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Derivative Instruments | 9 Months Ended
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Sep. 30, 2014
Summary of Derivative Instruments [Abstract] |
Derivative Instruments | DERIVATIVE INSTRUMENTS The Company enters into derivative instruments such as futures, options, swaps, forward contracts and other derivative contracts primarily to manage its foreign currency exposure, obtain exposure to a particular financial market, for yield enhancement, or for trading and speculation. The Company accounts for its derivatives in accordance with FASB ASC Topic Derivatives and Hedging, which requires all derivatives to be recorded at fair value on the Company’s balance sheet as either assets or liabilities, depending on the rights or obligations of the derivatives, with changes in fair value reflected in current earnings. The Company does not currently apply hedge accounting in respect of any positions reflected in its consolidated financial statements. The Company’s derivative instruments are generally traded under International Swaps and Derivatives Association master agreements, which establish the terms of the transactions entered into with the Company’s derivative counterparties. In the event one party becomes insolvent or otherwise defaults on its obligations, a master agreement generally permits the non-defaulting party to accelerate and terminate all outstanding transactions and net the transactions’ marked-to-market values so that a single sum in a single currency will be owed by, or owed to, the non-defaulting party. Effectively, this contractual close-out netting reduces credit exposure from gross to net exposure. Where the Company has entered into master netting agreements with counterparties, or the Company has the legal and contractual right to offset positions, the derivative positions are generally netted by counterparty and are reported accordingly in other assets and other liabilities. The tables below show the gross and net amounts of recognized derivative assets and liabilities, including the location on the consolidated balance sheets and fair value of the Company’s principal derivative instruments:
|  | Derivative Assets |
| At September 30, 2014 | Gross Amounts of Recognized Assets |  | Gross Amounts Offset in the Balance Sheet |  | Net Amounts of Assets Presented in the Balance Sheet |  | Balance Sheet Location |  | Collateral |  | Net Amount |
| Interest rate futures | $ | 674 |  |  | 192 |  |  | $ | 482 |  |  | Other assets |  | $ | — |  |  | $ | 482 |  |
| Foreign currency forward contracts (1) | 6,449 |  |  | 519 |  |  | 5,930 |  |  | Other assets |  | — |  |  | 5,930 |  |
| Foreign currency forward contracts (2) | 1,916 |  |  | 454 |  |  | 1,462 |  |  | Other assets |  | — |  |  | 1,462 |  |
| Credit default swaps | 682 |  |  | 79 |  |  | 603 |  |  | Other assets |  | 570 |  |  | 33 |  |
| Call rights | 264 |  |  | — |  |  | 264 |  |  | Other assets |  | — |  |  | 264 |  |
| Total | $ | 9,985 |  |  | $ | 1,244 |  |  | $ | 8,741 |  |  |  |  | $ | 570 |  |  | $ | 8,171 |  |
|  | Derivative Liabilities |
| At September 30, 2014 | Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset in the Balance Sheet |  | Net Amounts of Liabilities Presented in the Balance Sheet |  | Balance Sheet Location |  | Collateral Pledged |  | Net Amount |
| Interest rate futures | $ | 195 |  |  | 192 |  |  | $ | 3 |  |  | Other liabilities |  | $ | 3 |  |  | $ | — |  |
| Foreign currency forward contracts (1) | 12,592 |  |  | 2,673 |  |  | 9,919 |  |  | Other liabilities |  | — |  |  | 9,919 |  |
| Foreign currency forward contracts (2) | 469 |  |  | 454 |  |  | 15 |  |  | Other liabilities |  | — |  |  | 15 |  |
| Credit default swaps | 97 |  |  | 79 |  |  | 18 |  |  | Other liabilities |  | — |  |  | 18 |  |
| Weather contract | 254 |  |  | — |  |  | 254 |  |  | Other liabilities |  | 254 |  |  | — |  |
| Total | $ | 13,607 |  |  | $ | 3,398 |  |  | $ | 10,209 |  |  |  |  | $ | 257 |  |  | $ | 9,952 |  |
(1) | Contracts used to manage foreign currency risks in underwriting and non-investment operations.
(2) | Contracts used to manage foreign currency risks in investment operations.
|  | Derivative Assets |
| At December 31, 2013 | Gross Amounts of Recognized Assets |  | Gross Amounts Offset in the Balance Sheet |  | Net Amounts of Assets Presented in the Balance Sheet |  | Balance Sheet Location |  | Collateral |  | Net Amount |
| Interest rate futures | $ | 897 |  |  | 62 |  |  | $ | 835 |  |  | Other assets |  | $ | — |  |  | $ | 835 |  |
| Foreign currency forward contracts (1) | 9,612 |  |  | 1,179 |  |  | 8,433 |  |  | Other assets |  | — |  |  | 8,433 |  |
| Foreign currency forward contracts (2) | 1,013 |  |  | 338 |  |  | 675 |  |  | Other assets |  | — |  |  | 675 |  |
| Credit default swaps | 806 |  |  | 82 |  |  | 724 |  |  | Other assets |  | 310 |  |  | 414 |  |
| Total | $ | 12,328 |  |  | $ | 1,661 |  |  | $ | 10,667 |  |  |  |  | $ | 310 |  |  | $ | 10,357 |  |
|  | Derivative Liabilities |
| At December 31, 2013 | Gross Amounts of Recognized Liabilities |  | Gross Amounts Offset in the Balance Sheet |  | Net Amounts of Liabilities Presented in the Balance Sheet |  | Balance Sheet Location |  | Collateral Pledged |  | Net Amount |
| Interest rate futures | $ | 74 |  |  | 62 |  |  | $ | 12 |  |  | Other liabilities |  | $ | 12 |  |  | $ | — |  |
| Foreign currency forward contracts (1) | 2,204 |  |  | 28 |  |  | 2,176 |  |  | Other liabilities |  | — |  |  | 2,176 |  |
| Foreign currency forward contracts (2) | 1,557 |  |  | 338 |  |  | 1,219 |  |  | Other liabilities |  | — |  |  | 1,219 |  |
| Credit default swaps | 94 |  |  | 82 |  |  | 12 |  |  | Other liabilities |  | — |  |  | 12 |  |
| Weather contract | 2,490 |  |  | — |  |  | 2,490 |  |  | Other liabilities |  | 2,490 |  |  | — |  |
| Total | $ | 6,419 |  |  | $ | 510 |  |  | $ | 5,909 |  |  |  |  | $ | 2,502 |  |  | $ | 3,407 |  |
(1) | Contracts used to manage foreign currency risks in underwriting and non-investment operations.
(2) | Contracts used to manage foreign currency risks in investment operations.
Refer to “Note 4. Investments” for information on reverse repurchase agreements. The location and amount of the gain (loss) recognized in the Company’s consolidated statements of operations related to its principal derivative instruments are shown in the following table:
|  | Location of gain (loss) recognized on derivatives |  | Amount of gain (loss) recognized on derivatives |
| Three months ended September 30, |  |  | 2014 |  | 2013 |
| Interest rate futures | Net realized and unrealized (losses) gains on investments |  | $ | (1,805 | ) |  | $ | 3,291 |  |
| Foreign currency forward contracts (1) | Net foreign exchange gains |  | (1,340 | ) |  | 11,388 |  |
| Foreign currency forward contracts (2) | Net foreign exchange gains |  | 8,827 |  |  | (5,016 | ) |
| Credit default swaps | Net realized and unrealized (losses) gains on investments |  | (72 | ) |  | 266 |  |
| Weather contract | Net realized and unrealized (losses) gains on investments |  | 9 |  |  | — |  |
| Call rights | Other (loss) income |  | (1,956 | ) |  | — |  |
| Other | Other (loss) income |  | — |  |  | 281 |  |
| Total |  |  | $ | 3,663 |  |  | $ | 10,210 |  |
|  | Location of gain (loss) recognized on derivatives |  | Amount of gain (loss) recognized on derivatives |
| Nine months ended September 30, |  |  | 2014 |  | 2013 |
| Interest rate futures | Net realized and unrealized (losses) gains on investments |  | $ | (21,441 | ) |  | $ | 23,496 |  |
| Foreign currency forward contracts (1) | Net foreign exchange gains |  | 769 |  |  | 512 |  |
| Foreign currency forward contracts (2) | Net foreign exchange gains |  | 7,486 |  |  | (3,670 | ) |
| Credit default swaps | Net realized and unrealized (losses) gains on investments |  | 386 |  |  | 992 |  |
| Weather contract | Net realized and unrealized (losses) gains on investments |  | 1,404 |  |  | — |  |
| Call rights | Other (loss) income |  | 264 |  |  | — |  |
| Other | Other (loss) income |  | — |  |  | 281 |  |
| Total |  |  | $ | (11,132 | ) |  | $ | 21,611 |  |
(1) | Contracts used to manage foreign currency risks in underwriting and non-investment operations.
(2) | Contracts used to manage foreign currency risks in investment operations.
The Company is not aware of the existence of any credit-risk related contingent features that it believes would be triggered in its derivative instruments that are in a net liability position at September 30, 2014. Interest Rate Futures The Company uses interest rate futures within its portfolio of fixed maturity investments to manage its exposure to interest rate risk, which can include increasing or decreasing its exposure to this risk. At September 30, 2014, the Company had $493.9 million of notional long positions and $566.6 million of notional short positions of primarily Eurodollar, U.S. treasury and non-U.S. dollar futures contracts (December 31, 2013 - $1,169.3 million and $356.6 million, respectively). The fair value of these derivatives is determined using exchange traded prices. Foreign Currency Derivatives The Company’s functional currency is the U.S. dollar. The Company writes a portion of its business in currencies other than U.S. dollars and may, from time to time, experience foreign exchange gains and losses in the Company’s consolidated financial statements. All changes in exchange rates, with the exception of non-monetary assets and liabilities, are recognized currently in the Company’s consolidated statements of operations. Underwriting Operations Related Foreign Currency Contracts The Company’s foreign currency policy with regard to its underwriting operations is generally to hold foreign currency assets, including cash, investments and receivables that approximate the foreign currency liabilities, including claims and claim expense reserves and reinsurance balances payable. When necessary, the Company may use foreign currency forward and option contracts to minimize the effect of fluctuating foreign currencies on the value of non-U.S. dollar denominated assets and liabilities associated with its underwriting operations. The fair value of the Company’s underwriting operations related foreign currency contracts is determined using indicative pricing obtained from counterparties or broker quotes. At September 30, 2014, the Company had outstanding underwriting related foreign currency contracts of $154.8 million in notional long positions and $193.1 million in notional short positions, denominated in U.S. dollars (December 31, 2013 - $263.6 million and $139.8 million, respectively). Investment Portfolio Related Foreign Currency Forward Contracts The Company’s investment operations are exposed to currency fluctuations through its investments in non-U.S. dollar fixed maturity investments, short term investments and other investments. To economically hedge its exposure to currency fluctuations from these investments, the Company has entered into foreign currency forward contracts. The fair value of the Company’s investment portfolio related foreign currency forward contracts is determined using an interpolated rate based on closing forward market rates. At September 30, 2014, the Company had outstanding investment portfolio related foreign currency contracts of $29.9 million in notional long positions and $150.0 million in notional short positions, denominated in U.S. dollars (December 31, 2013 - $39.6 million and $159.1 million, respectively). Credit Derivatives The Company’s exposure to credit risk is primarily due to its fixed maturity investments, short term investments, premiums receivable and reinsurance recoverable. From time to time, the Company purchases credit derivatives to hedge its exposures in the insurance industry, and to assist in managing the credit risk associated with ceded reinsurance. The Company also employs credit derivatives in its investment portfolio to either assume credit risk or hedge its credit exposure. The fair value of the credit derivatives is determined using industry valuation models, broker bid indications or internal pricing valuation techniques. The fair value of these credit derivatives can change based on a variety of factors including changes in credit spreads, default rates and recovery rates, the correlation of credit risk between the referenced credit and the counterparty, and market rate inputs such as interest rates. At September 30, 2014, the Company had outstanding credit derivatives of $5.0 million in notional long positions and $27.4 million in notional short positions, denominated in U.S. dollars (December 31, 2013 - $7.1 million and $18.4 million, respectively). Weather Contract The Company, from time to time, transacts in certain derivative-based risk management products that address weather-related risks. The fair value of these contracts is determined through the use of an internal valuation model with the inputs to the internal valuation model based on proprietary data as observable market inputs are not available. The most significant unobservable input is the potential payment that would become due to a counterparty following the occurrence of a triggering event as reported by an external agency. Generally, the Company’s portfolio of such derivatives is relatively small and such derivatives are frequently seasonal in nature. At September 30, 2014, the Company had an outstanding weather contract with an insurance company of $2.3 million in a notional short position (December 31, 2013 - $6.4 million). Call Rights The Company has an agreement with a counterparty that gives the counterparty the right to purchase shares the Company has in certain of its equity method investees at a price above the Company’s current carrying value for those investments. The agreement is considered a derivative for accounting purposes and the Company’s estimated fair value of the agreement is $0.3 million at September 30, 2014. The fair value is based on an internal valuation model which incorporates the estimated intrinsic value of the agreement, the time value of money, and the likelihood of the agreement being exercised and ultimately settled.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80748-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5618551-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624258-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708773-113959 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624177-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5580258-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 20: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 + Details
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