The Company is involved in claims-related legal actions arising in the ordinary course of business. The Company accrues amounts resulting from claims-related legal actions in unpaid losses and LAE during the period when it determines an unfavorable outcome becomes probable and can estimate the amounts. Management makes revisions to estimates based on its analysis of subsequent information that the Company receives 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 United Property & Casualty Insurance Company (“UPC”) were involved in wrongful acts that resulted in UPC’s insolvency. The Claim demanded 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 the Claim remains open as of September 30, 2026, no litigation has arisen and on June 25, 2026, the Florida Office of Insurance Regulation (“OIR”) determined that former officers and directors of UPC were not a substantial contributing cause of UPC's insolvency. The Company believes that the OIR determination significantly diminishes the likelihood of litigation by DFS. Should the litigation be initiated, the directors and officers plan to vigorously defend against the Claim; however, due to the Company’s indemnification obligation, the Company accrued the policy retention amount of $1,500,000.

As of September 30, 2026 and December 31, 2025, the Company has unfunded commitments of $1,200,000 and $1,950,000, respectively, related to limited partnership investments.

The Company, as a lessee, has entered into a lease of commercial office space for 10.3 years. In addition to office space, the Company previously leased office equipment under operating leases, which have all come to a conclusion as of June 30, 2026.

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


	Financial Statement Line	September 30, 2026		December 31, 2025
Assets
Operating lease assets	Other assets	$	2,767	$	2,955

Liabilities
Operating lease liabilities	Operating lease liability	$	2,967	$	3,135

The components of lease expenses were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2026		2025		2026		2025
Operating lease expense	$	106	$	107	$	320	$	332

At September 30, 2026, future minimum gross lease payments relating to this non-cancellable operating lease agreement were as follows:


	Estimated Remaining Payments
2026	$	101
2027		407
2028		419
2029		432
2030		445
Thereafter		2,001
Total undiscounted future minimum lease payments		3,805
Less: Imputed interest		(838	)
Present value of lease liabilities	$	2,967

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


	September 30, 2026			December 31, 2025
Weighted average remaining lease term (months)		101		110
Weighted average discount rate		5.65	%		5.65	%

There were no other cash or non-cash related activities during the nine months ended September 30, 2026 and 2025.

Capital lease amortization expenses are included in depreciation expense in the Company's Unaudited Condensed Consolidated Statements of Comprehensive Income. See Note 13 of these Notes to Unaudited Condensed Consolidated Financial Statements for more information regarding depreciation expense, Note 9 for information regarding commitments related to long-term debt, and Note 8 for information regarding commitments related to regulatory actions.

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, the Company evaluated its eligibility and filed for a $10,161,000 refund in connection with its Employee Retention Tax Credit for the tax year ended December 31, 2021.

During the three and six months ended June 30, 2025, the Company received refunds of $2,939,000 and $4,469,000, respectively, 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 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 the Company's former subsidiary, UPC, which are subject to a variable ceding commission based on loss experience. With the receivership of UPC in 2023, the data received related to UPC losses is limited and infrequent and could shift AmCoastal’s commission related to these contracts unfavorably. The Company

cannot reasonably determine how this shift will be allocated between the contracted parties. Any updated calculations must be provided to the Company's reinsurance partners and the DFS as receiver of UPC. While the Company is currently unable to estimate the impact, the Company believes a loss contingency related to these commissions may exist as of September 30, 2026.

The Company 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.