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Fair Value Measurement
 6 Months Ended
Jun. 30, 2022
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 June 30, 2022 and December 31, 2021 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. For more information on the valuation methodologies used regarding securities in the Level 2 and Level 3 categories, see Note 3 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2021 report on Form 10-K.
June 30, 2022
Fair Value Measurements UsingTotal
(In thousands)Level 1Level 2Level 3Fair Value
Assets:
Fixed maturities, available-for-sale
U.S. Treasury obligations$— $221,744 $— $221,744 
U.S. Government-sponsored enterprise obligations— 17,633 — 17,633 
State and municipal bonds— 473,168 — 473,168 
Corporate debt, multiple observable inputs— 1,715,796 — 1,715,796 
Corporate debt, limited observable inputs— — 74,212 74,212 
Residential mortgage-backed securities— 384,952 273 385,225 
Agency commercial mortgage-backed securities— 11,940 — 11,940 
Other commercial mortgage-backed securities— 207,922 565 208,487 
Other asset-backed securities— 420,410 3,200 423,610 
Fixed maturities, trading— 45,274 — 45,274 
Equity investments
Financial10,813 289 2,125 13,227 
Utilities/Energy912 — — 912 
Industrial— — 2,500 2,500 
Bond funds116,358 — — 116,358 
All other14,615 — — 14,615 
Short-term investments287,642 38,408 — 326,050 
Other investments1,948 89,355 901 92,204 
Total assets categorized within the fair value hierarchy$432,288 $3,626,891 $83,776 4,142,955 
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 subsidiaries270,288 
Total assets at fair value$4,413,243 
Liabilities:
Other liabilities$— $— $24,000 $24,000 
Total liabilities categorized within the fair value hierarchy$— $— $24,000 $24,000 
December 31, 2021
Fair Value Measurements UsingTotal
(In thousands)Level 1Level 2Level 3Fair Value
Assets:
Fixed maturities, available-for-sale
U.S. Treasury obligations$— $238,507 $— $238,507 
U.S. Government-sponsored enterprise obligations— 20,234 — 20,234 
State and municipal bonds— 519,196 — 519,196 
Corporate debt, multiple observable inputs— 1,851,427 — 1,851,427 
Corporate debt, limited observable inputs— — 47,129 47,129 
Residential mortgage-backed securities— 453,644 297 453,941 
Agency commercial mortgage-backed securities— 14,141 — 14,141 
Other commercial mortgage-backed securities— 231,483 — 231,483 
Other asset-backed securities— 451,459 6,205 457,664 
Fixed maturities, trading— 43,670 — 43,670 
Equity investments
Financial6,615 855 — 7,470 
Industrial— — 2,500 2,500 
Bond funds187,059 — — 187,059 
All other17,778 — — 17,778 
Short-term investments174,944 42,043 — 216,987 
Other investments1,889 95,288 1,434 98,611 
Other assets— 649 — 649 
Total assets categorized within the fair value hierarchy$388,285 $3,962,596 $57,565 4,408,446 
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 subsidiaries270,816 
Total assets at fair value$4,679,262 
Liabilities:
Other liabilities$— $— $24,000 $24,000 
Total liabilities categorized within the fair value hierarchy$— $— $24,000 $24,000 
Other than as described below, see Note 3 of the Notes to Consolidated Financial Statements in ProAssurance’s December 31, 2021 report on Form 10-K for a summary description of the valuation methodologies used regarding securities in the Level 3 category, by security type.
Level 3 Valuation Methodologies
Residential mortgage-backed, other commercial mortgage-backed securities and other asset-backed securities consisted of securitizations of receivables valued using dealer quotes for similar securities or discounted cash flow models using yields currently available for similar securities. Similar securities are defined as securities of comparable credit quality that have like terms and payment features. Assessments of credit quality were based on NRSRO ratings, if available, or were subjectively determined by management if not available. At June 30, 2022, 71% of the securities were rated and the average rating was A+. At December 31, 2021, 100% of the securities were rated and the average rating was BBB+.
Quantitative Information Regarding Level 3 Valuations
Below is a quantitative information regarding securities in the Level 3 category, by security type:
Fair Value at
($ in thousands)June 30, 2022December 31, 2021Valuation TechniqueUnobservable InputRange
(Weighted Average)
Assets:
Corporate debt, limited observable inputs$74,212$47,129Market Comparable
Securities		Comparability Adjustment
0% - 5% (2.5%)
Discounted Cash FlowsComparability Adjustment
0% - 5% (2.5%)
Residential mortgage-backed securities$273$297Market Comparable
Securities		Comparability Adjustment
0% - 5% (2.5%)
Discounted Cash FlowsComparability Adjustment
0% - 5% (2.5%)
Other commercial mortgage-backed securities$565$—Market Comparable
Securities		Comparability Adjustment
0% - 5% (2.5%)
Discounted Cash FlowsComparability Adjustment
0% - 5% (2.5%)
Other asset-backed securities$3,200$6,205Market Comparable
Securities		Comparability Adjustment
0% - 5% (2.5%)
Discounted Cash FlowsComparability Adjustment
0% - 5% (2.5%)
Equity investments$4,625$2,500Discounted Cash FlowsComparability Adjustment
0% - 10% (5%)
Other investments$901$1,434Discounted Cash FlowsComparability Adjustment
0% - 10% (5%)
Liabilities:
Other liabilities$24,000$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.
 June 30, 2022
 Level 3 Fair Value Measurements – Assets
(In thousands)Corporate DebtAsset-backed SecuritiesEquity InvestmentsOther InvestmentsTotal
Balance, March 31, 2022$53,325 $9,303 $2,500 $3,440 $68,568 
Total gains (losses) realized and unrealized:
Included in earnings, as a part of:
Net investment income
— — — — — 
Net realized investment gains (losses)
— — — (787)(787)
Included in other comprehensive income
(1,319)(177)— — (1,496)
Purchases
8,787 1,473 — — 10,260 
Sales
(2,007)(192)— — (2,199)
Transfers in
17,828 570 2,125 — 20,523 
Transfers out
(2,402)(6,939)— (1,752)(11,093)
Balance, June 30, 2022$74,212 $4,038 $4,625 $901 $83,776 
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end
$— $— $— $(787)$(787)
 June 30, 2022
 Level 3 Fair Value Measurements - Assets
(In thousands)Corporate DebtAsset-backed SecuritiesEquity InvestmentsOther InvestmentsTotal
Balance, December 31, 2021$47,129 $6,502 $2,500 $1,434 $57,565 
Total gains (losses) realized and unrealized:
Included in earnings, as a part of:
Net investment income— 1 — — 1 
Net investment gains (losses)— — — (677)(677)
Included in other comprehensive income(2,312)(437)— — (2,749)
Purchases18,498 7,058 — 1,483 27,039 
Sales(3,026)(197)— (116)(3,339)
Transfers in18,828 570 2,125 529 22,052 
Transfers out(4,905)(9,459)— (1,752)(16,116)
Balance, June 30, 2022$74,212 $4,038 $4,625 $901 $83,776 
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end$— $— $— $(723)$(723)

 June 30, 2021
 Level 3 Fair Value Measurements – Assets
(In thousands)Corporate DebtAsset-backed SecuritiesEquity InvestmentsOther InvestmentsTotal
Balance, March 31, 2021$7,769 $9,313 $— $2,152 $19,234 
Total gains (losses) realized and unrealized:
Included in earnings, as a part of:
Net investment income— — — — — 
Net investment gains (losses)— — 1 (135)(134)
Included in other comprehensive income13 82 (2)— 93 
Purchases9,215 8,003 6,583 205 24,006 
Sales(160)(185)(5,730)— (6,075)
Transfers in— — — — — 
Transfers out(1,772)(7,356)— — (9,128)
Balance, June 30, 2021$15,065 $9,857 $852 $2,222 $27,996 
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end$— $— $— $(135)$(135)
 June 30, 2021
 Level 3 Fair Value Measurements – Assets
(In thousands)Corporate DebtAsset-backed SecuritiesEquity InvestmentsOther InvestmentsTotal
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 income1 (2)— — (1)
Net investment gains (losses)— (11)1 (135)(145)
Included in other comprehensive income33 (97)(2)— (66)
Purchases14,090 15,360 6,583 205 36,238 
Sales(177)(489)(5,730)— (6,396)
Transfers in858 — — 2,152 3,010 
Transfers out(3,005)(13,597)— — (16,602)
Balance, June 30, 2021$15,065 $9,857 $852 $2,222 $27,996 
Change in unrealized gains (losses) included in earnings for the above period for Level 3 assets held at period-end$— $— $— $(135)$(135)
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 December 31, 2021 or June 30, 2022.

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 six months ended June 30, 2022 and 2021 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 June 30, 2022 and December 31, 2021, 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 June 30, 2022 and fair values of these investments as of June 30, 2022 and December 31, 2021 were as follows:
 Unfunded
Commitments		Fair Value
(In thousands)June 30,
2022		June 30,
2022		December 31,
2021
Investment in unconsolidated subsidiaries:
Private debt funds (1)
$4,699$17,290 $18,465 
Long/short equity funds (2)
None5,335 655 
Non-public equity funds (3)
$52,262160,067 160,219 
Credit funds (4)
$54,04545,760 47,300 
Strategy focused funds (5)
$19,10841,836 44,177 
Total investments carried at NAV$270,288 $270,816 
Below is additional information regarding each of the investments listed in the table above as of June 30, 2022.
(1)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.
(2)This investment is comprised of interests in two unrelated LP funds. One LP fund holds primarily long and short North American equities and targets absolute returns using strategies designed to take advantage of market opportunities. The other LP holds long and short publicly traded securities that will passively generate income. Redemptions are permitted; one with 30 days written notice if outside of a lock-up period and the other above specified thresholds (lowest threshold is 90%) which may be only partially payable until after a fund audit is completed and are then payable within 30 days.
(3)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.
(4)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. One fund allows redemptions at any quarter-end with prior notice requirements of 180 days, while two other funds allow 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.
(5)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
ProAssurance did not have any assets or liabilities that were measured at fair value on a nonrecurring basis at June 30, 2022 or December 31, 2021.
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.
 June 30, 2022December 31, 2021
(In thousands)Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
Financial assets:
BOLI$80,818 $80,818 $81,767 $81,767 
Other investments$3,292 $3,292 $3,183 $3,183 
Other assets$28,743 $28,724 $40,581 $40,583 
Financial liabilities:
Senior notes due 2023*$250,000 $250,653 $250,000 $264,000 
Contribution Certificates$176,606 $132,724 $175,900 $179,892 
Other liabilities$27,593 $27,593 $52,332 $52,332 
* 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 $27.7 million and $39.5 million at June 30, 2022 and December 31, 2021, respectively. The fair value of the funded deferred compensation assets at December 31, 2021 included assets from a rabbi trust plan acquired in the NORCAL acquisition that was terminated during the first quarter of 2022. The rabbi trust assets consisted entirely of cash equivalents and mutual funds and had a total fair value of $5.2 million as of December 31, 2021 (see Note 2 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2021 report on Form 10-K for additional information on the NORCAL acquisition). Other assets also included an unsecured note receivable. 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 $27.6 million and $52.3 million at June 30, 2022 and December 31, 2021, respectively. The fair value of the funded deferred compensation liabilities at December 31, 2021 included liabilities from deferred compensation arrangements assumed in the NORCAL acquisition that were terminated during the first quarter of 2022 using the associated rabbi trust assets and cash; the termination of these deferred compensation arrangements did not result in a gain or loss during the first quarter of 2022. The funded deferred compensation liabilities had a total fair value of $18.4 million as of December 31, 2021 (see Note 2 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2021 report on Form 10-K 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 Note 13 of the Notes to Consolidated Financial Statements in ProAssurance's December 31, 2021 report on Form 10-K for further discussion of the terms of the Contribution Certificates).