General

Aspen Insurance Holdings Limited (“Aspen Holdings”) was incorporated on May 23, 2002 as a holding company headquartered in Bermuda. We underwrite specialty insurance and reinsurance on a global basis through our Operating Subsidiaries based in Bermuda, the United States and the United Kingdom: Aspen U.K. and AUL (corporate member of Syndicate 4711 at Lloyd’s of London and managed by AMAL) (United Kingdom), Aspen Bermuda (Bermuda) and Aspen Specialty and AAIC (United States). We also have branches in Australia, Canada, France, Germany, Ireland, Singapore, Switzerland and the United Arab Emirates. Please see Exhibit 21.1 of this report for a complete list of our subsidiaries and our corporate chart.

We manage our insurance and reinsurance businesses as two distinct business segments, Aspen Insurance and Aspen Reinsurance (“Aspen Re”), to enhance and better serve our global customer base. Financial data relating to our two business segments is included in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” and in Note 5 of our consolidated financial statements, “Segment Reporting.”

Aspen Reinsurance . Aspen Re consists of (i) property catastrophe reinsurance, (ii) other property reinsurance, (iii) casualty reinsurance, and (iv) specialty reinsurance. Aspen Capital Markets forms part of the property catastrophe reinsurance line of business as it focuses primarily on property catastrophe business through the use of alternative capital. Aspen Re is led by Thomas Lillelund, Chief Executive Officer of Aspen Re, Brian Boornazian, Chairman of Aspen Re, and Emil Issavi, President and Chief Underwriting Officer of Aspen Re.

 

In Aspen Re, property reinsurance business is assumed by Aspen Bermuda, Aspen U.K. and AUL (which is the sole corporate member of Syndicate 4711 at Lloyd’s of London (“Lloyd’s”) managed by AMAL) and written by teams located in Bermuda, France, Germany, Singapore, Switzerland, the United Kingdom, the United States, the United Arab Emirates and Australia. The property reinsurance business written in the United States is written exclusively by Aspen Re America as reinsurance intermediary.

Casualty reinsurance is mainly assumed by Aspen U.K. and AUL and written by teams located in Singapore, Switzerland, the United Kingdom, the United States, the United Arab Emirates and Australia. A small number of casualty reinsurance contracts are written by Aspen Bermuda. The business written in the United States is produced by Aspen Re America.

Specialty reinsurance is assumed by Aspen Bermuda, Aspen U.K., AUL, and AAIC and written by teams located in Ireland, Singapore, Switzerland, the United Kingdom, the United States, the United Arab Emirates and Australia. A small number of specialty reinsurance contracts are written by Aspen Bermuda. The reinsurance business written in the United States is produced by Aspen Re America and is written by AAIC.

Aspen Re continued its participation in the alternative reinsurance market through Aspen Capital Markets. Aspen Capital Markets focuses on developing alternative reinsurance structures to leverage Aspen Re’s existing underwriting franchise, increase its operational flexibility in the capital markets and provide investors direct access to its underwriting expertise.

Aspen Insurance . Our insurance segment consists of (i) property and casualty insurance, (ii) marine, aviation and energy insurance, (iii) and financial and professional lines insurance. The insurance segment is led by David Cohen, President and Chief Underwriting Officer of Aspen Insurance.

In our insurance segment, property and casualty insurance is written primarily in the London Market by Aspen U.K. and in the United States by AAIC and Aspen Specialty (on an admitted and excess and surplus lines basis, respectively). Our marine, aviation and energy insurance and financial and professional lines insurance are written mainly by Aspen U.K. and AUL with most of the same lines also written in the United States by AAIC and Aspen Specialty. We also write property, casualty and financial and professional lines business through Aspen Bermuda and marine, energy, financial and professional lines business through Aspen Singapore.

Business Strategy

Our goal is to generate superior value and long-term return on capital for our shareholders while ensuring that we have sufficient capital and liquidity to meet our obligations. We believe our global underwriting talent and product capabilities, coupled with our focus on expense discipline and risk management, positions us to achieve this goal.

Operating Effectiveness and Efficiency Program. We launched a comprehensive program to drive greater operating effectiveness and efficiency and to enhance our market position (the “Effectiveness and Efficiency Program”) in October 2017. The Effectiveness and Efficiency Program is intended to allow us to be a more nimble organization with faster decision-making ability and a more competitive expense ratio. Through actions that optimize work processes and increase operational efficiency, we expect the

Effectiveness and Efficiency Program to deliver cumulative total expense savings of approximately $160 million over the next three years. We expect approximately 70% of the savings related to the Effectiveness and Efficiency Program will benefit Aspen Insurance.

Key Strategies for Business Segments. Aspen Re’s key strategy is to maintain sufficient capital strength and access to capital markets to ensure that major losses can be absorbed and to meet additional demand from existing or new clients as opportunities arise. Our strategic execution is focused, in part, on geographical proximity to our clients as this allows us to maximize opportunities in markets which we believe have profitable growth potential. Via Aspen Capital Markets, Aspen Re is also centered on developing alternative reinsurance structures and collateralized reinsurance arrangements to leverage our existing underwriting franchise, increase our operational flexibility in the capital markets and provide investors with direct access to our underwriting expertise. 

Aspen Insurance’s strategy is to further embed our global product management and regional execution underwriting strategy by optimizing our global product reach, increasing our product distribution, optimizing existing channels and use of infrastructure to gain efficiencies and increase our relevance to clients and broker partners. Another core pillar of Aspen Insurance’s strategy is strong portfolio management and optimization by, for example, maintaining the diversification of our portfolio while managing volatility in our underwriting performance.

Risk Management.  We have a comprehensive risk management framework that defines the corporate risk appetite, risk strategy and the policies required to monitor, manage and mitigate the risk inherent in our business. In doing so, we aim to comply with existing and any emerging regulations, corporate governance and industry best practice and to monitor risks against six main risk objectives: (i) extreme losses to ensure they remain within planned limits, (ii) volatility of results ensuring they fall within planned limits, (iii) compliance with regulatory requirements, (iv) preserving rating agency credit ratings, (v) maintaining adequate solvency and liquidity at all times, and (vi) avoiding reputational risk.

Capital Management.   We continue to focus on capital management and maintain our capital at an appropriate level as determined by our internal risk appetite and the financial strength required by our customers, regulators and rating agencies. We monitor and review our group and operating entities’ capital and liquidity positions on an ongoing basis and allocate our capital in the most efficient way, which may include, subject to market conditions, rebalancing our investment portfolio within acceptable risk parameters, investing in new business opportunities and returning capital to shareholders. 

Investment Management.   Our investment strategy is focused on delivering stable investment income and total return through all market cycles while maintaining appropriate portfolio liquidity and credit quality to meet the requirements of our customers, rating agencies and regulators. This includes tactically adjusting the portfolio duration and asset allocation based on our views of interest rates, credit spreads and markets for different assets, as well as making appropriate decisions to enhance investment returns where possible.

Business Segments

We are organized into two business segments: Aspen Re and Aspen Insurance. We have determined our reportable segments, Aspen Insurance and Aspen Re, by taking into account the manner in which management makes operating decisions and assesses operating performance. Profit or loss for each of the business segments is measured by underwriting profit or loss. Underwriting profit is the excess of net earned premiums over the sum of losses and loss expenses, amortization of deferred policy acquisition costs and general and administrative expenses. Underwriting profit or loss provides a basis for management to evaluate the segment’s underwriting performance.

We provide additional disclosures for corporate and other (non-operating) income and expenses. Corporate and other income and expenses include net investment income, net realized and unrealized investment gains or losses, expenses associated with managing the Group, certain strategic and non-recurring costs, changes in fair value of derivatives or loan notes issued by Silverton, interest expenses, net realized and unrealized foreign exchange gains or losses, and income taxes, none of which are allocated to the business segments. Corporate expenses are not allocated to our business segments as they typically do not fluctuate with the levels of premiums written and are not directly related to our business segment operations. We do not allocate our assets by business segment as we evaluate underwriting results of each business segment separately from the results of our investment portfolio.

The table below sets forth the gross written premiums by business segment for the twelve months ended December 31, 2017 , 2016 and 2015 :

 

For a review of our results by business segment, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 5 of our consolidated financial statements, “Segment Reporting”.

Reinsurance

Aspen Re consists of property catastrophe reinsurance, other property reinsurance, casualty reinsurance, and specialty reinsurance. In addition, Aspen Capital Markets forms part of property catastrophe reinsurance as it focuses primarily on property catastrophe business through the use of alternative capital.

The reinsurance business we write can be analyzed by geographic region, reflecting the location of the reinsured risks, as set forth in the table below for the twelve months ended December 31, 2017 , 2016 and 2015 :

Aspen Re’s gross written premiums by principal line of business were as follows for the twelve months ended December 31, 2017 , 2016 and 2015 :

Property Catastrophe Reinsurance :  Property catastrophe reinsurance is generally written on a treaty excess of loss basis where we provide protection to an insurer for an agreed portion of the total losses from a single event in excess of a specified loss amount. In the event of a loss, most contracts provide for coverage of a second occurrence following the payment of a premium to reinstate the coverage under the contract, which is referred to as a reinstatement premium. The coverage provided under excess of loss reinsurance contracts may be on a worldwide basis or limited in scope to selected regions or geographical areas.

Silverton provided quota share support for Aspen Re’s global property catastrophe excess of loss reinsurance business. Silverton’s gross written premiums were $46.7 million for the twelve months ended December 31, 2017 , all of which were classified within property catastrophe reinsurance. Silverton was not renewed in 2017 and in the future any such quota share support for Aspen Re will be provided by a separate cell of Peregrine. For more information on Silverton and Peregrine, see Note 7 of our consolidated

financial statements, “Variable Interest Entities.” We have also increased our capacity through other collateralized reinsurance arrangements via Aspen Capital Markets.

Other Property Reinsurance :  Other property reinsurance includes property risks written on excess of loss and proportional treaties, facultative or single risk reinsurance. Risk excess of loss reinsurance provides coverage to a reinsured where it experiences a loss in excess of its retention level on a single “risk” basis. A “risk” in this context might mean the insurance coverage on one building or a group of buildings for fire or explosion or the insurance coverage under a single policy which the reinsured treats as a single risk. This line of business is generally less exposed to accumulations of exposures and losses but can still be impacted by catastrophes, such as earthquakes and hurricanes. Proportional treaty reinsurance provides proportional coverage to the reinsured, meaning that, subject to event limits where applicable and ceding commissions, we pay the same share of the covered original losses as we receive in premiums charged for the covered risks. Proportional contracts typically involve close client relationships which often include regular audits of the cedants’ data.

Casualty Reinsurance :  Casualty reinsurance is written on an excess of loss, proportional and facultative basis and consists of U.S. treaty, international treaty and casualty facultative reinsurance. Our U.S. treaty and facultative business comprises exposures to workers’ compensation (including catastrophe), medical malpractice, general liability, auto liability, professional liability and excess liability including umbrella liability. Our international treaty business reinsures exposures mainly with respect to general liability, auto liability, professional liability, workers’ compensation and excess liability.

Specialty Reinsurance :  Specialty reinsurance is written on an excess of loss and proportional basis and consists of credit and surety reinsurance, agriculture reinsurance, mortgage reinsurance and insurance, marine, aviation, terrorism, engineering, cyber and other specialty line s . Our credit and surety reinsurance business consists of trade credit, surety (mainly European, Japanese and Latin American risks) and mortgage reinsurance and insurance and political risks. Our specialty agricultural reinsurance business covers crop and multi-peril business. Other specialty lines include reinsurance treaties and some insurance policies covering policyholders’ interests in marine, energy, aviation liability, space, contingency, terrorism, engineering, nuclear and personal accident. In addition, specialty reinsurance included admitted and direct U.S. crop insurance. In 2018, we intend to write U.S. crop insurance business previously written via AgriLogic on a reinsurance basis through our strategic partnership with CGB Diversified Services, Inc. (“CGB DS”) via Crop Re Services LLC (“Crop Re”), a newly formed Delaware limited liability company responsible for directing the placement of reinsurance on behalf of CGB DS and CGB Insurance Company (“CGBIC”), an Indiana insurance company affiliate of CGB DS and an RMA licensed crop insurer. For more information on Crop Re, see Note 6 of our consolidated financial statements, “Investments.” We have also increased our capacity through other collateralized reinsurance arrangements via Aspen Capital Markets.

A high percentage of the property catastrophe reinsurance contracts we write exclude or limit coverage for losses arising from the peril of terrorism. Within the U.S., our other property reinsurance contracts generally include limited coverage for acts that are certified as “acts of terrorism” by the U.S. Treasury Department under the Terrorism Risk Insurance Act (“TRIA”), the Terrorism Risk Insurance Extension Act of 2005 (“TRIEA”), the Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”), which expired on December 31, 2014, and now the Terrorism Risk Insurance Program Reauthorization Act of 2015 (the “2015 TRIA Reauthorization”). We have written a limited number of property reinsurance contracts, both on a pro rata and risk excess basis, specifically covering the peril of terrorism. These contracts typically exclude coverage protecting against nuclear, biological, chemical or radiological attack, though we have written a small number of contracts that do not exclude such attacks, the coverage of which may be applicable to non-terrorism events.

 

Our gross written premiums by our principal line of business within our insurance segment were as follows for the twelve months ended December 31, 2017 , 2016 and 2015 :

  Property and Casualty Insurance :  The property and casualty insurance line consists of U.S. and U.K. commercial property, commercial liability, U.S. primary casualty, excess casualty, environmental liability and railroad liability, written on a primary, excess, quota share, program and facultative basis.

U.S. and U.K. Commercial Property:  Property insurance provides physical damage and business interruption coverage for losses arising from weather, fire, theft and other causes. The U.S. commercial property team covers mercantile, manufacturing, municipal and commercial real estate business. The U.K. commercial team’s client base is predominantly U.K. institutional property owners, small and middle market corporates and public sector clients.

Commercial Liability:  Commercial liability is primarily written in the United Kingdom and provides employers’ liability coverage, products and public liability coverage for insureds domiciled in the United Kingdom and Ireland. The U.K. regional team also covers directors’ and officers’ (“D&O”) and professional indemnity, predominantly to small and medium corporates.

U.S. Primary Casualty:  The U.S. primary casualty account consists primarily of lines written within the primary insurance sectors. We are focused on delivering expertise to brokers and customers in hospitality, real estate, construction and products liability.

Excess Casualty:  The excess casualty line comprises medium and large, sophisticated and risk-managed insureds worldwide and covers broad-based risks at lead/high excess attachment points, including general liability, commercial and residential construction liability, life science, railroads, trucking, product and public liability and associated types of cover found in general liability policies in the global insurance market, written from the United Kingdom, the United States and Bermuda.

Environmental Liability:  The environmental account primarily provides contractors’ pollution liability and pollution legal liability across industry segments that have environmental regulatory drivers and contractual requirements for coverage including: real estate and public entities, contractors and engineers, energy contractors and environmental contractors and consultants. The business is written in both the primary and excess insurance markets in the United States and the United Kingdom.

Railroad Liability : Our railroad liability business was established in 2016 and comprises primary and excess liability business for freight, commuter and excursion railroads. While also providing general liability coverage to the railroad support industry (contractors, repair shops and products manufacturers) as well as contingent liability for railcar fleet owners/managers and railroad protective liability in the United States.

On a significant portion of our property and casualty insurance contracts we are obligated to offer terrorism coverage under TRIPRA, and now the 2015 TRIA Reauthorization. Wherever possible, we exclude coverage protection against nuclear, biological, chemical or radiological (“NBCR”) attacks. However, certain U.S. states (notably New York and Florida) prohibit admitted market companies, such as AAIC, from fully excluding such perils, resulting in some level of exposures to NBCR as well as fire following such events. In addition, we would expect to benefit from the protection of 2015 TRIA Reauthorization and the over-arching $100 billion industry loss cap (subject to the relevant deductible and co-retention).

Marine, Aviation and Energy Insuranc e:  Our marine, aviation and energy insurance line consists of marine and energy liability, onshore energy physical damage, offshore energy physical damage, marine hull, specie, inland and ocean marine, and aviation, written on a primary, excess, quota share, program and facultative basis.

Marine and Energy Liability:  The marine and energy liability business based in the U.K. includes marine liability cover mainly related to the liabilities of ship-owners and port operators, including reinsurance of Protection and Indemnity Clubs (“P&I Clubs”). It also provides liability cover globally (including the U.S.) for companies in the oil and gas sector, both onshore and offshore and in the power generation sector. Our liability for U.S. commercial construction is now being written under our global excess casualty line and we are no longer writing new construction liability in this class.

Onshore Energy Physical Damage: Our marine, energy and construction property unit underwrites a variety of worldwide onshore energy and construction sector classes of business with a focus on property covers.

Offshore Energy Physical Damage:  Offshore energy physical damage provides insurance cover against physical damage losses in addition to operators’ extra expenses for companies operating in the oil and gas exploration and production sector.

Marine Hull:  The marine hull team insures physical damage to ships (including war and associated perils) and related marine assets.

Specie:  The specie business line focuses on the insurance of high value property items on an all risks basis, including fine art, general and bank related specie, jewelers’ block and armored car.

Inland and Ocean Marine:  The inland and ocean marine team writes business principally covering builders’ construction risk, contractors’ equipment, and global transportation exposures such as marine cargo, inland transit, warehousing and war, in addition to exhibition, fine arts and museums insurance. The book also consists of our newly acquired Managing General Agent, Blue Waters Insurers, Corp., which consists of inland, ocean marine and cargo business.

Aviation:  The aviation team writes physical damage insurance on hulls and spares (including war and associated perils), aviation hull deductible cover and comprehensive legal liability for airlines, smaller operators of airline equipment, airports and associated business and non-critical component part manufacturers.

Financial and Professional Lines Insurance :  Our financial and professional lines consists of financial and corporate risks, professional liability, management liability, credit and political risks, crisis management, accident and health, surety risks, and technology liability (cyber risks), written on a primary, excess, quota share, program and facultative basis.

Financial and Corporate Risks:  Our financial institutions business is written on both a primary and excess of loss basis and consists of professional liability, crime insurance and D&O cover, with the largest exposure comprising risks headquartered in the United Kingdom, followed by Australia, the United States and Canada. We cover financial institutions including commercial

and investment banks, asset managers, insurance companies, stockbrokers and insureds with hybrid business models. This account also includes a book of D&O insurance for commercial insureds located outside of the United States and a worldwide book of representations and warranties and tax indemnity business.

Professional Liability:  Our professional liability business is written out of the United States (including errors and omissions (“E&O”)), the United Kingdom and Bermuda and is written on both a primary and excess of loss basis. The U.K. team focuses on risks in the United Kingdom with some European, Australian and Canadian business while the U.S. team focuses on the United States. We insure a wide range of professions including lawyers, accountants, architects, engineers, doctors and medical technicians. This account also includes a portfolio of technology liability and data protection insurance. The data protection insurance covers firms for first party costs and third party liabilities associated with their breach of contractual or statutory data protection obligations.

Management Liability: Our management liability business is written out of the United States, the United Kingdom and Bermuda. We insure a diverse group of commercial and financial institutions predominantly on an excess basis. Our products include D&O liability, fiduciary liability, employment practices liability, fidelity insurance and blended liability programs including E&O liability. The focus of the account is predominantly on risks headquartered in the U.S. or risks with a material U.S. exposure.

Credit and Political Risks:  The credit and political risks team writes business covering the credit and contract frustration risks on a variety of trade and non-trade related transactions, as well as political risks (including multi-year war on land cover). We provide credit and political risks cover worldwide but with concentrations in a number of countries, such as China, Brazil, Russia (where we significantly reduced our exposures from 2014), the Netherlands and the United States.

Crisis Management:  The Crisis Management team writes insurance designed to protect individuals and corporations operating in high-risk areas around the world, including covering the shipping industry’s exposure to acts of piracy. It also writes terrorism and political violence insurance, providing coverage for damage to property (largely fixed assets such as buildings) resulting from acts of terrorism, strikes, riots, civil commotion or political violence, in addition to product recall business, a new product we began to write in 2016. This book is written on a global basis, although capacity is selectively deployed.

Accident and Health: The global accident and health team focuses on insurance and reinsurance products which help protect individuals, groups and companies from the consequences of accidental death or disability whether resulting from accident or sickness. This may include single or multi-person losses as well as major catastrophic events such as air crashes, earthquakes or terrorist attacks. Coverage written includes whole account treaty and facultative reinsurance protection for insurance companies.

Surety Risks:  Our surety team writes commercial surety risks, admiralty bonds and similar maritime undertakings including, but not limited to, federal and public official bonds, license and permits and fiduciary and miscellaneous bonds, focused on Fortune 1000 companies and large, privately owned companies in the United States.

Technology Liability (Cyber Risks) : Technology liability is written globally and provides coverage for technology, media and telecommunications firms offering protection for damages and legal defense expenses associated with financial loss claims from third parties and various forms of intellectual property breaches. We also incorporate data protection indemnity insurance against costs and liabilities that may arise when a company breaches its data protection obligations.

Underwriting and Reinsurance Purchasing

Our objective is to create a diversified portfolio of insurance and reinsurance risks, diversified across lines of business, products, geographic areas of coverage, cedants and sources. The acceptance of appropriately priced risk is the core of our business. Underwriting requires judgment, based on important assumptions about matters that are inherently unpredictable and beyond our control, and for which historical experience and probability analysis may not provide sufficient guidance. We view underwriting quality and risk management as critical to our success.

Underwriting. Our underwriting activities are managed in two product areas: reinsurance and insurance. For a discussion of our business and business segments, see above “Business — General” and “Business — Business Segments.”

Our Group Chief Executive Officer is supported by our Group Director of Underwriting who assists in the management of the underwriting process by developing our underwriting control framework and acting as an independent reviewer of underwriting activity across our businesses.   We underwrite according to the following principles:

Reinsurance Purchasing.   We purchase reinsurance and retrocession to mitigate and diversify our risk exposure to a level consistent with our risk appetite and to increase our insurance and reinsurance underwriting capacity. These agreements provide for recovery of a portion of our losses and loss adjustment expenses from our reinsurers. The amount and type of reinsurance that we purchase varies from year to year and is dependent on a variety of factors, including, but not limited to, the cost of a particular reinsurance contract and the nature of our gross exposures assumed, with the aim of securing cost-effective protection. We have a centralized ceded reinsurance department which coordinates the placement of all of our treaty reinsurance placements.

We have reinsurance covers in place for the majority of our insurance classes of business on an excess-of-loss basis and/or proportional treaty basis. The excess of loss covers provide protection in various layers and excess of varying attachment points according to the scope of cover provided. In 2017, we increased proportional reinsurance protection compared to our previous coverage in 2016 and we anticipate this continuing in 2018. During the third quarter of 2017, we completed a loss portfolio transfer for U.S. primary casualty business lines following a significant change in underwriting approach. In the fourth quarter of 2017, we purchased additional proportional reinsurance cover protecting our U.S. property business and, as part of the sale of AgriLogic, we purchased additional proportional reinsurance for our agriculture insurance account.

In respect of our purchased non-catastrophe specific reinsurance contracts, in 2017 we retained shares in only a few of our excess of loss contracts and proportional reinsurance treaties in the form of co-insurance and we anticipate further reductions in co-insurance in 2018.

With respect to natural perils coverage, we buy protections that cover both our insurance and reinsurance lines of business through a variety of products, including, but not limited to, excess of loss reinsurance, facultative reinsurance, aggregate covers, whole account covers and collaterized products which can be on either an indemnity or an index linked basis. For example, we may purchase industry loss warranty reinsurance which provides retrocessional coverage when insurance industry losses for a defined event exceed a certain level. We expect the type and level of coverage that we purchase will vary over time, reflecting our view of the changing dynamics of the underlying exposure and the reinsurance markets.  We manage our risk by seeking to limit the amount of exposure assumed from any one reinsured and the amount of the aggregate exposure to catastrophe losses from a single event in any one geographical zone. Additionally, in 2017 Aspen Re had quota share protection for worldwide catastrophe losses through its sidecar, Silverton, and in 2018 has the ability to do so through Peregrine and other collateralized reinsurance arrangements.

Although reinsurance agreements contractually obligate our reinsurers to reimburse us for an agreed-upon portion of our gross paid losses, we remain liable to our insureds to the extent that our reinsurers do not meet their obligations under these agreements. As a result, and in line with our risk management objectives, we evaluate the financial condition of our reinsurers and monitor concentrations of credit risk on an on-going basis. In general, we seek to place our reinsurance with highly rated companies with which we have a strong trading relationship or have fully collateralized arrangements in place. We maintain a list of authorized reinsurers graded for short, medium and long tail business which is regularly reviewed and updated by the Reinsurance Credit Committee. For additional information, please refer to Note 9, “Reinsurance” of our consolidated financial statements.

Risk Management

In this section, we provide a summary of our risk governance arrangements and current risk management strategy. We also provide more detail on the management of core underwriting and market risks and on our internal model. The internal model is an economic capital model which has been developed internally for use in certain business decision-making processes, the assessment of risk-based capital requirements and for various regulatory purposes.

Risk Governance

Board of Directors.   The Board of Directors of the Company (the “Board”) considers effective identification, measurement, monitoring, management and reporting of the risks facing our business to be key elements of its responsibilities and those of the Group Chief Executive Officer and management. Matters relating to risk management that are reserved for the Board include approval of the internal controls and risk management framework and any changes to the Group’s risk appetite statement and key risk limits. The Board also receives reports at each scheduled meeting from the Group Chief Risk Officer and the Chair of the Risk Committee as well as training in risk management processes including the design, operation, use and limitations of the internal model. As a result of these arrangements and processes, the Board, assisted by management and the Board Committees, is able to exercise effective oversight of the operation of the risk management strategy described in “Risk Management Strategy” below.

Board Committees.   The Board delegates oversight of the management of certain key risks to its Risk, Audit and Investment Committees. Each of the committees is chaired by an independent director of the Company who also reports to the Board on the committees’ discussions and matters arising.

Risk Committee:   The purpose of the Risk Committee is to assist the Board in its oversight duties in respect of the management of risk, including:

Audit Committee:   The Audit Committee is primarily responsible for assisting the Board in its oversight of the integrity of the financial statements. It is also responsible for reviewing the adequacy and effectiveness of the Company’s internal controls and receives regular reports from both internal and external audit in this regard.

Investment Committee:   The Investment Committee is primarily responsible for setting and monitoring the Group’s investment risk and asset allocation policies and ensuring that the Chairman of the Risk Committee is kept informed of such matters.

Management Committees.   The Group also has a number of executive management committees which have oversight of certain risk management processes including the following:

Group Executive Committee:   The Group Executive Committee is the main executive committee responsible for advising the Group Chief Executive Officer on matters relating to the strategy and conduct of the Group’s business.

Capital and Risk Principles Committee:   The primary purpose of the Capital and Risk Principles Committee is to assist the Group Chief Executive Officer and the Group Chief Risk Officer in their oversight duties in respect of the design and operation of the Group’s risk management systems. In particular, it has specific responsibilities in relation to the internal model and for the establishment of risk limits for accumulating underwriting exposures and monitoring solvency and liquidity requirements.

Reserve Committee:   The Reserve Committee is responsible for managing reserving risk and making recommendations to the Group Chief Executive Officer and the Group Chief Financial Officer relating to the appropriate level of reserves to include in the Group’s financial statements.

Underwriting Committee:   The purpose of the Underwriting Committee is to assist the Group Chief Executive Officer in his oversight duties in respect of the management and control of underwriting risk, including oversight of the independent review of the quality of each team’s underwriting.

Reinsurance Credit Committee:   The purpose of the Reinsurance Credit Committee is to seek to minimize credit risks arising from insurance and reinsurance counterparties by the assessment and monitoring of collateralized reinsurance arrangements, direct cedants, intermediaries and reinsurers.

Group Operations Committee : The purpose of the Group Operations Committee is to o versee the Group’s operational support functions to ensure that they are strategically aligned to provide coordinated, efficient and cost effective operational support to the execution of the Group’s underwriting plans.

Group Chief Risk Officer.   Among other things, our Group Chief Risk Officer provides the Board and the Risk Committee with reports and advice on risk management issues.

 

Risk Management Strategy

We operate an integrated enterprise-wide risk management strategy designed to deliver shareholder value in a sustainable and efficient manner while providing a high level of policyholder protection. The execution of our integrated risk management strategy is based on:

Risk Appetite Statement.   The risk appetite statement is a central component of the Group’s overall risk management framework and is approved by the Board. It sets out, at a high level, how we think about risk in the context of our business model, Group objectives and strategy. It sets out boundary conditions and limits for the level of risk we assume, together with a statement of the reward we aim to receive for this level of risk. Our risk appetite statement comprises the following components:

Risk Components.   The main types of risks that we face are summarized as follows:

Insurance risk:   The risk that underwriting results vary from their expected amounts, including the risk that reserves established in respect of prior periods differ significantly from the level of reserves included in the Group’s financial statements.

Market risk:   The risk of variation in the income generated by, and the fair value of, our investment portfolio, cash and cash equivalents and derivative contracts including the effect of changes in foreign currency exchange rates.

Credit risk:   The risk of diminution in the value of insurance receivables as a result of counter-party default. This principally comprises default and concentration risks relating to amounts receivable from intermediaries, policyholders and reinsurers. We include credit risks related to our investment portfolio under market risk. We include credit risks related to insurance contracts (e.g. credit and political risk policies) under insurance risk.

Liquidity risk:  The risks of failing to maintain sufficient liquid financial resources to meet liabilities as they fall due or to provide collateral as required for commercial or regulatory purposes.

Operational risk:  The risk of loss resulting from inadequate or failed internal processes, personnel or systems, or from external events.

Strategic risk :  The risk of adverse impact on shareholder value or income and capital of adverse business decisions, poor execution or failure to respond to market changes.

Regulatory risk : The risk of non-compliance with regulatory requirements, including ensuring we understand and comply with changes to those requirements is assessed and managed as operational risk. There is a residual risk that changes in regulation impact our ability to operate profitably in some jurisdictions or some lines of business.

Taxation risk : The risk that we do not understand, plan for and manage our tax obligations is assessed and managed as operational risk. There is a residual risk that changes in taxation impact our ability to operate profitably in some jurisdictions or some lines of business.

Emerging risk :  The risk that events or issues not previously identified or fully understood impact the operations or financial results of the Group.

We divide risks into “core” and “non-core” risks. Core risks comprise those risks which are inherent in the operation of our business, including insurance risks in respect of our underwriting operations and market and liquidity risks in respect of our investment activity. We intentionally expose the Company to core risks with a view to generating shareholder value but seek to manage the resulting volatility in our earnings and financial condition within the limits defined by our risk appetite. However, these core risks are intrinsically difficult to measure and manage and we may not, therefore, be successful in this respect. All other risks, including regulatory and operational risks, are classified as non-core. We seek, to the extent we regard as reasonably practicable and economically viable, to avoid or minimize our exposure to non-core risks.

Key Risk Limits.   We use the term risk limit to mean the upper limit of our tolerance for exposure to a given risk. Key risk limits are a sub-set of risk limits and are subject to annual approval by the Board on the advice of the Risk Committee as part of the annual business planning process. If a risk exceeds key risk limits, the Group Chief Risk Officer is required to report the excess and management’s plans for dealing with it to the Risk Committee.

Business Distribution

Our business is produced principally through brokers and reinsurance intermediaries. The brokerage distribution channel provides us with access to an efficient, global distribution system without the significant time and expense which would be incurred in creating wholly-owned distribution networks. The brokers and reinsurance intermediaries typically act in the interest of ceding clients or insurers and are instrumental to our continued relationship with our clients.

The following tables show our gross written premiums by broker for each of our segments for the twelve months ended December 31, 2017 , 2016 and 2015 :

 

Claims Management

We have a staff of experienced claims professionals organized into insurance and reinsurance teams which are managed separately. We have developed processes and internal business controls for identifying, tracking and settling claims, and authority levels have been established for all individuals involved in the reserving and settlement of claims.

The key responsibilities of our claims management departments are to:

On those accounts where it is applicable, a team of in-house claims professionals oversees and regularly audits claims handled under outsourcing agreements and manages those large claims and coverage issues on referral as required under the terms of those agreements.

Senior management receives a regular report on the status of our reserves and settlement of claims. We recognize that fair interpretation of our reinsurance agreements and insurance policies with our customers, and timely payment of valid claims, are a valuable service to our clients and enhance our reputation.

Reserves

Under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and applicable insurance laws and regulations in the countries in which we operate, we are required to establish loss reserves for the estimated unpaid portion of the ultimate liability for losses and loss expenses under the terms of our policies and agreements with our insured and reinsured customers. The process of estimating these reserves involves a considerable degree of judgment and, as of any given date, is inherently uncertain. For a full discussion regarding our loss and loss expenses reserving process, see Part II, Item 7, “Management’s Discussion and Analysis

of Financial Condition and Results of Operations — Critical Accounting Policies — Reserving Approach” and Part II, Item 8, “Financial Statements and Supplementary Data” and Item 1A, “Risk Factors — Our financial condition and operating results may be adversely affected if actual claims exceed our loss reserves.”

Investments

The Investment Committee of the Board establishes investment guidelines and supervises our investment activity. The Investment Committee regularly monitors our overall investment results and performance against our investment objectives and guidelines. These guidelines specify minimum criteria on the overall credit quality and liquidity characteristics of the portfolio, and include limitations on the size of certain holdings and restrictions on purchasing certain types of securities. Management and the Investment Committee review our investment performance and assess credit and market risk concentrations and exposures to issuers. We follow an investment strategy designed to emphasize the preservation of capital and provide sufficient liquidity for the prompt payment of claims.

In the course of 2017 , we engaged BlackRock Financial Management Inc., Alliance Capital Management L.P., Deutsche Investment Management Americas Inc., Pacific Investment Management Company LLC, Goldman Sachs Asset Management L.P. and Conning Asset Management Limited to provide investment advisory and management services for our portfolio of fixed income and equity investments. We have agreed to pay investment management fees based on the average market values of total assets held under management at the end of each calendar quarter. These agreements may be terminated generally by either party on short notice without penalty.

The total return of our investable assets, defined as the total of investments, cash and cash equivalents, excluding catastrophe bonds and funds held by variable interest entities (the "Managed Portfolio") for the twelve months ended December 31, 2017 was 3.4% ( 2016 —  2.2% ). Total return is calculated based on total net investment return ( i.e , net of investment management fees) including interest on cash equivalents, realized gains and losses and any change in unrealized gains/losses on our investments, divided by the average market value of our "Managed Portfolio" during the twelve months ended December 31, 2017 .

Fixed Income Portfolio.   We employ an active investment strategy that focuses on the outlook for interest rates, the yield curve and credit spreads. In addition, we manage the duration of our fixed income portfolio having regard to the average liability duration of our reinsurance and insurance risks.

As at December 31, 2017 , the fixed income portfolio duration was 3.90 years ( 2016 — 3.89  years). As at December 31, 2017 , the fixed income portfolio book yield was 2.56% compared to 2.49% as at December 31, 2016 .

Emerging Market Debt Portfolio . As at December 31, 2017 , we had a 4.0% position in U.S. Dollar BBB Emerging Market Debt.

Gross Unrealized Losses. As at December 31, 2017 , we held 761 available for sale fixed income securities ( December 31, 2016  — 677 fixed income securities) in an unrealized loss position with a fair value of $2,902.7 million ( 2016  — $2,554.1 million ) and gross unrealized losses of $33.8 million ( 2016  — $40.8 million ). We believe that the gross unrealized losses are attributable mainly to a combination of widening credit spreads and interest rate movements. We have assessed these securities which are in an unrealized loss position and believe the decline in value to be temporary.

U.S. Government and Agency Securities.   U.S. government and agency securities are composed of bonds issued by the U.S. Treasury and corporate debt issued by agencies such as Government National Mortgage Association (“GNMA”), Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”) and Federal Home Loan Bank.

Corporate Securities.   Corporate securities are composed of short-term, medium-term and long-term debt issued by corporations and supra-national entities.

Non-U.S. Government Securities.   Non-U.S. government securities are composed of bonds issued and guaranteed by foreign governments and their agents including, but not limited to, the U.K., Australia, Canada, France and Germany.

Municipal Securities.   Municipal securities are composed of bonds issued by U.S. municipalities.

Asset-Backed Securities.   Asset-backed securities are securities backed by notes or receivables against assets other than real estate.

Mortgage-Backed Securities.   Mortgage-backed securities are securities that represent ownership in a pool of mortgages. Both principal and income are backed by the group of mortgages in the pool. They include bonds issued by government-sponsored enterprises such as FNMA, FHLMC and GNMA.

Short-Term Investments.  Short-term investments comprise highly liquid debt securities with a maturity greater than three months but less than one year from the date of purchase and are held as part of our investment portfolio. Short-term investments are classified as either trading or available for sale according to the facts and circumstances of the investment held, and carried at estimated fair value.

Equity Securities.  Equity securities are comprised of U.S. and foreign equity securities and are classified as trading. The portfolio invests in global equity securities.

Catastrophe Bonds. Catastrophe bonds are variable rate fixed income investments with redemption values adjusted based on the occurrence of a covered event usually windstorms and earthquakes.

For additional information concerning our investments, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, Note 6 of our consolidated financial statements, “Investments,” and Note 8 of our consolidated financial statements, “Fair Value Measurements.”

For additional information concerning Other-Than-Temporary Impairment of Investments, see Note 2(c) of our consolidated financial statements, “Basis of Preparation and Significant Accounting Policies — Accounting for Investments, Cash and Cash Equivalents.”

Competition

The insurance and reinsurance industries are mature and highly competitive. Competition varies significantly on the basis of product and geography. Insurance and reinsurance companies compete on the basis of many factors, including premium charges, general reputation and perceived financial strength, the terms and conditions of the products offered, ratings assigned by independent rating agencies, speed of claims payments, reputation and experience in the particular risk to be underwritten, quality of service, the jurisdiction where the reinsurer or insurer is licensed or otherwise authorized, capacity and coverages offered and various other factors. Increased competition could result in fewer submissions for our products and services, lower rates charged, slower premium growth and less favorable policy terms and conditions, any of which could adversely impact our growth and profitability.

We compete with major U.S., U.K., Bermudian, European and other international insurers and reinsurers and underwriting syndicates from Lloyd’s, some of which have longer operating histories, more capital and/or more favorable ratings than we do, as well as greater marketing, management and business resources. We also compete with capital market participants that create alternative products, such as catastrophe bonds, that are intended to compete with traditional reinsurance products. The availability of these non-traditional products could reduce the demand for both traditional insurance and reinsurance products.

Our competitors include, but are not limited to, American International Group, Inc., Arch Capital Group Ltd., Axis Capital Holdings Limited, Chubb Limited, Sompo International, Everest Re Group Limited, Hannover Re, Lancashire Holdings Limited, Munich Re, PartnerRe Ltd., QBE Insurance Group Limited, Renaissance Re Holdings Ltd., SCOR SA, Swiss Re, Validus Holdings Ltd., XL Catlin and various Lloyd’s syndicates.

 

These ratings reflect A.M. Best’s, S&P’s and Moody’s respective opinions of the ability of Aspen U.K., Aspen Bermuda, Aspen Specialty and AAIC to pay claims and are not evaluations directed to investors in our ordinary shares and other securities and are not recommendations to buy, sell or hold our ordinary shares and other securities. A.M. Best maintains a letter scale rating system ranging from “A++” (Superior) to “F” (in liquidation). S&P maintains a letter scale rating system ranging from “AAA” (Extremely Strong) to “D” (Default). Moody’s maintains a letter scale rating system ranging from “Aaa” (Exceptional) to “C” (Lowest). Aspen Specialty’s and AAIC’s ratings reflect the Aspen group rating issued by A.M. Best. These ratings are subject to periodic review by, and may be revised downward or revoked at the sole discretion of, A.M. Best, S&P and Moody’s, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments” for details of recent ratings actions.

Employees

As at December 31, 2017 , we employed 1,334  persons in the following countries:

We believe that relations with our employees, none of which are subject to collective bargaining agreements, are good.

Regulatory Matters

General

The business of insurance and reinsurance is regulated in most countries, although the degree and type of regulation varies significantly from one jurisdiction to another. The discussion below summarizes the material laws and regulations applicable to our Operating Subsidiaries and, where relevant, Peregrine, Silverton and Aspen Capital Markets. Our Operating Subsidiaries have met or exceeded the solvency margins and ratios applicable to them under relevant law and regulation as at December 31, 2017 and December 31, 2016.

Bermuda Regulation

The Insurance Act 1978, as amended (the “Insurance Act”), regulates insurance companies in Bermuda, and it provides that no person may carry on any insurance business in or from within Bermuda unless registered as an insurer by the Bermuda Monetary Authority (the “BMA”) under the Insurance Act. The Insurance Act applies to both insurance and reinsurance business. We have one Bermuda-based Operating Subsidiary, Aspen Bermuda, a Class 4 insurer under the Insurance Act. We also have Peregrine and Silverton licensed as Special Purpose Insurers (“SPI”) under the Insurance Act. We also have a Bermuda-based insurance management subsidiary, ACM, which is registered under the Insurance Act as an insurance manager and as an insurance agent.

On March 25, 2016, Bermuda’s prudential framework for (re)insurance and group supervision was confirmed as being fully equivalent to the regulatory standards applied to European reinsurance companies and insurance groups in accordance with the requirements of the Solvency II Directive. Bermuda was granted this full ‘Solvency II equivalence’ for an unlimited period by the European Commission based on an assessment conducted by the European Insurance and Occupational Pensions Authority, and the equivalence decision was applied retroactively to January 1, 2016.

Group Supervision.   The BMA has implemented a framework for group supervision. The BMA may, in respect of an insurance group, determine whether it is appropriate for it to be the group supervisor of that group. For purposes of the Insurance Act, an insurance group is defined as a group of companies that conducts insurance business. Where the BMA determines that it is the group supervisor, it shall designate a specified insurer that is a member of the insurance group to be the “designated insurer” in respect of that insurance group and it shall give written notice to the designated insurer and other competent authorities that it is the group supervisor. Pursuant to the Insurance Act, the BMA acts as the group supervisor of the Aspen group of companies and has designated Aspen Bermuda as the designated insurer. The role of the designated insurer is to facilitate and maintain compliance by the group with the Group Rules (as defined below).

In carrying out its functions, the BMA makes rules for assessing the financial situation and the solvency position of the Group and/or its members and rules in respect of the system of governance and risk management of the insurance group and supervisory reporting and disclosures of the insurance group.

The current supervision, solvency and public disclosure rules (together, the “Group Rules”) apply to our Group so long as the BMA remains our Group supervisor. Through the Group Rules, the BMA may take action which affects the Company. Significant requirements of the Group Rules are set out below.

Group Financial Statements and Group Statutory Financial Return. Every insurance group is required to prepare an annual group statutory financial return and group statutory financial statements which must be submitted to the BMA by the designated insurer within five months after its financial year end (unless specifically extended by the BMA for a longer period not exceeding eight months). The Group Rules prescribe the rules pertaining to the preparation and substance of the group statutory financial statements (which include, in statutory form, a group balance sheet, a group income statement, a group statement of capital and surplus, and notes thereto).

The group statutory financial return must consist of the following documents: a cover sheet, an insurance group business solvency certificate, particulars of ceded reinsurance comprising of the top ten unaffiliated reinsurers for which the group has the highest recoverable balances and any reinsurer with recoverable balances exceeding 15% of the insurance group’s statutory capital and surplus, any adjustments applied to the group financial statements by the group to produce the economic balance sheet in the form of a reconciliation and a list of non-insurance financial regulated entities owned by the group.

Every insurance group must prepare and submit, on an annual basis, consolidated audited financial statements including notes to the financial statements of the parent company of the group prepared under GAAP Standards (“Group Financial Statements”). The Group Financial Statements must be audited annually by the group’s approved auditor who must prepare an auditor’s report in accordance with generally accepted auditing standards. The designated insurer is required to file with the BMA annually the audited Group Financial Statements within five months from the end of the relevant financial year, or such longer period as permitted by the BMA not exceeding eight months, and shall be accompanied by an unaudited statement for public disclosure

with respect to the group’s compliance with the MSM and Group Enhanced Capital Requirement (“ECR”). The Group Financial Statements are published by the BMA on its website.

In addition to the annual filings, every insurance group is required to submit quarterly consolidated financial statements of the parent company of the group, comprising unaudited consolidated group financial statements and a schedule of intra-group transactions and risk concentrations which will include details of material intra-group transactions, details surrounding all intra-group reinsurance and retrocession arrangements that have materialized since the most recent quarterly or annual financial return filed with the BMA and details of the top ten largest exposures to unaffiliated counterparties exposures exceeding 10% of the insurer’s statutory capital and surplus.

Group Capital and Solvency Return. Every insurance group must also prepare and submit a group capital and solvency return (“Group CSR”) in accordance with the Group Rules, which must consist of the following documents: a Group CSR declaration, the Group Bermuda Solvency Capital Requirement (“BSCR”), a risk-based capital adequacy model, and associated schedules, a Group Solvency Self-Assessment (“GSSA”), a Financial Condition Report and an opinion of a BMA approved Group Actuary on the economic balance sheet technical provisions. The Group Rules require that the insurance group perform the GSSA, which provides a determination of both the quality and quantity of the capital required to adequately cover material risks, at least annually. The Group CSR declaration must be signed by two directors of the parent company, one of which may be the chief executive, and either the chief risk officer or the chief financial officer of the parent company. The Group CSR must be filed within five months after the end of the financial year or such longer period, not exceeding eight months, as the BMA may determine.

Group Minimum Solvency Margin and Group Enhanced Capital Requirements. Aspen Holdings must ensure that the group’s statutory assets exceed the amount of its statutory liabilities by the aggregate minimum margin of solvency of each qualifying member. A member is a qualifying member of the insurance group if it is subject to solvency requirements in the jurisdiction in which it is registered.

Every insurance group must maintain available capital and surplus in an amount equal to or exceeding its Enhanced Capital Requirement (“ECR”). An insurance group’s ECR is to be calculated at the end of its relevant year by reference to either the BSCR Model or a BMA approved group internal capital model. For the financial year ending December 31, 2017 , Aspen Holdings has relied on the BSCR model.

The BMA expects insurance groups to operate at or above a group Target Capital Level (“TCL”) which exceeds the Group ECR. The TCL for insurance groups is set at 120% of its Group ECR. The Group holds capital in excess of its TCL as at December 31, 2017 .

Economic Balance Sheet Framework . The Economic Balance Sheet (“EBS”) framework is an accounting balance sheet approach using market consistent values for all current assets and current obligations relating to in-force business which applies to commercial insurers and insurance groups for which the BMA is group supervisor from the 2016 financial year end. The EBS framework is embedded as part of the Group CSR and forms the basis for the insurer’s ECR.

Public Disclosures . The Group Rules also include the requirement for insurance groups to prepare and publish a Financial Condition Report (“FCR”). Among other things, the FCR must provide details of measures governing business operations, the corporate governance framework, solvency and the financial performance of an insurance group. The FCR is publicly disclosed and is intended to provide additional information to the public in relation to the group’s business model, whereby they can make an informed assessment on whether the business is run in a prudent manner. The FCR is required to be filed with the BMA on or before the filing date of the Group CSR (May 31st of each year for Aspen Holdings) and will need to be published on the insurance group’s website, no later than fourteen days after being filed with the BMA.

Group Eligible Capital. The Group Rules also outline the eligible capital regime for insurance groups. The tiered capital system classifies all capital instruments into one of three tiers based on their “loss absorbency” characteristics with the highest quality capital classified as Tier 1 Capital and lesser quality capital classified as either Tier 2 Capital or Tier 3 Capital.

Group Governance . The Group Rules require Aspen Holdings to establish and effectively implement corporate governance policies and procedures, which it must periodically review to ensure they continue to support the overall organizational strategy of the group. In particular, Aspen Holdings must: (i) ensure that operational and oversight responsibilities of the group are clearly defined and documented and that the reporting of material deficiencies and fraudulent activities are transparent and devoid of conflicts of interest; (ii) establish systems for identifying on a risk sensitive basis those policies and procedures that must be reviewed annually and those policies and procedures that must be reviewed at other regular intervals; (iii) establish a risk management and internal controls framework and ensure that it is assessed regularly and such assessment is reported to the parent company board and the chief and senior executives; (iv) establish and maintain sound accounting and financial reporting procedures and practices for the group; and (v) establish and keep under review group functions relating to actuarial, compliance, internal audit and risk management functions which must address certain specific requirements as set out in the Group Rules.

A second Supervisory College was held by relevant regulators of the Group (i.e., the BMA, the PRA, North Dakota and Texas) in July 2017. Supervisory Colleges are a regular and integral part of the group supervision process. It is a regulatory tool intended to facilitate supervision both on a group and legal entity level and it allows involved supervisors from various jurisdictions to acquire a better understanding of the group with respect to risk exposures and inherent risks, financial position and soundness, capital adequacy, business activities, as well as risk management and governance systems. As with the first Supervisory College (which was held in April 2016), no material issues were identified.

Local Entity Supervision .  Aspen Bermuda, as an insurer carrying on general insurance business under the Insurance Act, is registered as a Class 4 insurer. In addition, the Insurance Act outlines provisions for SPIs, such as Peregrine and Silverton.

Principal Representative, Head and Principal Office . The Insurance Act requires every insurer, such as Aspen Bermuda, to appoint and maintain a principal representative resident in Bermuda and to maintain a principal office in Bermuda. The principal representative must be knowledgeable in insurance and is responsible for arranging the maintenance and custody of the statutory accounting records and for ensuring that the annual Statutory Financial Return, Statutory Financial Statements and Capital and Solvency Return for the insurer are filed. The principal representative is also responsible for notifying the BMA where the principal representative believes there is a likelihood of Aspen Bermuda becoming insolvent or that a reportable “event” under the Insurance Act has, to the principal representative’s knowledge, occurred or is believed to have occurred.

Further, any registered insurer that is a Class 3A, 3B, or Class 4 insurer, such as Aspen Bermuda, is required to maintain a head office in Bermuda and direct and manage its insurance business from Bermuda. This amendment to the Bermuda Insurance Act was implemented in 2016 and provides that in considering whether an insurer satisfies the requirements of having its head office in Bermuda, the BMA may consider (i) where the underwriting, risk management and operational decision making occurs; (ii) whether the presence of senior executives who are responsible for, and involved in, the decision making are located in Bermuda; and (iii) where meetings of the board of directors occur. The BMA will also consider (i) the location where management meets to effect policy decisions; (ii) the residence of the officers, insurance managers or employees; and (iii) the residence of one or more directors in Bermuda.

Approved Independent Auditor. Aspen Bermuda, as a Class 4 insurer, must appoint an independent auditor who will annually audit and report on the statutory financial statements, GAAP financial statements and the statutory financial return of the insurer, all of which are required to be filed annually with the BMA. The independent auditor must be approved by the BMA.

Loss Reserve Specialist. Class 4 insurers are required to submit an opinion of their BMA approved loss reserve specialist with their capital and solvency return in respect of their EBS technical provisions.

Annual Financial Statements and Annual Statutory Financial Return. As prescribed by the Insurance Act, Aspen Bermuda, a Class 4 insurer, must prepare annual statutory financial statements. The statutory financial return shall consist of an insurer information sheet, a report of the approved independent auditor on the GAAP financial statements, a statutory balance sheet, a statutory statement of income, a statutory statement of capital and surplus, notes to the statutory financial statements and a statutory declaration of compliance.

In addition to preparing statutory financial statements, Aspen Bermuda must file financial statements prepared in accordance with GAAP in respect of each financial year. Such statements must be filed with the BMA within a period of four months from the end of the financial year or such longer period, not exceeding seven months, as the BMA may determine. The audited financial statements will be published by the BMA.

Annual Capital and Solvency Return. Class 4 insurers are required to file a capital and solvency return in respect of their general business which must consist of the following documents: a CSR declaration, the BSCR and associated schedules, a Commercial Insurer's Solvency Self-Assessment (“CISSA”), a Financial Condition Report and an opinion of a BMA approved Loss Reserve Specialist on the economic balance sheet technical provisions. The Insurance (Prudential Standards) (Class 4 and 3B Solvency Requirement) Rules 2008 require that the insurer perform the CISSA, which provided a determination of both the quality and quantity of the capital required to adequately cover material risks, at least annually. The CISSA allows the BMA to obtain an insurer’s view of the capital resources required to achieve its business objectives and to assess the company’s governance, risk management and controls surrounding this process. The CSR declaration must be signed by two directors of the company, one of which may be the Chief Executive Officer and either the Chief Risk Officer or the Chief Financial Officer. The CSR must be filed within four months after the end of the financial year or such longer period, not exceeding seven months, as the BMA may determine.

Public Disclosures. Commercial insurers are required to prepare an FCR providing details of, among other things, measures governing the business operations, corporate governance framework and solvency and financial performance of the insurer. Where the commercial insurer is part of an insurance group. As Group Supervisor, the BMA may waive the submission of the legal entity FCR and may require the submission of the Group FCR which must clearly include information specific to the insurer. Aspen Bermuda has been granted a waiver for the submission of the legal entity FCR for the financial year ending December 31, 2017.

Enhanced Capital Requirements and Minimum Solvency Margin.  The BSCR employs a standard mathematical model that correlates the risk underwritten by Bermuda insurers to the capital that is dedicated to their business. The BSCR applies a standard measurement format to the risk associated with an insurer’s assets, liabilities and premiums, including a formula to take account of the catastrophe risk exposure. Aspen Bermuda must maintain available capital and surplus in an amount equal to or exceeding its ECR calculated using the BSCR model.

In order to minimize the risk of a shortfall in capital arising from an unexpected adverse deviation, the BMA expects that insurers operate at or above a threshold captive level (termed the target capital level (“TCL”)), which exceeds an insurer’s ECR. The TCL for a Class 4 insurer is set at 120% of ECR. Aspen Bermuda holds capital in excess of its TCL as at December 31, 2017.

As a Class 4 Insurer, Aspen Bermuda is also required to meet a minimum margin of solvency, which is the minimum amount by which the value of the general business assets of the insurer must exceed its general business liabilities, being equal to the greater of: (i) $100,000,000; or (ii) 50% of net premiums written (being gross premiums written less any premiums ceded by the insurer (not exceeding 25% of gross premiums)) in its current financial year; or (iii) 15% of net losses and loss expense provisions and other insurance reserves; or (iv) 25% of the ECR reported at the end of its relevant year.

Minimum Liquidity Ratio.   The Insurance Act provides a minimum liquidity ratio for general business insurers, like Aspen Bermuda. An insurer engaged in general business is required to maintain the value of its relevant assets at not less than 75% of the amount of its relevant liabilities. Relevant assets include, but are not limited to, cash and time deposits, quoted investments, unquoted bonds and debentures, investments in mortgage loans on real estate, investment income due and accrued, accounts and premiums receivable, reinsurance balances receivable and funds held by ceding reinsurers. There are certain categories of assets which, unless specifically permitted by the BMA, do not automatically qualify as relevant assets, such as unquoted equity securities, investments in and advances to affiliates and real estate and collateral loans. The relevant liabilities are total general business insurance reserves and total other liabilities less deferred income tax, sundry liabilities (by interpretation, those not specifically defined), and letters of credit and guarantees.

The BMA performed a prudential review of Aspen Bermuda in November 2016. No material issues were identified.

Supervision, Investigation and Intervention.   The BMA may appoint an inspector with extensive powers to investigate the affairs of an insurer, such as Aspen Bermuda, if it believes that such an investigation is in the best interests of its policyholders or persons who may become policyholders. In order to verify or supplement information otherwise provided to the BMA, the BMA may direct an insurer to produce documents or information relating to matters connected with its business. If it appears to the BMA that there is a risk of an insurer becoming insolvent, or being in breach of the Insurance Act, or any conditions imposed upon its registration under the Insurance Act, the BMA may, among other things, direct the insurer: (i) not to take on any new insurance business; (ii) not to vary any insurance contract if the effect would be to increase its liabilities; (iii) not to make certain investments; (iv) to realize certain investments; (v) to maintain in or transfer to the custody of a specified bank certain assets; (vi) not to declare or pay any dividends or other distributions, or to restrict the making of such payments; (vii) to limit its premium income; (viii) to remove a controller or officer; and/or (ix) to file a petition for the winding up of the insurer.

The BMA has the power to assist other regulatory authorities, including foreign insurance regulatory authorities, with their investigations involving insurance and reinsurance companies in Bermuda if it is satisfied that the assistance being requested is in connection with the discharge of regulatory responsibilities and that such cooperation is in the public interest.

Restrictions on Dividends, Distributions and Reduction of Capital.   Aspen Bermuda, Peregrine, Silverton and Aspen Holdings must comply with the provisions of the Bermuda Companies Act 1981, as amended (the “Companies Act”), regulating the payment of dividends and distributions. A Bermuda company may not declare or pay a dividend or make a distribution out of contributed surplus if there are reasonable grounds for believing that: (i) the company is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) the realizable value of the company’s assets would thereby be less than its liabilities. Further, as mandated by the Insurance Act, an insurer may not declare or pay any dividends during any financial year if it would cause the insurer to fail to meet its relevant margins, and an insurer which fails to meet its relevant margins on the last day of any financial year may not, without the approval of the BMA, declare or pay any dividends during the next financial year. In addition, as a Class 4 insurer, Aspen Bermuda may not in any financial year pay dividends which would exceed 25% of its total statutory capital and surplus, as shown on its statutory balance sheet in relation to the previous financial year, unless it files with the BMA a solvency affidavit at least seven days in advance. Further, Aspen Bermuda must obtain the prior approval of the BMA before reducing by 15% or more its total statutory capital as set out in its previous year’s financial statements.

Special Purpose Insurer . Peregrine and Silverton are registered as SPIs licensed to carry on special purpose business under the Insurance Act. Special purpose business is defined under the Insurance Act as insurance business under which an insurer fully funds its liabilities to the persons insured through (i) the proceeds of any one or more of (x) a debt issuance where the repayment rights of the providers of such debt are subordinated to the rights of the person insured, or (y) some other financing mechanism

approved by the BMA; (ii) cash; and (iii) time deposits. An SPI may only enter into contracts, or otherwise assume obligations, that are solely necessary for it to give effect to the special purpose for which it has been established.

Unlike other (re)insurers, SPIs are fully funded to meet their (re)insurance obligations and are deemed “bankruptcy remote”. As a result, the application and supervision processes are streamlined to facilitate the transparent structure. As SPIs, Peregrine and Silverton need to maintain a minimum solvency margin by which the value of the special purpose business assets must exceed its special purpose business liabilities by at least $1.00. Further, SPIs are currently not required to file annual loss reserve specialist opinions. SPIs are required to file electronic statutory financial returns via an E-SFR system. The BMA has the discretion to modify such insurer’s statutory filings requirements under the Insurance Act. Like other (re)insurers, the principal representative of an SPI has a duty to inform the BMA in relation to solvency matters, where applicable.

Segregated Account Companies. Peregrine and Silverton are also registered in Bermuda as segregated accounts companies under the Segregated Accounts Companies Act 2000, as amended. As a segregated accounts company, Peregrine and Silverton are required to segregate the assets and liabilities linked to their respective segregated accounts from the assets and liabilities linked to their other respective segregated accounts and from their general account assets and liabilities. The assets of each segregated account are only intended to be used to meet liabilities to creditors of that segregated account and are not intended to be available to meet liabilities to creditors in respect of other segregated accounts or, except where otherwise agreed and permitted by law, general account creditors of Peregrine or Silverton. The segregated account representative of a segregated accounts company has the duty to inform the Registrar of Companies in relation to solvency matters and non-compliance, where applicable.

Change of Controller and Officer Notifications.   Under the Insurance Act, where the shares of a shareholder or insurer or the shares of its parent company are traded on a recognized stock exchange, each shareholder or prospective shareholder will be responsible for notifying the BMA in writing of his becoming or ceasing to be a shareholder controller, directly or indirectly, of 10%, 20%, 33% or 50% of Aspen Holdings and ultimately Aspen Bermuda, Peregrine and Silverton within 45 days of such a change. The BMA may serve a notice of objection on any shareholder controller of Aspen Bermuda, Peregrine and Silverton if it appears to the BMA that the person is no longer fit and proper to be such a controller. A shareholder controller must notify the BMA where he has reduced or disposed of his holding in a Class 4 insurer where the proportion of the voting rights in the insurer held by him will have reduced or fallen below 10%, 20%, 33% or 50% not later than 45 days after such disposal.

Aspen Bermuda is required to notify the BMA in writing in the event of any person becoming or ceasing to be a controller, a controller being a managing director, chief executive of the insurer or of another company of which it is a subsidiary, or other person in accordance with whose directions or instructions the directors or controllers of the insurer or of another company of which it is a subsidiary are accustomed to act, including any person who holds, or is entitled to exercise, 10% or more of the voting shares or voting power or is able to exercise a significant influence over the management of Aspen Bermuda. Peregrine and Silverton are required to file with the annual statutory financial statements a list of every person who has become or ceased to be a shareholder controller or director during the financial year.

Each of Aspen Holdings and Aspen Bermuda is required to notify the BMA in writing in the event any person has become or ceased to be an officer of it, an officer being a director, chief executive or senior executive performing duties of underwriting, actuarial, risk management, compliance, internal audit, finance or investment matters.

No insurer shall take any steps to give effect to a material change, unless it has first served such notice on the BMA that it intends to effect such material change and before the end of 30 days, either the BMA has notified such company in writing that it has no objection to such change or that period has lapsed without the BMA having issued a notice of objection.

Designated insurers are also required to give notice to the BMA if any member of its group intends to give effect to any material change as defined under the Insurance Act. The designated insurer shall notify the BMA of any material change, effected by a member of the group, within 30 days of such material change taking effect.

ACM is required to notify the BMA in writing in the event of any person becoming or ceasing to be a shareholder, controller or officer of ACM within 14 days of such change.

Advance Notification of Material Changes. All registered insurers are required to give the BMA 14 days’ advance notice of certain matters that are likely to be of material significance to the BMA in carrying out its supervisory function under the Insurance Act.

The Bermuda Insurance Code of Conduct.  All Bermuda insurers are required to comply with the BMA’s Insurance Code of Conduct (the “Bermuda Insurance Code”) effective July 1, 2010, as amended in July 2015. The Bermuda Insurance Code is divided into six categories, including: (i) Proportionality Principle; (ii) Corporate Governance; (iii) Risk Management; (iv) Governance Mechanism; (v) Outsourcing; and (vi) Market Discipline and Disclosure. These categories contain the duties, requirements and compliance standards to be adhered to by all insurers under the Insurance Act. Failure to comply with these requirements will be

a factor taken into account by the BMA in determining whether an insurer is conducting its business in a sound and prudent manner under the Insurance Act and could result in the BMA exercising its powers of intervention and will be a factor in calculating the operational risk charge applicable in accordance with that insurer's risk based capital model.

In 2016, the BMA introduced an Insurance Manager Code of Conduct (the “Manager Code”) that insurance managers such as ACM are required to comply with. The Manager Code establishes duties, requirements and standards to be complied with by insurance managers registered under the Insurance Act, including the procedures and principles to be observed by such persons.

U.K. and E.U. Regulation

General. U.K. insurance companies are regulated by the Prudential Regulation Authority (the “PRA”) and the Financial Conduct Authority (the “FCA”). The PRA is responsible for prudential regulation of banks, building societies, credit unions, insurers and major investment firms and the FCA is responsible, among other things, for the regulation of the conduct of business of financial services firms.

Aspen U.K. is authorized by the PRA to effect and carry out contracts of insurance (which includes reinsurance) in the U.K. in all classes of general (non-life) business and is regulated by both the PRA and the FCA for prudential and conduct of business matters respectively.

An insurance company with authorization to write insurance business in the U.K. may currently provide cross-border services in other member states of the European Economic Area (“EEA”) subject to having notified the appropriate EEA host state regulator via the PRA prior to commencement of the provision of services and the appropriate EEA host state regulator not having good reason to refuse consent. As an alternative, such an insurance company may establish a branch office within another member state, subject to it also notifying the appropriate EEA host state regulator via the PRA. Aspen U.K. notified the Financial Services Authority (the “FSA”) (the PRA’s predecessor) of its intention to write insurance and reinsurance business in all other EEA member states. As a result, Aspen U.K. is licensed to write insurance business under the “freedom of services” within all EEA member states and under the “freedom of establishment” rights in France, Germany and Ireland (freedom of services and freedom of establishment rights together, “Passporting Rights”) contained in the European Council’s Insurance Directives. As a general insurer Aspen U.K. is able to carry out reinsurance business on a cross-border services basis across the EEA. The PRA is responsible for prudential regulation of Aspen U.K.’s European branches and the FCA and the appropriate EEA host state regulators are responsible for the conduct of business regulation of those branches.

Following the United Kingdom’s decision to withdraw from the E.U. (“Brexit”), our U.K. operations could lose their EEA financial services Passporting Rights. For more information on the uncertainty surrounding the implementation and effect of Brexit, please see “Risk Factors —The United Kingdom’s decision to withdraw from the E.U. could adversely impact our business, results of operations and financial condition” below.

The PRA and the FCA have extensive powers to intervene in the affairs of an authorized person, culminating in the ultimate sanction of the removal of authorization to carry on a regulated activity. The PRA and the FCA have power, among other things, to enforce and take disciplinary measures in respect of breaches of their rules by authorized firms and approved persons.

Supervision.   The PRA’s most recent review of Aspen U.K. was in July 2017 when they undertook their Periodic Summary Meeting. The FCA conducted a review of Aspen U.K. in February 2015. No material issues were raised as a result of these reviews and for the small number of areas where additional work was requested this has subsequently been completed.

Restrictions on Dividend Payments.   The company law of England and Wales prohibits Aspen U.K., AMAL or AUL from declaring a dividend to its shareholders unless it has “profits available for distribution.” The determination of whether a company has profits available for distribution is based on its accumulated realized profits and other distributable reserves less its accumulated realized losses. While the U.K. insurance regulatory rules impose no statutory restrictions on a general insurer’s ability to declare a dividend, the PRA’s rules require each authorized insurance company within its jurisdiction to maintain its solvency margin at all times. In line with common market practice for regulated institutions, the PRA previously requested that it be afforded with the opportunity to provide a “non-objection” prior to all future dividend payments made by Aspen U.K. In 2017, the PRA stated that they no longer routinely require Aspen U.K. to apply for a non-objection to dividends provided such dividend payment and Aspen U.K.’s resulting capital position are within Aspen U.K.’s board-approved solvency capital risk appetite.

Solvency Requirements. An E.U. directive covering the capital adequacy, risk management and regulatory reporting for insurers, known as Solvency II (the “Solvency II Directive”), was adopted by the European Parliament in April 2009 and implemented on January 1, 2016. Under the Solvency II regime, an insurer has the option of seeking the approval of a full or partial internal model from its regulator or to use a standard formula to calculate its capital requirements. On December 5, 2015, Aspen U.K. received approval from the PRA to use an agreed Internal Model to calculate its Solvency Capital Requirement (“SCR”) for Aspen U.K. and Aspen European as from January 1, 2016. Aspen U.K. is required to ensure that the Internal Model operates properly on a continuous basis and that it continues to comply with the “Solvency Capital Requirements - Internal Models” provisions as set

out in the PRA rulebook and Solvency II Delegated Acts. If Aspen U.K. fails to comply with these requirements, the PRA may revoke Aspen U.K.’s approval to use the Internal Model or apply a capital buffer to the SCR calculated by the Internal Model. Aspen U.K. must maintain the ability to calculate its SCR using the Standard Formula as prescribed by European Insurance and Occupational Pensions Authority (“EIOPA”) in accordance with the Solvency II Directive. Aspen U.K. is required to maintain a minimum margin of solvency equivalent to its SCR at all times, the calculation of which depends on the type and amount of insurance business written. The financial resources maintained in support of the SCR must be adequate, both as to amount and quality, to ensure that there is no significant risk that Aspen U.K.’s liabilities cannot be met as they fall due. If the PRA considers that there are insufficient capital resources, it can give guidance advising an insurer of the amount and quality of capital resources it considers necessary for that insurer. For more information regarding the risks associated with Solvency II, please refer to Item 1A, “Risk Factors.”

Under the Solvency II regime, solvency requirements apply to both Aspen U.K. and Aspen European. Aspen U.K. is also required to meet local capital requirements for its branches in Canada, Singapore, Australia and its insurance activities in Switzerland. Aspen U.K. holds capital in excess of all of its regulatory capital requirements as at December 31, 2017.

Solvency II Regime Reports and Returns. Under the Solvency II regime, Aspen U.K. is required to disclose to the PRA quarterly and annually Quantitative Reporting Templates (“QRTs”) and, at least every three years, a narrative Regular Supervisory Report (“RSR”). Both of these are submitted directly to the regulator. The QRTs report on a mixture of quantitative information on a Solvency II and local GAAP basis, which includes among others, the balance sheet and own funds, Solvency II capital position, invested assets, premiums, claims and technical provisions, reinsurance and group specific information. The RSR includes both qualitative and quantitative information and is more forward looking. In addition Aspen U.K. must complete a set of annual National Specific Templates (“NSTs”) required by the PRA which are applicable to solo firms only. An annual Solvency and Financial Condition Report (“SFCR”), which is a public document and on the Group’s website, must be completed and must include a mixture of narrative information and a sub-set of the QRTs. Similarly, an annual Own Risk and Solvency Assessment  (“ORSA”) must be completed for Aspen U.K. and submitted to the PRA. In 2016, the PRA notified Aspen U.K. that it had been granted a waiver for five years absolving it from the requirement to produce the QRTs, RSR, SFCR and ORSA at EEA-sub-group level due to Aspen Bermuda being subject to equivalent Group supervision. Certain quantitative and qualitative information included in the “Valuation for solvency purposes” and “Capital management” sections of the SFCR of insurers prepared at the solo, group and sub group level are subject to review by external auditors. However the sections of the SFCR which refer to metrics derived from an approved full or partial internal model are exempt from such review.

There are additional returns required by local regulators for Aspen U.K.’s branches in Australia, Canada, Ireland and Singapore and its insurance and reinsurance branches in Switzerland.

Change of Control Prior Notifications.   The PRA and the FCA regulate the acquisition of “control” of any U.K. insurance company and Lloyd’s managing agent which are authorized under the Financial Services and Markets Act 2000 (“FSMA”). Any legal entity or individual that (together with any person with whom it or he is “acting in concert”) directly or indirectly acquires 10% or more of the shares in a U.K. authorized insurance company or Lloyd’s managing agent, or their parent company, or is entitled to exercise or control the exercise of 10% or more of the voting power in such authorized insurance company or Lloyd’s managing agent or their parent company, would be considered to have acquired “control” for the purposes of the relevant legislation, as would a person who had significant influence over the management of such authorized insurance company or their parent company by virtue of his shareholding or voting power in either. A purchaser of 10% or more of the ordinary shares of the Company would therefore be considered to have acquired “control” of Aspen U.K. or AMAL. Under FSMA, any person proposing to acquire “control” over a U.K. authorized insurance company must give prior notification to the PRA and the FCA of his intention to do so. The PRA and the FCA would then have upwards of sixty working days to consider that person’s application to acquire “control.” Failure to make the relevant prior application could result in action being taken against Aspen U.K. or AMAL (as relevant) by the PRA and the FCA. Failure to make the relevant prior application would constitute criminal offense. A person who is already deemed to have “control” will require prior approval of the PRA and the FCA if such person increases their level of “control” beyond certain percentages. These percentages are 20%, 30% and 50%.

PRA, FCA and Bank of England Powers Over Unregulated Parent Companies. The Financial Services Act 2012 created additional powers for the FCA, PRA and the Bank of England to impose requirements on U.K. parent companies, such as Aspen European, of certain regulated firms. The powers allow the regulators to: (i) direct qualifying parent undertakings to comply with specific requirements; (ii) take enforcement action against qualifying parent undertakings if those directions are breached; and (iii) gather information from qualifying parent undertakings. For example, if an authorized firm is in crisis, the new powers may allow a regulator to direct a parent company to provide that firm with capital or liquidity necessary to improve the position of the firm. The definition of “qualifying parent undertakings” could allow the regulators to exercise these powers against an intermediate U.K. parent company of an insurer that is not at the head of the ownership chain. How the FCA, PRA and Bank of England will exercise these powers over unregulated holding companies remains uncertain but the FCA, PRA and Bank of England have indicated that they will be used rarely and only where the other regulatory tools available are ineffective.

Senior Insurance Managers Regime. As part of the implementing measures of Solvency II, Aspen U.K. and AMAL responded to the requirements of the Senior Insurance Managers Regime (“SIMR”). Firms are required to have governance maps in place detailing the positions of senior personnel and key functions (used by the PRA and FCA in its supervision of Aspen U.K. and AMAL) and are required to submit “Grandfathering Notifications” to the PRA to enrol existing senior managers within the new regime. The Senior Insurance Managers Regime came into full effect in 2016. The FCA and PRA are seeking to align the existing SIMR for insurers with the Senior Managers and Certification Regime (“SM&CR”). The SM&CR is an enhanced individual accountability framework which presently applies to directors and senior managers of banks and PRA investment firms. The FCA has announced that the SM&CR will be extended in the future to apply to all FCA authorised firms, and will replace the approved person regime. SIMR, which presently applies to insurers, will be amended to conform with the SM&CR rules and align the requirements with those already in place for banks and PRA investment firms. The final proposals of the FCA and PRA for such amendments are expected to become effective from late 2018.

Branch Regulations

Switzerland

General.   Aspen U.K. established a branch in Zurich, Switzerland to write property and casualty reinsurance. The Federal Office of Private Insurance, a predecessor to the Financial Markets Supervisory Authority (“FINMA”) confirmed that the Swiss branch of Aspen U.K. for its reinsurance operations is not subject to its supervision under the Insurance Supervision Act (Switzerland), so long as the Swiss branch only writes reinsurance.

In 2010, Aspen U.K. received approval from FINMA to establish another branch in Zurich, Switzerland to write insurance products. The activities of the Switzerland insurance branch are regulated by FINMA pursuant to the Insurance Supervision Act (Switzerland). In 2016, it was confirmed that FINMA was obliged to supervise the reinsurance operations of Aspen U.K.’s Swiss branch as a result of having both insurance and reinsurance operations in Switzerland.

Supervision.   FINMA conducted a review of Aspen U.K.’s Swiss operations in November 2016. No material issues were identified.

Singapore

General.   In 2008, Aspen U.K. received approval from the Monetary Authority of Singapore (“MAS”) to establish a reinsurance branch in Singapore. The activities of the Singapore branch are regulated by the MAS pursuant to The Insurance Act of Singapore. Aspen U.K. is also registered by the Accounting and Corporate Regulatory Authority (“ACRA”) as a foreign company in Singapore and in that capacity is separately regulated by ACRA pursuant to The Companies Act of Singapore. AMAL set up a subsidiary company, Aspen Singapore Pte. Ltd. (“ASPL”), to access insurance business in Singapore and regulatory approval for ASPL to act as an intermediary was received from the MAS in 2015. ASPL was incorporated by ACRA in 2015 as a local company regulated by the Companies Act of Singapore.

Supervision.   The MAS conducted a review in August 2016 of the Singapore branch of Aspen U.K. No material issues were identified.

Canada

General.   Aspen U.K. has a Canadian branch whose activities are regulated by the Office of the Superintendent of Financial Institutions (“OSFI”). OSFI is the federal regulatory authority that supervises Canadian and non-Canadian insurance companies operating in Canada pursuant to the Insurance Companies Act (Canada). In addition, the branch is subject to the laws and regulations of each of the provinces and territories in which it is licensed.

Supervision.   OSFI carried out an inspection visit to the Canadian branch of Aspen U.K. in September 2014. No material issues were identified.

Australia

General.   In 2008, Aspen U.K. received authorization from the Australian Prudential Regulation Authority (“APRA”) to establish a branch in Australia. The activities of the Australian branch are regulated by APRA pursuant to the Insurance Act of Australia 1973. Aspen U.K. is also registered by the Australian Securities and Investments Commission as a foreign company in Australia under the Corporations Act of Australia 2001.

Supervision.   APRA undertook a review of Aspen U.K.’s Australian branch in September 2015. No material issues were identified.

For additional information on our branches, refer to Note 19(a) of our consolidated financial statements, “Commitments and Contingent Liabilities — Restricted Assets.”

Other Regulated Firms

General . AUKSSL (previously APJ Services Limited) and ARML are authorized and regulated by the FCA. Both companies are subject to a separate prudential regime and other requirements for insurance intermediaries under the FCA Handbook.

Dubai

General. AUKSSL has established a branch in Dubai through which it places reinsurance business into Aspen U.K. The Dubai Financial Services Authority confirmed its approval of the branch in 2015.

Lloyd’s Regulation

General.   We participate in the Lloyd’s market through our ownership of AMAL and AUL. AMAL is the managing agent for Syndicate 4711. AUL provides underwriting capacity to Syndicate 4711 and is a Lloyd’s corporate member. AMAL is authorized by the PRA and regulated by the FCA and the PRA. AMAL received FSA (predecessor to the PRA and FCA) authorization in 2008. Our Lloyd’s operations are also subject to supervision by the Council of Lloyd’s. AMAL received authorization from Lloyd’s for Syndicate 4711 also in 2008. The PRA and the FCA have been granted broad authorization and intervention powers as they relate to the operations of all insurers, including Lloyd’s syndicates, operating in the U.K. The Lloyd’s market is authorized by the PRA and regulated by both the PRA and the FCA and is required to implement certain rules prescribed by the PRA and the FCA, which it does by the powers it has under the Lloyd’s Act 1982 relating to the operation of the Lloyd’s market. Lloyd’s prescribes, in respect of its managing agents and corporate members, certain minimum standards relating to their management and control, solvency and various other requirements. The PRA and the FCA directly monitor Lloyd’s managing agents’ compliance with their own regulatory requirements. If it appears to the PRA or the FCA that either Lloyd’s is not fulfilling its regulatory responsibilities or that managing agents are not complying with the applicable regulatory rules and guidance, they may intervene in accordance with their powers under the FSMA. By entering into a membership agreement with Lloyd’s, AUL undertakes to comply with all Lloyd’s byelaws and regulations as well as the provisions of the Lloyd’s Acts and FSMA that are applicable to it. The operation of Syndicate 4711, as well as AMAL and their respective directors, are subject to the Lloyd’s supervisory regime.

Supervision.   AMAL was in scope for the PRA Periodic Summary Meeting performed in July 2017. No material issues were raised as a result of this review.

Solvency Requirements.   Underwriting capacity of a member of Lloyd’s must be supported by providing a deposit (referred to as “Funds at Lloyd’s”) in the form of cash, securities or letters of credit in an amount determined in accordance with Lloyd’s requirements and the Solvency II regime. The amount of such deposit is calculated for each member through the completion of an annual capital adequacy exercise. Under these requirements, Lloyd’s must demonstrate that each member has sufficient assets to meet its underwriting liabilities plus a required solvency margin. This margin can have the effect of reducing the amount of funds available to distribute as profits to the member or increasing the amount required to be funded by the member to cover its solvency margin. In 2015, Lloyd’s received confirmation that its application to use its Internal Model to calculate its SCR was approved by the PRA. Effective in 2016, Lloyd’s Internal Model has been used to calculate Lloyd’s capital requirement.

Restrictions.   A Reinsurance to Close (“RITC”) is a reinsurance contract to transfer the responsibility for discharging all the liabilities that attach to one year of account of a syndicate into a later year of account of the same or different syndicate in return for a premium. A RITC is usually put in place after the third year of operations of a syndicate year of account. If the managing agency concludes that an appropriate RITC for a syndicate that it manages cannot be determined equitably or negotiated on commercially acceptable terms in respect of a particular underwriting year, the underwriting year must remain open and be placed into run-off. During this period there cannot be a release of the Funds at Lloyd’s of a corporate member that is a member of that syndicate without the consent of Lloyd’s and such consent will only be considered where the member has surplus Funds at Lloyd’s.

Intervention Powers.   The Council of Lloyd’s has wide discretionary powers to regulate members’ underwriting at Lloyd’s. It may, for instance, change the basis on which syndicate expenses are allocated or vary the Funds at Lloyd’s or the investment criteria applicable to the provision of Funds at Lloyd’s. Exercising any of these powers might affect the return on an investment of the corporate member in a given underwriting year. Further, the annual business plans of a syndicate are subject to the review and approval of the Lloyd’s Franchise Board. The Franchise Board is responsible for setting risk management and profitability targets for the Lloyd’s market and operates a business planning and monitoring process for all syndicates.

If a member of Lloyd’s is unable to pay its debts to policyholders, such debts may be payable by the Lloyd’s Central Fund, which in many respects acts as an equivalent to a state guaranty fund in the United States. If Lloyd’s determines that the Central Fund needs to be increased, it has the power to assess premium levies on current Lloyd’s members. The Council of Lloyd’s has

discretion to call or assess up to 3% of a member’s underwriting capacity in any one year as a Central Fund contribution. Our syndicate capacity for the 2018 underwriting year is $736.0 million ( 2017 underwriting year — $737.0 million). Above this level, it requires consent of members voting at a general meeting.

Jersey Regulation

General.   In 2010, we purchased APJ Jersey, a Jersey registered insurance company, which is subject to the jurisdiction of the Jersey Financial Services Commission (“JFSC”). The JFSC sets the solvency regime for those insurance companies under its jurisdiction. APJ Jersey holds funds in excess of the minimum requirement.

Supervision.   JFSC undertook a review of APJ Jersey in March 2013. No material matters were identified.

U.S. Regulation

General. AAIC is a Texas-domiciled insurance company and is licensed to write insurance on an admitted basis in 50 U.S. states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. In addition, AAIC is a certified surety company approved by the U.S. Department of the Treasury and an approved insurance provider for crop insurance by the U.S. Department of Agriculture.  

We also write surplus lines policies through Aspen Specialty, Aspen U.K. and AMAL. Aspen Specialty is an insurance company domiciled and licensed in North Dakota and is therefore subject to North Dakota laws and regulations applicable to domestic insurers. Aspen Specialty is not licensed in any other state, however it is eligible to write surplus lines policies on a non-admitted basis in all 50 U.S. states and the District of Columbia. Aspen Specialty accepts business only through licensed surplus lines brokers and does not market directly to the public.

Aspen U.K. is not licensed in any state in the U.S., however it is an alien insurer eligible to write surplus lines business in all 50 U.S. States, the District of Columbia and other U.S. jurisdictions based on its listing in the Quarterly Listing of the International Insurers Department (“IID”) of the National Association of Insurance Commissioners (“NAIC”). Pursuant to IID requirements, Aspen U.K. has established a U.S. surplus lines trust fund with a U.S. bank to secure U.S. surplus lines policies. As noted above, we participate in the Lloyd’s market through our ownership of AMAL and AUL; AMAL is the managing agent for Syndicate 4711, and AUL provides underwriting capacity to Syndicate 4711 and is therefore a Lloyd’s corporate member. Syndicate 4711 also appears on the IID. As of December 31, 2017 , Aspen U.K.’s and Syndicate 4711’s surplus lines trust funds were $195.0 million .

Following the enactment of the Non-Admitted and Reinsurance Reform Act (the “NRRA”), as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), no U.S. state can prohibit a surplus lines broker from placing business with a non-admitted insurer domiciled outside the U.S., such as Aspen U.K., that appears on the IID. IID listed insurers are required to report and continually maintain a capital and/or surplus amount of $45 million. As a matter of U.S. federal law, this means that Aspen U.K. should be surplus lines eligible in every U.S. state, even in states where Aspen U.K. had not previously been an eligible surplus lines insurer. Some states have developed eligibility standards and filing requirements separate from the IID listing, and our satisfaction of this additional listing or filing requirement is necessary to maintain our eligibility and acceptance by surplus lines brokers in those states.

Aspen Specialty, Aspen U.K. and AMAL are subject to limited state insurance regulations in states where they are surplus lines eligible. Specifically, rate and form regulations otherwise applicable to admitted insurers generally do not apply to Aspen Specialty, Aspen U.K. and AMAL’s surplus lines transactions. In addition, because Aspen U.K. is not licensed under the laws of any U.S. state, U.S. solvency regulation tools, including risk-based capital standards, investment limitations, credit for reinsurance and holding company filing requirements, otherwise applicable to admitted insurers do not generally apply to alien surplus lines insurers such as Aspen U.K. However, Aspen U.K. and AMAL are subject to federal and state incidental regulations in areas such as those pertaining to federal reporting related to terrorism coverage and post-disaster emergency orders. We monitor federal and state regulations and directives and comply as necessary for all affected subsidiaries.

Aspen Management is a Massachusetts corporation licensed as a surplus lines broker in Massachusetts, Connecticut, Georgia, New York and Texas. ASIS is a California limited liability company licensed as a surplus lines broker in California. Aspen Management and ASIS serve as surplus lines brokers only for companies within the Aspen Group, and do not act on behalf of non-Aspen third parties or market directly to the public.

Aspen Re America is a Delaware corporation and functions as a reinsurance intermediary with offices in Connecticut, Florida, Georgia, Illinois and New York. Aspen Re America acts as a reinsurance intermediary for Aspen U.K. and as an approved Lloyd's coverholder for the purpose of accessing certain non-U.S. business for AMAL only. Aspen Re America does not provide reinsurance intermediary services for non-Aspen third parties or market directly to the public.

Aspen U.S. Services is a Delaware corporation that provides administrative and technical services to our U.S. entities, primarily from our Rocky Hill, Connecticut office. It is authorized to contract such business in the various states where we have physical offices. No filings are required with state insurance departments.

AgriLogic is a Texas limited liability company and it is a specialist U.S. crop business serving as an agricultural consultant. AAIC became an approved insurance provider (“AIP”) under the Federal Agriculture Improvement and Reform Act of 1996, the Federal Crop Insurance Act and regulations promulgated by the Risk Management Agency (“RMA”) of the United States Department of Agriculture. Federal crop and livestock insurance coverage issued by AgriLogic on behalf of AAIC is regulated primarily by the RMA through RMA management and the Federal Crop Insurance Corporation, which is a federal sponsored reinsurance company that AAIC is required to cede reinsurance coverage to as part of the federal crop insurance program. AgriLogic and AAIC are also subject to market conduct and financial reviews by the RMA. A portion of the AAIC policies issued by AgriLogic are not part of the federal crop insurance program and are subject to traditional state based insurance regulation. As discussed above, AAIC is a Texas-domiciled insurance company and is therefore subject to Texas laws and regulations applicable to domestic insurers.

In December 2017, Aspen U.S. Holdings sold all AgriLogic subsidiaries, except AgriLogic Consulting, to CGB Diversified Services, Inc. (“CGB DS”), a Louisiana corporation, in exchange for a 23.2% stake in the newly formed company, Crop Re Services LLC (“Crop Re”), a Delaware limited liability company responsible for directing the placement of reinsurance on behalf of CGB DS and CGB Insurance Company (“CGBIC”), an Indiana insurance company affiliate of CGB DS and an RMA licensed crop insurer. The remaining 76.8% of Crop Re is owned by CGB DS. AAIC’s primary crop insurance coverage will be run-off and AAIC, or an affiliate of AAIC, will provide quota share reinsurance to CGBIC for both federal and state regulated crop insurance as part of Aspen’s ownership in Crop Re. For more information on Crop Re, see Note 6 of our consolidated financial statements, “Investments.”

Blue Waters Insurers, Corp. is a Puerto Rico licensed insurance producer that is authorized to issue marine coverage on behalf of AAIC. Puerto Rico is a territory of the U.S. and an NAIC accredited jurisdiction.

State Insurance Holding Company Acts. Aspen Specialty and its affiliates are subject to the insurance holding company laws of North Dakota, and AAIC and its affiliates are subject to the insurance holding company laws of Texas. The holding company laws require that each U.S. insurance company within the holding company system furnish annual information about certain transactions with affiliated companies. Generally, all material transactions among companies in the holding company system affecting Aspen Specialty or AAIC, including sales, loans, reinsurance agreements, service agreements and dividend payments, must be fair and, if material or of a specified category, require prior notice and approval or non-disapproval by the North Dakota Commissioner of Insurance for Aspen Specialty or the Texas Commissioner of Insurance for AAIC.

The insurance holding company laws of North Dakota and Texas also require the annual submission of an enterprise risk report by a domestic insurer’s ultimate controlling person identifying risks likely to have a material adverse effect upon the financial condition or liquidity of such insurer or its insurance holding company system as a whole.

Change of Control Prior Notifications.   Before a person can acquire control of a U.S. domestic insurer or its holding company, such as the Company, prior written approval must generally be obtained from the insurance commissioner of the state where the insurer is domiciled. A person is generally presumed to have acquired “control” if it acquires, directly or indirectly, 10% or more of the voting securities of a U.S. domestic insurer or its holding company. This statutory presumption of control may be rebutted by a showing that control does not exist in fact.

Prior to granting approval of an application to acquire control of a domestic insurer or its holding company, the domiciliary state insurance commissioner will consider such factors as the financial strength of the proposed acquirer, the integrity and management of the acquirer’s board of directors and executive officers, the acquirer’s plans for the future operations of the domestic insurer and any anti-competitive results that may arise from the consummation of the acquisition of control. These laws also require prior notice of a proposed divestiture of a controlling interest in a domestic insurer or its holding company. These laws may discourage potential acquisition or divestiture proposals and may delay, deter or prevent a change of control involving us, including through unsolicited transactions that some or all of our shareholders might consider to be desirable.

State Insurance Regulation.   State insurance authorities have broad authority to regulate admitted insurance business, including licensing, admitted assets, capital and surplus, market conduct, regulating unfair trade and claims practices, establishing reserve requirements or solvency standards, filing of rates and forms and regulating investments and dividends.

AAIC and Aspen Specialty prepare statutory financial statements in accordance with Statutory Accounting Principles (“SAP”) and procedures prescribed or permitted by applicable domiciliary states. State insurance laws and regulations require Aspen Specialty and AAIC to file statutory financial statements with insurance departments in every state where they are licensed. State insurance departments also conduct periodic examinations of the books and records, financial reporting, policy filings and market conduct of insurance companies licensed in their states. Coordinated financial examinations are generally carried out every five

years by the insurance departments of the domiciliary states under guidelines promulgated by the NAIC. In 2014, AAIC and ASIC completed Texas and North Dakota financial examinations for the five-year period ending December 31, 2012 and no material issues were identified. A routine financial examination of AAIC and ASIC commenced in late 2017 for the period January 1, 2013 through December 31, 2017 and as of [February 2018] no report has been issued.

Statutory Accounting Principles.   SAP is a basis of accounting developed to assist insurance regulators in monitoring and regulating the solvency of insurance companies. SAP is generally designed to report information in respect of an insurance company’s ability to meet its obligations to policyholders and claimants, and focuses on surplus adequacy. Accordingly, statutory accounting focuses on valuing assets and liabilities of insurers at financial reporting dates in accordance with appropriate insurance law and regulatory provisions applicable in each insurer’s domiciliary state.

U.S. GAAP is concerned with a company’s solvency, but it is also concerned with other financial measurements, such as income and cash flows. Accordingly, U.S. GAAP gives more consideration to appropriate matching of revenue and expenses and accounting for management’s stewardship of assets than does SAP. As a direct result, different assets and liabilities and different amounts of assets and liabilities will be reflected in financial statements prepared in accordance with U.S. GAAP as opposed to SAP.

The application of the SAP rules on AAIC and Aspen Specialty, established by the NAIC and adopted by the Departments of Insurance of the states, establishes, among other things, the amount of statutory surplus and statutory net income of our U.S. Operating Subsidiaries and thus determines, in part, the amount of funds they have available to pay as dividends to parent company entities.

State Dividend Limitations.   Under North Dakota and Texas law, respectively, Aspen Specialty and AAIC may only pay dividends out of earned surplus as distinguished from contributed surplus. In addition, under North Dakota and Texas law, an insurance company’s policyholder surplus after payment of a dividend must be reasonable in relation to its outstanding liabilities and adequate for its financial needs.

In addition, the ability of Aspen Specialty or AAIC to declare extraordinary dividends is subject to prior approval of the applicable state insurance regulator. The North Dakota insurance law defines an extraordinary dividend as a dividend that exceeds, together with all dividends declared or distributed by the insurer within the preceding twelve months, the lesser of:

The Texas insurance law defines an extraordinary dividend as a dividend that exceeds, together with all dividends declared or distributed by the insurer within the preceding twelve months, the greater of:

Aspen U.S. Holdings must also meet its own dividend eligibility requirements under Delaware corporate law in order to distribute any dividends received from Aspen Specialty and AAIC. In particular, any dividend paid by Aspen U.S. Holdings must be declared out of surplus or net profits.

The dividend limitations imposed by the North Dakota and Texas insurance laws are based on the financial results of Aspen Specialty and AAIC determined by using SAP accounting practices, which differ in certain respects from accounting principles used in financial statements prepared in conformity with U.S. GAAP. The significant differences relate to deferred acquisition expenses, deferred income taxes, required investment reserves, reserve calculation assumptions and surplus notes. Since both North Dakota and Texas law require insurance companies to pay dividends out of earned surplus as distinguished from contributed surplus, neither Aspen Specialty nor AAIC could pay a dividend as of December 31, 2017 .

Own Risk and Solvency Assessment (ORSA). The North Dakota and Texas insurance laws require an insurer, or the insurance group, to conduct an internal own risk and solvency assessment at least annually of such insurer’s material risks in normal and stressed environments and submit an annual summary report, which is a confidential assessment of the material and relevant risks associated with such insurer’s business plan, as well as the sufficiency of its capital resources to support these risks. We have filed the annual required summary report of our own risk and solvency assessment with the Texas Department of Insurance, our lead U.S. regulator, since 2016.

Cybersecurity Regulations. In 2017, new cybersecurity rules took effect for financial institutions, insurers and certain other companies supervised by the New York Department of Financial Services (the “NYDFS Cybersecurity Regulation”), such as AAIC, which is licensed in New York. The NYDFS Cybersecurity Regulation imposes significant new regulatory burdens intended to protect the confidentiality, integrity and availability of information systems.

In 2017, the NAIC also adopted the Insurance Data Security Model Law (the “Cybersecurity Model Law”). The Cybersecurity Model Law would require insurers, insurance producers and other entities required to be licensed under state insurance laws to comply with certain requirements under state insurance laws, such as developing and maintaining a written information security program, conducting risk and overseeing the data security practices of third-party vendors. The Cybersecurity Model Law closely resembles the NYDFS Cybersecurity Regulation. The Cybersecurity Model Law will be introduced within the U.S. states for adoption into state law.

State Risk-Based Capital Regulations.   Most states require their domestic insurers to annually report their risk-based capital based on a formula that takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk and business risk. The states use the formula as an early warning regulatory tool to identify possibly inadequately capitalized insurers for the purposes of initiating regulatory action, and not as a means to rank insurers generally. Most states’ insurance law imposes broad confidentiality requirements on those engaged in any manner in the insurance business and on the regulator as to the use and publication of risk-based capital data. The regulator typically has explicit regulatory authority to require various actions by, or to take various actions against, insurers whose total adjusted capital does not exceed certain risk-based capital levels.

Additionally, since February 2016, the NAIC has been developing a methodology for the calculation of group capital for all the entities in an insurance holding company system. The goal is to provide a simple method for regulators to aggregate the available capital and the minimum capital of each entity in a group in a way that applies to all companies regardless of their structure. One conceptual issue with the group capital calculation is its intended use, which regulators have still not articulated, other than characterizing it as “another regulatory tool,” rather than a regulatory requirement. While it is still under discussion, it is expected that the new group capital requirements will incorporate existing risk-based capital requirements.

Residual Market Mechanisms and Guaranty Funds.   Licensed and admitted U.S. insurers such as Aspen Specialty and AAIC are required to participate in various state residual market mechanisms whose goal is to provide affordability and availability of insurance to those consumers who may not otherwise be able to obtain insurance, including, for example catastrophe insurance in high-risk areas. The mechanics of how each state’s residual markets operate may differ, but generally, risks are either assigned to various private carriers or the state manages the risk through a pooling arrangement. If losses exceed the funds the pool has available to pay those losses, the pools have the ability to assess insurers to provide additional funds to the pool. The amounts of the assessment for each company are normally based upon the proportion of each insurer’s (and in some cases the insurer’s and its affiliates’) written premium for coverages similar to those provided by the pool, and are frequently uncapped. State guaranty associations also have the ability to assess licensed U.S. insurers in order to provide funds for payment of losses for insurers which have become insolvent. In many cases, but not all, assessed insurers may recoup the amount of these guaranty fund and state pool assessments through premium rates, premium tax credits or policy surcharges.

Operations of Aspen U.K. and Aspen Bermuda.   Aspen U.K. and Aspen Bermuda are not admitted to engage in the business of insurance in the U.S. although, as stated above, Aspen U.K. and Syndicate 4711, due to their inclusion in the NAIC Quarterly Listing of Alien Insurers, are eligible to write surplus lines business as alien, non-admitted insurers in all 50 U.S. states, the District of Columbia and other U.S. jurisdictions, such as Puerto Rico, in accordance with the Dodd-Frank Act. The laws of most states regulate or prohibit the sale of insurance and reinsurance within their jurisdictions by non-admitted insurers and reinsurers. We do not intend that Aspen Bermuda maintain an office or solicit, advertise, settle claims or conduct other insurance activities in any jurisdiction other than Bermuda where the conduct of such activities would require Aspen Bermuda to be so admitted. Aspen U.K. does not maintain an office in the U.S. but it reinsures U.S. primary risk as an alien accredited/trusteed reinsurer in 50 U.S. states and the District of Columbia and, as noted above, writes excess and surplus lines business as an eligible, but non-admitted, alien surplus lines insurer. It accepts business only through U.S. licensed surplus lines brokers and does not market directly to the public. Although it does not underwrite or handle claims directly in the U.S., Aspen U.K. may grant limited underwriting authorities and retain third-party administrators, duly licensed, for the purpose of facilitating U.S business. Aspen U.K. has also issued limited underwriting authorities to various affiliated U.S. entities described above.

In addition to the regulatory requirements imposed by the jurisdictions in which they are licensed, reinsurers’ business operations are affected by regulatory requirements in various U.S. states governing “credit for reinsurance” laws imposed on ceding companies. In general, a ceding company which obtains reinsurance from a reinsurer that is licensed, accredited or approved by the jurisdiction or state in which the reinsurer files statutory financial statements is permitted to reflect in its statutory financial statements a credit in an aggregate amount equal to the liability for unearned premiums (which are that portion of premiums written which applies to the unexpired portion of the policy period) and loss reserves and loss adjustment expense reserves ceded to the reinsurer. However, cedants are permitted to take a credit to statutory surplus resulting from reinsurance obtained from a non-licensed and non-accredited reinsurer only to the extent that the reinsurer provides a letter of credit, trust account or other acceptable security arrangement.

For its U.S. reinsurance activities, Aspen U.K. has established and must maintain a multi-beneficiary U.S. trust fund for the benefit of its U.S. cedants so that they are able to take financial statement credit for reinsurance without the need for Aspen U.K.

to post contract-specific security. The minimum trust fund amount is $20.0 million plus an amount equal to 100% of Aspen U.K.’s U.S. reinsurance liabilities collateralized under this arrangement. The total market value of assets in the Aspen U.K. multi-beneficiary trust were $1,350.9 million as at December 31, 2017 and $1,351.2 million as at December 31, 2016 . For its U.S. reinsurance activities, Aspen Bermuda likewise has established and must maintain a multi-beneficiary U.S. trust fund for the benefit of its U.S. cedants so that they are able to take financial statement credit for reinsurance without the need for Aspen Bermuda to post contract specific security. The minimum trust fund amount is $20.0 million plus an amount equal to 100% of Aspen Bermuda’s U.S. reinsurance liabilities collateralized under this arrangement. As further explained below, Aspen Bermuda has obtained approval to post reduced collateral in Florida, New York and North Dakota (i.e., 20% versus 100%). As at December 31, 2017 , the total assets held in the U.S. trust fund and other assets available to secure against the U.S. trust fund’s liabilities were $1,333.6 million ( 2016  — $1,267.4 million ).

As a result of the Dodd-Frank Act, only a ceding insurer’s state of domicile can dictate the credit for reinsurance requirements. Other NAIC jurisdictions in which a ceding insurer is licensed are no longer able to require additional collateral from non-admitted reinsurers or otherwise impose their own credit for reinsurance laws on ceding insurers domiciled in other states. In 2011, the NAIC adopted revisions to its Credit for Reinsurance Model Law and Model Regulation (together the “Amended Credit for Reinsurance Model Act”). As at December 1, 2017, the Amended Credit for Reinsurance Model Act has been adopted in at least 34 states, including Texas, where the law took effect on January 1, 2018 and North Dakota, where the law took effect on January 1, 2016. In those states that have adopted the Amended Credit for Reinsurance Model Act and adopted regulations to establish application and approval procedures, qualifying non-admitted reinsurers domiciled in “qualified jurisdictions” who meet certain minimum rating and capital requirements would, upon application to and approval by the state Insurance Departments, be permitted to post less than the 100% collateral currently required with respect to a cedant domiciled in that state. Bermuda is among the approved “qualified jurisdictions” which allows U.S. states that have adopted the Amended Credit for Reinsurance Model Act to implement reduced collateral requirements with respect to reinsurers domiciled in Bermuda, such as Aspen Bermuda. Aspen Bermuda has obtained approval to post reduced collateral in Florida, New York and North Dakota (i.e., 20% versus 100%). Texas had not yet promulgated regulations that would permit a reinsurer to post less than 100% collateral. We will continue to monitor developments in collateral reduction with a view to seeking approval to post reduced collateral in other relevant states over time.

Further, the Dodd-Frank Act authorizes the U.S. Department of Treasury (“Treasury”) and the Office of the U.S. Trade Representative (“USTR”) to negotiate covered agreements governing certain matters relating to insurance with foreign jurisdictions. Such covered agreements could pre-empt state insurance laws. In 2017, the U.S. federal authorities and their E.U. counterparts announced the successful completion of their negotiations of a covered agreement between the U.S. and the E.U, and on September 22, 2017, the U.S. and E.U. signed the covered agreement.

In terms of reinsurance, the covered agreement eliminates collateral and local presence requirements for E.U. and U.S. reinsurers operating in each other’s markets. In connection with an alien reinsurer’s assumption of insurance business from a U.S. cedant, the covered agreement gives the U.S. states five years to remove the existing reinsurance collateral requirements for such alien, non-admitted reinsurers domiciled in the E.U. (such as Aspen U.K.) that meet certain standards. These standards include, among others, minimum capital and risk-based capital, confirmation of financial condition by the reinsurer’s domestic regulator and claims payment standards. If the U.S. states do not remove such reinsurance collateral requirements, they will face federal pre-emption determinations. The Trump administration has also issued a U.S. policy statement providing guidance on implementation which “encourages” each state to “promptly” adopt credit for reinsurance laws and regulations consistent with the covered agreement, and to implement the required phase-out collateral requirements.

Lloyd’s is licensed as a market in Illinois, Kentucky and the U.S. Virgin Islands to write insurance business. It is also eligible to write surplus lines and reinsurance business in all other U.S. states and territories. Lloyd’s as a whole makes certain returns to U.S. regulators and each syndicate makes quarterly trust returns to the New York Department of Financial Services with respect to its surplus lines and reinsurance business. Separate trust funds are in place to support this business. As at December 31, 2017 , Syndicate 4711 had $73.1 million held in trust for its surplus lines business and $49.3 million held in trust for its reinsurance business.

Investment adviser regulation. Our subsidiary Aspen Capital Advisors Inc. (“Aspen Advisors”) is registered with the United States Securities and Exchange Commission (“SEC”) as a registered investment adviser. Aspen Advisors is the investment adviser to a private investment fund that primarily invests in securities tied to weather, natural disasters or other insurance risks as well as certain collateralized property catastrophe reinsurance contracts. In the future, Aspen Advisors may form and manage additional privately offered pooled investment vehicles, customize funds for single investors or groups of investors or manage separately managed accounts of other qualified clients on a limited basis. Aspen Advisors net assets under management as at December 31, 2017 were $91.9 million, all of which were managed on a discretionary basis. The amount disclosed differs from Aspen Advisors “regulatory assets under management” disclosed in Part 1 of its Form ADV, which is calculated in accordance with the requirements of that form.

Aspen Advisors is subject to regulation as an investment adviser by the SEC. Federal and state securities laws and regulations are primarily intended to protect investors in the securities markets and generally grant regulatory agencies broad rulemaking and enforcement powers, including the power to limit or restrict the conduct of business for failure to comply with such laws and regulations. The SEC and state securities regulatory authorities from time to time may make inquiries and conduct examinations regarding compliance by Aspen Advisors with securities and other laws and regulations. We intend to cooperate with such inquiries and examinations and take corrective action when warranted. Aspen Advisors may also be subject to similar laws and regulations in foreign countries if it provides investment advisory services, offers products similar to those described above or conducts other activities.

Available Information

Our website is maintained at www.aspen.co. The information on our website is not incorporated by reference in this report. We make available, free of charge through our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC. We also make available, free of charge from our website, our Code of Business Conduct and Ethics, Corporate Governance Guidelines, Audit Committee Charter, Compensation Committee Charter, Corporate Governance and Nominating Committee Charter, Disclosure Policy and Director Independence Standards. Such information is also available in print for any shareholder who sends a request to Aspen Insurance Holdings Limited, Attention: Company Secretary, 141 Front Street, Hamilton HM19, Bermuda.

The public may read and copy any materials we file electronically with the SEC at the SEC Public Reference Room at 100 F Street, N.E., Washington, DC 20549. Information on the operation of the SEC Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC. The address of the SEC’s website is www.sec.gov.