
a)	Concentrations of Credit Risk

Credit Risk Aggregation

The Company monitors and manages the aggregation of credit risk on a group-wide basis allowing it to consider exposure management strategies for individual companies, countries, regions, sectors and any other relevant inter-dependencies. The Company's credit exposures are aggregated based on the origin of risk. As part of its credit aggregation framework, the Company also assigns aggregate credit limits by single counterparty (a group of companies or country). These limits are based on and adjusted for a variety of factors including the prevailing economic environment and the nature of the underlying credit exposures. The Company's credit aggregation measurement and reporting process is facilitated by its credit risk exposure database, which contains relevant information on counterparty details and credit risk exposures. The Company also licenses third party tools to provide credit risk assessments.

Credit risk aggregation is also managed through minimizing overlaps in underwriting, financing and investing activities.

The assets that potentially subject the Company to concentrations of credit risk consist principally of cash and investments, reinsurance recoverable and (re)insurance premiums receivable balances, as described below:

(i) Cash and Investments

In order to mitigate concentration and operational risks related to cash and cash equivalents, the Company limits the maximum amount of cash that can be deposited with a single counterparty and limits acceptable counterparties based on current rating, outlook and other relevant factors.

The Company's investment portfolio is managed by external investment managers in accordance with its investment guidelines. The Company limits such credit risk through diversification, issuer exposure limitation graded by ratings and, with respect to custodians, through contractual and other legal remedies. Excluding U.S. government and agency securities, the Company limits its concentration of credit risk to any single corporate issuer to 2% or less of its investment grade fixed maturities portfolio for securities rated A- or above and 1% or less of its investment grade fixed maturities portfolio for securities rated below A-.

At December 31, 2017, the Company was in compliance with these limits.

(ii) Reinsurance Recoverable Balances

Within the Company's reinsurance purchasing activities, it is exposed to the credit risk of a reinsurer failing to meet its obligations under reinsurance contracts. To help mitigate this, the Company's reinsurance purchasing is subject to financial security requirements specified by its Reinsurance Security Committee. This Committee maintains a list of approved reinsurers, performs credit risk assessments for potential new reinsurers, regularly monitors approved reinsurers with consideration for events which may have a material impact on their creditworthiness, recommends counterparty tolerance levels for different types of ceded business and monitors concentrations of credit risk. This assessment considers a wide range of individual attributes, including a review of the counterparty’s financial strength, industry position and other qualitative factors. Generally, the Committee requires that reinsurers who do not meet specified requirements provide collateral.

At December 31, 2017, the three largest balances by reinsurer accounted for 12%, 11% and 7% (2016: 13%, 10% and 9%) of reinsurance recoverable on unpaid and paid losses.

At December 31, 2017, amounts related to reinsurers with the ten largest balances comprised 56% (2016: 67%) of reinsurance recoverable on unpaid and paid losses and had a weighted average A.M. Best rating of A+ (2016: A+).

(iii) Premium Balances Receivable

The diversity of the Company's client base limits the credit risk associated with its premium balances receivable. In addition, for insurance contracts the Company has contractual rights to cancel cover for non-payment of premiums and for reinsurance contracts the Company has contractual rights to offset premium balances receivable with corresponding payments for losses and loss expenses.

Brokers and other intermediaries collect premiums from customers on behalf of the Company. The Company has policies and standards in place to manage and monitor credit risk from intermediaries with a focus on day-to-day monitoring of the largest positions.

These contractual rights contribute to the mitigation of credit risk, as does monitoring of aged premium balances receivable. In light of these mitigating factors, and considering that a significant portion of premium balances receivable are not currently due based on the terms of the underlying contracts, the Company does not utilize specific credit quality indicators to monitor its premium balances receivable.

At December 31, 2017, the Company recorded an allowance for estimated uncollectible premium balances receivable of $6 million (2016: $2 million).

For the year ended December 31, 2017, bad debt expense was $nil (2016: $1 million).


b)	Brokers

The Company produces its business through brokers and direct relationships with insurance companies. For the year ended December 31, 2017, three brokers accounted for 49% (2016: 52%; 2015: 53%) of total gross premiums written.

Marsh & McLennan Companies Inc. accounted for 20% (2016: 21%; 2015: 22%), Aon plc for 17% (2016: 19%; 2015: 18%), and Willis Tower Watson PLC for 12% (2016: 12%; 2015: 13%).

No other broker and no single insured or reinsured accounted for more than 10% of gross premiums written in any of the last three years.


c)	Lease Commitments

In the ordinary course of business, the Company renews and enters into new leases for office space which expire at various dates. For the year ended December 31, 2017, total rent expense with respect to operating leases was $29 million (2016: $25 million; 2015: $28 million).

Future minimum lease payments are expected to be as follows:




Year ended December 31,

2018	$	27,777
2019	26,514
2020	22,661
2021	23,817
2022	22,745
Later years	84,606
Total future minimum lease payments	$	208,120


d)	Legal Proceedings

From time to time, the Company is subject to routine legal proceedings, including arbitrations, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against the Company in the ordinary course of insurance or reinsurance operations. Estimated amounts payable under such proceedings are included in the reserve for losses and loss expenses in the Consolidated Balance Sheets.

The Company is not party to any material legal proceedings arising outside the ordinary course of business.


e)	Investments

At December 31, 2017 the Company has $414 million (2016: $401 million) of unfunded investment commitments related to the other investment portfolio, which are callable by investment managers (see Note 6(c) 'Investments'). At December 31, 2017 the Company has a $16 million (2016: $2 million) commitment to purchase commercial mortgage loans.


f)	Funds at Lloyd's

The Company operates in the Lloyd’s market through its corporate member, AXIS Corporate Capital UK Limited which represents its participation in Syndicate 1686 and Novae Corporate Underwriting Limited, the sole corporate member of Syndicate 2007. Lloyd’s sets capital requirements for corporate members annually through the application of a capital model that is based on regulatory rules pursuant to Solvency II.

The capital provided to support underwriting, or FAL may be satisfied by cash, certain investments and letters of credit provided by approved banks.

At December 31, 2017, investments and cash of $1.2 billion (2016: $383 million) were restricted to satisfy the Company's FAL requirements (see Note 6 'Investments' and Note 21 'Statutory Financial Information').