We are involved in claims-related legal actions arising in the ordinary course of business. We accrue amounts resulting from claims-related legal actions in unpaid losses and LAE during the period that we determine an unfavorable outcome becomes probable and we can estimate the amounts. Management makes revisions to our estimates based on its analysis of subsequent information that we receive regarding various factors, including: (i) per claim information; (ii) company and industry historical loss experience; (iii) judicial decisions and legal developments in the awarding of damages; and (iv) trends in general economic conditions, including the effects of inflation.

On October 20, 2023, the Company received notice that the Florida Department of Financial Services ("DFS") filed a notice of claim and demand for tender of policy limits under the Company's director and officer insurance policy (the “Claim”). The Claim alleges that former officers and directors of UPC were involved in wrongful acts that resulted in UPC's insolvency. The Claim demands immediate tender of the Company's director and officer’s policy limit of $40,000,000 where the Company has a retention of $1,500,000. The former directors and officers of UPC deny the allegations. Although no litigation has arisen from the Claim, litigation is anticipated. The directors and officers plan to vigorously defend against the Claim, however, due to the Company's indemnification obligation, during 2023, the Company accrued the policy retention amount of $1,500,000.

We have fully funded two limited partnership investments and partially funded two additional limited partnership investments. The amount of unfunded commitments was $1,950,000 and $1,400,000 at December 31, 2025 and 2024, respectively.

We, as lessee, have entered into leases of commercial office space of various term lengths. In addition to office space, we lease office equipment under operating leases.

The classification of operating lease asset and liability balances within the Consolidated Balance Sheets was as follows:


	Financial Statement Line	December 31, 2025		December 31, 2024
Assets
Operating lease assets	Other assets	$	2,955	$	3,209

Liabilities
Operating lease liabilities	Operating lease liability	$	3,135	$	3,323

The components of lease expenses were as follows:


	Year Ended December 31,
	2025		2024
Operating lease expense	$	438	$	220

At December 31, 2025, future minimum gross lease payments relating to these non-cancellable operating lease agreements were as follows:


	Estimated Remaining Payments
2026	$	398
2027		407
2028		419
2029		432
2030		445
Thereafter		2,001
Total undiscounted future minimum lease payments		4,102
Less: Imputed interest		(967	)
Present value of lease liabilities	$	3,135

Weighted average remaining lease term and discount rate related to operating leases were as follows:


	December 31, 2025			December 31, 2024
Weighted average remaining lease term (months)		110		121
Weighted average discount rate		5.65	%		5.64	%

Other cash and non-cash related activities were as follows:


	Year Ended December 31,
	2025		2024
Cash paid for amounts included in the measurement of lease liabilities
Investing cash flows from operating leases	$	—	$	95

Right-of-use assets obtained in exchange for new operating lease liabilities	$	—	$	3,256

See Note 8 for information regarding depreciation expense. See Note 12 for information regarding commitments related to long-term debt, and Note 16 for commitments related to regulatory actions.

We previously leased and occupied office space in which we no longer operate. Effective October 1, 2022, this office space was subleased to a third party. The sublease was effective from October 1, 2022 through July 31, 2025, with no option to extend. However, on February 29, 2024, this sublease was cancelled as a part of an agreement to terminate the original lease associated with the office space. As of December 31, 2024, we recognized $33,000 of income related to this sublease, exclusive of the lease expense associated with the original lease.

A series of legislation was enacted in the United States during 2020 and 2021 in response to the COVID-19 pandemic that provided financial relief for businesses impacted by government-mandated shutdowns, work stoppages, or other losses suffered by employers. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided an employee retention credit, which is a refundable tax credit against certain employment taxes of up to $5,000 per employee for eligible employers. The tax credit is equal to 50% of qualified wages paid to employees during a quarter, capped at $10,000 of qualified wages per employee. During the second quarter of 2022, we evaluated our eligibility and filed for a $10,161,000 refund in connection with our Employee Retention Tax Credit for the tax year ended December 31, 2021. During the year ended December 31, 2025, we have received refunds of $4,469,000 that were outstanding as of December 31, 2024. These were recorded as a contra-expense to payroll tax in the periods received. With these receipts, as of December 31, 2025, the Company has received all requested funds from the Internal Revenue Service related to this refund and no longer has an unrecorded gain contingency related to this balance.

AmCoastal participates in shared quota-share reinsurance agreements with our former subsidiary, UPC, which are subject to a variable ceding commission based on loss experience. With the receivership of UPC in 2023, data related to UPC losses is limited and infrequent and could shift AmCoastal’s commission related to these contracts unfavorably. We cannot reasonably determine how this shift will be allocated between the contracted parties. Any updated calculations must be provided to both our reinsurance partners and the DFS as receiver of UPC. We are unable to estimate the impact; however, we believe a loss contingency related to these commissions may exist as of December 31, 2025.

We will continue to monitor the matter for further developments that could affect the outcome of these contingencies and will make any appropriate adjustments each quarter.