COMMITMENTS, CONTINGENCIES AND OTHER ITEMS

CONCENTRATION OF CREDIT RISK

Instruments which potentially subject the Company to concentration of credit risk consist principally of investments, including the Company’s equity method investments, cash, premiums receivable and reinsurance balances. The Company limits the amount of credit exposure to any one financial institution and, except for U.S. Government securities, none of the Company’s investments exceeded 10% of shareholders’ equity at December 31, 2014. See “Note 7. Reinsurance”, for information with respect to reinsurance recoverable.

EMPLOYMENT AGREEMENTS

The Board of Directors has authorized the execution of employment agreements between the Company and certain officers. These agreements provide for, among other things, severance payments under certain circumstances, as well as accelerated vesting of options and restricted stock grants, upon a change in control, as defined therein and under the terms of the Company’s 2001 Stock Incentive Plan, Premium Option Plan and 2010 Performance-Based Equity Incentive Plan.

LETTERS OF CREDIT AND OTHER COMMITMENTS

At December 31, 2014, the Company’s banks have issued letters of credit of approximately $624.9 million in favor of certain ceding companies, including the letter of credit facility with CEP noted below. In connection with the Company’s Top Layer Re joint venture, Renaissance Reinsurance has committed $37.5 million of collateral to support a letter of credit and is obligated to make a mandatory capital contribution of up to $50.0 million in the event that a loss reduces Top Layer Re’s capital and surplus below a specified level. The letters of credit are secured by cash and investments of similar amounts. The Company’s standby letter of credit facility contains certain financial covenants.

On April 26, 2010, Renaissance Reinsurance and CEP entered into a Pledge Agreement in respect of its letter of credit facility with CEP which is evidenced by the Master Reimbursement Agreement, dated as of April 29, 2009, and provides for the issuance and renewal of letters of credit which are used to support business written by Syndicate 1458. Letter of credit fees will be payable pursuant to the terms of the Reimbursement Agreement. At December 31, 2014, these letters of credit amounted to $300.0 million and £70.0 million, respectively. Pursuant to the Pledge Agreement, Renaissance Reinsurance has agreed to pledge and maintain certain securities with a collateral value equal to 75% of the aggregate amount of the then outstanding letters of credit. In respect of the 25% unsecured portion, Renaissance Reinsurance is required to comply with certain financial covenants, including maintaining a certain minimum financial strength rating, minimum net worth, and a maximum consolidated debt to capital ratio for the consolidated group. In the event Renaissance Reinsurance is unable to satisfy any of these financial covenants, it will be required to pledge additional collateral in respect of the unsecured portion.

PRIVATE EQUITY AND INVESTMENT COMMITMENTS

The Company has committed capital to private equity partnerships and other entities of $623.8 million, of which $544.1 million has been contributed at December 31, 2014. The Company’s remaining commitments to these funds at December 31, 2014 totaled $84.0 million. These commitments do not have a defined contractual commitment date.

INDEMNIFICATIONS AND WARRANTIES

In the ordinary course of its business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Company. Based on past experience, management currently believes that the likelihood of such an event is remote.

OPERATING AND CAPITAL LEASES

The Company leases office space under operating leases which expire at various dates through 2021. Future minimum lease payments under existing operating leases are expected to be as follows:




	Minimum lease payments
2015	$	6,184
2016	5,234
2017	2,321
2018	2,035
2019	1,455
After 2019	142
Future minimum lease payments under existing operating leases	$	17,371

The Company’s capital leases primarily relate to office space in Bermuda with an initial lease term of 20 years, ending in 2028, and a bargain renewal option for an additional 30 years. The future minimum lease payments of the Company’s capital leases are detailed below, and relate principally to the transaction noted above, excluding the bargain renewal option.




	Minimum lease payments
2015	$	3,017
2016	3,017
2017	2,417
2018	2,501
2019	2,661
After 2019	23,433
Future minimum lease payments under existing capital leases	$	37,046

LITIGATION

The Company and its subsidiaries are subject to lawsuits and regulatory actions in the normal course of business that do not arise from or directly relate to claims on reinsurance treaties or contracts or direct surplus lines insurance policies. This category of business litigation may involve allegations of underwriting or claims-handling errors or misconduct, employment claims, regulatory actions or disputes arising from the Company’s business ventures. The Company’s operating subsidiaries are subject to claims litigation involving, among other things, disputed interpretations of policy coverages. Generally, the Company’s direct surplus lines insurance operations are subject to greater frequency and diversity of claims and claims-related litigation than its reinsurance operations and, in some jurisdictions, may be subject to direct actions by allegedly injured persons or entities seeking damages from policyholders. These lawsuits, involving claims on policies issued by the Company’s subsidiaries which are typical to the insurance industry in general and in the normal course of business, are considered in its loss and loss expense reserves which are discussed in its loss reserves discussion. In addition, the Company may from time to time engage in litigation or arbitration related to its claims for payment in respect of ceded reinsurance, including disputes that challenge the Company’s ability to enforce its underwriting intent. Such matters could result, directly or indirectly, in providers of protection not meeting their obligations to the Company or not doing so on a timely basis. The Company may also be subject to other disputes from time to time, relating to operational or other matters distinct from insurance or reinsurance claims. Any litigation or arbitration, or regulatory process, contains an element of uncertainty, and the value of an exposure or a gain contingency related to a dispute is difficult to estimate accordingly. Currently, the Company believes that no individual litigation or arbitration to which it is presently a party is likely to have a material adverse effect on its financial condition, business or operations.

PLATINUM ACQUISITION

On November 24, 2014, the Company announced that RenaissanceRe and Platinum entered into a Merger Agreement under which RenaissanceRe will acquire Platinum. The transaction will benefit the combined companies’ clients through an expanded product offering and broker relationships and will accelerate the growth of the Company’s U.S. specialty and casualty reinsurance platform. The agreement has been unanimously approved by both companies’ Board of Directors and, if approved by Platinum shareholders, the transaction is expected to close on March 2, 2015. Platinum has scheduled a special meeting of shareholders to consider and vote upon the proposed acquisition and related matters on February 27, 2015. There can be no assurance that the Merger will occur.

Upon completion of the Merger, Platinum Common Shares (other than dissenting shares) shall be canceled and converted into the right to receive, at the election of the holder thereof in accordance with the terms of the Merger Agreement, (i) the cash election consideration, which is an amount of cash equal to $66.00 (the “Cash Election Consideration”), (ii) the share election consideration, which is 0.6504 common shares, par value $1.00 per share of RenaissanceRe (“RenaissanceRe Common Shares”) (the “Share Election Consideration”), or (iii) the standard election consideration (the “Standard Election Consideration”), which is comprised of the standard exchange ratio (which is 0.2960 RenaissanceRe Common Shares) and the standard cash amount (which is an amount of cash equal to $35.96), in each case less applicable withholding taxes and plus cash in lieu of any fractional RenaissanceRe Common Shares such Platinum shareholders would otherwise be entitled to receive. The number of RenaissanceRe Common Shares to be issued to Platinum shareholders as consideration for the Merger is 7.5 million, and each of the Cash Election Consideration and the Share Election Consideration is subject to proration if the un-prorated aggregate share consideration is less than or greater than, respectively, 7.5 million RenaissanceRe Common Shares. All Platinum Common Shares that are held by Platinum as treasury stock or held by any wholly owned subsidiary of Platinum, or owned by RenaissanceRe or any wholly owned subsidiary of RenaissanceRe immediately before the Merger, will be canceled and no payment will be made in respect thereof.

In addition, the Merger Agreement requires that, subject to applicable laws, following the date of approval and adoption of the Merger Agreement by the Platinum shareholders and prior to the Effective Time (as defined in the Merger Agreement), Platinum shall declare and pay the special dividend of $10.00 per Platinum Common Share (the “Special Dividend”) to the holders of record of outstanding Platinum Common Shares as of a record date for the Special Dividend to be set as designated by Platinum’s board of directors. On February 10, 2015, Platinum announced that the Special Dividend would be payable prior to the effective time of the Merger on the closing date of the Merger to Platinum shareholders of record at the close of business on the last business day prior to the closing date, which Special Dividend is conditioned on the Merger having been approved by the shareholders of Platinum at the special meeting of its shareholders on February 27, 2015 (or any adjournment or postponement thereof).

The aggregate consideration for the transaction is expected to be approximately $1.9 billion, comprised of the Special Dividend, the issuance of 7.5 million RenaissanceRe Common Shares, and cash consideration. The Company anticipates funding the cash consideration to be paid by RenaissanceRe from available cash resources, the liquidation of certain of the Company’s fixed maturity investments trading, and short term alternative financing. Following the closing of the Merger, if such closing occurs, the Company intends to issue $300.0 million in debt to replace the short term alternative financing used to fund part of the cash consideration to be paid by RenaissanceRe. However, there can be no assurance that the Company will be able to secure adequate sources of financing on favorable terms.

The Company incurred $6.7 million of corporate expenses associated with the Merger in 2014 and is contractual obligated to pay an investment bank $10.0 million upon closing of the Merger. The Company expects to incur additional costs and expenses associated with the Merger in 2015.