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Derivative Instruments
 12 Months Ended
Dec. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
12. DERIVATIVE INSTRUMENTS
The following tables summarize the gross fair values of individual derivative instruments and the impact of legal rights of offset as reported in the Consolidated Balance Sheets as of December 31, 2020 and 2019.
Gross
Amounts of
Recognized
Assets /
Liabilities		Gross
Amounts
Offset in the
Consolidated
Balance Sheet		Net Amounts
of Assets/
Liabilities
Presented
in the
Consolidated
Balance Sheet		Gross Amount
of Collateral
Received /
Pledged not
Offset in the
Consolidated
Balance Sheet		Net Amount
December 31, 2020:
Derivative Assets:
Interest rate swaps$93 $— $93 $— $93 
Total non-VIE derivative assets$93 $— $93 $— $93 
Derivative Liabilities:
Credit derivatives$— $— $— $— $— 
Interest rate swaps114 — 114 113 1 
Total non-VIE derivative liabilities$114 $— $114 $113 $1 
Variable Interest Entities Derivative Assets:
Currency swaps$41 $— $41 $— $41 
Total VIE derivative assets$41 $— $41 $— $41 
Variable Interest Entities Derivative Liabilities:
Interest rate swaps$1,835 $— $1,835 $— $1,835 
Total VIE derivative liabilities$1,835 $— $1,835 $— $1,835 
Gross
Amounts of
Recognized
Assets /
Liabilities		Gross
Amounts
Offset in the
Consolidated
Balance Sheet		Net Amounts
of Assets/
Liabilities
Presented
in the
Consolidated
Balance Sheet		Gross Amount
of Collateral
Received /
Pledged not
Offset in the
Consolidated
Balance Sheet		Net Amount
December 31, 2019:
Derivative Assets:
Interest rate swaps$75 $— $75 $— $75 
Total non-VIE derivative assets$75 $— $75 $— $75 
Derivative Liabilities:
Credit derivatives$— $— $— $— $— 
Interest rate swaps89 — 90 89 1 
Total non-VIE derivative liabilities$90 $— $90 $89 $1 
Variable Interest Entities Derivative Assets:
Currency swaps$52 $— $52 $— $52 
Total VIE derivative assets$52 $— $52 $— $52 
Variable Interest Entities Derivative Liabilities:
Interest rate swaps$1,657 $— $1,657 $— $1,657 
Total VIE derivative liabilities$1,657 $— $1,657 $— $1,657 

Amounts representing the right to reclaim cash collateral or the obligation to return cash collateral are not offset against fair value amounts recognized for derivative instruments on the Consolidated Balance Sheets. The amounts representing the right to reclaim cash collateral and posted margin, recorded in “Other assets” were $1 and $36 as of December 31, 2020 and 2019, respectively. There were no amounts held representing an obligation to return cash collateral as of December 31, 2020 and 2019.
The following tables summarize the location and amount of gains and losses of derivative contracts in the Consolidated Statements of Total Comprehensive Income (Loss) for the years ended December 31, 2020, 2019 and 2018:
Location of Gain (Loss) Recognized
in Consolidated Statements of
Total Comprehensive Income (Loss)		Amount of Gain (Loss) Recognized in Consolidated Statement of Total Comprehensive Income (Loss) –
Year Ended December 31,
202020192018
Non-VIE derivatives:
Credit derivativesNet gains (losses) on derivative contracts$— $2 $(1)
Interest rate swapsNet gains (losses) on derivative contracts(9)(6)1 
Futures contractsNet gains (losses) on derivative contracts(41)(45)7 
Total non-VIE derivatives(50)(50)7 
Variable Interest Entities:
Currency swapsIncome (loss) on variable interest entities(6)(12)11 
Interest rate swapsIncome (loss) on variable interest entities(138)(20)493 
Total Variable Interest Entities(144)(32)505 
Total derivative contracts$(193)$(82)$512 

Credit Derivatives
Credit derivatives, which are privately negotiated contracts, provide the counterparty with credit protection against the occurrence of a specific event such as a payment default or bankruptcy relating to an underlying obligation. Credit derivatives issued are insured by AAC. The outstanding credit derivative transaction at December 31, 2020, does not include ratings based collateral-posting triggers or otherwise require Ambac to post collateral regardless of Ambac’s ratings or the size of the mark to market exposure to Ambac.
Our credit derivatives were written on a “pay-as-you-go” basis. Similar to an insurance policy, pay-as-you-go provides that
Ambac pays interest shortfalls on the referenced transaction as they are incurred on each scheduled payment date, but only pays principal shortfalls upon the earlier of (i) the date on which the assets designated to fund the referenced obligation have been disposed of and (ii) the legal final maturity date of the referenced obligation.
Ambac maintains internal credit ratings on its guaranteed obligations, including credit derivative contracts, solely to indicate management’s view of the underlying credit quality of the guaranteed obligations. The principal notional outstanding for credit derivative contracts was $257 and $280 as of
December 31, 2020 and 2019, respectively, which had internal Ambac ratings of AA in both periods:
Interest Rate Derivatives
Ambac, through its subsidiary Ambac Financial Services (“AFS”), uses interest rate swaps, US Treasury futures contracts and other derivatives, to provide a partial economic hedge against the effects of rising interest rates elsewhere in the Company, including on Ambac’s financial guarantee exposures. Additionally, AFS provided interest rate swaps to states, municipalities and their authorities, asset-backed issuers and other entities in connection with their financings. As of December 31, 2020 and 2019, the notional amounts of AFS's derivatives are as follows:
Notional - December 31,
Type of Derivative20202019
Interest rate swaps—pay-fixed/receive-variable$726 $1,261 
US Treasury futures contracts—short240 755 
Interest rate swaps—receive-fixed/pay-variable195 332 

Derivatives of Consolidated Variable Interest Entities
Certain VIEs consolidated under the Consolidation Topic of the ASC entered into derivative contracts to meet specified purposes within the securitization structure. The notional for VIE derivatives outstanding as of December 31, 2020 and 2019, were as follows:
Notional - December 31,
Type of VIE Derivative20202019
Interest rate swaps—receive-fixed/pay-variable$1,233 $1,194 
Interest rate swaps—pay-fixed/receive-variable1,151 1,176 
Currency swaps308 329 
Credit derivatives— 9 
Contingent Features in Derivatives Related to Ambac Credit Risk
Ambac’s over-the-counter interest rate swaps are centrally cleared when eligible. Certain interest rate swaps remain with professional swap-dealer counterparties and direct customer counterparties. These non-cleared swaps are generally executed under standardized derivative documents including collateral support and master netting agreements. Under these agreements, Ambac is required to post collateral in the event net unrealized losses exceed predetermined threshold levels. Additionally, given that AAC is no longer rated by an independent rating agency, counterparties have the right to terminate the swap positions.
As of December 31, 2020 and 2019, the net liability fair value of derivative instruments with contingent features linked to Ambac’s own credit risk was $113 and $89, respectively, related to which Ambac had posted cash and securities as collateral with a fair value of $130 and $109, respectively. All such ratings-based contingent features have been triggered requiring maximum collateral levels to be posted by Ambac while preserving counterparties’ rights to terminate the contracts. Assuming all such contracts terminated at fair value on December 31, 2020, settlement of collateral balances and net derivative liabilities would result in a net receipt of cash and/or securities by Ambac. If counterparties elect to exercise their right to terminate, the actual termination payment amounts will be determined in accordance with derivative contract terms, which may result in amounts that differ from market values as reported in Ambac’s financial statements.