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Variable Interest Entity and Noncontrolling Interests

12 Months Ended

Dec. 31, 2023

Variable Interest Entity and Noncontrolling Interest Disclosure [Abstract]

Variable Interest Entity and Noncontrolling Interests

Somers Holdings Ltd.

In March 2014, the Company invested $100 million and acquired 2,500,000 common shares of Somers. Somers was considered a VIE and the Company concluded that it was the primary beneficiary of Somers. In the 2020 fourth quarter, Arch Capital, Somers and Greysbridge, a wholly-owned subsidiary of Arch Capital, entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”). The merger and the related Greysbridge equity financing closed on July 1, 2021. Effective July 1, 2021, Somers is wholly owned by Greysbridge, and Greysbridge is owned 40% by the Company, 30% by certain investment funds managed by Kelso and 30% by certain investment funds managed by Warburg. Based on the governing documents of Greysbridge, the Company concluded that, while it retains significant influence over Somers, Somers no longer constitutes a variable interest entity. Accordingly, effective July 1, 2021, the Company no longer consolidates the results of Somers in its consolidated financial statements and footnotes. The Company classifies its investment as ‘investments in operating affiliates’ on the Company’s balance sheets and is accounted for under the equity method.

The following table summarizes Somers’ cash flow from operating, investing and financing activities.

			Year Ended December 31,
			2023						2022						2021
Total cash provided by (used for):
Operating activities			—						—						47
Investing activities			—						—						96
Financing activities			—						—						(2)

Redeemable noncontrolling interests

The following table sets forth activity in the redeemable noncontrolling interests:

			December 31,
			2023						2022						2021
Balance, beginning of year			$	11					$	9					$	58
Impact of deconsolidation of Somers			—						—						(49)
Other			(9)						2						—
Balance, end of year			$	2					$	11					$	9

The portion of income or loss attributable to third party investors is recorded in the consolidated statements of income in ‘net (income) loss attributable to noncontrolling interests’ as summarized in the table below:

			December 31,
			2023						2022						2021
Amounts attributable to non-redeemable noncontrolling interests			$	—					$	—					$	(78)
Amounts attributable to redeemable noncontrolling interests			1						(6)						(4)
Net (income) loss attributable to noncontrolling interests			$	1					$	(6)					$	(82)

Bellemeade Re

The Company has entered into aggregate excess of loss mortgage reinsurance agreements with various special purpose reinsurance companies domiciled in Bermuda (the “Bellemeade Agreements”). At the time the Bellemeade Agreements were entered into, the applicability of the accounting guidance that addresses VIEs was evaluated. As a result of the evaluation of the Bellemeade Agreements, the Company concluded that these entities are VIEs. However, given that the ceding insurers do not have the unilateral power to direct those activities that are significant to their economic performance, the Company does not consolidate such entities in its consolidated financial statements. The reinsurance premium paid in regard to the Bellemeade Agreements is calculated by multiplying the outstanding reinsurance coverage amount at the beginning of the period by the coupon rate, which is the SOFR plus a contractual risk margin, less the actual investment income collected during the preceding month on the assets included in the underlying reinsurance trusts. In the event the assets included in the underlying reinsurance trusts (became severely impaired or worthless and the special purpose reinsurance companies were unable to meet their future obligations, the Company’s mortgage insurance subsidiaries would be liable to fulfill claim payments to policyholders. The Company’s maximum exposure to loss associated with these VIEs is determined as the amount of mortgage insurance claim payments on the insured policies, net of aggregate reinsurance payments previously received, up to the full aggregate excess of loss reinsurance coverage amounts.

			December 31, 2023												December 31, 2022
Bellemeade Entities  (Issue Date)			Total VIE Assets																								Coverage Remaining from Reinsurers (1)						Total VIE Assets
2017-1 Ltd. (Oct-17)			$	—																							$	—					$	37
2018-1 Ltd. (Apr-18) (2)			—																								—						90
2018-3 Ltd. (Oct-18)			—																								—						199
2019-1 Ltd. (Mar-19)			71																								—						108
2019-2 Ltd. (Apr-19) (2)			—																								—						325
2019-3 Ltd. (Jul-19)			99																								—						223
2019-4 Ltd. (Oct-19) (2)			—																								—						266
2020-2 Ltd. (Sep-20) (2)			—																								—						105
2020-3 Ltd. (Nov-20) (2)			—																								—						244
2020-4 Ltd. (Dec-20) (2)			—																								—						98
2021-1 Ltd. (Mar-21) (2)			—																								—						467
2021-2 Ltd. (Jun-21) (2)			—																								—						458
2021-3 Ltd. (Sep-21)			429																								112						490
2022-1 Ltd. (Jan-22)			256																								26						284
2022-2 Ltd. (Sep-22)			201																								126						201
2023-1 Ltd. (Oct-23)			186																								47
Total			$	1,242																							$	311					$	3,595

(1) Coverage from a separate panel of reinsurers remaining at December 31, 2023.

(2) Agreements terminated in the 2023 fourth quarter.

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- Definition

Variable Interest Entity and Noncontrolling Interest Disclosure [Abstract]

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The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss, and the entire disclosure for noncontrolling interest in consolidated subsidiaries, which could include the name of the subsidiary, the ownership percentage held by the parent, the ownership percentage held by the noncontrolling owners, the amount of the noncontrolling interest, the location of this amount on the balance sheet (when not reported separately), an explanation of the increase or decrease in the amount of the noncontrolling interest, the noncontrolling interest share of the net Income or Loss of the subsidiary, the location of this amount on the income statement (when not reported separately), the nature of the noncontrolling interest such as background information and terms, the amount of the noncontrolling interest represented by preferred stock, a description of the preferred stock, and the dividend requirements of the preferred stock.

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