Deal-Contingent Foreign Currency Forward

On December 21, 2023, the Company entered into a deal-contingent foreign currency forward (the “Deal-Contingent Forward”) to manage the risk of appreciation of the GBP-denominated purchase price of the acquisition of Castel Underwriting Agencies Limited (“Castel”). The Castel acquisition is expected to close during the first half of 2024, subject to regulatory approvals and customary closing conditions. The Deal-Contingent Forward has a 200.0 million GBP notional amount and will only be executed if and when the Castel acquisition closes. As the Deal-Contingent Forward is an economic hedge and has not been designated as an accounting hedge, any gains or losses resulting from the Deal-Contingent Forward, including changes in the instrument’s fair value, will be recognized through earnings in the period incurred.

Interest Rate Cap

On April 7, 2022, the Company entered into an interest rate cap agreement to manage its exposure to interest rate fluctuations related to the Company’s Term Loan in the amount of $25.5 million. The interest rate cap has a $1,000.0 million notional amount, 2.75% strike, and terminates on December 31, 2025. At inception, the Company formally designated the interest rate cap as a cash flow hedge. As of December 31, 2023, the interest rate cap continued to be an effective hedge.

For the years ended December 31, 2023 and 2022, the decrease of $16.2 million and increase of $20.4 million, respectively, in the fair value of the interest rate cap were recognized in Other comprehensive income (loss). As of December 31, 2023, the Company expects $19.6 million of unrealized gains from the interest rate cap to be reclassified into earnings over the next twelve months. See Note 18, Income Taxes, for further information on the tax effects on other comprehensive income related to the interest rate cap.

See Note 15, Fair Value Measurements, for further information on the fair value of derivatives.