PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
MEMORANDUM
FROM: Calderwood & Harkness LLP 1585 Broadway, 34th Floor New York, NY 10036
TO: Dennis R. Okonkwo General Counsel & Corporate Secretary Quorum Insurance Holdings Corp. 280 Asylum Street, Suite 2200 Hartford, CT 06103
DATE: October 3, 2025
RE: Initial Gap Analysis — Board Committee Charters of Quorum Insurance Holdings Corp.
ENGAGEMENT NO.: 1025-00005
PREPARED BY: Natasha Forbes, Lead Associate; Eric Johannsen, Working Associate
REVIEWED BY: Elaine Forsythe, Responsible Partner; Howard Bellamy, Billing Partner
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I. Executive Summary
Calderwood & Harkness LLP ("C&H" or the "Firm") is pleased to present the results of our initial gap analysis of the five existing standing committee charters (the "Charters") of the Board of Directors (the "Board") of Quorum Insurance Holdings Corp. ("QIH," "Quorum," or the "Company") (NYSE: QIHC), a Delaware-incorporated, publicly traded multi-line insurance and financial technology holding company headquartered in Hartford, Connecticut. This memorandum was prepared at the direction of Mr. Dennis R. Okonkwo, General Counsel and Corporate Secretary, pursuant to the engagement letter dated September 5, 2025 (Engagement No. 1025-00005).
The five existing standing committees whose charters were analyzed are:
1. Audit Committee
2. Compensation & Human Capital Committee
3. Nominating & Corporate Governance Committee
4. Risk Committee
5. Investment Committee
Each of the five Charters was originally adopted on February 12, 2016, in connection with the Company's initial public offering and listing on the New York Stock Exchange. Targeted amendments were subsequently adopted on March 20, 2019 (affecting the Audit Committee and the Nominating & Corporate Governance Committee charters) and June 14, 2021 (affecting the Audit Committee and Compensation & Human Capital Committee charters, the latter principally to add "Human Capital" to the committee name). No comprehensive restatement of any of the Charters has been undertaken since their original adoption in 2016. The Risk Committee and Investment Committee charters have never been amended in any respect.
Our analysis benchmarks each Charter against four principal frameworks:
(a) NYSE Listed Company Manual Sections 303A.01 through 303A.14, including the 2024 amendments to Section 303A regarding committee composition, charter content mandates, and annual self-evaluation requirements;
(b) Delaware General Corporation Law ("DGCL") §§ 141(a) and 141(c), addressing the permissible scope of delegation of Board authority to committees, non-delegable Board actions, and fiduciary duty considerations;
(c) SEC Rule 10D-1 and related regulatory requirements, including NYSE Rule 303A.14 regarding the adoption and administration of executive compensation clawback policies; and
(d) Governance best practices, as informed by the Apex Proxy Advisors, Inc. ("Apex") benchmarking report delivered June 30, 2025 (the "Apex Report"), which evaluates QIH governance practices against a peer group of 14 publicly traded insurance holding companies, as well as C&H's own experience advising publicly traded insurance holding companies on governance matters.
This gap analysis was triggered by a convergence of several significant developments, each of which independently warranted Board attention and which, taken together, compelled a comprehensive review of the Company's governance documentation:
• Garrett & Whitfield LLP Management Letter (March 14, 2025). The Company's independent auditor, Garrett & Whitfield LLP ("G&W") (lead engagement partner: Roland S. Brewer), in connection with the audit of the Company's financial statements for the fiscal year ended December 31, 2024 ("FY 2024"), issued a management letter containing several observations relevant to governance documentation, including the absence of a formal Technology & Information Security Committee charter and certain matters relating to the Risk Committee's oversight of insurance-specific risk categories and subsidiary-level claims-settlement authorities.
• Veltrano Institutional Partners, LP Shareholder Letter (June 18, 2025). Veltrano Institutional Partners, LP ("Veltrano"), which holds approximately 8.3% of the Company's outstanding common stock, through its Head of Corporate Governance & Stewardship, Terrence "Terry" Blackwood, delivered a letter to the Board urging governance modernization, including updates to committee charters, enhanced ESG disclosure, and adoption of a formal shareholder engagement protocol.
• Apex Proxy Advisors Benchmarking Report (June 30, 2025). Dana Durneval, Senior Vice President, Advisory Services, of Apex Proxy Advisors, Inc., delivered a comprehensive governance benchmarking report comparing QIH's governance practices against the 14-company peer group, identifying multiple areas where the Company's governance documentation lags peer practice.
• Board Authorization (July 22, 2025). At its regularly scheduled meeting on July 22, 2025, the Board authorized a comprehensive governance overhaul project, including retention of outside counsel to conduct a gap analysis of the Company's committee charters and Delegation of Authority Matrix and to prepare restated governance documents.
High-Level Finding: Each of the five existing Charters contains material gaps requiring remediation, ranging from compliance deficiencies relative to current NYSE listing standards to deviations from governance best practices as reflected in peer company documentation and evolving investor expectations. Additionally, the absence of a standalone Technology & Cybersecurity Oversight Committee charter represents a significant governance deficiency relative to peer practice, as 11 of the 14 companies in the Apex peer group have adopted either a standalone technology and cybersecurity committee or have incorporated explicit cybersecurity oversight language into their audit or risk committee charters.
Primary Recommendation: We recommend a full restatement of all five existing Charters and the creation of a sixth charter for a new Technology & Cybersecurity Oversight Committee. Given the breadth and significance of the identified gaps, piecemeal amendments would be impractical and risk creating internal inconsistencies; accordingly, a clean restatement approach, accompanied by redlined comparisons to the existing Charters for Board review, is strongly preferred. Detailed findings and recommendations are set forth in the sections that follow.
II. Scope and Methodology
A. Scope of Review
Calderwood & Harkness received the following documents from the Office of the General Counsel on September 19, 2025, as the primary corpus for this review:
• Audit Committee Charter (as amended through June 14, 2021)
• Compensation & Human Capital Committee Charter (as amended through June 14, 2021)
• Nominating & Corporate Governance Committee Charter (as amended through March 20, 2019)
• Risk Committee Charter (as adopted February 12, 2016; unamended)
• Investment Committee Charter (as adopted February 12, 2016; unamended)
• Delegation of Authority Matrix (last comprehensively updated October 6, 2017)
• Corporate Governance Guidelines (as amended through March 20, 2019)
• Amended and Restated Bylaws (as amended through June 14, 2021)
In addition to these governance documents, C&H reviewed the following supplementary materials:
• Garrett & Whitfield LLP management letter, dated March 14, 2025, addressed to the Audit Committee of QIH (the "G&W Management Letter")
• Apex Proxy Advisors, Inc. governance benchmarking report, dated June 30, 2025 (the "Apex Report")
• Veltrano Institutional Partners, LP shareholder letter, dated June 18, 2025 (the "Veltrano Letter")
• Selected SEC no-action letters and staff guidance relating to committee charter requirements and clawback policy administration
• NYSE interpretive guidance and frequently asked questions regarding Sections 303A.01 through 303A.14, including guidance published in connection with the 2024 amendments
The review was conducted during the period of September 19, 2025 through October 3, 2025. The working team consisted of Natasha Forbes (Lead Associate), Eric Johannsen (Working Associate), and two additional associates who provided research support. Elaine Forsythe (Responsible Partner) and Howard Bellamy (Billing Partner) supervised the review and contributed to the formulation of recommendations.
Scope Limitation: This memorandum addresses the five committee charters exclusively. A companion memorandum of the same date (the "DOA Matrix Memorandum") addresses the Delegation of Authority Matrix separately. Although we note interactions between the Charters and the DOA Matrix at various points in this memorandum, the detailed analysis of the DOA Matrix is reserved for the companion memorandum. Similarly, while we reference the Corporate Governance Guidelines and Bylaws where relevant to charter analysis, a comprehensive review of those documents is beyond the scope of this engagement as currently defined.
B. Analytical Framework
Our analysis applies four distinct but interrelated frameworks to each Charter:
NYSE Listed Company Manual Section 303A. We conducted a comprehensive review of Sections 303A.01 through 303A.14 of the NYSE Listed Company Manual, with particular attention to the 2024 amendments to Section 303A. The 2024 amendments introduced enhanced requirements regarding committee composition, expanded charter content mandates, and clarified expectations for annual committee self-evaluation processes. As each of the existing Charters predates the 2024 amendments, none of the current charter language reflects these updates. This is a threshold compliance concern that pervades the entire suite of governance documents. Our analysis identifies specific provisions within each Charter that require conforming revisions and, separately, identifies instances where current charter language, while not technically non-compliant with pre-2024 standards, falls short of the expectations established by the 2024 amendments.
DGCL §§ 141(a) and 141(c). Delaware law governs the permissible scope of delegation of Board authority to committees. DGCL § 141(c) permits the Board to delegate to committees certain powers and authority, subject to specified limitations. Certain Board actions are non-delegable under Delaware law, including the approval of mergers, amendments to the certificate of incorporation, recommendations of dissolution, and the declaration of dividends. Our analysis evaluates each Charter's delegation of authority provisions against the requirements and limitations of DGCL § 141(c), with attention to whether the current charter language clearly articulates the boundaries of committee authority and appropriately reserves non-delegable matters to the full Board.
SEC Rule 10D-1 / NYSE Rule 303A.14. In October 2022, the SEC adopted Rule 10D-1, which directed the national securities exchanges to adopt listing standards requiring listed companies to adopt and comply with a written clawback policy for the recovery of erroneously awarded incentive-based compensation. The NYSE adopted Rule 303A.14 in implementation of this requirement, with an effective date of October 2, 2023. The administration of the clawback policy must be assigned to a specific committee of the Board, and the relevant committee's charter should reflect this responsibility. As detailed below, the Audit Committee Charter currently contains no reference to clawback policy administration, which constitutes a compliance gap under current listing standards.
Governance Best Practices. We supplement the foregoing legal and regulatory frameworks with a best-practices analysis derived from two sources: (i) the Apex Report, which provides a detailed comparison of QIH's governance practices against a peer group of 14 publicly traded insurance holding companies (as described in Section II.C below); and (ii) C&H's own experience advising insurance holding companies and other financial institutions on governance matters, including our work with more than thirty publicly traded insurance and financial services companies over the past five years. Best-practice recommendations are distinguished from compliance-driven recommendations throughout this memorandum to assist the Board and management in prioritizing remediation efforts.
C. Peer Benchmarking Context
The Apex Report utilizes a peer group of 14 publicly traded insurance holding companies, selected by Apex on the basis of comparable business profile, market capitalization, and asset size. While the full peer group listing is set forth in Appendix B to this memorandum, the following key peer statistics are referenced at various points in our analysis and are summarized here for convenience:
• Technology / Cybersecurity Oversight: 11 of the 14 peer companies (78.6%) have adopted either a standalone technology and cybersecurity oversight committee or have incorporated explicit cybersecurity oversight provisions into their audit committee or risk committee charters. QIH has neither.
• DOA Matrix Currency: 12 of the 14 peer companies (85.7%) have updated their Delegation of Authority Matrices within the prior 24 months. QIH's DOA Matrix was last comprehensively updated on October 6, 2017 — more than eight years ago.
• Charter Content and Structure: Peer median practices on charter content (e.g., inclusion of self-evaluation provisions, inter-committee coordination protocols, periodic charter review requirements, and ESG oversight provisions) inform the gap identification throughout this memorandum. Where peer practice is particularly instructive, we reference specific peer statistics in the relevant charter analysis.
For additional context, QIH's key corporate metrics as of FY 2024 are as follows:
The Company's regulated insurance subsidiaries include Quorum Property & Casualty Insurance Company (domiciled in Connecticut, NAIC No. 38472), Lone Star Specialty Insurance Company (domiciled in Texas, NAIC No. 41359), and Great Lakes Surety & Indemnity Co. (domiciled in Ohio, NAIC No. 29814). In addition, the Company operates a fintech subsidiary, Vantage Digital Insurance Solutions, Inc. (president: Camille R. DuPont), which offers digital distribution and insurtech-enabled products.
III. Charter-by-Charter Gap Analysis
The following sections present C&H's gap analysis findings for each of the five existing Charters. For each Charter, we provide a brief description of its current state, followed by a detailed discussion of each identified gap, the basis for our finding, and our recommendation for remediation. Each gap is classified as a "Compliance Gap" (indicating a deficiency relative to current mandatory legal or listing requirements), a "Best Practice Gap" (indicating a deficiency relative to prevailing governance best practices among peer companies and as recommended by leading proxy advisory firms and institutional investors), or an "Enhancement Opportunity" (indicating an area where the Charter, while not technically deficient, could be strengthened to improve clarity, completeness, or effectiveness).
A. Audit Committee Charter
1. Current State
The Audit Committee Charter was originally adopted on February 12, 2016 and has been amended twice — on March 20, 2019 and June 14, 2021. Of the five existing Charters, the Audit Committee Charter has received the most attention from the Board, reflecting the critical role of the Audit Committee in financial reporting oversight and regulatory compliance. Notwithstanding these prior amendments, the Charter has not been comprehensively restated, and significant gaps have accumulated in the intervening years as regulatory requirements and best practices have evolved.
The Audit Committee is currently chaired by Dr. Lilian Fong-Archer, an independent director who qualifies as an "audit committee financial expert" under Item 407(d)(5) of SEC Regulation S-K. Dr. Fong-Archer, the former Chief Financial Officer of Pinehurst Financial Group, Inc., has served on the QIH Board since 2019 and has chaired the Audit Committee since 2021. The Company's independent auditor is Garrett & Whitfield LLP, with Roland S. Brewer serving as the lead engagement partner.
The Audit Committee's responsibilities, as currently described in the Charter, encompass oversight of the Company's financial reporting process, oversight of the independent auditor's qualifications, independence, and performance, oversight of the Company's system of internal controls, and oversight of the Company's compliance with legal and regulatory requirements related to financial reporting. The internal audit function, led by Chief Audit Executive Renata M. Vásquez, reports functionally to the Audit Committee and administratively to the Chief Financial Officer.
2. Gap: Absence of Enterprise Risk Management (ERM) Oversight Responsibility
Classification: Best Practice Gap
The current Audit Committee Charter does not include any explicit reference to oversight responsibility for the Company's enterprise risk management ("ERM") framework. While the Charter addresses internal controls and financial reporting risk in general terms, it does not assign the Audit Committee a role in the oversight of the broader ERM framework, including the identification, assessment, and mitigation of material enterprise risks.
This gap was identified as an observation in the G&W Management Letter dated March 14, 2025. Specifically, G&W noted that the absence of a clearly defined ERM oversight assignment — either to the Audit Committee, the Risk Committee, or shared between the two — creates ambiguity regarding the Board's overall approach to enterprise risk governance. G&W further observed that best practice for insurance holding companies, given the complexity and interrelatedness of insurance risks, is to assign ERM oversight responsibility either to the Audit Committee, to the Risk Committee, or to a shared arrangement between the two, with a clearly documented coordination protocol.
The Apex Report corroborates this observation, noting that 12 of 14 peer companies have explicitly assigned ERM oversight responsibility in at least one committee charter, and 8 of 14 have adopted a shared oversight model with a defined coordination protocol between the audit and risk committees.
Recommendation: Add an explicit ERM oversight provision to the Audit Committee Charter, designating the Audit Committee as a co-steward (together with the Risk Committee) of enterprise risk management oversight. The provision should include a defined coordination protocol between the Audit Committee and the Risk Committee (currently chaired by Raymond T. Huerta) that specifies the respective roles of each committee, establishes regular information-sharing mechanisms (e.g., joint sessions or cross-reporting), and addresses specific areas of overlapping jurisdiction such as financial reporting risk, reserving adequacy, internal control effectiveness, and regulatory examination findings. The corresponding Risk Committee Charter should include a mirror provision, as discussed in Section III.D below.
3. Gap: Missing Clawback-Policy Administration Language
Classification: Compliance Gap
In October 2022, the SEC adopted Rule 10D-1, which required the national securities exchanges to adopt listing standards mandating that listed companies adopt and comply with a written clawback policy for the recovery of erroneously awarded incentive-based compensation in the event of an accounting restatement. The NYSE adopted Rule 303A.14 in implementation of this requirement, with compliance required by October 2, 2023. QIH adopted a clawback policy in compliance with these requirements. However, the administration of that policy must be assigned to a Board committee, and the responsible committee's charter should reflect this administrative authority and responsibility.
The current Audit Committee Charter contains no reference whatsoever to clawback-policy administration. It does not designate the Audit Committee — or any other committee — as the body responsible for administering the clawback policy. It does not grant the Audit Committee authority to determine when recovery of erroneously awarded compensation is required. It does not describe the committee's role in overseeing the implementation of clawback determinations. This is a direct compliance gap relative to current NYSE listing standards, which contemplate that the administering committee's charter will reflect its clawback-related responsibilities.
We note that the Compensation & Human Capital Committee Charter also lacks clawback-related provisions, and the allocation of clawback administration responsibility between the Audit Committee and the Compensation Committee is a matter for the Board to determine. However, given that clawback determinations are triggered by accounting restatements and require an analysis of the financial reporting implications, the prevailing practice among listed companies — and the approach recommended by C&H — is to designate the Audit Committee as the primary administering body, with the Compensation Committee serving in an advisory capacity with respect to compensation-design aspects.
Recommendation: Add provisions to the Audit Committee Charter designating the Audit Committee as the body responsible for administering the Company's clawback policy adopted pursuant to SEC Rule 10D-1 and NYSE Rule 303A.14. The provisions should grant the Audit Committee authority to: (a) determine when a restatement triggers the clawback policy; (b) calculate the amount of erroneously awarded incentive-based compensation subject to recovery; (c) determine whether any exceptions to recovery apply (e.g., impracticability exceptions under the rule); (d) oversee the implementation of recovery, including the method and timing of recovery; and (e) report to the full Board on clawback determinations and their implementation. Corresponding advisory-role language should be added to the Compensation & Human Capital Committee Charter.
4. Gap: Annual Self-Evaluation Provision Missing
Classification: Compliance Gap
Section 303A.09 of the NYSE Listed Company Manual requires that the audit committee, compensation committee, and nominating/governance committee of a listed company each conduct an annual self-evaluation. The 2024 amendments to Section 303A further clarified the NYSE's expectations regarding the process and substance of committee self-evaluations, including the expectation that the evaluation address the committee's performance, the adequacy of the committee's charter, and the committee's effectiveness in fulfilling its responsibilities.
The current Audit Committee Charter does not include any provision requiring the committee to conduct an annual self-evaluation. This is a compliance deficiency under current NYSE listing standards.
Recommendation: Add a mandatory annual self-evaluation provision to the Audit Committee Charter. The provision should require the committee to conduct, on at least an annual basis, a self-evaluation of its performance, effectiveness, and the adequacy of its charter, and to report the results of such evaluation to the Nominating & Corporate Governance Committee and/or the full Board. The provision should specify that the self-evaluation may be conducted through questionnaires, interviews, facilitated discussions, or other methods as the committee deems appropriate, and that the committee may engage external advisors to assist with the evaluation process.
5. Gap: Insufficient Independence and Financial-Expert Qualification Language
Classification: Best Practice Gap (trending toward Compliance Gap)
The current Charter's provisions regarding committee member independence requirements and the definition of "audit committee financial expert" were drafted in 2016 and do not reflect the 2024 amendments to NYSE Section 303A. While the substantive requirements of independence and financial expertise have not fundamentally changed, the 2024 amendments refined certain definitional elements and introduced enhanced procedural requirements regarding the Board's determination of independence and financial expertise.
Dr. Lilian Fong-Archer qualifies as an "audit committee financial expert" under both SEC rules (Item 407(d)(5) of Regulation S-K) and NYSE standards, by virtue of her prior service as Chief Financial Officer of Pinehurst Financial Group, Inc. and her extensive experience in financial reporting and auditing matters. However, the Charter's definitional language for the "audit committee financial expert" designation has not been updated to conform to the current regulatory formulation, and the Charter does not adequately describe the Board's process for making the independence and financial-expertise determinations.
Recommendation: Conform the Charter's independence requirements and financial-expert qualification definitions to the current NYSE standards, including the 2024 amendments. Update the definitional language to reflect the current SEC and NYSE formulations. Add procedural language requiring that the Board's independence and financial-expertise determinations be made annually and documented in the proxy statement.
6. Gap: Coordination Protocol with Risk Committee
Classification: Best Practice Gap
As noted in connection with the ERM oversight gap (Section III.A.2 above), there is no formal protocol for information-sharing or coordination between the Audit Committee and the Risk Committee. Both committees have overlapping interests in several critical areas, including but not limited to: enterprise risk management; reserving adequacy and actuarial assumptions; internal controls over financial reporting; regulatory examination findings from the Connecticut, Texas, and Ohio departments of insurance; and cybersecurity risk (to the extent that it affects financial reporting and internal controls).
The absence of a coordination protocol creates a risk of both duplicative effort and gaps in oversight. In the insurance context, where financial reporting is intimately connected to risk management (e.g., loss reserve estimates are both a financial reporting judgment and a risk management output), the failure to establish a formal coordination mechanism is particularly concerning.
Recommendation: Add an inter-committee coordination provision to the Audit Committee Charter, establishing formal mechanisms for information-sharing and coordination between the Audit Committee and the Risk Committee. Recommended mechanisms include: (a) at least two joint sessions per year between the Audit Committee and the Risk Committee; (b) standing invitation for the Risk Committee Chair (currently Raymond T. Huerta) to attend Audit Committee sessions addressing ERM, reserving, or regulatory matters; (c) quarterly cross-reporting on areas of mutual interest; and (d) a defined escalation protocol for matters that fall within the jurisdiction of both committees. A corresponding provision should be added to the Risk Committee Charter.
7. Additional Observations
In addition to the gaps identified above, C&H notes the following observations regarding the Audit Committee Charter that, while not rising to the level of formal gap findings, merit attention during the restatement process:
Whistleblower / Complaint-Handling Procedures. The current Charter references the Audit Committee's responsibility for establishing procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal controls, or auditing matters, including the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. However, the Charter references these procedures in summary fashion without detailing the substantive elements of the complaint-handling process. During the restatement, we recommend expanding this provision to describe the committee's oversight role with greater specificity, including the committee's authority to investigate complaints, retain outside advisors in connection with investigations, and report findings to the full Board.
Oversight of Internal Audit Function. The current Charter adequately addresses the Audit Committee's oversight of the internal audit function, led by Chief Audit Executive Renata M. Vásquez. However, the Charter could be strengthened by adding explicit language regarding the functional reporting line of the Chief Audit Executive to the Audit Committee (as distinct from the administrative reporting line to the Chief Financial Officer), and by specifying the committee's role in the appointment, termination, and compensation of the Chief Audit Executive and in reviewing and approving the annual internal audit plan.
B. Compensation & Human Capital Committee Charter
1. Current State
The Compensation & Human Capital Committee Charter was originally adopted on February 12, 2016 and was amended on June 14, 2021. The 2021 amendment was principally directed at adding "Human Capital" to the committee name, reflecting the Board's recognition of the growing importance of human-capital-management oversight as a board-level responsibility. However, as discussed below, the 2021 amendment did not add substantive provisions regarding human-capital-management oversight, resulting in a gap between the committee's expanded nomenclature and the scope of its charter-defined responsibilities.
The committee is currently chaired by Claudia M. Severin, an independent director who serves as Chief Executive Officer of Broadpath Talent Advisors, LLC. Ms. Severin has served on the QIH Board since 2021 and brings significant expertise in executive compensation, talent management, and human capital strategy. The committee's primary responsibilities, as currently described in the Charter, include determining the compensation of the Chief Executive Officer, reviewing and approving the compensation of other executive officers, overseeing the Company's equity compensation plans, and advising the Board on director compensation matters.
2. Gap: Missing Authority to Retain Independent Compensation Consultants Without Further Board Approval
Classification: Compliance Gap
Section 303A.05 of the NYSE Listed Company Manual requires that compensation committees of listed companies have the sole authority to retain and terminate compensation consultants, legal counsel, and other advisors, and the sole authority to approve fees and other retention terms for such advisors. This authority is to be exercised by the committee in its sole discretion, without the requirement of further Board approval. The purpose of this requirement is to ensure the independence of the compensation committee's advisory resources and to avoid potential conflicts of interest that could arise if the full Board — which includes management directors — were required to approve the committee's engagement of outside advisors.
The current Charter is directly inconsistent with this NYSE requirement. As currently drafted, the Charter provides that the committee must obtain the approval of the full Board before engaging independent compensation consultants. This language was likely included in the original 2016 Charter as a general governance safeguard but has the effect of contravening the NYSE's mandate of sole committee authority over advisor retention. The 2021 amendment to the Charter did not address this issue.
This is a compliance gap that requires prompt remediation. We note that the Company has in practice engaged compensation consultants at the direction of the Compensation Committee, and we are not aware of any instance in which the Board has declined to approve a committee request for consultant engagement. Nevertheless, the Charter language as written does not conform to current NYSE listing requirements.
Recommendation: Amend the Charter to grant the Compensation & Human Capital Committee the sole authority to retain, terminate, and set fees for independent compensation consultants, legal counsel, and other advisors, without the requirement of further Board approval. The revised language should track the formulation of NYSE Section 303A.05 and should specify that the Company shall provide appropriate funding, as determined by the committee, for payment of reasonable compensation to any such advisors. The provision should also include language addressing the committee's obligation to assess the independence of any compensation consultant, legal counsel, or other advisor engaged by the committee, consistent with NYSE requirements.
3. Gap: Substantive Human-Capital-Management Oversight Language Absent
Classification: Best Practice Gap
As noted above, the 2021 amendment to the Charter added "Human Capital" to the committee name but did not add substantive provisions regarding the committee's role in overseeing human-capital-management ("HCM") matters. The result is a significant disparity between the committee's name — which signals to investors and other stakeholders that the committee exercises board-level oversight of human capital — and the actual scope of the committee's charter-defined responsibilities, which remain limited to executive compensation, equity plans, and director compensation.
The current Charter lacks provisions addressing the following HCM areas that are increasingly expected components of compensation committee or human capital committee oversight:
• Workforce strategy and planning, including workforce composition, skills development, and labor market dynamics
• Diversity, equity, and inclusion ("DEI") strategy and metrics, including Board-level oversight of the Company's DEI goals, programs, and progress
• Talent development and succession planning below the C-suite level (the Charter addresses CEO succession planning but does not extend to the broader leadership pipeline)
• Employee engagement, retention, and workplace culture, including review of employee survey results and attrition data
• Total rewards philosophy and strategy, including the alignment of compensation programs with workforce recruitment and retention objectives
• Pay equity analysis and reporting
The Apex Report notes that 10 of 14 peer companies have adopted substantive HCM oversight provisions in their compensation committee charters, and 7 of 14 have added specific DEI oversight language. The Veltrano Letter, while focused on governance modernization generally, includes language regarding the importance of human capital disclosure and oversight that is consistent with the expectation that the Company's governance documents will reflect meaningful HCM oversight responsibilities.
Recommendation: Add comprehensive human-capital-management oversight provisions to the Charter. The provisions should describe the committee's role in overseeing the Company's HCM strategy, reviewing workforce metrics and trends, overseeing DEI initiatives, reviewing talent development and succession planning programs, and receiving periodic reports from management on employee engagement and workplace culture. The provisions should be drafted to establish an oversight role appropriate to the Board level, without encroaching on management's operational responsibilities for day-to-day HCM matters.
4. Gap: Annual Self-Evaluation Provision Missing
Classification: Compliance Gap
As with the Audit Committee Charter, the Compensation & Human Capital Committee Charter does not include a provision requiring the committee to conduct an annual self-evaluation. This is a compliance deficiency under NYSE Section 303A.09, which requires that the compensation committee of a listed company conduct an annual performance evaluation.
Recommendation: Add a mandatory annual self-evaluation provision to the Charter, consistent with the approach described in Section III.A.4 above for the Audit Committee. The provision should require the committee to evaluate its performance, effectiveness, and the adequacy of its charter on at least an annual basis and to report the results to the Nominating & Corporate Governance Committee and/or the full Board.
5. Gap: Compensation Risk Assessment
Classification: Best Practice Gap
The Charter does not explicitly require the committee to oversee an annual assessment of whether the Company's compensation policies and practices create risks that are reasonably likely to have a material adverse effect on the Company. Item 402(s) of SEC Regulation S-K requires disclosure in the annual proxy statement regarding the Company's compensation-related risk assessment, and best practice — as reflected in peer company charters and proxy advisory firm expectations — is for the compensation committee charter to explicitly assign the committee responsibility for overseeing this assessment.
In the insurance context, compensation risk assessment is particularly important given the potential for compensation structures to incentivize excessive risk-taking in underwriting, reserving, and claims management. The alignment of incentive compensation with prudent risk management is a matter of regulatory interest to state insurance departments as well as to investors and proxy advisory firms.
Recommendation: Add a provision to the Charter requiring the committee to oversee, on at least an annual basis, an assessment of the Company's compensation policies and practices, including those applicable to employees below the executive-officer level, to determine whether such policies and practices create risks that are reasonably likely to have a material adverse effect on the Company. The provision should require the committee to receive a report from management on the results of the assessment and to discuss the findings with the full Board as appropriate. The committee should also coordinate with the Risk Committee regarding the integration of compensation risk into the Company's broader enterprise risk management framework.
6. Additional Observations
CEO Compensation-Setting Process. The current Charter's description of the committee's role in setting CEO compensation is adequate in its current form. However, the provisions addressing non-CEO executive officer compensation could be clarified to more precisely delineate the committee's approval authority, the role of the CEO in making recommendations regarding the compensation of other officers, and the committee's process for reviewing and approving individual compensation actions.
Clawback Policy Administration. As discussed in Section III.A.3 above in connection with the Audit Committee Charter, the allocation of clawback policy administration responsibility requires clarification. We recommend that primary administration responsibility reside with the Audit Committee, given the financial-reporting nexus of clawback determinations. However, the Compensation Committee should play an advisory role with respect to the compensation-design aspects of clawback policy administration, including the identification of incentive-based compensation subject to the policy, the assessment of any hardship or impracticability exceptions, and the design of future compensation arrangements in light of clawback considerations. Appropriate advisory-role language should be included in the Compensation & Human Capital Committee Charter.
C. Nominating & Corporate Governance Committee Charter
1. Current State
The Nominating & Corporate Governance Committee Charter (the "Nom/Gov Charter") was originally adopted on February 12, 2016 and was amended once on March 20, 2019. Notably, this Charter has not been amended since 2019, predating the 2021 amendments to the Audit Committee and Compensation Committee charters. As a result, the Nom/Gov Charter is the least current of the three charters specifically identified in NYSE Section 303A (the audit committee, compensation committee, and nominating/corporate governance committee charters are each subject to specific NYSE content requirements).
The committee is currently chaired by Arthur J. Pennington, who also serves as the Lead Independent Director of the Board. Mr. Pennington is a retired partner of Mercer-Bexley Advisory Partners, has served on the QIH Board since 2017, and brings deep experience in corporate governance, mergers and acquisitions, and fiduciary matters. The Nom/Gov Committee's current charter-defined responsibilities include director nominations, Board composition and structure, corporate governance guidelines, and director independence determinations.
2. Gap: ESG / Sustainability Oversight Not Addressed
Classification: Best Practice Gap
The Nom/Gov Charter contains no reference to environmental, social, or governance ("ESG") oversight, sustainability matters, or the Company's corporate responsibility practices. In the current governance landscape, the allocation of ESG oversight to a specific Board committee — most commonly the nominating and corporate governance committee — has become a widely adopted practice among publicly traded companies, particularly those in industries with significant ESG exposure.
The Veltrano Letter, dated June 18, 2025, specifically urged the Company to enhance its governance documentation and disclosure practices, which contextually includes the formal assignment of ESG oversight responsibilities. Veltrano, holding approximately 8.3% of the Company's outstanding common stock, is one of QIH's largest institutional shareholders, and its engagement on governance matters warrants serious consideration.
Additionally, Westbrook Fiduciary Trust Company, through Elisa N. Fujimoto, Director of ESG & Governance, has expressed support for governance modernization including enhanced ESG transparency. Westbrook holds approximately 5.7% of the Company's outstanding common stock, and together with Veltrano, these two institutional shareholders control approximately 14.0% of the Company's outstanding shares. Their shared interest in ESG governance is significant and should be reflected in the Company's governance documentation.
The Apex Report confirms that 12 of 14 peer companies have assigned ESG oversight responsibilities to a specific Board committee, with 9 of 14 assigning this responsibility to the nominating and corporate governance committee and 3 of 14 establishing a dedicated ESG or sustainability subcommittee.
Recommendation: Add ESG and sustainability oversight responsibilities to the Nom/Gov Charter. The provisions should describe the committee's role in overseeing the Company's ESG strategy, receiving periodic reports from management on ESG initiatives and performance, reviewing the Company's ESG reporting and disclosures (including any sustainability report or ESG metrics included in the annual proxy statement), and overseeing the Company's stakeholder engagement activities on ESG matters. The provision should be drafted to establish an oversight framework that is adaptable to evolving regulatory requirements and stakeholder expectations regarding ESG disclosure and performance.
3. Gap: Director Skills-Matrix Requirement Absent
Classification: Best Practice Gap
The current Nom/Gov Charter does not require the committee to develop, maintain, or periodically review a director skills matrix or competency framework. A director skills matrix is a governance tool that maps the skills, qualifications, experiences, and demographic attributes of individual directors against the Board's identified needs, enabling the committee to assess the overall composition of the Board and to identify gaps that should be addressed through the director recruitment and nomination process.
The use of a skills matrix has become a standard governance practice among publicly traded companies and is expected by institutional investors and proxy advisory firms. The Apex Report notes that 13 of 14 peer companies disclose a director skills matrix in their annual proxy statement, and 11 of 14 reference the skills matrix requirement in their nominating committee charter. Both Veltrano (approximately 8.3% of outstanding shares) and Westbrook (approximately 5.7% of outstanding shares) have indicated, through their respective governance engagement activities, that they expect the Company to adopt and disclose a director skills matrix.
Recommendation: Add a provision to the Nom/Gov Charter requiring the committee to develop and annually review a board skills matrix that identifies the skills, qualifications, experiences, and attributes that the Board considers important to its effectiveness, maps individual directors against these criteria, and identifies gaps to be addressed through the nomination and director recruitment process. The skills matrix should be disclosed in the annual proxy statement, consistent with peer practice.
4. Gap: Shareholder-Engagement Protocol Not Referenced
Classification: Best Practice Gap
The Nom/Gov Charter does not include any provision addressing structured engagement between the Board and the Company's significant shareholders on governance matters. Shareholder engagement has become a critical component of corporate governance, and the formalization of engagement protocols — specifying which directors are available for engagement, the frequency and format of engagement, and the topics appropriate for Board-level shareholder dialogue — is increasingly expected by institutional investors.
The Veltrano Letter specifically requested the establishment of a formal shareholder engagement protocol that would provide significant shareholders with a structured opportunity to discuss governance matters with independent directors. Veltrano's Mr. Blackwood has indicated through informal channels that Veltrano values proactive engagement and considers the absence of a formal engagement protocol to be a governance deficiency.
Westbrook's Ms. Fujimoto has similarly expressed interest in formalized engagement mechanisms, noting that Westbrook's governance team prefers to engage directly with independent directors rather than solely through management on matters of governance significance.
Recommendation: Add a shareholder-engagement protocol provision to the Nom/Gov Charter. The provision should specify that the Lead Independent Director (currently Arthur J. Pennington) and the Nom/Gov Committee Chair (if different from the Lead Independent Director) shall be available for engagement with holders of three percent (3%) or more of the Company's outstanding common stock on matters of corporate governance significance. The provision should address the frequency and format of engagement opportunities (e.g., annual off-season engagement program), the topics appropriate for Board-level shareholder dialogue, and the committee's role in reviewing shareholder feedback and incorporating it into governance deliberations. Management (through the General Counsel and/or the Head of Investor Relations) should continue to serve as the initial point of contact for shareholder governance inquiries, with escalation to the Lead Independent Director as appropriate.
5. Gap: Board-Refreshment Provisions
Classification: Best Practice Gap
The Nom/Gov Charter does not address board refreshment policies, including mandatory retirement age, tenure limits for independent directors, or overboarding policies (limits on the number of public-company boards on which a director may serve). These matters are properly addressed in the Corporate Governance Guidelines rather than in the Nom/Gov Charter, but the Charter should cross-reference the relevant provisions of the Guidelines to ensure completeness and to signal the committee's role in overseeing compliance with these policies.
We understand from discussions with the Office of the General Counsel that the Company is considering the following amendments to its Corporate Governance Guidelines in connection with the governance overhaul project:
• Mandatory Retirement Age: Adoption of a mandatory retirement age of 75 for all directors
• Tenure Limit: Adoption of a 15-year tenure limit for independent directors, subject to waiver by the Board upon recommendation of the Nom/Gov Committee in extraordinary circumstances
• Overboarding Policy: Independent directors limited to service on no more than four (4) total public-company boards, including QIH; the CEO limited to no more than two (2) total public-company boards, including QIH
Recommendation: Upon adoption of the foregoing Corporate Governance Guidelines amendments, add cross-references to the Nom/Gov Charter establishing the committee's responsibility for administering and overseeing compliance with the mandatory retirement age, tenure limit, and overboarding policies. The Charter should specify the committee's authority to recommend waivers to the full Board in appropriate circumstances and should require the committee to monitor director service on other public-company boards on an ongoing basis.
6. Gap: Majority Voting Standard
Classification: Best Practice Gap
The current Nom/Gov Charter references a plurality voting standard for uncontested director elections. We understand that the Company is considering an amendment to its Corporate Governance Guidelines that would adopt a majority voting standard for uncontested director elections, which is the prevailing standard among large-capitalization publicly traded companies and is expected by institutional investors and proxy advisory firms.
Under a majority voting standard, a director nominee in an uncontested election must receive a majority of the votes cast (i.e., the number of shares voted "for" the nominee must exceed the number of shares voted "against" the nominee) in order to be elected. A director who fails to receive a majority of votes cast is typically required to tender a resignation, which the Board (acting through the Nom/Gov Committee) considers and determines whether to accept or reject.
Recommendation: Update the Nom/Gov Charter language to reflect the majority voting standard upon its adoption in the Corporate Governance Guidelines and/or the Bylaws. The Charter should describe the committee's role in establishing the procedures for director resignation tenders, evaluating tendered resignations, and recommending to the full Board whether to accept or reject such resignations. The provision should include a timeline for the Board's consideration and public disclosure of its decision regarding any tendered resignation.
7. Gap: Annual Self-Evaluation Provision Missing
Classification: Compliance Gap
Consistent with the deficiency identified in the Audit Committee and Compensation Committee charters, the Nom/Gov Charter does not include a provision requiring the committee to conduct an annual self-evaluation. This is a compliance deficiency under NYSE Section 303A.09.
Recommendation: Add a mandatory annual self-evaluation provision, consistent with the approach described in Section III.A.4 above.
D. Risk Committee Charter
1. Current State
The Risk Committee Charter was originally adopted on February 12, 2016 and has never been subsequently amended. It is the only Charter among the five that has received no updates whatsoever in nearly ten years of the Company's existence as a public company. This is a notable fact in light of the significant evolution of risk management practices, regulatory expectations, and the Company's own risk profile during this period.
The committee is currently chaired by Raymond T. Huerta, an independent director who previously served as a state insurance commissioner. Mr. Huerta has served on the QIH Board since 2020 and brings regulatory and risk management expertise that is highly relevant to the committee's oversight responsibilities. The Risk Committee's current charter-defined responsibilities, as originally established in 2016, address risk oversight in general and relatively abstract terms, without the specificity that would be expected of a risk committee charter for a multi-line insurance holding company operating regulated subsidiaries in multiple states.
2. Gap: Absence of Insurance-Specific Risk Categories
Classification: Best Practice Gap (with compliance implications)
The current Risk Committee Charter addresses risk oversight in generic terms that would be applicable to any publicly traded company, without referencing the insurance-specific risk categories that are critical to the governance of an insurance holding company. Specifically, the Charter does not mention or address the following risk categories that are fundamental to QIH's business:
• Reserving Risk: The risk that the Company's loss reserves, including both case reserves and incurred-but-not-reported ("IBNR") reserves, are inadequate to cover ultimate claims liabilities
• Reinsurance Risk: The risk that the Company's reinsurance counterparties are unable to fulfill their obligations, or that the Company's reinsurance program is inadequate to protect against adverse loss experience
• Catastrophe Exposure: The risk of loss from natural or man-made catastrophic events, including hurricanes, earthquakes, wildfires, and other perils, particularly relevant to Quorum Property & Casualty Insurance Company and Lone Star Specialty Insurance Company
• Underwriting Risk: The risk that the Company's underwriting practices result in inadequate pricing, adverse selection, or excessive exposure concentration
• Claims Management Risk: The risk of deficiencies in claims investigation, adjustment, settlement, and litigation management processes, including the risk of claims settlements exceeding authorized thresholds
The absence of insurance-specific risk language is particularly concerning in light of the G&W Management Letter's observation that Lone Star Specialty Insurance Company's claims-settlement authorities were found to be exceeding Board-authorized thresholds during FY 2024. Specifically, G&W noted instances in which claims settlements at Lone Star Specialty reached $3.0 million per occurrence, compared to the Board-authorized threshold of $1.0 million per occurrence established in the DOA Matrix. This observation underscores the need for explicit charter language that assigns the Risk Committee oversight responsibility for insurance-specific risk categories and for the monitoring of subsidiary compliance with Board-authorized risk and authority limits.
QIH's three regulated insurance subsidiaries — Quorum Property & Casualty Insurance Company (domiciled in Connecticut, NAIC No. 38472), Lone Star Specialty Insurance Company (domiciled in Texas, NAIC No. 41359), and Great Lakes Surety & Indemnity Co. (domiciled in Ohio, NAIC No. 29814) — generate complex and interconnected risk profiles that warrant explicit charter reference. The Risk Committee should have a clear mandate to oversee these risks at the holding-company level, with regular reporting from subsidiary-level chief risk officers and from the Chief Compliance Officer, Ivan D. Pruett.
Recommendation: Add enumerated insurance-specific risk categories to the Risk Committee Charter, with a description of the committee's oversight role for each category. Require regular reporting from subsidiary chief risk officers and from the Chief Compliance Officer regarding each risk category. Establish a protocol for the committee to review and approve key risk parameters, such as aggregate catastrophe exposure limits, reinsurance program structure, and reserving methodology, on at least an annual basis. Include specific language regarding the committee's responsibility to monitor subsidiary compliance with Board-authorized risk and authority limits, including claims-settlement authorities.
3. Gap: No Coordination Protocol with Audit Committee
Classification: Best Practice Gap
As discussed in Section III.A.6 above in connection with the Audit Committee Charter, there is no formal mechanism for coordination between the Risk Committee and the Audit Committee, despite significant overlapping responsibilities. This gap is of equal concern when viewed from the Risk Committee perspective. The Risk Committee's oversight of enterprise risk, insurance risk, and regulatory compliance risk necessarily intersects with the Audit Committee's oversight of financial reporting, internal controls, and compliance with financial regulatory requirements.
Recommendation: Add an inter-committee coordination provision to the Risk Committee Charter, mirroring the provision to be added to the Audit Committee Charter. The provision should establish regular joint sessions, cross-reporting mechanisms, and an escalation protocol for matters that fall within the jurisdiction of both committees.
4. Gap: No Coordination Protocol with Proposed Technology & Cybersecurity Oversight Committee
Classification: Enhancement Opportunity
If the Board adopts C&H's recommendation to establish a new Technology & Cybersecurity Oversight Committee (as discussed in Section V below), the Risk Committee Charter should include a coordination protocol with that committee. Technology risk and cybersecurity risk are components of the Company's broader enterprise risk profile, and the Risk Committee should have visibility into the Technology & Cybersecurity Oversight Committee's findings and activities. Similarly, the new committee will benefit from understanding the Risk Committee's view of how technology and cybersecurity risks fit within the enterprise risk management framework.
Recommendation: Add a forward-looking coordination provision to the Risk Committee Charter, to become operative upon the establishment of the Technology & Cybersecurity Oversight Committee. The provision should address information-sharing regarding technology risk, cyber risk, and operational resilience, and should establish regular reporting between the two committees.
5. Gap: Regulatory and Compliance Risk Oversight
Classification: Best Practice Gap
The current Risk Committee Charter does not explicitly address the committee's role in overseeing regulatory compliance risk across the multiple state insurance jurisdictions in which QIH's regulated subsidiaries operate. QIH's insurance subsidiaries are subject to comprehensive regulation by the Connecticut Department of Insurance (the domestic regulator of Quorum Property & Casualty Insurance Company), the Texas Department of Insurance (the domestic regulator of Lone Star Specialty Insurance Company), and the Ohio Department of Insurance (the domestic regulator of Great Lakes Surety & Indemnity Co.), as well as the insurance regulatory authorities of each additional state in which these subsidiaries are licensed to conduct business.