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Fair Value Measurement | 9 Months Ended
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Sep. 30, 2021
Fair Value Disclosures [Abstract] |
Fair Value Measurement | Fair Value Measurement Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three level hierarchy has been established for valuing assets and liabilities based on how transparent (observable) the inputs are that are used to determine fair value, with the inputs considered most observable categorized as Level 1 and those that are the least observable categorized as Level 3. Hierarchy levels are defined as follows:
| Level 1: | quoted (unadjusted) market prices in active markets for identical assets and liabilities. For ProAssurance, Level 1 inputs are generally quotes for securities actively traded in exchange or over-the-counter markets.
| Level 2: | market data obtained from sources independent of the reporting entity (observable inputs). For ProAssurance, Level 2 inputs generally include quoted prices in markets that are not active, quoted prices for similar assets or liabilities, and results from pricing models that use observable inputs such as interest rates and yield curves that are generally available at commonly quoted intervals.
| Level 3: | the reporting entity’s own assumptions about market participant assumptions based on the best information available in the circumstances (non-observable inputs). For ProAssurance, Level 3 inputs are used in situations where little or no Level 1 or 2 inputs are available or are inappropriate given the particular circumstances. Level 3 inputs include results from pricing models for which some or all of the inputs are not observable, discounted cash flow methodologies, single non-binding broker quotes and adjustments to externally quoted prices that are based on management judgment or estimation.
Fair values of assets measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 are shown in the following tables. Where applicable, the tables also indicate the fair value hierarchy of the valuation techniques utilized to determine those fair values. For some assets, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When this is the case, the asset is categorized based on the level of the most significant input to the fair value measurement. Assessments of the significance of a particular input to the fair value measurement require judgment and consideration of factors specific to the assets being valued.
| September 30, 2021
| Fair Value Measurements Using |  | Total
(In thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Fair Value
Assets: |  |  |  |  |  |  |
Fixed maturities, available-for-sale |  |  |  |  |  |  |
U.S. Treasury obligations | $ | — |  |  | $ | 242,705 |  |  | $ | — |  |  | $ | 242,705 |
U.S. Government-sponsored enterprise obligations | — |  |  | 20,468 |  |  | — |  |  | 20,468 |
State and municipal bonds | — |  |  | 522,707 |  |  | — |  |  | 522,707 |
Corporate debt, multiple observable inputs | — |  |  | 1,943,401 |  |  | — |  |  | 1,943,401 |
Corporate debt, limited observable inputs | — |  |  | — |  |  | 19,712 |  |  | 19,712 |
Residential mortgage-backed securities | — |  |  | 473,674 |  |  | 4,235 |  |  | 477,909 |
Agency commercial mortgage-backed securities | — |  |  | 14,942 |  |  | — |  |  | 14,942 |
Other commercial mortgage-backed securities | — |  |  | 219,024 |  |  | — |  |  | 219,024 |
Other asset-backed securities | — |  |  | 432,261 |  |  | 11,007 |  |  | 443,268 |
Fixed maturities, trading | — |  |  | 45,049 |  |  | — |  |  | 45,049 |
Equity investments |  |  |  |  |  |  |
Financial | — |  |  | 868 |  |  | — |  |  | 868 |
Utilities/Energy | — |  |  | — |  |  | 69 |  |  | 69 |
Industrial | — |  |  | — |  |  | 2,500 |  |  | 2,500 |
Bond funds | 191,834 |  |  | — |  |  | — |  |  | 191,834 |
All other | 19,259 |  |  | — |  |  | — |  |  | 19,259 |
Short-term investments | 112,706 |  |  | 39,002 |  |  | — |  |  | 151,708 |
Other investments | 1,864 |  |  | 104,978 |  |  | — |  |  | 106,842 |
Other assets | — |  |  | 601 |  |  | — |  |  | 601 |
Total assets categorized within the fair value hierarchy | $ | 325,663 |  |  | $ | 4,059,680 |  |  | $ | 37,523 |  |  | 4,422,866 |
Assets carried at NAV, which approximates fair value and which are not categorized within the fair value hierarchy, reported as a part of: |  |  |  |  |  |  |
Investment in unconsolidated subsidiaries |  |  |  |  |  |  | 251,675 |
Total assets at fair value |  |  |  |  |  |  | $ | 4,674,541 |
Liabilities: |  |  |  |  |  |  |
Other liabilities | $ | — |  |  | $ | — |  |  | $ | 24,000 |  |  | $ | 24,000 |
Total liabilities categorized within the fair value hierarchy | $ | — |  |  | $ | — |  |  | $ | 24,000 |  |  | $ | 24,000 |
| December 31, 2020
| Fair Value Measurements Using |  | Total
(In thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Fair Value
Assets: |  |  |  |  |  |  |
Fixed maturities, available-for-sale |  |  |  |  |  |  |
U.S. Treasury obligations | $ | — |  |  | $ | 107,059 |  |  | $ | — |  |  | $ | 107,059 |
U.S. Government-sponsored enterprise obligations | — |  |  | 12,261 |  |  | — |  |  | 12,261 |
State and municipal bonds | — |  |  | 332,920 |  |  | — |  |  | 332,920 |
Corporate debt, multiple observable inputs | — |  |  | 1,326,077 |  |  | — |  |  | 1,326,077 |
Corporate debt, limited observable inputs | — |  |  | — |  |  | 3,265 |  |  | 3,265 |
Residential mortgage-backed securities | — |  |  | 274,509 |  |  | 2,032 |  |  | 276,541 |
Agency commercial mortgage-backed securities | — |  |  | 13,310 |  |  | — |  |  | 13,310 |
Other commercial mortgage-backed securities | — |  |  | 113,092 |  |  | — |  |  | 113,092 |
Other asset-backed securities | — |  |  | 266,345 |  |  | 6,661 |  |  | 273,006 |
Fixed maturities, trading | — |  |  | 48,456 |  |  | — |  |  | 48,456 |
Equity investments |  |  |  |  |  |  |
Financial | 13,810 |  |  | — |  |  | — |  |  | 13,810 |
Utilities/Energy | 564 |  |  | — |  |  | — |  |  | 564 |
Consumer oriented | 1,262 |  |  | — |  |  | — |  |  | 1,262 |
Industrial | 2,240 |  |  | — |  |  | — |  |  | 2,240 |
Bond funds | 69,475 |  |  | — |  |  | — |  |  | 69,475 |
All other | 20,202 |  |  | — |  |  | — |  |  | 20,202 |
Short-term investments | 307,695 |  |  | 30,118 |  |  | — |  |  | 337,813 |
Other investments | 1,509 |  |  | 42,607 |  |  | — |  |  | 44,116 |
Other assets | — |  |  | 329 |  |  | — |  |  | 329 |
Total assets categorized within the fair value hierarchy | $ | 416,757 |  |  | $ | 2,567,083 |  |  | $ | 11,958 |  |  | 2,995,798 |
Assets carried at NAV, which approximates fair value and which are not categorized within the fair value hierarchy, reported as a part of: |  |  |  |  |  |  |
Equity investments |  |  |  |  |  |  | 12,548 |
Investment in unconsolidated subsidiaries |  |  |  |  |  |  | 233,711 |
Total assets at fair value |  |  |  |  |  |  | $ | 3,242,057 |
The fair values for securities included in the Level 2 category, with the few exceptions described below, were developed by one of several third party, nationally recognized pricing services, including services that price only certain types of securities. Each service uses complex methodologies to determine values for securities and subject the values they develop to quality control reviews. Management selected a primary source for each type of security in the portfolio and reviewed the values provided for reasonableness by comparing data to alternate pricing services and to available market and trade data. Values that appeared inconsistent were further reviewed for appropriateness. Any value that did not appear reasonable was discussed with the service that provided the value and adjusted, if necessary. There were no material changes to the values supplied by the pricing services as of September 30, 2021 and December 31, 2020. Level 2 Valuations Below is a summary description of the valuation methodologies primarily used by the pricing services for securities in the Level 2 category, by security type: U.S. Treasury obligations were valued based on quoted prices for identical assets, or, in markets that are not active, quotes for similar assets, taking into consideration adjustments for variations in contractual cash flows and yields to maturity. U.S. Government-sponsored enterprise obligations were valued using pricing models that consider current and historical market data, normal trading conventions, credit ratings and the particular structure and characteristics of the security being valued, such as yield to maturity, redemption options, and contractual cash flows. Adjustments to model inputs or model results were included in the valuation process when necessary to reflect recent regulatory, government or corporate actions or significant economic, industry or geographic events affecting the security’s fair value. State and municipal bonds were valued using a series of matrices that considered credit ratings, the structure of the security, the sector in which the security falls, yields and contractual cash flows. Valuations were further adjusted, when necessary, to reflect the expected effect on fair value of recent significant economic or geographic events or ratings changes. Corporate debt, multiple observable inputs consisted primarily of corporate bonds, but also included a small number of bank loans. The methodology used to value Level 2 corporate bonds was the same as the methodology previously described for U.S. Government-sponsored enterprise obligations. Bank loans were valued based on an average of broker quotes for the loans in question, if available. If quotes were not available, the loans were valued based on quoted prices for comparable loans or, if the loan was newly issued, by comparison to similar seasoned issues. Broker quotes were compared to actual trade prices to permit assessment of the reliability of the quotes; unreliable quotes were not considered in quoted averages. Residential and commercial mortgage-backed securities were valued using a pricing matrix which considers the issuer type, coupon rate and longest cash flows outstanding. The matrix used was based on the most recently available market information. Agency and non-agency collateralized mortgage obligations were both valued using models that consider the structure of the security, current and historical information regarding prepayment speeds, ratings and ratings updates, and current and historical interest rate and interest rate spread data. Other asset-backed securities were valued using models that consider the structure of the security, monthly payment information, current and historical information regarding prepayment speeds, ratings and ratings updates, and current and historical interest rate and interest rate spread data. Spreads and prepayment speeds consider collateral type. Fixed maturities, trading are held by the Lloyd's Syndicates segment and include U.S. Treasury obligations, corporate debt with multiple observable inputs and other asset-backed securities. These securities were valued using the respective valuation methodologies discussed above for each security type. Equity investments were securities not traded on an exchange on the valuation date. The securities were valued using the most recently available quotes for the securities. Short-term investments were securities maturing within one year, carried at fair value which approximated the cost of the securities due to their short-term nature. Other investments consisted primarily of convertible bonds valued using a pricing model that incorporated selected dealer quotes as well as current market data regarding equity prices and risk free rates. If dealer quotes were unavailable for the security being valued, quotes for securities with similar terms and credit status were used in the pricing model. Dealer quotes selected for use were those considered most accurate based on parameters such as underwriter status and historical reliability. Other assets consisted of an interest rate cap derivative instrument, valued using a model which considers the volatilities from other instruments with similar maturities, strike prices, durations and forward yield curves. Under the terms of the interest rate cap agreement, ProAssurance paid a premium of $2 million for the right to receive cash payments based upon a notional amount of $35 million if and when the three-month LIBOR rises above 2.35%. The Company's variable-rate Mortgage Loans bear an interest rate of three-month LIBOR plus 1.325%. Level 3 Valuations Below is a summary description of the valuation methodologies used as well as quantitative information regarding securities in the Level 3 category, by security type: Level 3 Valuation Methodologies Corporate debt, limited observable inputs consisted of corporate bonds valued using dealer quotes for similar securities or discounted cash flow models using yields currently available for similar securities. Similar securities are defined as securities of comparable credit quality that have like terms and payment features. Assessments of credit quality were based on NRSRO ratings, if available, or were determined by management if not available. At September 30, 2021, 100% of the securities were rated and the average rating was BBB. At December 31, 2020, 100% of the securities were rated and the average rating was BB+. Residential mortgage-backed and other asset-backed securities consisted of securitizations of receivables valued using dealer quotes for similar securities or discounted cash flow models using yields currently available for similar securities. Similar securities are defined as securities of comparable credit quality that have like terms and payment features. Assessments of credit quality were based on NRSRO ratings, if available, or were subjectively determined by management if not available. At September 30, 2021, 95% of the securities were rated and the average rating was A. At December 31, 2020, 51% of the securities were rated and the average rating was AA-. Equity Securities consisted of a preferred stock and a mutual fund for which limited observable inputs were available at September 30, 2021. The equity securities were primarily priced using broker/dealer quotes and internal models with some inputs that are unobservable. Other liabilities consisted of the contingent consideration which is a portion of the purchase price for the NORCAL acquisition and is recorded at fair value each reporting period. The ultimate payout under the contingent consideration is dependent on the after-tax development of NORCAL's ultimate net losses over a three-year period beginning December 31, 2020 and may total up to $84 million. See further discussion around the contingent consideration in Note 2 and Note 9. Quantitative Information Regarding Level 3 Valuations
|  | Fair Value at |  |  |  |  |  |
($ in thousands) |  | September 30, 2021 |  | December 31, 2020 |  | Valuation Technique |  | Unobservable Input |  | Range (Weighted Average)
Assets: |  |  |  |  |  |  |  |  |  |
Corporate debt, limited observable inputs |  | $19,712 |  | $3,265 |  | Market Comparable Securities |  | Comparability Adjustment |  | 0% - 5% (2.5%)
|  |  |  |  |  | Discounted Cash Flows |  | Comparability Adjustment |  | 0% - 5% (2.5%)
Residential mortgage-backed securities |  | $4,235 |  | $2,032 |  | Market Comparable Securities |  | Comparability Adjustment |  | 0% - 5% (2.5%)
|  |  |  |  |  | Discounted Cash Flows |  | Comparability Adjustment |  | 0% - 5% (2.5%)
Other asset-backed securities |  | $11,007 |  | $6,661 |  | Market Comparable Securities |  | Comparability Adjustment |  | 0% - 5% (2.5%)
|  |  |  |  |  | Discounted Cash Flows |  | Comparability Adjustment |  | 0% - 5% (2.5%)
Equity securities |  | $2,569 |  | $— |  | Discounted Cash Flows |  | Comparability Adjustment |  | 0% - 10% (5%)
Liabilities: |  |  |  |  |  |  |  |  |  |
Other liabilities |  | $24,000 |  | $— |  | Stochastic Model/Discounted Cash Flows |  | N/A |  | 0% - 10% (8%)
The significant unobservable inputs used in the fair value measurement of the above listed securities were the valuations of comparable securities with similar issuers, credit quality and maturity. Changes in the availability of comparable securities could result in changes in the fair value measurements. Fair Value Measurements - Level 3 Assets The following tables present summary information regarding changes in the fair value of assets measured using Level 3 inputs.
|  |  |  |  | September 30, 2021
|  |  |  |  | Level 3 Fair Value Measurements - Assets
(In thousands) |  |  |  |  | Corporate Debt |  | Asset-backed Securities |  | Equity Securities |  | Other Investments |  | Total |  |
Balance, June 30, 2021 |  |  |  |  | $ | 15,065 |  |  | $ | 9,857 |  |  | $ | 852 |  |  | $ | 2,222 |  |  | $ | 27,996 |  |  |
Total gains (losses) realized and unrealized: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Included in earnings, as a part of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net realized investment gains (losses) |  |  |  |  | — |  |  | — |  |  | (2) |  |  | (639) |  |  | (641) |  |  |
Included in other comprehensive income |  |  |  |  | 49 |  |  | (74) |  |  | 18 |  |  | — |  |  | (7) |  |  |
Purchases |  |  |  |  | 10,881 |  |  | 12,666 |  |  | 2,500 |  |  | — |  |  | 26,047 |  |  |
Sales |  |  |  |  | (284) |  |  | (17) |  |  | — |  |  | — |  |  | (301) |  |  |
Transfers in |  |  |  |  | — |  |  | — |  |  | 69 |  |  | — |  |  | 69 |  |  |
Transfers out |  |  |  |  | (5,999) |  |  | (7,190) |  |  | (868) |  |  | (1,583) |  |  | (15,640) |  |  |
Balance, September 30, 2021 |  |  |  |  | $ | 19,712 |  |  | $ | 15,242 |  |  | $ | 2,569 |  |  | $ | — |  |  | $ | 37,523 |  |  |
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | (1) |  |  | $ | (639) |  |  | $ | (640) |  |  |
|  |  |  |  | September 30, 2021
|  |  |  |  | Level 3 Fair Value Measurements - Assets
(In thousands) |  |  |  |  | Corporate Debt |  | Asset-backed Securities |  | Equity Securities |  | Other Investments |  | Total |  |
Balance, December 31, 2020 |  |  |  |  | $ | 3,265 |  |  | $ | 8,693 |  |  | $ | — |  |  | $ | — |  |  | $ | 11,958 |  |  |
Total gains (losses) realized and unrealized: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Included in earnings, as a part of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net investment income |  |  |  |  | 1 |  |  | (2) |  |  | — |  |  | — |  |  | (1) |  |  |
Net realized investment gains (losses) |  |  |  |  | — |  |  | (11) |  |  | (1) |  |  | (774) |  |  | (786) |  |  |
Included in other comprehensive income |  |  |  |  | 82 |  |  | (171) |  |  | 16 |  |  | — |  |  | (73) |  |  |
Purchases |  |  |  |  | 24,971 |  |  | 28,026 |  |  | 9,083 |  |  | 205 |  |  | 62,285 |  |  |
Sales |  |  |  |  | (461) |  |  | (506) |  |  | (5,730) |  |  | — |  |  | (6,697) |  |  |
Transfers in |  |  |  |  | 858 |  |  | — |  |  | 69 |  |  | 2,152 |  |  | 3,079 |  |  |
Transfers out |  |  |  |  | (9,004) |  |  | (20,787) |  |  | (868) |  |  | (1,583) |  |  | (32,242) |  |  |
Balance, September 30, 2021 |  |  |  |  | $ | 19,712 |  |  | $ | 15,242 |  |  | $ | 2,569 |  |  | $ | — |  |  | $ | 37,523 |  |  |
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | (1) |  |  | $ | (774) |  |  | $ | (775) |  |  |
|  |  |  |  | September 30, 2020
|  |  |  |  | Level 3 Fair Value Measurements – Assets
(In thousands) |  |  |  |  | Corporate Debt |  | Asset-backed Securities |  | Other Investments |  | Total
Balance, June 30, 2020 |  |  |  |  | $ | 3,117 |  |  | $ | 5,978 |  |  | $ | 1,568 |  |  | $ | 10,663 |
Total gains (losses) realized and unrealized: |  |  |  |  |  |  |  |  |  |  |
Included in earnings, as a part of: |  |  |  |  |  |  |  |  |  |  |
Net realized investment gains (losses) |  |  |  |  | — |  |  | (2) |  |  | 143 |  |  | 141 |
Included in other comprehensive income |  |  |  |  | (6) |  |  | (58) |  |  | — |  |  | (64) |
Purchases |  |  |  |  | 900 |  |  | 8,513 |  |  | — |  |  | 9,413 |
Sales |  |  |  |  | (16) |  |  | (99) |  |  | — |  |  | (115) |
Transfers out |  |  |  |  | — |  |  | (1,378) |  |  | (1,711) |  |  | (3,089) |
Balance, September 30, 2020 |  |  |  |  | $ | 3,995 |  |  | $ | 12,954 |  |  | $ | — |  |  | $ | 16,949 |
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | 143 |  |  | $ | 143 |
|  |  |  |  | September 30, 2020
|  |  |  |  | Level 3 Fair Value Measurements – Assets
(In thousands) |  |  |  |  | Corporate Debt |  | Asset-backed Securities |  | Other Investments |  | Total
Balance, December 31, 2019 |  |  |  |  | $ | 5,079 |  |  | $ | 2,992 |  |  | $ | 3,086 |  |  | $ | 11,157 |
Total gains (losses) realized and unrealized: |  |  |  |  |  |  |  |  |  |  |
Included in earnings, as a part of: |  |  |  |  |  |  |  |  |  |  |
Net investment income |  |  |  |  | — |  |  | (10) |  |  | — |  |  | (10) |
Net realized investment gains (losses) |  |  |  |  | — |  |  | (2) |  |  | 151 |  |  | 149 |
Included in other comprehensive income |  |  |  |  | 38 |  |  | 23 |  |  | — |  |  | 61 |
Purchases |  |  |  |  | 900 |  |  | 13,341 |  |  | — |  |  | 14,241 |
Sales |  |  |  |  | (2,173) |  |  | (888) |  |  | — |  |  | (3,061) |
Transfers in |  |  |  |  | 945 |  |  | 605 |  |  | — |  |  | 1,550 |
Transfers out |  |  |  |  | (794) |  |  | (3,107) |  |  | (3,237) |  |  | (7,138) |
Balance, September 30, 2020 |  |  |  |  | $ | 3,995 |  |  | $ | 12,954 |  |  | $ | — |  |  | $ | 16,949 |
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end |  |  |  |  | $ | — |  |  | $ | — |  |  | $ | 151 |  |  | $ | 151 |
Fair Value Measurements - Level 3 Liabilities There was no change in the fair value of the contingent consideration from the date of the NORCAL acquisition on May 5, 2021 to September 30, 2021. Transfers Transfers shown in the preceding Level 3 tables were as of the end of the period in which the transfer occurred. All transfers were to or from Level 2. All transfers in and out of Level 3 during the three and nine months ended September 30, 2021 and 2020 related to securities held for which the level of market activity for identical or nearly identical securities varies from period to period. The securities were valued using multiple observable inputs when those inputs were available; otherwise the securities were valued using limited observable inputs. Fair Values Not Categorized At September 30, 2021 and December 31, 2020, certain LPs/LLCs and investment funds measure fund assets at fair value on a recurring basis and provide a NAV for ProAssurance's interest. The carrying value of these interests is based on the NAV provided and was considered to approximate the fair value of the interests. For investment in unconsolidated subsidiaries, ProAssurance recognizes any changes in the NAV of its interests in equity in earnings (loss) of unconsolidated subsidiaries during the period of change. In accordance with GAAP, the fair value of these investments was not classified within the fair value hierarchy. The amount of ProAssurance's unfunded commitments related to these investments as of September 30, 2021 and fair values of these investments as of September 30, 2021 and December 31, 2020 were as follows:
| Unfunded Commitments |  | Fair Value
(In thousands) | September 30, 2021 |  | September 30, 2021 |  | December 31, 2020
Equity investments: |  |  |  |  |
Mortgage fund (1) | None |  | $ | — |  |  | $ | 12,548 |
Investment in unconsolidated subsidiaries: |  |  |  |  |
Private debt funds (2) | $8,929 |  | 18,523 |  |  | 16,387 |
Long/short equity funds (3) | None |  | 533 |  |  | 596 |
Non-public equity funds (4) | $38,713 |  | 144,539 |  |  | 138,357 |
Credit funds (5) | $41,123 |  | 43,125 |  |  | 34,848 |
Strategy focused funds (6) | $34,988 |  | 44,955 |  |  | 43,523 |
|  |  | 251,675 |  |  | 233,711 |
Total investments carried at NAV |  |  | $ | 251,675 |  |  | $ | 246,259 |
Below is additional information regarding each of the investments listed in the table above as of September 30, 2021. (1)This investment fund was focused on the structured mortgage market. The fund primarily invested in U.S. Agency mortgage-backed securities. Redemptions are allowed at the end of any calendar quarter with a prior notice requirement of 65 days and are paid within 45 days at the end of the redemption dealing day. (2)This investment is comprised of interests in two unrelated LP funds that are structured to provide interest distributions primarily through diversified portfolios of private debt instruments. One LP allows redemption by special consent, while the other does not permit redemption. Income and capital are to be periodically distributed at the discretion of the LPs over an anticipated time frame that spans from three to eight years. (3)This investment holds primarily long and short North American equities and targets absolute returns using strategies designed to take advantage of market opportunities. Redemptions are permitted; however, redemptions above specified thresholds (lowest threshold is 90%) may be only partially payable until after a fund audit is completed and are then payable within 30 days. (4)This investment is comprised of interests in multiple unrelated LP funds, each structured to provide capital appreciation through diversified investments in private equity, which can include investments in buyout, venture capital, debt including senior, second lien and mezzanine, distressed debt, collateralized loan obligations and other private equity-oriented LPs. Two of the LPs allow redemption by terms set forth in the LP agreements; the others do not permit redemption. Income and capital are to be periodically distributed at the discretion of the LP over time frames that are anticipated to span up to ten years. (5)This investment is comprised of multiple unrelated LP funds. Two funds seek to obtain superior risk-adjusted absolute returns through a diversified portfolio of debt securities, including bonds, loans and other asset-backed instruments. The remaining funds focus on private middle market company mezzanine and senior secured loans, opportunities across the credit spectrum, mortgage backed-loans, as well as various types of loan-backed investments. Three of the funds allow redemptions at any quarter-end with prior notice requirements that vary from 90 to 180 days, while another fund allows for redemptions with consent of the General Partner. The remaining funds do not allow redemptions. For the funds that do not allow redemptions, income and capital are to be periodically distributed at the discretion of the LP over time frames throughout the remaining life of the funds. (6) This investment is comprised of multiple unrelated LPs/LLCs funds. One fund is an LLC focused on investing in North American consumer products companies, comprised of equity and equity-related securities, as well as debt instruments. A second fund is focused on aircraft investments, along with components and assets related to aircrafts. For both funds, redemptions are not permitted. Another fund is an LP focused on North American energy infrastructure assets that allows redemption with consent of the General Partner. The remaining funds are real estate focused LPs, one of which allows for redemption with prior notice. ProAssurance may not sell, transfer or assign its interest in any of the above LPs/LLCs without special consent from the LPs/LLCs. Nonrecurring Fair Value Measurement During the third quarter of 2020, ProAssurance recognized a nonrecurring fair value measurement related to the goodwill in its Specialty P&C reporting unit with a carrying value of $161.1 million prior to the fair value measurement. This nonrecurring fair value measurement resulted in the goodwill being written down to its implied fair value of zero resulting in an impairment of goodwill of $161.1 million. The inputs used in the fair value measurement were non-observable and, as such, were categorized as a Level 3 valuation. ProAssurance did not have any other assets or liabilities that were measured at fair value on a nonrecurring basis at September 30, 2021 or December 31, 2020. Financial Instruments - Methodologies Other Than Fair Value The following table provides the estimated fair value of the Company's financial instruments that, in accordance with GAAP for the type of investment, are measured using a methodology other than fair value. Fair values provided primarily fall within the Level 3 fair value category.
| September 30, 2021 |  | December 31, 2020
(In thousands) | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
Financial assets: |  |  |  |  |  |  |
BOLI | $ | 80,821 |  |  | $ | 80,821 |  |  | $ | 67,847 |  |  | $ | 67,847 |
Other investments | $ | 3,170 |  |  | $ | 3,170 |  |  | $ | 2,952 |  |  | $ | 2,952 |
Other assets | $ | 39,584 |  |  | $ | 39,593 |  |  | $ | 31,128 |  |  | $ | 31,141 |
Financial liabilities: |  |  |  |  |  |  |
Senior notes due 2023* | $ | 250,000 |  |  | $ | 267,988 |  |  | $ | 250,000 |  |  | $ | 269,160 |
Mortgage Loans* | $ | — |  |  | $ | — |  |  | $ | 36,113 |  |  | $ | 36,113 |
Contribution Certificates | $ | 175,766 |  |  | $ | 178,728 |  |  | $ | — |  |  | $ | — |
Other liabilities | $ | 51,456 |  |  | $ | 51,456 |  |  | $ | 30,334 |  |  | $ | 30,334 |
* Carrying value excludes unamortized debt issuance costs.
The fair value of the BOLI was equal to the cash surrender value associated with the policies on the valuation date. Other investments listed in the table above include FHLB common stock carried at cost and an annuity investment carried at amortized cost. Three of ProAssurance's insurance subsidiaries are members of an FHLB. The estimated fair value of the FHLB common stock was based on the amount the subsidiaries would receive if their memberships were canceled, as the memberships cannot be sold. The fair value of the annuity represents the present value of the expected future cash flows discounted using a rate available in active markets for similarly structured instruments. Other assets and other liabilities primarily consisted of related investment assets and liabilities associated with funded deferred compensation agreements. The fair value of the funded deferred compensation assets was based upon quoted market prices, which is categorized as a Level 1 valuation, and had a fair value of $38.5 million and $30.6 million at September 30, 2021 and December 31, 2020, respectively. The fair value of the funded deferred compensation assets as of September 30, 2021 included rabbi trust assets acquired as a result of the NORCAL acquisition, which consists entirely of cash equivalents and mutual funds with a total fair value of $5.1 million (see Note 2 for additional information on NORCAL acquisition). Other assets also included an unsecured note receivable under a separate line of credit agreement. The fair value of the note receivable was based on the present value of expected cash flows from the note receivable, discounted at market rates on the valuation date for receivables with similar credit standings and similar payment structures. Other liabilities primarily consisted of liabilities associated with funded deferred compensation agreements. The reported balance is determined based on the amount of elective deferrals and employer contributions adjusted for periodic changes in the fair value of the participant balances based on the performance of the funds selected by the participants and had a fair value of $51.5 million and $30.3 million at September 30, 2021 and December 31, 2020, respectively. The fair value of the funded deferred compensation liabilities as of September 30, 2021 included liabilities assumed as a result of the NORCAL acquisition, with a total fair value of $18.0 million (see Note 2 for additional information). The fair value of the debt, excluding the Contribution Certificates, was estimated based on the present value of expected future cash outflows, discounted at rates available on the valuation date for similar debt issued by entities with a similar credit standing to ProAssurance. The fair value of the Contribution Certificates was estimated based on a binomial option pricing model. The Contribution Certificates is a portion of the purchase consideration for the NORCAL acquisition and are issued to certain NORCAL policyholders in the conversion, and those instruments are an obligation of NORCAL Insurance Company, the successor of NORCAL Mutual Insurance Company (see Note 2 and 11 for further discussion of the terms of the Contribution Certificates).

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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