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, 2015. See “Note 8. 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, 2015, the Company’s banks have issued letters of credit of approximately $837.4 million in favor of certain ceding companies, including the Renaissance Reinsurance FAL 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.

At December 31, 2015, letters of credit in the amounts of $360.0 million and £85.0 million were issued pursuant to the Renaissance Reinsurance FAL Facility.

See “Note 10. Debt and Credit Facilities” for additional information related to the Company’s debt and credit facilities.

PRIVATE EQUITY AND INVESTMENT COMMITMENTS

The Company has committed capital to private equity partnerships and other entities of $724.5 million, of which $528.8 million has been contributed at December 31, 2015. The Company’s remaining commitments to these funds at December 31, 2015 totaled $204.5 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 2023. Future minimum lease payments under existing operating leases are expected to be as follows:




	Minimum lease payments
2016	$	8,018
2017	7,448
2018	7,176
2019	6,545
2020	5,018
After 2020	9,831
Future minimum lease payments under existing operating leases	$	44,036

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
2016	$	3,017
2017	2,417
2018	2,539
2019	2,661
2020	2,661
After 2020	19,958
Future minimum lease payments under existing capital leases	$	33,253

FOREIGN TO FOREIGN RETROCESSIONS

During the fourth quarter of 2015, the Company recognized a recovery and corresponding reduction to acquisition expenses in its Catastrophe Reinsurance segment of $7.7 million associated with the December 2015 decision by the IRS to revoke its position that federal excise tax applies on foreign to foreign retrocessions.

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 claims and claim expense reserves which are discussed in “Note 9. Reserve for Claims and Claim Expenses”. 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.