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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2016
Fair Value Disclosures [Abstract] |
Fair Value Measurements | FAIR VALUE MEASUREMENTS The use of fair value to measure certain assets and liabilities with resulting unrealized gains or losses is pervasive within the Company’s consolidated financial statements. Fair value is defined under accounting guidance currently applicable to the Company to be the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between open market participants at the measurement date. The Company recognizes the change in unrealized gains and losses arising from changes in fair value in its consolidated statements of operations, with the exception of changes in unrealized gains and losses on its fixed maturity investments available for sale, which are recognized as a component of accumulated other comprehensive income in shareholders’ equity. FASB ASC Topic Fair Value Measurements and Disclosures prescribes a fair value hierarchy that prioritizes the inputs to the respective valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to valuation techniques that use at least one significant input that is unobservable (Level 3). The three levels of the fair value hierarchy are described below:
• | Fair values determined by Level 1 inputs utilize unadjusted quoted prices obtained from active markets for identical assets or liabilities for which the Company has access. The fair value is determined by multiplying the quoted price by the quantity held by the Company;
• | Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals, broker quotes and certain pricing indices; and
• | Level 3 inputs are based all or in part on significant unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In these cases, significant management assumptions can be used to establish management’s best estimate of the assumptions used by other market participants in determining the fair value of the asset or liability.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement of the asset or liability. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and the Company considers factors specific to the asset or liability. In order to determine if a market is active or inactive for a security, the Company considers a number of factors, including, but not limited to, the spread between what a seller is asking for a security and what a buyer is bidding for the same security, the volume of trading activity for the security in question, the price of the security compared to its par value (for fixed maturity investments), and other factors that may be indicative of market activity. There have been no material changes in the Company’s valuation techniques, nor have there been any transfers between Level 1 and Level 2, or Level 2 and 3 during the period represented by these consolidated financial statements. Below is a summary of the assets and liabilities that are measured at fair value on a recurring basis and also represents the carrying amount on the Company’s consolidated balance sheets:
| At September 30, 2016 | Total |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |
| Fixed maturity investments |  |  |  |  |  |  |  |
| U.S. treasuries | $ | 2,564,635 |  |  | $ | 2,564,635 |  |  | $ | — |  |  | $ | — |  |
| Agencies | 120,761 |  |  | — |  |  | 120,761 |  |  | — |  |
| Municipal | 550,062 |  |  | — |  |  | 550,062 |  |  | — |  |
| Non-U.S. government (Sovereign debt) | 313,560 |  |  | — |  |  | 313,560 |  |  | — |  |
| Non-U.S. government-backed corporate | 129,423 |  |  | — |  |  | 129,423 |  |  | — |  |
| Corporate | 1,916,092 |  |  | — |  |  | 1,916,092 |  |  | — |  |
| Agency mortgage-backed | 521,987 |  |  | — |  |  | 521,987 |  |  | — |  |
| Non-agency mortgage-backed | 283,333 |  |  | — |  |  | 283,333 |  |  | — |  |
| Commercial mortgage-backed | 492,311 |  |  | — |  |  | 492,311 |  |  | — |  |
| Asset-backed | 207,976 |  |  | — |  |  | 207,976 |  |  | — |  |
| Total fixed maturity investments | 7,100,140 |  |  | 2,564,635 |  |  | 4,535,505 |  |  | — |  |
| Short term investments | 1,136,660 |  |  | — |  |  | 1,136,660 |  |  | — |  |
| Equity investments trading | 345,565 |  |  | 345,565 |  |  | — |  |  | — |  |
| Other investments |  |  |  |  |  |  |  |
| Catastrophe bonds | 298,408 |  |  | — |  |  | 298,408 |  |  | — |  |
| Private equity partnerships (1) | 192,217 |  |  | — |  |  | — |  |  | — |  |
| Senior secured bank loan fund (1) | 19,440 |  |  | — |  |  | — |  |  | — |  |
| Hedge funds (1) | 1,556 |  |  | — |  |  | — |  |  | — |  |
| Total other investments | 511,621 |  |  | — |  |  | 298,408 |  |  | — |  |
| Other assets and (liabilities) |  |  |  |  |  |  |  |
| Assumed and ceded (re)insurance contracts (2) | (12,012 | ) |  | — |  |  | — |  |  | (12,012 | ) |
| Derivatives (3) | 4,682 |  |  | 916 |  |  | 3,766 |  |  | — |  |
| Other | (8,173 | ) |  | — |  |  | (8,173 | ) |  | — |  |
| Total other assets and (liabilities) | (15,503 | ) |  | 916 |  |  | (4,407 | ) |  | (12,012 | ) |
|  | $ | 9,078,483 |  |  | $ | 2,911,116 |  |  | $ | 5,966,166 |  |  | $ | (12,012 | ) |
(1) | Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.
(2) | Included in assumed and ceded (re)insurance contracts at September 30, 2016 was $5.8 million and $17.8 million of other assets and other liabilities, respectively.
(3) | See “Note 11. Derivative Instruments” for additional information related to the fair value by type of contract, of derivatives entered into by the Company.
| At December 31, 2015 | Total |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |
| Fixed maturity investments |  |  |  |  |  |  |  |
| U.S. treasuries | $ | 2,064,944 |  |  | $ | 2,064,944 |  |  | $ | — |  |  | $ | — |  |
| Agencies | 137,976 |  |  | — |  |  | 137,976 |  |  | — |  |
| Municipal | 583,282 |  |  | — |  |  | 583,282 |  |  | — |  |
| Non-U.S. government (Sovereign debt) | 334,981 |  |  | — |  |  | 334,981 |  |  | — |  |
| Non-U.S. government-backed corporate | 138,994 |  |  | — |  |  | 138,994 |  |  | — |  |
| Corporate | 2,055,323 |  |  | — |  |  | 2,047,705 |  |  | 7,618 |  |
| Agency mortgage-backed | 504,518 |  |  | — |  |  | 504,518 |  |  | — |  |
| Non-agency mortgage-backed | 270,763 |  |  | — |  |  | 270,763 |  |  | — |  |
| Commercial mortgage-backed | 561,496 |  |  | — |  |  | 561,496 |  |  | — |  |
| Asset-backed | 130,541 |  |  | — |  |  | 130,541 |  |  | — |  |
| Total fixed maturity investments | 6,782,818 |  |  | 2,064,944 |  |  | 4,710,256 |  |  | 7,618 |  |
| Short term investments | 1,208,401 |  |  | — |  |  | 1,208,401 |  |  | — |  |
| Equity investments trading | 393,877 |  |  | 393,877 |  |  | — |  |  | — |  |
| Other investments |  |  |  |  |  |  |  |
| Catastrophe bonds | 241,253 |  |  | — |  |  | 241,253 |  |  | — |  |
| Private equity partnerships (1) | 214,848 |  |  | — |  |  | — |  |  | — |  |
| Senior secured bank loan fund (1) | 23,231 |  |  | — |  |  | — |  |  | — |  |
| Hedge funds (1) | 2,289 |  |  | — |  |  | — |  |  | — |  |
| Total other investments | 481,621 |  |  | — |  |  | 241,253 |  |  | — |  |
| Other assets and (liabilities) |  |  |  |  |  |  |  |
| Assumed and ceded (re)insurance contracts (2) | (5,899 | ) |  | — |  |  | — |  |  | (5,899 | ) |
| Derivatives (3) | 1,486 |  |  | (1,234 | ) |  | 2,720 |  |  | — |  |
| Other | (12,320 | ) |  | — |  |  | (12,320 | ) |  | — |  |
| Total other assets and (liabilities) | (16,733 | ) |  | (1,234 | ) |  | (9,600 | ) |  | (5,899 | ) |
|  | $ | 8,849,984 |  |  | $ | 2,457,587 |  |  | $ | 6,150,310 |  |  | $ | 1,719 |  |
(1) | Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.
(2) | Included in assumed and ceded (re)insurance contracts at December 31, 2015 was $3.5 million and $9.4 million of other assets and other liabilities, respectively.
(3) | See “Note 11. Derivative Instruments” for additional information related to the fair value by type of contract, of derivatives entered into by the Company.
Level 1 and Level 2 Assets and Liabilities Measured at Fair Value Fixed Maturity Investments Fixed maturity investments included in Level 1 consist of the Company’s investments in U.S. treasuries. Fixed maturity investments included in Level 2 are agencies, municipal, non-U.S. government, non-U.S. government-backed corporate, corporate, agency mortgage-backed, non-agency mortgage-backed, commercial mortgage-backed and asset-backed. The Company’s fixed maturity investments are primarily priced using pricing services, such as index providers and pricing vendors, as well as broker quotations. In general, the pricing vendors provide pricing for a high volume of liquid securities that are actively traded. For securities that do not trade on an exchange, the pricing services generally utilize market data and other observable inputs in matrix pricing models to determine month end prices. Observable inputs include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, bids, offers, reference data and industry and economic events. Index pricing generally relies on market traders as the primary source for pricing, however models are also utilized to provide prices for all index eligible securities. The models use a variety of observable inputs such as benchmark yields, transactional data, dealer runs, broker-dealer quotes and corporate actions. Prices are generally verified using third party data. Securities which are priced by an index provider are generally included in the index. In general, broker-dealers value securities through their trading desks based on observable inputs. The methodologies include mapping securities based on trade data, bids or offers, observed spreads, and performance on newly issued securities. Broker-dealers also determine valuations by observing secondary trading of similar securities. Prices obtained from broker quotations are considered non-binding, however they are based on observable inputs and by observing secondary trading of similar securities obtained from active, non-distressed markets. The Company considers these Level 2 inputs as they are corroborated with other market observable inputs. The techniques generally used to determine the fair value of the Company’s fixed maturity investments are detailed below by asset class. U.S. treasuries Level 1 - At September 30, 2016, the Company’s U.S. treasuries fixed maturity investments were primarily priced by pricing services and had a weighted average effective yield of 0.9% and a weighted average credit quality of AA (December 31, 2015 - 1.3% and AA, respectively). When pricing these securities, the pricing services utilize daily data from many real time market sources, including active broker dealers. Certain data sources are regularly reviewed for accuracy to attempt to ensure the most reliable price source is used for each issue and maturity date. Agencies Level 2 - At September 30, 2016, the Company’s agency fixed maturity investments had a weighted average effective yield of 1.3% and a weighted average credit quality of AA (December 31, 2015 - 1.7% and AA, respectively). The issuers of the Company’s agency fixed maturity investments primarily consist of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and other agencies. Fixed maturity investments included in agencies are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources and integrate other observations from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The fair value of each security is individually computed using analytical models which incorporate option adjusted spreads and other daily interest rate data. Municipal Level 2 - At September 30, 2016, the Company’s municipal fixed maturity investments had a weighted average effective yield of 1.7% and a weighted average credit quality of AA (December 31, 2015 - 2.0% and AA, respectively). The Company’s municipal fixed maturity investments are primarily priced by pricing services. When evaluating these securities, the pricing services gather information regarding the security from third party sources such as trustees, paying agents or issuers. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk. In certain instances, securities are individually evaluated using a spread over widely accepted market benchmarks. Non-U.S. government (Sovereign debt) Level 2 - At September 30, 2016, the Company’s non-U.S. government fixed maturity investments had a weighted average effective yield of 1.1% and a weighted average credit quality of AAA (December 31, 2015 - 1.4% and AA, respectively). The issuers of securities in this sector are non-U.S. governments and their respective agencies as well as supranational organizations. Securities held in these sectors are primarily priced by pricing services that employ proprietary discounted cash flow models to value the securities. Key quantitative inputs for these models are daily observed benchmark curves for treasury, swap and high issuance credits. The pricing services then apply a credit spread for each security which is developed by in-depth and real time market analysis. For securities in which trade volume is low, the pricing services utilize data from more frequently traded securities with similar attributes. These models may also be supplemented by daily market and credit research for international markets. Non-U.S. government-backed corporate Level 2 - At September 30, 2016, the Company’s non-U.S. government-backed corporate fixed maturity investments had a weighted average effective yield of 1.0% and a weighted average credit quality of AAA (December 31, 2015 - 1.3% and AA, respectively). Non-U.S. government-backed fixed maturity investments are primarily priced by pricing services that employ proprietary discounted cash flow models to value the securities. Key quantitative inputs for these models are daily observed benchmark curves for treasury, swap and high issuance credits. The pricing services then apply a credit spread to the respective curve for each security which is developed by in-depth and real time market analysis. For securities in which trade volume is low, the pricing services utilize data from more frequently traded securities with similar attributes. These models may also be supplemented by daily market and credit research for international markets. Corporate Level 2 - At September 30, 2016, the Company’s corporate fixed maturity investments principally consisted of U.S. and international corporations and had a weighted average effective yield of 3.5% and a weighted average credit quality of BBB (December 31, 2015 - 3.8% and BBB, respectively). The Company’s corporate fixed maturity investments are primarily priced by pricing services. When evaluating these securities, the pricing services gather information from market sources regarding the issuer of the security and obtain credit data, as well as other observations, from markets and sector news. Evaluations are updated by obtaining broker dealer quotes and other market information including actual trade volumes, when available. The pricing services also consider the specific terms and conditions of the securities, including any specific features which may influence risk. In certain instances, securities are individually evaluated using a spread which is added to the U.S. treasury curve or a security specific swap curve as appropriate. Agency mortgage-backed Level 2 - At September 30, 2016, the Company’s agency mortgage-backed fixed maturity investments included agency residential mortgage-backed securities with a weighted average effective yield of 2.1%, a weighted average credit quality of AA and a weighted average life of 5.0 years (December 31, 2015 - 2.7%, AA and 6.1 years, respectively). The Company’s agency mortgage-backed fixed maturity investments are primarily priced by pricing services using a mortgage pool specific model which utilizes daily inputs from the active to be announced market which is very liquid, as well as the U.S. treasury market. The model also utilizes additional information, such as the weighted average maturity, weighted average coupon and other available pool level data which is provided by the sponsoring agency. Valuations are also corroborated with daily active market quotes. Non-agency mortgage-backed Level 2 - The Company’s non-agency mortgage-backed fixed maturity investments include non-agency prime residential mortgage-backed and non-agency Alt-A fixed maturity investments. The Company has no fixed maturity investments that were classified as sub-prime at the time of purchase held in its fixed maturity investments portfolio. At September 30, 2016, the Company’s non-agency prime residential mortgage-backed fixed maturity investments had a weighted average effective yield of 4.2%, a weighted average credit quality of non-investment grade, and a weighted average life of 4.5 years (December 31, 2015 - 3.8%, non-investment grade and 4.3 years, respectively). The Company’s non-agency Alt-A fixed maturity investments held at September 30, 2016 had a weighted average effective yield of 5.0%, a weighted average credit quality of non-investment grade and a weighted average life of 5.9 years (December 31, 2015 - 4.7%, non-investment grade and 5.4 years, respectively). Securities held in these sectors are primarily priced by pricing services using an option adjusted spread model or other relevant models, which principally utilize inputs including benchmark yields, available trade information or broker quotes, and issuer spreads. The pricing services also review collateral prepayment speeds, loss severity and delinquencies among other collateral performance indicators for the securities valuation, when applicable. Commercial mortgage-backed Level 2 - At September 30, 2016, the Company’s commercial mortgage-backed fixed maturity investments had a weighted average effective yield of 2.3%, a weighted average credit quality of AAA, and a weighted average life of 3.7 years (December 31, 2015 - 2.9%, AAA and 3.7 years, respectively). Securities held in these sectors are primarily priced by pricing services. The pricing services apply dealer quotes and other available trade information such as bids and offers, prepayment speeds which may be adjusted for the underlying collateral or current price data, the U.S. treasury curve and swap curve as well as cash settlement. The pricing services discount the expected cash flows for each security held in this sector using a spread adjusted benchmark yield based on the characteristics of the security. Asset-backed Level 2 - At September 30, 2016, the Company’s asset-backed fixed maturity investments had a weighted average effective yield of 2.1%, a weighted average credit quality of AAA and a weighted average life of 2.8 years (December 31, 2015 - 2.1%, AAA and 2.5 years, respectively). The underlying collateral for the Company’s asset-backed fixed maturity investments primarily consists of student loans, credit card receivables, auto loans and other receivables. Securities held in these sectors are primarily priced by pricing services. The pricing services apply dealer quotes and other available trade information such as bids and offers, prepayment speeds which may be adjusted for the underlying collateral or current price data, the U.S. treasury curve and swap curve as well as cash settlement. The pricing services determine the expected cash flows for each security held in this sector using historical prepayment and default projections for the underlying collateral and current market data. In addition, a spread is applied to the relevant benchmark and used to discount the cash flows noted above to determine the fair value of the securities held in this sector. Short Term Investments Level 2 - The fair value of the Company’s portfolio of short term investments is generally determined using amortized cost which approximates fair value and, in certain cases, in a manner similar to the Company’s fixed maturity investments noted above. At September 30, 2016, the Company’s short term investments had a weighted average effective yield of 0.5% and a weighted average credit quality of AAA (December 31, 2015 - 0.4% and AAA, respectively). Equity Investments, Classified as Trading Level 1 - The fair value of the Company’s portfolio of equity investments, classified as trading is primarily priced by pricing services, reflecting the closing price quoted for the final trading day of the period. When pricing these securities, the pricing services utilize daily data from many real time market sources, including applicable securities exchanges. All data sources are regularly reviewed for accuracy to attempt to ensure the most reliable price source was used for each security. Other investments Catastrophe bonds Level 2 - The Company’s other investments include investments in catastrophe bonds which are recorded at fair value based on broker or underwriter bid indications. Other assets and liabilities Derivatives Level 1 and Level 2 - Other assets and liabilities include certain derivatives entered into by the Company. The fair value of these transactions includes certain exchange traded foreign currency forward contracts which are considered Level 1, and certain credit derivatives, determined using standard industry valuation models and considered Level 2, as the inputs to the valuation model are based on observable market inputs, including credit spreads, credit ratings of the underlying referenced security, the risk free rate and the contract term. Other Level 2 - The liabilities measured at fair value and included in Level 2 at September 30, 2016 of $8.2 million are comprised of cash settled restricted stock units (“CSRSU”) that form part of the Company’s compensation program. The fair value of the Company’s CSRSUs is determined using observable exchange traded prices for the Company’s common shares. Level 3 Assets and Liabilities Measured at Fair Value Below is a summary of quantitative information regarding the significant observable and unobservable inputs (Level 3) used in determining the fair value of assets and liabilities measured at fair value on a recurring basis:
| At September 30, 2016 | Fair Value (Level 3) |  | Valuation Technique |  | Unobservable (U) and Observable (O) Inputs |  | Low |  | High |  | Weighted Average or Actual |
| Other assets and (liabilities) |  |  |  |  |  |  |  |  |  |  |  |
| Assumed and ceded (re)insurance contracts | (677 | ) |  | Internal valuation model |  | Bond price (U) |  | $ | 100.01 |  |  | $ | 102.95 |  |  | $ | 101.57 |  |
|  |  |  |  |  | Liquidity discount (U) |  | n/a |  |  | n/a |  |  | 1.3 | % |
| Assumed and ceded (re)insurance contracts | (11,335 | ) |  | Internal valuation model |  | Net undiscounted cash flows (U) |  | n/a |  |  | n/a |  |  | $ | (11,520 | ) |
|  |  |  |  |  | Expected loss ratio (U) |  | n/a |  |  | n/a |  |  | 39.0 | % |
|  |  |  |  |  | Net acquisition expense ratio (O) |  | n/a |  |  | n/a |  |  | (21.7 | )% |
|  |  |  |  |  | Contract period (O) |  | 0.7 years |  |  | 4.7 years |  |  | 4.3 years |  |
|  |  |  |  |  | Discount rate (U) |  | n/a |  |  | n/a |  |  | 1.1 | % |
| Total assumed and ceded (re)insurance contracts | (12,012 | ) |  |  |  |  |  |  |  |  |  |  |
| Total other assets and (liabilities) | (12,012 | ) |  |  |  |  |  |  |  |  |  |  |
|  | $ | (12,012 | ) |  |  |  |  |  |  |  |  |  |  |
Other assets and liabilities Assumed and ceded (re)insurance contracts Level 3 - At September 30, 2016, the Company had a $0.7 million net liability related to an assumed reinsurance contract accounted for at fair value, with the fair value obtained through the use of an internal valuation model. The inputs to the internal valuation model are principally based on indicative pricing obtained from independent brokers and pricing vendors for similarly structured marketable securities. The most significant unobservable inputs include prices for similar marketable securities and a liquidity premium. The Company considers the prices for similar securities to be unobservable, as there is little, if any market activity for these similar assets. In addition, the Company has estimated a liquidity premium that would be required if the Company attempted to effectively exit its position by executing a short sale of these securities. Generally, an increase in the prices for similar marketable securities or a decrease in the liquidity premium would result in an increase in the expected profit and ultimate fair value of this assumed reinsurance contract. Level 3 - At September 30, 2016, the Company had an $11.3 million net liability related to assumed and ceded (re)insurance contracts accounted for at fair value, with the fair value obtained through the use of an internal valuation model. The inputs to the internal valuation model are principally based on proprietary data as observable market inputs are generally not available. The most significant unobservable inputs include the assumed and ceded expected net cash flows related to the contracts, including the expected premium, acquisition expenses and losses; the expected loss ratio and the relevant discount rate used to present value the net cash flows. The contract period and acquisition expense ratio are considered observable input as each is defined in the contract. The negative acquisition expense ratio used to determine the fair value of the contracts at September 30, 2016 is the result of override commissions on the contracts being higher than the gross acquisition expenses. Generally, an increase in the net expected cash flows and expected term of the contract and a decrease in the discount rate, expected loss ratio or acquisition expense ratio, would result in an increase in the expected profit and ultimate fair value of these assumed and ceded (re)insurance contracts. Below is a reconciliation of the beginning and ending balances, for the periods shown, of assets and liabilities measured at fair value on a recurring basis using Level 3 inputs. Interest and dividend income are included in net investment income and are excluded from the reconciliation.
|  | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) |
|  | Fixed maturity investments trading |  | Other assets and (liabilities) |  | Total |
| Balance - July 1, 2016 | $ | — |  |  | $ | (2,680 | ) |  | $ | (2,680 | ) |
| Total realized gains |  |  |  |  |  |
| Included in other income | — |  |  | 795 |  |  | 795 |  |
| Purchases | — |  |  | (10,127 | ) |  | (10,127 | ) |
| Settlements | — |  |  | — |  |  | — |  |
| Balance - September 30, 2016 | $ | — |  |  | $ | (12,012 | ) |  | $ | (12,012 | ) |
|  | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) |
|  | Fixed maturity investments trading |  | Other assets and (liabilities) |  | Total |
| Balance - January 1, 2016 | $ | 7,618 |  |  | $ | (5,899 | ) |  | $ | 1,719 |  |
| Total unrealized losses |  |  |  |  |  |
| Included in net investment income | (118 | ) |  | — |  |  | (118 | ) |
| Total realized gains |  |  |  |  |  |
| Included in other income | — |  |  | 4,587 |  |  | 4,587 |  |
| Purchases | — |  |  | (10,700 | ) |  | (10,700 | ) |
| Settlements | (7,500 | ) |  | — |  |  | (7,500 | ) |
| Balance - September 30, 2016 | $ | — |  |  | $ | (12,012 | ) |  | $ | (12,012 | ) |
|  | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) |
|  | Fixed maturity investments trading |  | Other assets and (liabilities) |  | Total |
| Balance - July 1, 2015 | $ | 7,660 |  |  | $ | 75,687 |  |  | $ | 83,347 |  |
| Total unrealized (losses) gains |  |  |  |  |  |
| Included in net investment income | (65 | ) |  | 4 |  |  | (61 | ) |
| Included in other income | — |  |  | (78 | ) |  | (78 | ) |
| Total realized gains |  |  |  |  |  |
| Included in other income | — |  |  | 1,827 |  |  | 1,827 |  |
| Total foreign exchange losses | — |  |  | 7 |  |  | 7 |  |
| Purchases | — |  |  | (498 | ) |  | (498 | ) |
| Settlements | — |  |  | — |  |  | — |  |
| Balance - September 30, 2015 | $ | 7,595 |  |  | $ | 76,949 |  |  | $ | 84,544 |  |
| Change in unrealized gains for the period included in earnings for assets held at the end of the period included in net investment income | $ | (65 | ) |  | $ | 4 |  |  | $ | (61 | ) |
| Change in unrealized gains for the period included in earnings for assets held at the end of the period included in other income | $ | — |  |  | $ | (78 | ) |  | $ | (78 | ) |
|  | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) |
|  | Fixed maturity investments trading |  | Other assets and (liabilities) |  | Total |
| Balance - January 1, 2015 | $ | 15,660 |  |  | $ | (8,934 | ) |  | $ | 6,726 |  |
| Total unrealized (losses) gains |  |  |  |  |  |
| Included in net investment income | (565 | ) |  | 180 |  |  | (385 | ) |
| Included in other income | — |  |  | (426 | ) |  | (426 | ) |
| Total realized gains |  |  |  |  |  |
| Included in other income | — |  |  | 4,655 |  |  | 4,655 |  |
| Total foreign exchange gains | — |  |  | 7 |  |  | 7 |  |
| Purchases | — |  |  | 81,467 |  |  | 81,467 |  |
| Settlements | (7,500 | ) |  | — |  |  | (7,500 | ) |
| Balance - September 30, 2015 | $ | 7,595 |  |  | $ | 76,949 |  |  | $ | 84,544 |  |
| Change in unrealized gains for the period included in earnings for assets held at the end of the period included in net investment income | $ | (383 | ) |  | $ | 180 |  |  | $ | (203 | ) |
| Change in unrealized gains for the period included in earnings for assets held at the end of the period included in other income | $ | — |  |  | $ | (426 | ) |  | $ | (426 | ) |
Financial Instruments Disclosed, But Not Carried, at Fair Value The Company uses various financial instruments in the normal course of its business. The Company’s insurance contracts are excluded from the fair value of financial instruments accounting guidance, unless the Company elects the fair value option, and therefore, are not included in the amounts discussed herein. The carrying values of cash and cash equivalents, accrued investment income, receivables for investments sold, certain other assets, payables for investments purchased, certain other liabilities, and other financial instruments not included herein approximated their fair values. Debt Included on the Company’s consolidated balance sheet at September 30, 2016 were debt obligations of $951.6 million (December 31, 2015 - $960.5 million). At September 30, 2016, the fair value of the Company’s debt obligations was $1.0 billion (December 31, 2015 – $973.3 million). The fair value of the Company’s debt obligations is determined using indicative market pricing obtained from third-party service providers, which the Company considers Level 2 in the fair value hierarchy. There have been no changes during the period in the Company’s valuation technique used to determine the fair value of the Company’s debt obligations. The Fair Value Option for Financial Assets and Financial Liabilities The Company has elected to account for certain financial assets and financial liabilities at fair value using the guidance under FASB ASC Topic Financial Instruments as the Company believes it represents the most meaningful measurement basis for these assets and liabilities. Below is a summary of the balances the Company has elected to account for at fair value:
|  | September 30, 2016 |  | December 31, 2015 |
| Other investments | $ | 511,621 |  |  | $ | 481,621 |  |
| Other assets | $ | 5,804 |  |  | $ | 3,463 |  |
| Other liabilities | $ | 17,816 |  |  | $ | 9,362 |  |
Included in net investment income for the three and nine months ended September 30, 2016 were net unrealized gains of $2.8 million and losses of $17.6 million, respectively, related to the changes in fair value of other investments (2015 – losses of $13.9 million and losses of $10.7 million, respectively). Included in other income for the three and nine months ended September 30, 2016 were net unrealized gains of $Nil and $Nil, respectively related to the changes in the fair value of other assets and liabilities (2015 - losses of $0.1 million and $0.4 million, respectively). Measuring the Fair Value of Other Investments Using Net Asset Valuations The table below shows the Company’s portfolio of other investments measured using net asset valuations as a practical expedient:
| At September 30, 2016 | Fair Value |  | Unfunded Commitments |  | Redemption Frequency |  | Redemption Notice Period (Minimum Days) |  | Redemption Notice Period (Maximum Days) |
| Private equity partnerships | $ | 192,217 |  |  | $ | 233,006 |  |  | See below |  | See below |  | See below |
| Senior secured bank loan fund | 19,440 |  |  | 5,055 |  |  | See below |  | See below |  | See below |
| Hedge funds | 1,556 |  |  | — |  |  | See below |  | See below |  | See below |
| Total other investments measured using net asset valuations | $ | 213,213 |  |  | $ | 238,061 |  |  |  |  |  |  |  |
Private equity partnerships – The Company’s investments in private equity partnerships included alternative asset limited partnerships (or similar corporate structures) that invest in certain private equity asset classes, including U.S. and global leveraged buyouts, mezzanine investments, distressed securities, real estate, and oil, gas and power. The Company generally has no right to redeem its interest in any of these private equity partnerships in advance of dissolution of the applicable private equity partnership. Instead, the nature of these investments is that distributions are received by the Company in connection with the liquidation of the underlying assets of the respective private equity partnership. It is estimated that the majority of the underlying assets of the limited partnerships would liquidate over 7 to 10 years from inception of the respective limited partnership. Senior secured bank loan fund – At September 30, 2016, the Company had $19.4 million invested in a closed end fund which invests primarily in loans. The Company has no right to redeem its investment in this fund. It is estimated that the majority of the underlying assets in this closed end fund would liquidate over 4 to 5 years from inception of the fund. Hedge funds – The Company invests in hedge funds that pursue multiple strategies. The Company’s investments in hedge funds at September 30, 2016 were $1.6 million of so called “side pocket” investments which are not redeemable at the option of the shareholder. The Company will retain its interest in the side pocket investments referred to above, until the underlying investments attributable to such side pockets are liquidated, realized or deemed realized at the discretion of the fund manager.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13433-108611 + Details
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