trustees, payroll service providers, benefits administrators, software and system vendors, health plan providers, and providers of human resources, among others. As we do not fully control the actions of these third parties, we are subject to the risk that their decisions, actions, or inactions may adversely impact us, and replacing these service providers could create significant delay and expense. A failure by third parties to comply with service-level agreements or regulatory or legal requirements in a high-quality and timely manner, particularly during periods of our peak demand for their services, could result in economic and reputational harm to us. In addition, we face risks as we transition from in-house functions to third-party support functions and providers that there may be disruptions in service or other unintended results that may adversely affect our business operations. These third parties face their own technology, operating, business and economic risks, and any significant failures by them, including the improper use or disclosure of confidential client, employee or company information, could cause harm to our business and reputation. If one or more of these third parties, whether negligently or intentionally, fails to provide the risk-bearing insurance, capital as agreed, mishandles or misappropriates funds, or otherwise fails to properly provide products and services as expected, we face potential liability for damages and reputational harm. An interruption in or the cessation of service by any service provider as a result of systems failures, cybersecurity incidents, capacity constraints, financial difficulties, or for any other reason could disrupt our operations, impact our ability to offer certain products and services, and result in contractual or regulatory penalties, liability claims from Clients or employees, damage to our reputation, and harm to our business.
Previous report
Our ability to attract and retain Clients, employees, investors, capital and insurer trading partners is highly dependent upon the external perceptions of our level of service, trustworthiness, business practices, financial condition and other subjective qualities. Negative perceptions or publicity regarding these matters could erode trust and confidence and damage our reputation among existing and potential Clients which in turn could make it difficult for us to maintain existing Clients and attract new ones. Damage to our reputation due to a failure to proactively communicate to stakeholders on changes in strategy and business plans could further affect the confidence of our Clients, regulators, creditors, investors, insurer trading partners and other parties that are important to our business, having a material adverse effect on our business, ability to raise capital, financial condition, and results of operations.
Previous report
It is possible that stakeholders may not be satisfied with our ESG practices or the speed of their adoption. Actual or perceived shortcomings with respect to our ESG initiatives and reporting could negatively impact our business. We could also incur additional costs and require additional resources to monitor, report, and comply with various ESG practices.
Previous report
Such litigation and other proceedings may include, but are not limited to, complaints from or litigation by Branches, usually related to alleged breaches of contract or wrongful termination under the Branch agreements, actions relating to intellectual property, infringement, misappropriation or other violation, commercial arrangements and Branch arrangements.
Previous report
Our ability to provide services and to create and maintain comprehensive tracking and reporting of Client accounts depends in part on our capacity to store, retrieve and process data, manage significant databases and expand and periodically upgrade our information processing capabilities. As our operations evolve, we will need to continue to make investments in new and enhanced information systems. As our information system providers revise and upgrade their hardware, software and equipment technology, we may encounter difficulties in integrating these new technologies into our business. Any integration of artificial intelligence (“AI”) in our or any third-party’s operations is expected to pose new or unknown cybersecurity risks and challenges. Interruption or loss of our information processing capabilities or adverse consequences from implementing new or enhanced systems could have a material adverse effect on our business, financial condition and results of operations.
Previous report
In the course of providing services, we may electronically store or transmit personal information (including sensitive personal information), such as social security numbers or credit card or bank information, of Clients or employees of Clients. Breaches in data security or infiltration by unauthorized persons of our network security could cause interruptions in operations and damage to our reputation, among other adverse impacts. While we maintain policies, procedures and technological safeguards designed to protect the security and privacy of this information, we cannot entirely eliminate the risk of improper access to or disclosure of personal information nor the related costs we incur to mitigate the consequences from such events. Security incidents can also occur as a result of non-technical issues, such as physical theft. More recently, advancements in AI, such as generative AI, may pose serious risks for many of the traditional tools used to identify individuals, including voice recognition (whether by machine or the human ear), facial recognition or screening questions to confirm identities. In addition, generative AI systems may also be used by malicious actors to create more sophisticated cyber-attacks (i.e., more realistic phishing or other attacks). The advancements in AI could lead to an increase in the frequency of identity fraud or cyberattacks (whether successful or unsuccessful), which could cause us to incur increasing costs, including costs to deploy additional personnel, protection technologies and policies and procedures, train employees, and engage third-party experts and consultants. Data privacy and cybersecurity laws, rules and regulations are matters of growing public concern and are continuously changing in the states in which we operate. The failure to adhere to or successfully implement procedures to respond to these regulations could result in legal liability or impairment to our reputation.
Previous report
We rely substantially upon third-party service providers for various aspects of our business processes and to protect us from service disruptions and cybersecurity intrusions. This reliance may mean that we will not be able to resolve operational problems internally or on a timely basis, which could lead to participant or Client dissatisfaction or long-term disruption of our operations. Our operations also depend upon our third-party service providers to communicate appropriately and respond swiftly to their own service disruptions through industry standard best practices in information security, business continuity and/or disaster recovery. As a last resort, we may rely on our ability to replace a third-party service provider if such third-party service provider experiences difficulties that interrupt operations for a prolonged period of time or if an essential third-party service terminates. If these service arrangements are terminated for any reason without an immediately available substitute arrangement, our operations may be severely interrupted or delayed. If such interruption or delay were to continue for a substantial period of time, it could adversely impact our business, financial condition and results of operations.
Previous report
Further, despite security measures implemented by us and our vendors, our systems and those of our vendors may be vulnerable to physical break-ins, unauthorized access, viruses or other disruptive problems. If our systems or facilities were infiltrated or damaged, our Clients could experience data loss, financial loss and significant business interruption leading to a material adverse effect on our business, financial condition and results of operations. We may be required to expend significant additional resources to modify protective measures, to investigate and remediate vulnerabilities or other exposures or to make required notifications.
Previous report
While we manage some of our information technology systems and some are outsourced to third parties, all information technology systems are potentially vulnerable to damage, breakdown or interruption from a variety of sources, including but not limited to cyberattacks, ransomware, malware, security breaches, theft or misuse, unauthorized access or improper actions by insiders or employees, sophisticated nation-state and nation-state-supported actors, natural disasters, terrorism, war, telecommunication and electrical failures or other compromise. We are at risk of attack by a growing list of adversaries through increasingly sophisticated methods of attack. Because the techniques used to infiltrate or sabotage systems change frequently, we may be unable to anticipate these techniques or implement adequate preventative measures.
Previous report
For example, in August 2023, we became aware that the Company was the victim of a cyberattack and unauthorized access was gained to our servers through a third-party service provider (the “2023 Cyber Incident”). In response to this event, the Company took immediate action to secure the compromised servers and to prevent the unauthorized person(s) from continuing to have access, or gaining future access, to the Company’s accounts or related information. The Company also reassessed and modified its approach to third-party service providers that provide cybersecurity services to the Company. Through our investigation, we were not able to conclusively determine whether personal information was accessed without authorization. Therefore, with an abundance of caution, we provided notification of the incident to potentially affected parties, including government departments and agencies and state regulators, departments of insurance and other such departments or agencies with oversight over regulated insurance entities. While we determined the security event was not material and did not have a material impact on the Company’s business, operating results or financial conditions, we cannot rule out future impacts from this event, or other future events. If we fail to make such notifications within the timelines required under applicable laws it could result in violations, fines, penalties, litigation, proceedings or enforcement action. In addition, it is possible that state regulators may initiate investigations of the Company in connection with the incident, that the Company could be subject to civil penalties, resolution agreements, monitoring or similar agreements, or third-party claims against the Company, including class action lawsuits. Moreover, future incidents of this nature that could occur with respect to our systems or the systems of our third-party service providers, as well as any other security incident or other misuse or disclosure of our participant or other data could lead to improper use or disclosure of Company information, including personal information obtained from our participants, and information from employees. Any such incident or misuse of data could harm our reputation, lead to legal exposure, divert management attention and resources, increase our operating expenses due to the employment of consultants and third-party experts and the purchase of additional security infrastructure, and/or subject us to liability, resulting in increased costs and loss of revenue. In addition, any remediation efforts we undertake may not be successful. The perception that we do not adequately protect the privacy of information of our employees or Clients could inhibit our growth and damage our reputation.
Previous report
If we are unable to maintain and upgrade our system safeguards, we may incur unexpected costs and certain aspects of our systems may become more vulnerable to unauthorized access. While we select our Clients and third-party vendors carefully, cyberattacks and security breaches at a Client or vendor could adversely impact our or our vendors’ ability to deliver products and services and otherwise conduct business and could put our systems at risk. Additionally, we are an acquisitive organization and the process of integrating the information systems of the businesses we acquire is complex and exposes us to additional risk as we may not adequately identify weaknesses in the targets’ information systems, which could expose us to unexpected liabilities or make our own systems more vulnerable to attack.
Previous report
These types of incidents affecting us, our Clients, or our third-party vendors could result in intellectual property or other confidential information being lost or stolen, including client, employee or company data. We may not be able to detect breaches in our information technology systems or assess the severity or impact of a breach in a timely manner. In addition, to the extent we integrate AI into our operations, this may increase cybersecurity and privacy risks, including the risk of unauthorized or misuse of AI tools.
Previous report
We have implemented various measures to manage our risks related to system and network security and disruptions, but a security breach or a significant and extended disruption in the functioning of our information technology systems could damage our reputation and cause us to lose Clients, adversely impact our operations, and operating results, and require us to incur significant expense to address and remediate or otherwise resolve such issues. In order to maintain the level of security, service, compliance and reliability that our Clients and laws of various jurisdictions require, we will be required to make significant additional investments in our information technology systems on an ongoing basis.
Previous report
We have experienced information technology system disruptions and cyberattacks in the past, and a failure of our information technology infrastructure and cyberattacks could adversely impact us in the future.
Previous report
We depend on our information technology systems for the efficient operation of our business. Accordingly, we rely upon the capacity, reliability and security of our information technology hardware and software infrastructure and our ability to expand and update this infrastructure in response to our changing needs. Despite our implementation of security measures, our systems are vulnerable to damage from computer viruses, natural disasters, incursions by intruders or hackers, failures in hardware or software, power fluctuations, cyber terrorists and other similar disruptions. Additionally, we rely on third parties to support the operation of our information technology hardware and software infrastructure, and in certain instances, utilize web-based applications. We routinely monitor our systems for information technology disruptions and cyberattacks and have processes in place to detect and remediate vulnerabilities. Nevertheless, we have experienced occasional information technology disruptions, cyberattacks, phishing attempts and attempted breaches, including the 2023 Cyber Incident. We responded to and mitigated the impact of these incidents. Cyber-criminals are constantly devising new, sophisticated schemes to gain unauthorized access to computer systems and confidential or sensitive data, including through the use of AI. The failure of our information technology systems or those of our vendors to perform as anticipated for any reason or any significant breach of security could disrupt our business and result in numerous adverse consequences, including reduced effectiveness and efficiency of operations, inappropriate disclosure of confidential and proprietary information, reputational harm, increased overhead costs, loss of important information, theft or misappropriation of funds, violation of privacy or other laws, and exposure to litigation or indemnity claims, including resulting from Client-imposed cybersecurity controls or other related contractual obligations, which could have a material adverse effect on our business and results of operations. In addition, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.
Previous report
Cybersecurity breaches, including, among other issues, computer viruses, ransomware attacks, fraud, human error, improper access by employees or vendors, phishing campaigns, malware attacks, unauthorized parties gaining access to our information technology systems and similar incidents could disrupt the security of our internal systems and business applications or those of our vendors, impair our ability to provide services to our Clients and protect the privacy of their data, compromise confidential business information, result in intellectual property or other confidential or proprietary information being lost or stolen, including Client, employee or Company data, which could harm our competitive position or reputation or otherwise adversely impact our business.
Previous report
Bunch Holdings beneficially owns more than 50% of the voting power for the election of members of our board of directors. As a result, we are a “controlled company” within the meaning of the corporate governance standards of the Nasdaq rules. Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain Nasdaq corporate governance requirements.
Previous report
As a controlled company, we rely on the exemption from the Nasdaq standards that enables us not to have director nominees selected or recommended for our board of directors be approved by either a majority of our independent directors or a nominating committee. As a consequence of our reliance on this exemption from the Nasdaq standard provided to “controlled companies,” you do not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq.
Reworded paragraphs (92)
Previous wording
Factors, such as business revenue, economic conditions, the volatility and strength of the capital markets, inflation and public health emergencies, can affect the business and economic environment. For example, in recent years, the global economic environment was characterized by persistent inflation, rising interest rates, volatility in global financial markets (leading to, among other things, a decline in equity prices), continued supply chain complications, recessionary fears, and geopolitical uncertainty, including the war between Russia and Ukraine and the war between Israel and Hamas, and these wars’ impacts on global security and markets.
Current wording
Factors, such as business revenue, economic conditions, the volatility and strength of the capital markets, inflation and public health emergencies, can affect the business and economic environment. For example, in recent years, the global economic environment was characterized by persistent inflation, rising interest rates, volatility in global financial markets (leading to, among other things, a decline in equity prices), continued supply chain complications, recessionary fears, and geopolitical uncertainty, including ongoing wars and military conflicts and their impacts on global security and markets.
Previous wording
Major slowdowns in the various housing markets we serve, including as a result of changes in prevailing interest rates or U.S. monetary policies that affect interest rates, could adversely impact our ability to generate new business. For example, this may impact the market for new homes or autos, which could adversely impact our personal lines, Clients or the market for small business start-ups, which could adversely impact our commercial lines Clients. Any changes in U.S. trade policy, including new and existing tariffs as well as other trade measures, could result in reduced economic activity, increased costs in operating our business, reduced demand and/or changes in purchasing behaviors for new homes or autos, material changes in the pricing of new homes or autos, limits on trade with the United States or other potentially adverse economic outcomes. Further, such changes in U.S. trade policy could trigger retaliatory actions, including tariffs and other trade measures, by affected countries, resulting in “trade wars,” which could affect the volume of economic activity in the U.S., including demand for our services. We cannot predict the impact of recent developments or future developments, and such existing or future tariffs or other trade measures could have a material adverse effect on our results of operations, financial position and cash flows. Furthermore, during inflationary periods, interest rates have historically increased, which would have a direct effect on the interest expense in case we decide to refinance our existing long-term borrowings, or incur any additional indebtedness.
Current wording
Major slowdowns in the various housing markets we serve, including as a result of changes in prevailing interest rates or U.S. monetary policies that affect interest rates, could adversely impact our ability to generate new business. For example, this may impact the market for new homes or autos, which could adversely impact our personal lines, Clients or the market for small business start-ups, which could adversely impact our commercial lines Clients. Any changes in U.S. trade policy, including new and existing tariffs as well as other trade measures, could result in reduced economic activity, increased costs in operating our business, reduced demand and/or changes in purchasing behaviors for new homes or autos, material changes in the pricing of new homes or autos, limits on trade with the U.S. or other potentially adverse economic outcomes. Further, such changes in U.S. trade policy could trigger retaliatory actions, including tariffs and other trade measures, by affected countries, resulting in “trade wars,” which could affect the volume of economic activity in the U.S., including demand for our services. We cannot predict the impact of recent developments or future developments, and such existing or future tariffs or other trade measures could have a material adverse effect on our results of operations, financial position and cash flows. Furthermore, during inflationary periods, interest rates have historically increased, which would have a direct effect on the interest expense in case we decide to refinance our existing long-term borrowings, or incur any additional indebtedness.
Previous wording
We derive most of our revenue from commissions and fees. We do not determine the insurance premiums on which our commissions are generally based. Moreover, insurance premiums are cyclical in nature and may vary widely based on market conditions. Because of market cycles for insurance product pricing, which we cannot predict or control, our commission revenues and profitability can be volatile or remain depressed for significant periods of time. In addition, there have been and may continue to be various trends in the insurance industry toward alternative insurance markets including, among other considerations, greater levels of self-insurance, captives, rent-a-captives, risk retention groups and non-insurance capital markets-based solutions to traditional insurance.
Current wording
We derive most of our revenue from commissions and fees, which are based on insurance premiums we do not control. Moreover, insurance premiums are cyclical in nature and may vary based on market conditions, making our commission revenues and profitability subject to volatility and prolonged periods of depression. These fluctuations are difficult to predict, which limits our ability to accurately forecast revenues and plan for acquisitions, capital expenditures, dividends, and debt repayments. In addition, there have been and may continue to be industry trends toward alternative insurance markets including, among other considerations, greater levels of self-insurance, captives, rent-a-captives, risk retention groups and non-insurance capital markets-based solutions to traditional insurance, which may further reduce premium volumes. Any sustained decrease in premium rates or shift away from traditional insurance could adversely affect our business, financial condition, and results of operations.
Previous wording
Because the revenue we earn on the sale of certain insurance products is based on premiums and commission rates set by insurance carriers, any decreases in these premiums or commission rates, or actions by insurance carriers seeking repayment of commissions, could result in revenue decreases or expenses to us.
Current wording
Because the revenue we earn on the sale of certain insurance products is based on premiums and commission rates set by insurance carriers, any decreases in these premiums or commission rates, or actions by insurance carriers, including seeking repayment of commissions, could result in revenue decreases or expenses to us.
Previous wording
Insurance carriers or their affiliates may under certain circumstances seek the chargeback or repayment of commissions as a result of a policy lapse, surrender, cancellation, rescission, default, or upon other specified circumstances. As a result of the chargeback or required repayment of commissions, we may incur an expense in a particular period related to revenue previously recognized in a prior period and reflected in our financial statements. Such an expense could have a material adverse effect on our results of operations and financial condition, particularly if the expense is greater than the amount of related revenue retained by us.
Current wording
Insurance carriers or their affiliates may under certain circumstances seek the chargeback or repayment of commissions if policies lapse, are surrendered, cancelled, rescinded, defaulted, or upon other specified circumstances, which could result in an expense in periods after revenue was recognized. Such an expense could have a material adverse effect on our results of operations and financial condition, particularly if the expense is greater than the amount of related revenue retained by us.
Previous wording
The commission rates are set by insurance carriers and are based on the premiums that the insurance carriers charge. The potential for changes in premium rates is significant, due to pricing cyclicality in the insurance market. In addition, the insurance industry has been characterized by periods of intense price competition due to excessive underwriting capacity and periods of favorable premium levels due to shortages of capacity.
Current wording
The commission rates, set by insurance carriers are based on the premiums that the insurance carriers charge, which are subject to significant change due to pricing cyclicality in the insurance market, competitive pressures, and carriers’ efforts to reduce costs. In addition, the insurance industry has been characterized by periods of intense price competition due to excessive underwriting capacity and periods of favorable premium levels due to shortages of capacity. Furthermore, carriers may reduce commission rates as they outsource premium production to non-affiliated brokers or agents.
Previous wording
Capacity could also be reduced by insurance carriers failing or withdrawing from writing certain coverages that we offer our Clients. Commission rates and premiums can change based on prevailing legislative, economic and competitive factors that affect insurance carriers. These factors, which are not within our control, include the capacity of insurance carriers to place new business, underwriting and non-underwriting profits of insurance carriers, consumer demand for insurance products, the availability of comparable products from other insurance carriers at a lower cost and the availability of alternative insurance products, such as government benefits and self-insurance products, to consumers. We cannot predict the timing or extent of future changes in commission rates or premiums or the effect any of these changes will have on our business, financial condition and results of operations.
Current wording
Premium and commission variability is influenced by legislative, economic, and competitive factors beyond our control, including carrier capacity, profitability, consumer demand, and the availability of alternative products such as government programs or self-insurance. We cannot predict the timing or extent of future changes in commission rates or premiums or the effect any of these changes will have on our business, financial condition and results of operations.
Previous wording
We derive a significant portion of our insurance carrier capacity from a limited number of insurance carriers. If one or more of these insurance carriers terminated their arrangement with us, it could result in less favorable arrangements with new insurance carriers and additional expense.
Current wording
We derive a significant portion of our insurance carrier capacity from a limited number of insurance carriers. If one or more of these insurance carriers changes or terminates their arrangement with us, it could result in less favorable arrangements with new insurance carriers and additional expense.
Previous wording
For the year ended December 31, 2024 and 2023, five insurance carriers accounted for 44.2% and 43.1%, respectively, of our Total Written Premium. For the year ended December 31, 2024, The Progressive Corporation accounted for 13% of our total revenues, and for the year ended December 31, 2023, The Progressive Corporation and The Travelers Companies, Inc. accounted for 11% and 10% of our total revenues, respectively. Should any of these insurance carriers seek to terminate their arrangement with us, we could be forced to move our business to another insurance carrier, which could result in less favorable arrangements and additional expense.
Current wording
For the years ended December 31, 2025 and 2024, five insurance carriers accounted for 40.1% and 44.2%, respectively, of our Total Written Premium. For the years ended December 31, 2025 and 2024, The Progressive Corporation accounted for 11% and 13% of our total revenues, respectively. Should any of these insurance carriers seek to change or terminate their arrangement with us, we could be forced to move our business to another insurance carrier, which could result in less favorable arrangements and additional expense.
Previous wording
If insurance intermediaries or insurance carriers experience liquidity problems, insolvency or other financial difficulties, or do not timely provide required information or payments to us, we could encounter delays in payments owed to us, the loss of insurance carrier appointments, E&O claims and difficulty collecting receivables owed to us by insurance carriers. These conditions may adversely affect our revenue and make it difficult for us to accurately predict our future results, which could harm our business, financial condition and results of our operations.
Current wording
If insurance intermediaries or insurance carriers experience liquidity problems, insolvency or other financial difficulties, or do not provide required information or payments to us, we could encounter delays in payments owed to us, the loss of insurance carrier appointments, E&O claims and difficulty collecting receivables owed to us by insurance carriers. These conditions may adversely affect our revenue and make it difficult for us to accurately predict our future results, which could harm our business, financial condition and results of our operations.
Previous wording
Contingent commissions we receive from insurance carriers are less predictable than standard commissions, and any decrease in the amount of these kinds of commissions we receive could adversely affect our results of operations.
Current wording
Contingent commissions we receive from insurance carriers are less predictable than standard commissions, and any decrease in the amount of contingent commissions we receive could adversely affect our results of operations.
Previous wording
Typically an averageof approximately 3% of our total revenue consists of contingent commissions we receive from insurance carriers. Contingent commissions are paid by certain insurance carriers based upon the profitability, volume or growth of the business placed with those insurance carriers during the prior year. If, due to the current economic environment or for any other reason, including weather-related factors, we are unable to meet applicable profitability, volume or growth thresholds, or if one or more insurance carriers increase their estimate of loss reserves (over which we have no control), contingent commissions we receive could be less than anticipated, which could adversely affect our business, financial condition and results of operations.
Current wording
Typically, an averageof approximately 4% of our total revenue consists of contingent commissions we receive from insurance carriers. Contingent commissions are paid by certain insurance carriers based upon the profitability, volume or growth of the business placed with those insurance carriers during the prior year. If, due to the current economic environment or for any other reason, including weather-related factors, we are unable to meet applicable profitability, volume or growth thresholds, or if one or more insurance carriers increase their estimate of loss reserves (over which we have no control), contingent commissions we receive could be less than anticipated, which could adversely affect our business, financial condition and results of operations.
Previous wording
We have employees and other labor sources and operations in the Philippines, vendors (including third party technology providers) outside of the U.S., and we may in the future expand our operations to other countries. While these arrangements may lower operating costs, they also subject us to the uncertain political climates, including political unrest and uncertainty, and potential disruptions in international trade, economic sanctions, as well as import and export controls and any amendments to those laws, as well as potentially increased data security and privacy risks and local economic, fluctuations in the value of currency and inflation and labor conditions.
Current wording
We have employees and other labor sources and operations in the Philippines, vendors (including technology providers) outside of the U.S., and we may expand our operations to other countries. While these arrangements may lower operating costs, they also expose us to political unrest, trade disruptions, sanctions, as well as import/export controls, data security and privacy risks, currency fluctuations, inflation and labor conditions.
Previous wording
Our oversight aimed at ensuring adherence to applicable quality and compliance standards may be more difficult with employees, labor sources, operations or vendors located outside of the United States and may both make it more difficult for us to achieve our operational objectives and expose us to additional liability. Countries outside of the United States may be subject to relatively higher degrees of political, financial and social instability and may lack the infrastructure to withstand political unrest or natural disasters. The occurrence of natural disasters, pandemics or political or economic instability in these countries or regions could interfere with work performed by these labor sources and vendors or could result in our having to replace or reduce these labor sources or vendors. Our operations or vendors in other countries could potentially shut down suddenly for any reason, including financial problems or personnel issues. Such disruptions could decrease efficiency, increase our costs, and have an adverse effect on our business and results of operations.
Current wording
Our oversight aimed at ensuring adherence to applicable quality and compliance standards may be more difficult with offshore employees, labor sources, operations or vendors, which may hinder our operational objectives and may expose us to additional liability. Countries outside of the U.S. may be subject to relatively higher degrees of political, financial and social instability and may lack the infrastructure to withstand political unrest or natural disasters, which could disrupt offshore work or force us to replace vendors or shut down suddenly due to financial or personnel issues. Such disruptions could decrease efficiency, increase our costs, and have an adverse effect on our business and results of operations.
Previous wording
The practice of utilizing labor based in foreign countries has come under increased scrutiny in the United States. Governmental authorities could seek to impose financial costs or restrictions on foreign companies providing services to clients or companies in the United States. Governmental authorities may attempt to prohibit or otherwise discourage us from sourcing services from offshore labor. In addition, insurance carriers may require us to use labor based in the United States for regulatory or other reasons. To the extent that we are required to use labor based in the United States, we may face increased costs as a result of higher-priced U.S.-based labor.
Current wording
The practice of utilizing labor based in foreign countries has come under increased scrutiny in the U.S.. Governmental authorities could seek to impose financial costs or restrictions on foreign companies providing services to clients or companies in the U.S. Governmental authorities may attempt to prohibit or otherwise discourage us from sourcing services from offshore labor. In addition, insurance carriers may require us to use U.S.-based labor for regulatory or other reasons, which could increase costs.
Previous wording
We are exposed to various risks arising out of natural disasters, including earthquakes, hurricanes, fires, floods, landslides, tornadoes, typhoons, tsunamis, hailstorms, explosions, climate events or weather patterns and pandemic health events, as well as man-made disasters, including acts of terrorism, military actions, security breaches, cyberattacks and other similar incidents, explosions and biological, chemical or radiological events. Climate change may cause more extreme weather conditions such as more intense hurricanes, thunderstorms, tornadoes and snow or ice storms, as well as rising sea levels and increased volatility in seasonal temperatures. The continued threat of terrorism and ongoing military actions may cause significant volatility in global financial markets, and a natural or man-made disaster could trigger an economic downturn in the areas directly or indirectly affected by the disaster. These consequences could, among other impacts, result in a decline in business and increased claims from those areas. They could also result in reduced underwriting capacity of our insurance carriers, making it more difficult for our agents to place business. Disasters also could disrupt public and private infrastructure, including communications and financial services, which could disrupt our normal business operations. Any increases in insurance carrier loss ratios due to natural or man-made disasters could impact our contingent commissions, which are primarily driven by both growth and profitability metrics.
Current wording
We are exposed to various risks arising out of natural disasters, including earthquakes, hurricanes, fires, floods, landslides, tornadoes, typhoons, tsunamis, hailstorms, explosions, climate events or weather patterns and pandemic health events, as well as man-made disasters, including acts of terrorism, military actions, security breaches, cyberattacks and other similar incidents, explosions and biological, chemical or radiological events. Climate change may cause more extreme weather conditions such as more intense hurricanes, thunderstorms, tornadoes and snow or ice storms, as well as rising sea levels and increased volatility in seasonal temperatures. The continued threat of terrorism and ongoing military actions may cause significant volatility in global financial markets, and a natural or man-made disaster could trigger an economic downturn in the areas directly or indirectly affected by the disaster.
Previous wording
The effects of climate change continue to create an alarming level of concern for the state of the global environment. As a result, the global business community has increased its political and social awareness surrounding the issue. Though the federal government has recently issued policies to reverse climate-related regulatory trends, international, state, and local agencies continue to propose numerous initiatives to supplement the global effort to combat climate change. If new legislation or regulation is enacted, we could incur increased costs and capital expenditures to comply, which may impact our financial condition and operating performance.
Current wording
Though the federal government has recently issued policies to reverse climate-related regulatory trends, international, state, and local agencies continue to propose numerous initiatives to supplement the global effort to combat climate change. If new legislation or regulation is enacted, we could incur increased costs and capital expenditures to comply, which may impact our financial condition and operating performance.
Previous wording
In addition, the U.S. Federal Reserve has identified climate change as a systemic risk to the economy. It also reported that a gradual change in investor sentiment regarding climate risk introduces the possibility of abrupt tipping points or significant swings in sentiment, which could create unpredictable follow-on effects in financial markets, and we may be negatively impacted by a general economic decline. While the U.S. Federal Reserve withdrew from the Network of Central Banks and Supervisors for Greening the Financial System on January 17, 2025, potentially signaling a reversal of climate change policies, these risks remain and international, state, and local agencies continue to propose numerous initiatives to supplement the global effort to combat climate change.
Current wording
In addition, the U.S. Federal Reserve has in the past identified climate change as a potential risk to the economic stability of the financial system. It also reported that a gradual change in investor sentiment regarding climate risk introduces the possibility of abrupt tipping points or significant swings in sentiment, which could create unpredictable follow-on effects in financial markets. If this occurred, not only would we be negatively impacted by the general economic decline but a drop in the stock market affecting our stock price could negatively impact our ability to grow through mergers and acquisitions financed using our Class A Common Stock. While the U.S. Federal Reserve withdrew from the Network of Central Banks and Supervisors for Greening the Financial System on January 17, 2025, signaling a reversal of climate change policies, these risks remain.
Previous wording
We are subject to litigation, regulatory investigations and claims arising in the normal course of our business operations. The risks associated with these matters often may be difficult to assess or quantify and the existence and magnitude of potential claims often remain unknown for substantial periods of time. While we have insurance coverage for some of these potential claims, others may not be covered by insurance, insurance carriers may dispute coverage or any ultimate liabilities may exceed our coverage.
Current wording
We are subject to litigation, regulatory investigations and claims arising in the normal course of our business operations. The risks associated with these matters often may be difficult to assess or quantify and the existence and magnitude of potential claims often remain unknown for substantial periods of time. We may face claims that are not covered by insurance, where coverage is disputed, or where liabilities exceed available limits.
Previous wording
We are subject to laws and regulations, as well as regulatory investigations. The insurance industry has been subject to a significant level of scrutiny by various regulatory bodies, including state attorneys general and insurance departments, concerning certain practices within the insurance industry, as well as those regulating international trade such as economic sanctions, anti-money laundering and counter-terrorism financing. From time-to-time, we receive informational requests from governmental authorities. We have cooperated and will continue to cooperate fully with all governmental agencies.
Current wording
We are subject to laws and regulations, as well as regulatory investigations. The insurance industry has been subject to a significant level of scrutiny by various regulatory bodies, including state attorneys general and insurance departments, concerning certain practices within the insurance industry, as well as those regulating international trade such as economic sanctions, anti-money laundering and counter-terrorism financing.
Previous wording
There have been a number of revisions to existing, or proposals to modify or enact new laws and regulations regarding insurance agents and brokers. These actions have imposed or could impose additional obligations on us with respect to our products sold. Some insurance carriers have agreed with regulatory authorities to end the payment of contingent commissions on insurance products, which could impact our commissions that are based on the volume, consistency and profitability of business generated by us.
Current wording
There have been a number of revisions to existing laws and regulations, or proposals to modify or enact new laws and regulations regarding insurance agents and brokers. These actions have imposed or could impose additional obligations on us with respect to products we sell. Some insurance carriers have agreed with regulatory authorities to end the payment of contingent commissions on insurance products, which could impact our commissions that are based on the volume, consistency and profitability of business generated by us.
Previous wording
We cannot predict the impact that any new laws, rules or regulations may have on our business and financial results, particularly in light of potential changes implemented by the new Trump administration. Given the current regulatory environment and the number of Branches operating in local markets throughout the country, it is possible that we will become subject to further governmental inquiries and subpoenas and have lawsuits filed against us. Regulators may raise issues during investigations, examinations or audits that could, if determined adversely, have a material impact on us. The interpretations of regulations by regulators may change and statutes may be enacted with retroactive impact. We could also be materially adversely affected by any new industry-wide regulations or practices that may result from these proceedings.
Current wording
We cannot predict the impact that any new laws, rules or regulations may have on our business and financial results, particularly in light of potential changes implemented by the Trump administration. Given the current regulatory environment and the number of Branches operating in local markets throughout the country, it is possible that we will become subject to further governmental inquiries and subpoenas and have lawsuits filed against us. Regulators may raise issues during investigations, examinations or audits that could, if determined adversely, have a material impact on us. We could also be materially adversely affected by any new industry-wide regulations or practices that may result from these proceedings.
Previous wording
We have significant insurance agency and brokerage operations, and are subject to claims and litigation in the ordinary course of business resulting from alleged and actual errors and omissions in placing insurance and rendering coverage advice. These activities, if any, could involve substantial amounts of money. Since E&O claims against us may allege our liability for all or part of the amounts in question, claimants may seek large damage awards. These claims can involve significant defense costs. Errors and omissions could include failure, whether negligently or intentionally, to place coverage on behalf of Clients, to provide insurance carriers with complete and accurate information relating to the risks being insured, or to appropriately apply funds that we hold in trust. It is not always possible to prevent or detect errors and omissions, and the precautions we take may not be effective in all cases. Given the unpredictability of E&O claims and of litigation that could flow from them, it is possible that an adverse outcome in a particular matter could have a material adverse effect on our results of operations, financial condition or cash flow in a given quarterly or annual period.
Current wording
We have significant insurance agency and brokerage operations, and are subject to claims and litigation in the ordinary course of business resulting from alleged and actual errors and omissions in placing insurance and rendering coverage advice. Since E&O claims against us may allege our liability for all or part of the amounts in question, claimants may seek large damage awards. These claims can involve significant defense costs. Errors and omissions could include failure, whether negligently or intentionally, to place coverage on behalf of Clients, to provide insurance carriers with complete and accurate information relating to the risks being insured, or to appropriately apply funds that we hold in trust. Given the unpredictability of E&O claims and of litigation that could flow from them, it is possible that an adverse outcome in a particular matter could have a material adverse effect on our results of operations, financial condition or cash flow in a given quarterly or annual period.
Previous wording
The business of providing insurance products and services is highly competitive and we expect competition to intensify. To the extent that the financial services industry experiences further consolidation, we may experience increased competition from insurance carriers and the financial services industry, as a growing number of larger financial institutions increasingly, and aggressively, offer a wider variety of financial services, including insurance intermediary services. We compete for Clients on the basis of reputation, Client service, program and product offerings and our ability to tailor products and services to meet the specific needs of a Client.
Current wording
The business of providing insurance products and services is highly competitive and we expect competition to intensify. To the extent that the financial services industry experiences further consolidation, we may experience increased competition from insurance carriers and the financial services industry, as a growing number of larger financial institutions increasingly, and aggressively, offer a wider variety of financial services, including insurance intermediary services.
Previous wording
In addition, in recent years, private equity sponsors have invested tens of billions of dollars into the insurance sector, transforming existing players and creating new ones to compete with large brokers. These new competitors, alliances among competitors or mergers of competitors could emerge and gain significant market share, and some of our competitors may have or may develop a lower cost structure, adopt more aggressive pricing policies or provide services that gain greater market acceptance than the services that we offer or develop. Competitors may be able to respond to the need for technological changes and innovate faster, or price their services more aggressively. They may also compete for skilled professionals, finance acquisitions, fund internal growth and compete for market share more effectively than we do. To respond to increased competition and pricing pressure, we may have to lower the cost of our services or decrease the level of service provided to Clients, which could have an adverse effect on our business, financial condition and results of operations. In addition, a number of insurance carriers are engaged in the direct sale of insurance, primarily to individuals, and do not pay commissions to brokers or other market intermediaries. Furthermore, we compete with various other companies that provide risk-related services or alternatives to traditional insurance services, including insurtech start-up companies, which are focused on using technology and innovation, including artificial intelligence, digital platforms, data analytics, robotics and blockchain, to simplify and improve the Client experience, increase efficiencies, alter business models and effect other potentially disruptive changes in the industries in which we operate.
Current wording
In recent years, private equity sponsors have invested tens of billions of dollars into the insurance sector, transforming existing players and creating new ones to compete with large brokers. These new competitors, alliances among competitors or mergers of competitors could emerge and gain significant market share, and some of our competitors may have or may develop a lower cost structure, adopt more aggressive pricing policies or provide services that gain greater market acceptance than the services that we offer or develop. They may also compete for skilled professionals, finance acquisitions, fund internal growth and compete for market share more effectively than we do. To respond to increased competition and pricing pressure, we may have to lower the cost of our services or decrease the level of service provided to Clients, which could have an adverse effect on our business, financial condition and results of operations. Furthermore, we compete with various other companies that provide risk-related services or alternatives to traditional insurance services, including insurtech start-up companies, which are focused on using technology and innovation, including artificial intelligence, digital platforms, data analytics, robotics and blockchain, to simplify and improve the Client experience, increase efficiencies, alter business models and effect other potentially disruptive changes in the industries in which we operate.
Previous wording
Some of our competitors may be able to sustain the costs of litigation more effectively than we can because they have substantially greater resources. In the event any of such competitors initiate litigation against us, such litigation, even if without merit, could be time-consuming and costly to defend and may divert management’s attention and resources away from our business and adversely affect our business, financial condition and results of operations.
Current wording
In addition, any litigation initiated by competitors, even if without merit, could be costly, time-consuming, divert management’s attention, and negatively impact our financial condition and results of operations. Some of our competitors may be able to sustain the costs of litigation more effectively than we can because they have substantially greater resources. In the event any of such competitors initiate litigation against us, such litigation, even if without merit, could be time-consuming and costly to defend and may divert management’s attention and resources away from our business and adversely affect our business, financial condition and results of operations.
Previous wording
•Climate change regulation in the United States, individual states, or around the world moving us toward a low-carbon economy, which could create new competitive pressures around innovative insurance solutions; and
Current wording
•Climate change regulation in the U.S., individual states, or around the world moving us toward a low-carbon economy, which could create new competitive pressures around innovative insurance solutions; and
Previous wording
We derive a substantial portion of our TWFG MGA business from our relationships with retail insurance brokerage firms. There has been considerable consolidation in the retail insurance brokerage industry, driven primarily by the acquisition of small and mid-size retail insurance brokerage firms by larger brokerage firms, financial institutions or other organizations. We expect this trend to continue. As a result, we may lose all or a substantial portion of the business we obtain from retail insurance brokerage firms that are acquired by other firms who have their own wholesale insurance brokerage operations or established relationships with other wholesale insurance brokerage firms. To date, our business has not been materially affected by consolidation among retail insurance brokers.
Current wording
We derive a substantial portion of our TWFG MGA business from our relationships with retail insurance brokerage firms. There has been considerable consolidation in the retail insurance brokerage industry, driven primarily by the acquisition of small and mid-size retail insurance brokerage firms by larger brokerage firms, financial institutions or other organizations. We expect this trend to continue. As a result, we may lose all or a substantial portion of the business we obtain from retail insurance brokerage firms that are acquired by other firms who have their own wholesale insurance brokerage operations or established relationships with other wholesale insurance brokerage firms. To date, our business has not been materially affected by consolidation among retail insurance brokers. However, we cannot be assured that we will not be affected by industry consolidation that occurs in the future.
Previous wording
Our failure to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies in the future could reduce our ability to compete successfully and harm our competitive position and results of operations.
Current wording
Our failure to raise additional capital or generate cash flows necessary to expand our operations could reduce our ability to compete successfully and harm our competitive position and results of operations.
Previous wording
As of December 31, 2024 and December 31, 2023, intangible assets represented 22.6% and 31.6%, respectively, of our total assets. Intangible assets are stated at cost, less accumulated amortization, and are amortized on the straight-line method over their respective estimated useful lives. We also evaluate our intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value may no longer be recoverable. If we determine that intangible assets are impaired, we would be required to write-down the value of these assets.
Current wording
As of December 31, 2025 and December 31, 2024, intangible assets represented 37.2% and 22.6%, respectively, of our total assets. Intangible assets are stated at cost, less accumulated amortization, and are amortized on the straight-line method over their respective estimated useful lives. We also evaluate our intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value may no longer be recoverable. If we determine that intangible assets are impaired, we would be required to write-down the value of these assets.
Previous wording
Regulations affecting insurance carriers with which we place business affect how we conduct our operations.
Current wording
Regulations affecting insurance carriers with which we place business may adversely affect how we conduct our operations.
Previous wording
A significant portion of our business is concentrated in Texas, California and Louisiana, representing 52.5%, 16.2% and 13.9%, respectively, of our Total Written Premiums in 2024. The insurance business is primarily a state-regulated industry, and therefore, state legislatures may enact laws that adversely affect the insurance industry. Because our business is concentrated in the states identified above, we face greater exposure to unfavorable changes in regulatory conditions in those states than insurance intermediaries whose operations are more diversified through a greater number of states. In addition, the occurrence of adverse economic conditions, natural or other disasters, or other circumstances specific to or otherwise significantly impacting these states could adversely affect our financial condition, results of operations and cash flows. We are susceptible to losses and interruptions caused by hurricanes (particularly in Texas, where our headquarters and several offices are located), earthquakes, power shortages, telecommunications failures, water shortages, floods, fire, extreme weather conditions, geopolitical events such as terrorist acts and other natural or man-made disasters. Our insurance coverage with respect to natural disasters is limited and is subject to deductibles and coverage limits. Such coverage may not be adequate, or may not continue to be available at commercially reasonable rates and terms. For example, recent catastrophes, carrier underwriting losses, and regulatory actions in California may result in a significant decline in the availability of homeowners insurance products and carrier markets.
Current wording
A significant portion of our business is concentrated in Texas, California and Louisiana, representing 54.1%, 15.2% and 12.4%, respectively, of our Total Written Premiums in 2025. The insurance business is primarily a state- regulated industry, and therefore, state legislatures may enact laws that adversely affect the insurance industry. As such, we face greater exposure to unfavorable changes in regulatory conditions in those states than insurance intermediaries whose operations are more diversified through a greater number of states. In addition, the occurrence of adverse economic conditions, natural or other disasters, or other circumstances specific to or otherwise significantly impacting these states could adversely affect our financial condition, results of operations and cash flows. We are susceptible to losses and interruptions caused by hurricanes (particularly in Texas, where our headquarters and several Branches are located), earthquakes, power shortages, telecommunications failures, water shortages, floods, fire, extreme weather conditions, geopolitical events such as terrorist acts and other natural or man-made disasters. Our insurance coverage with respect to natural disasters is limited and is subject to deductibles and coverage limits. Such coverage may not be adequate, or may not continue to be available at commercially reasonable rates and terms.
Previous wording
The industry in which we operate is subject to extensive regulation. We are subject to regulation and supervision both federally and in each applicable local jurisdiction. In general, these regulations are designed to protect Clients, insurance carriers and other parties and to protect the integrity of the financial markets, rather than to protect stockholders or creditors. Our ability to conduct business in these jurisdictions depends on our compliance with the rules and regulations promulgated by federal regulatory bodies and other regulatory authorities. Failure to comply with regulatory requirements, or changes in regulatory requirements or interpretations, could result in actions by regulators, potentially leading to fines and penalties, adverse publicity and damage to our reputation in the marketplace. There can be no assurance that we will be able to adapt effectively to any changes in law. In extreme cases, revocation of our or a subsidiary’s authority to do business in one or more jurisdictions could result from failure to comply with regulatory requirements. In addition, we could face lawsuits by Clients, insurance carriers and other parties for alleged violations of certain of these laws and regulations. It is difficult to predict whether changes resulting from new laws and regulations, as well as changes in interpretation of current laws and regulations, will affect the industry or our business and, if so, to what degree.
Current wording
The industry in which we operate is subject to extensive regulation. We are subject to regulation and supervision both federally and in each applicable local jurisdiction. Our ability to conduct business in these jurisdictions depends on our compliance with the rules and regulations promulgated by federal regulatory bodies and other regulatory authorities. Failure to comply with regulatory requirements, or changes in regulatory requirements or interpretations, could result in actions by regulators, potentially leading to fines and penalties, adverse publicity and damage to our reputation in the marketplace and, in extreme cases, revocation of our or our subsidiary’s authority to do business in one or more jurisdictions. In addition, we could face lawsuits by Clients, insurance carriers and other parties for alleged violations of certain of these laws and regulations.
Previous wording
State insurance laws grant supervisory agencies, including state insurance departments, broad administrative authority. State insurance regulators and the National Association of Insurance Commissioners continually review existing laws and regulations, some of which affect our business. These supervisory agencies regulate many aspects of the insurance business, including the licensing of insurance brokers and agents and other insurance intermediaries, the handling of third-party funds held in trust, and trade practices, such as marketing, advertising and compensation arrangements entered into by insurance brokers and agents. This legal and regulatory oversight could reduce our profitability or limit our growth by increasing the costs of legal and regulatory compliance, and by limiting or restricting the products or services we sell, the markets we serve or enter, the methods by which we sell our products and services, and the form of compensation we can accept from our Clients, insurance carriers and third parties. Moreover, in response to perceived excessive cost or inadequacy of available insurance, states have from time to time created state insurance funds and assigned risk pools, which compete directly, on a subsidized basis, with private insurance providers.
Current wording
State insurance laws grant supervisory agencies, including state insurance departments, broad administrative authority to regulate many aspects of the insurance business. This legal and regulatory oversight could reduce our profitability or limit our growth by increasing the costs of legal and regulatory compliance, and by limiting or restricting the products or services we sell, the markets we serve or enter, the methods by which we sell our products and services, and the form of compensation we can accept from our Clients, insurance carriers and third parties.
Previous wording
There is also continued legislative interest in passing a federal privacy law. In addition to data protection laws, foreign countries and U.S. states have enacted and continue to consider enacting cybersecurity laws and regulations. For example, the New York State Department of Financial Services issued in 2023 cybersecurity regulations which imposed an array of detailed security measures on covered entities. A number of states have also adopted laws covering data collected by insurance licensees that include security and breach notification requirements. The existing privacy-related laws and regulations are subject to potentially differing interpretations. All of these evolving compliance and operational requirements impose significant costs that are likely to increase over time, may divert resources from other initiatives and projects and could restrict the way services involving data are offered, all of which may adversely affect our results of operations.
Current wording
Evolving compliance and operational requirements impose significant costs that are likely to increase over time, may divert resources from other initiatives and projects and could restrict the way services involving data are offered, all of which may adversely affect our results of operations. As such, our expansion increases our legal and regulatory complexity.
Previous wording
We are subject to taxation at the federal, state and local levels in the United States and the Philippines. Our future effective tax rate and cash flows could be affected by changes in the composition of earnings in jurisdictions with differing tax rates, changes in statutory rates and other legislative changes, changes in the valuation of our deferred tax assets and liabilities, changes in determinations regarding the jurisdictions in which we are subject to tax, and our ability to repatriate earnings from foreign jurisdictions. From time to time, U.S. federal, state and local and foreign governments make substantive changes to tax rules and their application, which could result in materially higher corporate taxes than would be incurred under existing tax law and could adversely affect our financial condition or results of operations. We are subject to ongoing and periodic tax audits and disputes in U.S. federal and various state, local and foreign jurisdictions. An unfavorable outcome from any tax audit could result in higher tax costs, penalties and interest, thereby adversely affecting our financial condition or results of operations. In addition, changes in tax laws in the United States could materially affect the amount of payments that we are obligated to make under the tax receivable agreement we entered into with the Pre-IPO LLC Members in connection with the IPO (the “Tax Receivable Agreement”).
Current wording
We are subject to taxation at the federal, state and local levels in the U.S. and the Philippines. Our future effective tax rate and cash flows could be affected by changes in the composition of earnings in jurisdictions with differing tax rates, changes in statutory rates and other legislative changes, changes in the valuation of our deferred tax assets and liabilities, changes in determinations regarding the jurisdictions in which we are subject to tax, and our ability to repatriate earnings from foreign jurisdictions. From time to time, U.S. federal, state and local and foreign governments make substantive changes to tax rules and their application, which could result in materially higher corporate taxes than would be incurred under existing tax law and could adversely affect our financial condition or results of operations. We are subject to ongoing and periodic tax audits and disputes in U.S. federal and various state, local and foreign jurisdictions. An unfavorable outcome from any tax audit could result in higher tax costs, penalties and interest, thereby adversely affecting our financial condition or results of operations. In addition, changes in tax laws in the U.S. could materially affect the amount of payments that we are obligated to make under the tax receivable agreement we entered into with the Pre-IPO LLC Members in connection with the IPO (the “Tax Receivable Agreement”).
Previous wording
In addition, we are directly and indirectly affected by new tax legislation and regulation and the interpretation of tax laws and regulations worldwide. Changes in such legislation, regulation or interpretation could increase our taxes and have an adverse effect on our operating results and financial condition. For example, the Organization for Economic Co-operation and Development and numerous jurisdictions have had an increased focus on issues concerning the taxation of multinational businesses and several related reforms have been put forth (including the implementation of a global minimum tax rate of at least 15% for large multinational businesses). These rules, should they be implemented via domestic legislation of countries or via international treaties, could have a material impact on our effective tax rate or result in higher cash tax liabilities. There can be no assurance that our tax payments, tax credits, or incentives will not be adversely affected by these or other initiatives.
Current wording
In addition, we are directly and indirectly affected by new tax legislation and regulation and the interpretation of tax laws and regulations worldwide. Changes in such legislation, regulation or interpretation could increase our taxes and have an adverse effect on our operating results and financial condition. For example, the Organization for Economic Co-operation and Development and numerous jurisdictions have had an increased focus on issues concerning the taxation of multinational businesses and several related reforms have been put forth (including the implementation of a global minimum tax rate of at least 15% for large multinational businesses). These rules, should they be implemented via domestic legislation of countries or via international treaties, could have a material impact on our effective tax rate or result in higher cash tax liabilities. These rules, should they be implemented via domestic legislation of countries or via international treaties, could have a material impact on our effective tax rate or result in higher cash tax liabilities. There can be no assurance that our tax payments, tax credits, or incentives will not be adversely affected by these or other initiatives.
Previous wording
In the past, state regulators have scrutinized the manner in which insurance brokers are compensated. For example, the Attorney General of the State of New York brought charges against members of the insurance brokerage community. Given that the insurance brokerage industry has faced scrutiny from regulators in the past over its compensation practices, and the transparency and discourse to Clients regarding brokers’ compensation, it is possible that regulators may choose to revisit the same or other practices in the future. If they do so, compliance with new regulations along with any sanctions that might be imposed for past practices deemed improper could have an adverse impact on our future results of operations and inflict significant reputational harm on our business.
Current wording
In the past, state regulators have scrutinized the compensation practices of insurance brokers. Given that the insurance brokerage industry has faced scrutiny from regulators in the past over its compensation practices, and the transparency and discourse to Clients regarding brokers’ compensation, it is possible that regulators may choose to revisit the same or other practices in the future. If they do so, compliance with new regulations along with any sanctions that might be imposed for past practices deemed improper could have an adverse impact on our future results of operations and inflict significant reputational harm on our business.
Previous wording
Our success depends, in part, on our ability to develop and implement technology-based solutions that anticipate or keep pace with rapid and continuing changes in technology, industry standards, and Client preferences. We may not be successful in anticipating or responding to these developments on a timely and cost-effective basis. The effort to gain technological expertise, develop new technologies in our business, keep pace with technologies, and achieve internal efficiencies through technology require us to incur significant expenses and attract talent with the necessary skills. There is no assurance that our technological investments in internal systems and digital distribution platforms will achieve the intended efficiencies, and such unrealized savings or benefits could affect our results of operations. In addition, there is no assurance that our technological investments will properly facilitate our operational needs, and any failure of technology and automated systems to function or perform as expected could harm our operations, business and financial condition.
Current wording
Our success depends, in part, on our ability to develop and implement technology-based solutions that anticipate or keep pace with rapid and continuing changes in technology, industry standards, and Client preferences. These may include new applications or insurance-related services based on artificial intelligence, machine learning, robotics, blockchain or new approaches to data mining. The effort to gain technological expertise, develop new technologies in our business, keep pace with technologies, and achieve internal efficiencies through technology require us to incur significant expenses and attract talent with the necessary skills. There is no assurance that our technological investments in internal systems and digital distribution platforms will achieve the intended efficiencies, and such unrealized savings or benefits could affect our results of operations. In addition, there is no assurance that our technological investments will properly facilitate our operational needs, and any failure of technology and automated systems to function or perform as expected could harm our operations, business and financial condition.
Previous wording
Our future success depends, in part, on our ability to anticipate and respond effectively to the threat of digital disruption and other technology change. These may include new applications or insurance-related services based on artificial intelligence, machine learning, robotics, blockchain or new approaches to data mining. We may be exposed to competitive risks related to the adoption and application of new technologies by established market participants (for example, through disintermediation) or new entrants such as technology companies, insurtech start-up companies and others. We must also develop and implement technology solutions and technical expertise among our employees that anticipate and keep pace with rapid and continuing changes in technology, industry standards, Client preferences and internal control standards. We may not be successful in anticipating or responding to these developments on a timely and cost-effective basis, and our ideas may not be accepted in the marketplace. Additionally, the effort to gain technological expertise and develop new technologies in our business requires us to incur significant expenses. If we cannot offer new technologies as quickly as our competitors, or if our competitors develop more cost-effective technologies or product offerings, we could experience a material adverse effect on our operating results, Client relationships, growth and compliance programs.
Current wording
Additionally, we may be exposed to competitive risks related to the adoption and application of new technologies by established market participants (for example, through disintermediation) or new entrants such as technology companies, insurtech start-up companies and others.
Showing the first 40 of 92 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
They could also result in reduced underwriting capacity of our insurance carriers, making it more difficult for our agents to place business. Disasters also could disrupt public and private infrastructure, including communications and financial services, which could disrupt our normal business operations. Any increases in insurance carrier loss ratios due to natural or man-made disasters could impact our contingent commissions, which are primarily driven by both growth and profitability metrics.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Underwriting management and binding authority are dependent upon contracts between us and the insurance carriers. Those contracts can be terminated by the insurance carrier with little advance notice. Moreover, upon expiration of the contract term, insurance carriers may choose those agreements to lapse or request changes in the terms of the program, including the scope of our underwriting authority or the amount of commissions we receive, which could reduce our revenues from the program.
Previous report — wording carried elsewhere
However, we cannot be assured that we will not be affected by industry consolidation that occurs in the future, particularly if any of our significant retail insurance brokerage Clients are acquired by retail insurance brokers with their own wholesale insurance brokerage operations or preferred relationships with wholesalers other than TWFG.
Previous report — wording carried elsewhere
Any acceleration of repayment of our and our subsidiaries’ indebtedness may negatively affect our financial condition and operating results. In addition, we may not have sufficient funds to finance repayment of any of such indebtedness upon any such change of control.
Previous report — wording carried elsewhere
Branches may not be made on a timely basis. Any such loss or delay in payment could have a material and adverse effect on a Branch’s ability to satisfy its obligations under its Branch agreement, including its ability to make payments for contractual fees or to indemnify us.