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Variable Interest Entities
12 Months Ended
Dec. 31, 2018
Variable Interest Entity, Not Primary Beneficiary, Disclosures [Abstract]  
Variable Interest Entities
Variable Interest Entities

BAM

As a mutual insurance company, BAM is owned by its members. BAM charges an insurance premium on each municipal bond insurance policy it writes. A portion of the premium is a MSC and the remainder is a risk premium. In the event of a municipal bond refunding, the MSC from the original issuance can be reutilized, in effect serving as a credit against the total insurance premium on the refunding of the municipal bond. Issuers of debt insured by BAM are members of BAM so long as any of their BAM-insured debt is outstanding, and as members they have certain interests in BAM, including the right to vote for BAM’s directors and to receive dividends in the future, if declared.
The equity at risk funded by BAM’s members is not sufficient to fund its operations without the additional financial support provided by the BAM Surplus Notes and accordingly, BAM is considered to be a VIE.
At inception, BAM and HG Re also entered into the FLRT. HG Re provides first loss protection up to 15%-of-par outstanding on each municipal bond insured by BAM. For capital appreciation bonds, par is adjusted to the estimated equivalent par value for current interest paying bonds. In return, BAM cedes 60% of the risk premium charged for insuring the municipal bond, net of a ceding commission. HG Re’s obligations under the FLRT are limited to the assets in the Regulation 114 Trust and the Supplemental Trust.  Losses required to be reimbursed under the FLRT are subject to an aggregate limit equal to the assets held in the Collateral Trusts at any point in time.  In addition, under the FLRT, HG Holdings Ltd, a subsidiary of HG Global, has the right to designate two directors for election to BAM’s board of directors.
Since BAM is owned by its members, its equity and results of operations are included in non-controlling interests. However, White Mountains is required to consolidate BAM’s results in its financial statements because BAM is a VIE for which White Mountains is the primary beneficiary.

Kudu

On February 5, 2018, White Mountains entered into an agreement to fund up to $125.0 million in Kudu Investment Management, LLC (“Kudu”), a capital provider to asset management and wealth management firms. Kudu specializes in providing capital solutions to asset managers and registered investment advisers, for purposes including generational ownership transfers, management buyouts, acquisition and growth finance, and legacy partner liquidity.
White Mountains has determined that Kudu is a VIE but that White Mountains is not the primary beneficiary. White Mountains’s ownership interest gives White Mountains the opportunity to exert significant influence over the significant financial and operating activities of Kudu. Accordingly, Kudu meets the criteria to be accounted for under the equity method. White Mountains has taken the fair value option for its investment in Kudu. White Mountains’s investment in Kudu is measured at fair value using NAV as a practical expedient. Changes in the fair value of Kudu have been recorded in realized and unrealized investment gains. White Mountains’s maximum loss in Kudu is limited to the amount invested. As of December 31, 2018, Kudu is recorded within other long-term investments at a carrying amount of $30.7 million.