Fair Value Hierarchy

Fair value is defined as the price to sell an asset or transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants. We use a fair value hierarchy that gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. The hierarchy is broken down into three levels as follows:


•	Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access.


•	Level 2 - Valuations based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.


•	Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The unobservable inputs reflect our own judgments about assumptions that market participants might use.

The availability of observable inputs can vary from financial instrument to financial instrument and is affected by a wide variety of factors including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment.

Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in Level 3. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This may lead us to change the selection of our valuation technique (from market to cash flow approach) or may cause us to use multiple valuation techniques to estimate the fair value of a financial instrument. This circumstance could cause an instrument to be reclassified between levels within the fair value hierarchy.

We used the following valuation techniques and assumptions in estimating the fair value of our financial instruments as well as the general classification of such financial instruments pursuant to the above fair value hierarchy.

Fixed Maturities

At each valuation date, we use the market approach valuation technique to estimate the fair value of our fixed maturities portfolio, when possible. This market approach includes, but is not limited to, prices obtained from third party pricing services for identical or comparable securities and the use of “pricing matrix models” using observable market inputs such as yield curves, credit risks and spreads, measures of volatility, and prepayment speeds. Pricing from third party pricing services is sourced from multiple vendors, when available, and we maintain a vendor hierarchy by asset type based on historical pricing experience and vendor expertise. When prices are unavailable from pricing services, we obtain non-binding quotes from broker-dealers who are active in the corresponding markets.

The following describes the significant inputs generally used to determine the fair value of our fixed maturities by asset class.

U.S. government and agency

U.S. government and agency securities consist primarily of bonds issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. As the fair values of our U.S. Treasury securities are based on unadjusted market prices in active markets, they are classified within Level 1. The fair values of U.S. government agency securities are priced using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. government agency securities are classified within Level 2.

Non-U.S. government

Non-U.S. government securities comprise bonds issued by non-U.S. governments and their agencies along with supranational organizations (collectively also known as sovereign debt securities). The fair value of these securities is based on prices obtained from international indices or a valuation model that includes the following inputs: interest rate yield curves, cross-currency basis index spreads, and country credit spreads for structures similar to the sovereign bond in terms of issuer, maturity and seniority. As the significant inputs are observable market inputs, the fair value of non-U.S. government securities are classified within Level 2.

Corporate debt

Corporate debt securities consist primarily of investment-grade debt of a wide variety of corporate issuers and industries. The fair values of these securities are generally determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As these spreads and the yields for the risk-free yield curve are observable market inputs, the fair values of our corporate debt securities are classified within Level 2. Where pricing is unavailable from pricing services, we obtain non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, securities are classified within Level 3.

Agency RMBS

Agency RMBS securities consist of bonds issued by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. The fair values of these securities are priced using a mortgage pool specific model which uses daily inputs from the active to be announced market and the spread associated with each mortgage pool based on vintage. As the significant inputs are observable market inputs, the fair values of Agency RMBS securities are classified within Level 2.

CMBS

CMBS include mostly investment-grade bonds originated by non-agencies. The fair values of these securities are determined using a pricing model which uses dealer quotes and other available trade information along with security level characteristics to determine deal specific spreads. As the significant inputs are observable market inputs, the fair values of CMBS securities are classified within Level 2. Where pricing is unavailable from pricing services, we obtain non-binding quotes from brokerdealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. These securities are classified within Level 3.

Non-Agency RMBS

Non-Agency RMBS include mostly investment-grade bonds originated by non-agencies. The fair values of these securities are determined using an option adjusted spread model or other relevant models, which use inputs including available trade information or broker quotes, prepayment and default projections based on historical statistics of the underlying collateral and current market data. As the significant inputs are observable market inputs, the fair values of Non-Agency RMBS securities are classified withing Level 2.

ABS

ABS include mostly investment-grade bonds backed by pools of loans with a variety of underlying collateral, including automobile loan receivables, student loans, credit card receivables, and CLO Debt originated by a variety of financial institutions. Similarly to MBS, the fair values of ABS are priced through the use of a model which uses prepayment speeds and spreads sourced primarily from the new issue market. As the significant inputs used to price ABS are observable market inputs, the fair values of ABS are classified within Level 2. Where pricing is unavailable from pricing services, we obtain non-binding quotes from broker-dealers. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. These securities are classified within Level 3.

Municipals

Our municipal portfolio comprises revenue and general obligation bonds issued by U.S. domiciled state and municipal entities. The fair value of these securities is determined using spreads obtained from broker-dealers, trade prices and the new issue market. As the significant inputs used to price the municipals are observable market inputs, municipals are classified within Level 2.

Equity Securities

Equity securities include common stocks, exchange-traded funds and bond mutual funds. For common stocks and exchange-traded funds, we classified these within Level 1 as their fair values are based on unadjusted quoted market prices in active markets. Our investments in bond mutual funds have daily liquidity, with redemption based on the NAV of the funds. Accordingly, we have classified these investments as Level 2.

Other Investments

As a practical expedient, we estimate fair values for hedge funds, direct lending funds, private equity funds and real estate funds using NAVs as advised by external fund managers or third party administrators. For each of these funds, the NAV is based on the manager's or administrator's valuation of the underlying holdings in accordance with the fund's governing documents and in accordance with U.S. GAAP. For hedge funds, direct lending funds and real estate funds any funds that we have not yet received a NAV concurrent with our period end date, we record an estimate of the change in fair value for the period subsequent to the most recent NAV. Such estimates are based on return estimates for the period between the most recently issued NAV and the period end date, and the inclusion of any subscriptions, redemptions, drawdowns and distributions. Estimates are obtained from the relevant fund managers. Accordingly, we do not typically have a reporting lag in our fair value measurements for these funds. Historically, our valuation estimates incorporating these return estimates have not significantly diverged from the subsequent NAVs. For private equity funds the typical reporting lag is three months before NAV statements are released. We estimate fair value for our private equity funds by starting with the prior quarter-end NAV and adjusting for capital calls, redemptions and distributions.

Within the hedge fund, direct lending fund, real estate fund and private equity fund industries, there is a general lack of transparency necessary to facilitate a detailed independent assessment of the values placed on the securities underlying the NAV provided by the fund manager or fund administrator. To address this, on a quarterly basis, we perform a number of monitoring procedures designed to assist us in the assessment of the quality of the information provided by managers and administrators. These procedures include, but are not limited to, regular review and discussion of each fund's performance with its manager, regular evaluation of fund performance against applicable benchmarks and the backtesting of our fair value estimates against subsequently received NAVs. Backtesting involves comparing our previously reported values for each individual fund against NAVs per audited financial statements (for year-end values) and final NAVs from fund managers and fund administrators (for interim values).

The fair value of our hedge funds, direct lending funds, private equity funds and real estate funds are measured using the NAV practical expedient and therefore have not been categorized with the fair value hierarchy.

At June 30, 2016, our investments in CLO - Equities were classified within Level 3 as we estimated the fair value for these securities using an income approach valuation technique (discounted cash flow model) due to the lack of observable and relevant trades in the secondary markets.

Other privately held securities comprise investments with our strategic (re)insurance partners. The investments can take the form of convertible preferred shares, convertible notes and notes payable. As all the investments in this category were made during the first 6 months of 2016, the cost of these investments is believed to approximate fair value at June 30, 2016. These securities are classified within Level 3.

Short-Term Investments

Short-term investments primarily comprise highly liquid securities with maturities greater than three months but less than one year from the date of purchase. These securities are classified within Level 2 because these securities are typically not actively traded due to their approaching maturity and, as such, their amortized cost approximates fair value.

Derivative Instruments

Our foreign currency forward contracts, interest rate swaps and commodity contracts are customized to our economic hedging strategies and trade in the over-the-counter derivative market. We use the market approach valuation technique to estimate the fair value for these derivatives based on significant observable market inputs from third party pricing vendors, non-binding broker-dealer quotes and/or recent trading activity. Accordingly, we classified these derivatives within Level 2.

We also participate in non-exchange traded derivative-based risk management products addressing weather risks. We use observable market inputs and unobservable inputs in combination with industry or internally-developed valuation and forecasting techniques to determine fair value. We classify these instruments within Level 3.

Insurance-linked Securities

Insurance-linked securities comprise an investment in a catastrophe bond. We obtain non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. These securities are classified within Level 3.

Cash Settled Awards

Cash settled awards comprise restricted stock units that form part of our compensation program. Although the fair value of these awards is determined using observable quoted market prices in active markets, the stock units themselves are not actively traded. Accordingly, we have classified these liabilities within Level 2.

The tables below present the financial instruments measured at fair value on a recurring basis for the periods indicated:



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair value based on NAV practical expedient		Total Fair Value

At June 30, 2016
Assets
Fixed maturities
U.S. government and agency	$	1,483,577	$	31,801	$	—	$	—	$	1,515,378
Non-U.S. government	—		642,815		—		—		642,815
Corporate debt	—		4,340,269		62,022		—		4,402,291
Agency RMBS	—		2,383,582		—		—		2,383,582
CMBS	—		1,070,825		10,210		—		1,081,035
Non-Agency RMBS	—		85,358		—		—		85,358
ABS	—		1,297,890		—		—		1,297,890
Municipals	—		154,867		—		—		154,867
	1,483,577		10,007,407		72,232		—		11,563,216
Equity securities
Common stocks	87		—		—		—		87
Exchange-traded funds	491,319		—		—		—		491,319
Bond mutual funds	—		134,965		—		—		134,965
	491,406		134,965		—		—		626,371
Other investments
Hedge funds	—		—		—		532,233		532,233
Direct lending funds	—		—		—		120,962		120,962
Private equity funds	—		—		—		93,722		93,722
Real estate funds	—		—		—		10,851		10,851
Other privately held investments	—		—		41,755		—		41,755
CLO - Equities	—		—		65,883		—		65,883
	—		—		107,638		757,768		865,406
Short-term investments	—		41,086		—		—		41,086
Other assets
Derivative instruments (see Note 5)	—		6,734		5		—		6,739
Insurance-linked securities	—		—		25,025		—		25,025
Total Assets	$	1,974,983	$	10,190,192	$	204,900	$	757,768	$	13,127,843
Liabilities
Derivative instruments (see Note 5)	$	—	$	4,542	$	1,978	$	—	$	6,520
Cash settled awards (see Note 7)	—		29,650		—		—		29,650
Total Liabilities	$	—	$	34,192	$	1,978	$	—	$	36,170



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair value based on NAV practical expedient		Total Fair Value

At December 31, 2015
Assets
Fixed maturities
U.S. government and agency	$	1,632,355	$	19,594	$	—	$	—	$	1,651,949
Non-U.S. government	—		739,005		—		—		739,005
Corporate debt	—		4,324,251		38,518		—		4,362,769
Agency RMBS	—		2,249,236		—		—		2,249,236
CMBS	—		1,072,376		10,922		—		1,083,298
Non-Agency RMBS	—		101,008		—		—		101,008
ABS	—		1,371,270		—		—		1,371,270
Municipals	—		161,214		—		—		161,214
	1,632,355		10,037,954		49,440		—		11,719,749
Equity securities
Common stocks	—		—		—		—		—
Exchange-traded funds	473,973		—		—		—		473,973
Bond mutual funds	—		124,025		—		—		124,025
	473,973		124,025		—		—		597,998
Other investments
Hedge funds	—		—		—		656,773		656,773
Direct lending funds	—		—		—		90,120		90,120
Private equity funds	—		—		—		—		—
Real estate funds	—		—		—		4,929		4,929
Other privately held investments	—		—		—		—		—
CLO - Equities	—		—		27,257		37,677		64,934
	—		—		27,257		789,499		816,756
Short-term investments	—		34,406		—		—		34,406
Other assets
Derivative instruments (see Note 5)	—		2,072		4,395		—		6,467
Insurance-linked securities	—		—		24,925		—		24,925
Total Assets	$	2,106,328	$	10,198,457	$	106,017	$	789,499	$	13,200,301
Liabilities
Derivative instruments (see Note 5)	$	—	$	7,692	$	10,937	$	—	$	18,629
Cash settled awards (see Note 7)	—		33,215		—		—		33,215
Total Liabilities	$	—	$	40,907	$	10,937	$	—	$	51,844

During 2016 and 2015, we had no transfers between Levels 1 and 2.

Level 3 Fair Value Measurements

Except for hedge funds, direct lending funds, private equity funds and real estate funds priced using NAV as a practical expedient and certain fixed maturities and insurance-linked securities priced using broker-dealer quotes (underlying inputs are not available), the following table quantifies the significant unobservable inputs we have used in estimating fair value at June 30, 2016 for our investments classified as Level 3 in the fair value hierarchy.



	Fair Value			Valuation Technique	Unobservable Input	Range	Weighted Average

Other investments - CLO - Equities	$	39,940		Discounted cash flow	Default rates	4.0%	4.0%
					Loss severity rate	35.0% - 53.5%	36.5%
					Collateral spreads	3.2% - 4.0%	3.9%
					Estimated maturity dates	3 - 7 years	7 years

	25,943			Liquidation value	Fair value of collateral	100%	100%
					Discount margin	0.7% - 19.9%	4.2%

Derivatives - Weather derivatives, net	$	(1,973	)	Simulation model	Weather curve	1 - 1914⁽¹⁾	n/a⁽²⁾
					Weather standard deviation	1 - 230⁽¹⁾	n/a⁽²⁾

(1) Measured in Heating Degree Days ("HDD") which is the number of degrees the daily temperature is below a reference temperature. The cumulative HDD for the duration of the derivatives contract is compared to the strike value to determine the necessary settlement.


(2)	Due to the diversity of the portfolio, the range of unobservable inputs can be widespread; therefore, presentation of a weighted average is not useful. Weather parameters may include various temperature and/or precipitation measures that will naturally vary by geographic location of each counterparty's operations.

The CLO - Equities market continues to be mostly inactive with only a small number of transactions being observed in the market and fewer still involving transactions in our CLO - Equities. Accordingly, we rely on the use of models to estimate the fair value of our investments in CLO - Equities. With all of our direct investments in CLO - Equities past the end of their reinvestment period, there is uncertainty over the remaining time until maturity. As such our direct investments in CLO - Equities are valued at the lower of the liquidation value and our internal discounted cash flow modelled estimate of fair value. The liquidation valuation is based on the fair value of the net underlying collateral which is determined by applying market discount margins by credit quality bucket. An increase (decrease) in the market discount margin would result in a decrease (increase) in value of our CLO - Equities. Regarding the discounted cash flow model, the default and loss severity rates are the most judgmental unobservable market inputs to which the valuation of CLO - Equities is most sensitive. A significant increase (decrease) in either of these significant inputs in isolation would result in lower (higher) fair value estimates for direct investments in our CLO - Equities and, in general, a change in default rate assumptions will be accompanied by a directionally similar change in loss severity rate assumptions. Collateral spreads and estimated maturity dates are less judgmental inputs as they are based on the historical average of actual spreads and the weighted average life of the current underlying portfolios, respectively. A significant increase (decrease) in either of these significant inputs in isolation would result in higher (lower) fair value estimates for direct investments in our CLO - Equities. In general, these inputs have no significant interrelationship with each other or with default and loss severity rates.

On a quarterly basis, our valuation process for CLO - Equities includes a review of the underlying cash flows and key assumptions used in the discounted cash flow model, and a review of the underlying collateral along with related discount margin by credit quality bucket. We review and update the above significant unobservable inputs based on information obtained from secondary markets, including from the managers of the CLOs we hold. These inputs are the responsibility of management and, in order to ensure fair value measurement is applied consistently and in accordance with U.S. GAAP, we update our assumptions through regular communication with industry participants and ongoing monitoring of the deals in which we participate (e.g. default and loss severity rate trends), we maintain a current understanding of the market conditions, historical results, as well as emerging trends that may impact future cash flows. By maintaining this current understanding, we are able to assess the reasonableness of the inputs we ultimately use in our model.

Weather derivatives relate to non-exchange traded risk management products addressing weather risks. We use observable market inputs and unobservable inputs in combination with industry or internally-developed simulation models to determine fair value; these models may reference market price information for similar instruments. The pricing models are internally reviewed by Risk Management personnel prior to implementation and are reviewed periodically thereafter.

Observable and unobservable inputs to these models vary by contract type and would typically include the following:


•	Observable inputs: market prices for similar instruments, notional, option strike, term to expiry, contractual limits;


•	Unobservable inputs: correlation; and


•	Both observable and unobservable inputs: weather curves, weather standard deviation.

In general, weather curves are the most significant contributing input to fair value determination; changes in this variable can result in higher or lower fair value depending on the underlying position. In addition, changes in any or all of the unobservable inputs identified above may contribute positively or negatively to overall portfolio value. The correlation input will quantify the interrelationship, if any, amongst the other variables.

The following tables present changes in Level 3 for financial instruments measured at fair value on a recurring basis for the periods indicated:



	Opening Balance		Transfers into Level 3		Transfers out of Level 3			Included in earnings⁽¹⁾			Included in OCI⁽²⁾			Purchases		Sales			Settlements/ Distributions			Closing Balance		Change in unrealized investment gain/(loss)⁽³⁾

Three months ended June 30, 2016
Fixed maturities
Corporate debt	$	40,250	$	20,412	$	—		$	(981	)	$	1,164		$	3,723	$	(2,105	)	$	(441	)	$	62,022	$	—
CMBS	10,551		—		—			—			58			—		—			(399		)	10,210		—
ABS	—		—		—			—			—			—		—			—			—		—
	50,801		20,412		—			(981		)	1,222			3,723		(2,105		)	(840		)	72,232		—
Other investments
Other privately held investments	36,712		—		—			(1,150		)	—			6,193		—			—			41,755		(1,150		)
CLO - Equities	60,371		—		—			10,028			—			—		—			(4,516		)	65,883		10,028
	97,083		—		—			8,878			—			6,193		—			(4,516		)	107,638		8,878
Other assets
Derivative instruments	5,977		—		—			(358		)	—			446		—			(6,060		)	5		5
Insurance-linked securities	24,916		—		—			109			—			—		—			—			25,025		109
	30,893		—		—			(249		)	—			446		—			(6,060		)	25,030		114
Total assets	$	178,777	$	20,412	$	—		$	7,648		$	1,222		$	10,362	$	(2,105	)	$	(11,416	)	$	204,900	$	8,992

Other liabilities
Derivative instruments	$	15,028	$	—	$	—		$	(809	)	$	—		$	1,830	$	—		$	(14,071	)	$	1,978	$	110
Total liabilities	$	15,028	$	—	$	—		$	(809	)	$	—		$	1,830	$	—		$	(14,071	)	$	1,978	$	110

Six months ended June 30, 2016
Fixed maturities
Corporate debt	$	38,518	$	20,412	$	(1,955	)	$	(979	)	$	1,088		$	9,544	$	(4,015	)	$	(591	)	$	62,022	$	—
CMBS	10,922		—		—			—			(86		)	—		—			(626		)	10,210		—
ABS	—		—		—			—			—			—		—			—			—		—
	49,440		20,412		(1,955		)	(979		)	1,002			9,544		(4,015		)	(1,217		)	72,232		—
Other investments
Other privately held investments	—		—		—			(1,150		)	—			42,905		—			—			41,755		(1,150		)
CLO - Equities	27,257		36,378		—			9,012			—			—		—			(6,764		)	65,883		9,012
	27,257		36,378		—			7,862			—			42,905		—			(6,764		)	107,638		7,862
Other assets
Derivative instruments	4,395		—		—			2,590			—			1,805		—			(8,785		)	5		5
Insurance-linked securities	24,925		—		—			100			—			—		—			—			25,025		100
	29,320		—		—			2,690			—			1,805		—			(8,785		)	25,030		105
Total assets	$	106,017	$	56,790	$	(1,955	)	$	9,573		$	1,002		$	54,254	$	(4,015	)	$	(16,766	)	$	204,900	$	7,967

Other liabilities
Derivative instruments	$	10,937	$	—	$	—		$	2,614		$	—		$	805	$	—		$	(12,378	)	$	1,978	$	111
Total liabilities	$	10,937	$	—	$	—		$	2,614		$	—		$	805	$	—		$	(12,378	)	$	1,978	$	111



	Opening Balance		Transfers into Level 3		Transfers out of Level 3			Included in earnings⁽¹⁾			Included in OCI⁽²⁾			Purchases		Sales		Settlements/ Distributions			Closing Balance		Change in unrealized investment gain/(loss)⁽³⁾

Three months ended June 30, 2015
Fixed maturities
Corporate debt	$	26,857	$	—	$	—		$	—		$	244		$	20,714	$	—	$	(4,807	)	$	43,008	$	—
CMBS	17,061		5,072		—			—			(120		)	—		—		(113		)	21,900		—
ABS	39,921		—		(39,851		)	—			43			—		—		(3		)	110		—
	83,839		5,072		(39,851		)	—			167			20,714		—		(4,923		)	65,018		—
Other investments
Other privately held investments	—		—		—			—			—			—		—		—			—		—
CLO - Equities	36,960		—		—			3,208			—			—		—		(3,247		)	36,921		3,208
	36,960		—		—			3,208			—			—		—		(3,247		)	36,921		3,208
Other assets
Derivative instruments	—		—		—			240			—			—		—		—			240		240
Insurance-linked securities	25,000		—		—			(163		)	—			—		—		—			24,837		(163		)
	25,000		—		—			77			—			—		—		—			25,077		77
Total assets	$	145,799	$	5,072	$	(39,851	)	$	3,285		$	167		$	20,714	$	—	$	(8,170	)	$	127,016	$	3,285

Other liabilities
Derivative instruments	$	7,308	$	—	$	—		$	(3,171	)	$	—		$	1,141	$	—	$	(4,460	)	$	818	$	13
Total liabilities	$	7,308	$	—	$	—		$	(3,171	)	$	—		$	1,141	$	—	$	(4,460	)	$	818	$	13

Six months ended June 30, 2015
Fixed maturities
Corporate debt	$	15,837	$	—	$	—		$	—		$	424		$	31,624	$	—	$	(4,877	)	$	43,008	$	—
CMBS	17,763		5,072		—			—			(324		)	—		—		(611		)	21,900		—
ABS	40,031		—		(39,851		)	—			105			—		—		(175		)	110		—
	73,631		5,072		(39,851		)	—			205			31,624		—		(5,663		)	65,018		—
Other investments
Other privately held investments	—		—		—			—			—			—		—		—			—		—
CLO - Equities	37,046		—		—			6,738			—			—		—		(6,863		)	36,921		6,738
	37,046		—		—			6,738			—			—		—		(6,863		)	36,921		6,738
Other assets
Derivative instruments	111		—		—			(827		)	—			—		—		956			240		240
Insurance-linked securities	—		—		—			(163		)	—			25,000		—		—			24,837		(163		)
	111		—		—			(990		)	—			25,000		—		956			25,077		77
Total assets	$	110,788	$	5,072	$	(39,851	)	$	5,748		$	205		$	56,624	$	—	$	(11,570	)	$	127,016	$	6,815

Other liabilities
Derivative instruments	$	15,288	$	—	$	—		$	(11,722	)	$	—		$	2,223	$	—	$	(4,971	)	$	818	$	13
Total liabilities	$	15,288	$	—	$	—		$	(11,722	)	$	—		$	2,223	$	—	$	(4,971	)	$	818	$	13


(1)	Gains and losses included in earnings on fixed maturities are included in net realized investment gains (losses). Gains and (losses) included in earnings on other investments are included in net investment income. Gains (losses) on weather derivatives included in earnings are included in other insurance-related income.


(2)	Gains and losses included in other comprehensive income (“OCI”) on fixed maturities are included in unrealized gains (losses) arising during the period.


(3)	Change in unrealized investment gain (loss) relating to assets held at the reporting date.

The transfers into and out of fair value hierarchy levels reflect the fair value of the securities at the end of the reporting period.

Transfers into Level 3 from Level 2

The transfers to Level 3 from Level 2 made during the three months ended June 30, 2016 were primarily due to the lack of observable market inputs and multiple quotes from pricing vendors and broker-dealers for certain fixed maturities. The transfers into Level 3 during the six months ended June 30, 2016 were the result of a change in valuation methodology relating to our CLO equity fund. An income approach valuation technique (discounted cash flow model) is used to estimate fair value at June 30, 2016. As the NAV practical expedient is no longer used the CLO equity fund is now categorized within the fair value hierarchy.

The transfers to Level 3 from Level 2 made during the three and six months ended June 30, 2015 were primarily due to the lack of observable market inputs and multiple quotes from pricing vendors and broker-dealers for certain fixed maturities.

Transfers out of Level 3 into Level 2

There were no transfers to Level 2 from Level 3 made during the three months ended June 30, 2016. The transfers to Level 2 from Level 3 made during the six months ended June 30, 2016 were primarily due to the availability of observable market

inputs and quotes from pricing vendors on certain fixed maturities.

The transfers to Level 2 from Level 3 made during the three and six months ended June 30, 2015 were primarily due to the availability of observable market inputs and quotes from pricing vendors on CLO Debt securities.

Financial Instruments Not Carried at Fair Value

U.S. GAAP guidance over disclosures about the fair value of financial instruments are also applicable to financial instruments not carried at fair value, except for certain financial instruments, including insurance contracts.

The carrying values of cash equivalents (including restricted amounts), accrued investment income, receivable for investments sold, certain other assets, payable for investments purchased and certain other liabilities approximated their fair values at June 30, 2016, due to their respective short maturities. As these financial instruments are not actively traded, their respective fair values are classified within Level 2.

The carrying value of mortgage loans held-for-investment approximated their fair value at June 30, 2016, due to the fact that the loans are within their first two years of issue. The estimated fair value of mortgage loans is primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk, or is determined from pricing for similar loans. Mortgage loans are not actively traded, their respective fair values are classified within Level 3.

At June 30, 2016, our senior notes are recorded at amortized cost with a carrying value of $992 million (2015: $992 million) and have a fair value of $1,081 million (2015: $1,058 million). The fair values of these securities were obtained from a third party pricing service and pricing was based on the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As these spreads and the yields for the risk-free yield curve are observable market inputs, the fair values of our senior notes are classified within Level 2.