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Derivative Instruments | 12 Months Ended
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Dec. 31, 2016
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Derivative Instruments | Note 9: Derivative Instruments U.S. Public Finance Insurance The Company’s derivative exposure within its U.S. public finance insurance operations primarily consists of insured int erest rate and inflation-linked swaps related to insured U.S. public finance debt issues. These derivatives do not qualify for the financial guarantee scope exception and are accounted for as derivative instruments. Corporate The Company has entered into derivative instrument s primarily consisting of interest rate swaps to manage the risks associated with fluctuations in interest rates of certain contracts. I n t e r na t i on a l and S t r u c t u r e d F i n an c e I n s u r an c e The Company has entered into derivative instrument s to provide financial guarantee insurance to structured finance transactions that do not qualify for the financial guarantee scope exception and, therefore, are accounted for as derivative s. These insured CDS contracts, primarily referencing corporate obligations, CMBS, R MBS, A BS and commercial real estate loans and CDOs, are intended to be held for the entire term of the contract unless a settlement with the counterparty is negotiated. The Company no longer insures new CDS contracts. The Company’s derivative exposure within its international and structured finance insurance segment also includes insured interest rate and inflation-linked swaps related to insured debt issues. The Company has also entered into a derivative contract as a result of a commutation occurring in 2014. Changes in the fair value of the Company’s non-insured derivative are included in “Net gains (losses) on financial instruments at fair value and foreign exchange” on the Company’s consolidated statements of operations. Variable Interest Entities VIEs consolidated by the Company have entered into derivative instrument s consisting of interest rate swaps, interest rate caps and cross currency swaps. Interest rate swaps and i nterest rate caps are entered into to mitigate the risks associated with fluctuations in interest rates or fair values of certain contracts. Cross currency swaps are entered into to manage the variability in cash flows resulting from fluctuations in foreign currency rates. Credit Derivatives Sold The following table s present information about credit derivatives sold by the Company’s insurance operations that were outstanding as of December 31, 2016 and 2015. Credit ratings represent the lower of underlying ratings assigned to the collateral by Moody’s, S&P or MBIA.
$ in millions |  | As of December 31, 2016
|  |  |  | Notional Value |  |  |
Credit Derivatives Sold |  | Weighted Average Remaining Expected Maturity |  |  | AAA |  |  | AA |  |  | A |  |  | BBB |  |  | Below Investment Grade |  |  | Total Notional |  |  | Fair Value Asset (Liability)
Insured credit default swaps |  | 3.8 Years |  | $ | - |  | $ | - |  | $ | 115 |  | $ | - |  | $ | 473 |  | $ | 588 |  | $ | (64)
Insured swaps |  | 15.7 Years |  |  | - |  |  | 137 |  |  | 2,146 |  |  | 732 |  |  | 20 |  |  | 3,035 |  |  | (2)
Insured swaps - held for sale |  | 14.3 Years |  |  | - |  |  | - |  |  | - |  |  | 420 |  |  | - |  |  | 420 |  |  | -
Total notional |  |  |  | $ | - |  | $ | 137 |  | $ | 2,261 |  | $ | 1,152 |  | $ | 493 |  | $ | 4,043 |  |  |
Total fair value |  |  |  | $ | - |  | $ | - |  | $ | (1) |  | $ | (1) |  | $ | (64) |  |  |  |  | $ | (66)
$ in millions |  | As of December 31, 2015
|  |  |  | Notional Value |  |  |
Credit Derivatives Sold |  | Weighted Average Remaining Expected Maturity |  |  | AAA |  |  | AA |  |  | A |  |  | BBB |  |  | Below Investment Grade |  |  | Total Notional |  |  | Fair Value Asset (Liability)
Insured credit default swaps |  | 2.1 Years |  | $ | 1,947 |  | $ | - |  | $ | 300 |  | $ | - |  | $ | 961 |  | $ | 3,208 |  | $ | (85)
Insured swaps |  | 16.5 Years |  |  | - |  |  | 109 |  |  | 2,715 |  |  | 940 |  |  | 22 |  |  | 3,786 |  |  | (3)
Total notional |  |  |  | $ | 1,947 |  | $ | 109 |  | $ | 3,015 |  | $ | 940 |  | $ | 983 |  | $ | 6,994 |  |  |
Total fair value |  |  |  | $ | - |  | $ | - |  | $ | (4) |  | $ | (2) |  | $ | (82) |  |  |  |  | $ | (88)
Internal credit ratings assigned by MBIA on the underlying collateral are derived b y t h e Co m pan y’s s u r v e ill a n ce g r ou p. I n a ss ign i n g a n i n t e r n a l r a t i n g, c u rr en t s t a t u s r epo r t s f r o m i ss ue rs an d t r u s t ee s, a s w el l a s p ubli c l y a v ai l able t r a n s a c t i o n-s p e c i f i c i n f o rm a t ion, a re r e v iew e d. A l s o, whe re ap p r o p r ia t e, c a sh f l o w a n al ys e s an d c ol l a t e r a l v a l ua t ion s a re c on s id e r e d. T h e m a x i m u m p o t e n t i a l a m o u n t o f f u t u re p a y m en t s (u n di sc oun t ed) o n C D S c on t r a c t s a re e s t i m a t e d a s t he no t ion a l v a l u e plu s an y a d di t iona l d e b t s e rv i ce c o s t s, s u ch a s in t e r e st o r o t h e r a m ou n t s owin g o n CD S c on t r a c t s. T he m a x i m u m a m oun t o f f u t u re debt service pa ym en t s t ha t MB I A m a y b e r equi r e d t o m a ke und e r t he se g uarantees as of December 31, 2016 i s $637 m illion. T h e m a x i m u m po t en t ia l a m ou n t o f f u t u re pa ym en t s (un d i s c o un t ed) o n i n s u r e d s w a p s a re e s t i m a t e d a s t he no t ion a l v a l u e o f s u ch c o n t r a c t s. M B I A m a y hol d r e c ou rse p r o v i s ion s wi t h t hi rd pa r t ie s i n de r i v a t i ve instrument s t h r o u g h b o t h r ein s u r a n ce a n d s ub r o ga t i on r igh t s. M B I A’s r e in s u r an ce a rr ange m en t s p r o v i d e t ha t i n t h e e v en t MB I A pa ys a c la i m und e r a gua r an t e e o f a de r i v a t i ve c on t r a c t, MB I A ha s t h e r igh t t o c olle ct a m o un t s f r o m an y r e i n s u r e rs t ha t h a v e r ei n s u r e d t h e gua r a n t e e o n ei t he r a p r op o r t io n a l o r no n-p r opo r t iona l ba s i s, d epend i n g upo n t h e u n de r l y in g r ein s u r a n ce a g r e e m e n t. M B I A m a y a l s o h a v e r e c ou rse t h r o u g h s u b r oga t io n r igh t s wh e r e b y i f M B I A m a k e s a c lai m pa ym en t, i t may be en t i t l e d t o an y r i gh t s o f t h e in s u r ed c oun t e r pa r t y, in c lu d in g t h e r ig h t t o an y a ss e t s hel d a s c o lla t e r al. Counterparty Credit Risk The Company manages counterparty credit risk on an individual counterparty basis through master netting agreements covering derivative instruments in the corporate segment. The se agreements allow the Company to contractually net amounts due from a counterparty with those amounts due to such counterparty when certain triggering events occur. The Company only executes swaps under master netting agreements, which typically contain mutual credit downgrade provisions that generally provide the ability to require assignment or termination in the event either MBIA or the counterparty is downgraded below a specified credit rating. Under these a greem ents, the Company may receive or provide cash, U.S. Treasury or other highly rated secur ities to secure counterparties’ exposure to the Company or its exposure to counterparties, respectively. Such collateral is available to the holder to pay for replacing the counterparty in the event that the counterparty defaults. As of December 31, 2016, the Company did not hold cash collateral to derivative counterparties but posted cash collateral to derivative counterparties of $1 million. All of the $1 million is included within “Other liabilities” as cash collate ral netted against accrued interest on derivative liabilities. As of December 31, 2015, the Company did not hold cash collateral to derivative counterparties but posted cash collateral to derivative counterparties of $50 million. Of this amount, $31 million is netted within “Derivative liabilities” and $19 million is included within “Other liabilities” as cash collateral netted against accrued interest on derivative liabilities. As of December 31, 2016 and 2015, the Company had securities with a fair value of $276 million and $259 million, respectively, posted to derivative counterparties and th ese amount s are included within “Fixed-maturity securities held as available-for-sale, at fair value” on the Company’s consolidated balance sheet s. As of December 31, 2016 and 2015, the fair value on one Credit Support Annex (“CSA”) was $3 million. This CSA governs collateral posting requirements between MBIA and its derivative counterparties. The Company did not receive collateral due to the Company’s credit rating, which was below the CSA minimum credit ratings level for holding counterparty collateral. As of December 31, 2016, th e counterparty was rated A 1 by Moody’s and A by S&P, and as of December 31, 2015, the counterparty was rated A2 by Moody’s and A by S&P. Financial Statement Presentation The fair value of amounts recognized for eligible derivative contracts executed with the same counterparty under a master netting agreement, including any cash collateral that may have been received or posted by the Company, is presented on a net basis in accordance with accounting guidance for the offsetting of fair value amounts related to derivative instruments. Insured CDS and insured swaps are not subject to master netting agreements. VIE derivative assets and liabilities are not presented net of any m aster netting agreements. Counterparty netting of derivative assets and liabilities offsets balances in “Interest rate swaps” as of December 31, 2016 and 2015. As of December 31, 2016, the total fair value of the Company’s derivative assets was $25 million, of which $23 million was reported within “Other assets” and “Other assets” presented under “Assets of consolidated variable interest entities” on the Company’s consolidated balance sheets. Embedd ed derivatives of $2 million w ere reported within “Medium-term notes” on the Company’s consolidated balance sheets. As of December 31, 2016, the total fair value of the Company’s derivative liabilities was $316 million, of which $299 million was reported within “Derivative liabilities” on the Company’s consolidated balance sheets. Embedded derivatives of $17 million w ere reported within “Medium-term notes” on the Company’s consolidated balance sheets. The following table presents the total fair value of the Company’s derivative assets and liabilities by instrument and balance sheet location, before counterparty netting and posting of cash collateral, as of December 31, 2016:
In millions |  |  |  |  | Derivative Assets (1) |  | Derivative Liabilities (1)
|  |  | Notional |  |  |  |  |  |  |  |  |  |
|  |  | Amount |  |  |  | Fair |  |  |  | Fair
Derivative Instruments |  | Outstanding |  | Balance Sheet Location |  | Value |  | Balance Sheet Location |  | Value
Not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |
| Insured credit default swaps |  | $ | 588 |  | Other assets |  | $ | - |  | Derivative liabilities |  | $ | (64)
| Insured swaps |  |  | 3,035 |  | Other assets |  |  | - |  | Derivative liabilities |  |  | (2)
| Insured swaps - held for sale |  |  | 420 |  | Assets held for sale |  |  | - |  | Liabilities held for sale |  |  | -
| Interest rate swaps |  |  | 1,062 |  | Other assets |  |  | 3 |  | Derivative liabilities |  |  | (213)
| Interest rate swaps-embedded |  |  | 376 |  | Medium-term notes |  |  | 2 |  | Medium-term notes |  |  | (17)
| Currency swaps-VIE |  |  | 71 |  | Other assets-VIE |  |  | 20 |  | Derivative liabilities-VIE |  |  | -
| All other |  |  | 83 |  | Other assets |  |  | - |  | Derivative liabilities |  |  | (20)
| All other-VIE |  |  | 35 |  | Other assets-VIE |  |  | - |  | Derivative liabilities-VIE |  |  | -
| All other-embedded |  |  | 5 |  | Other investments |  |  | - |  | Other investments |  |  | -
Total non-designated derivatives |  | $ | 5,675 |  |  |  | $ | 25 |  |  |  | $ | (316)
__________ |  |  |  |  |  |  |  |  |  |  |  |  |
(1) - In accordance with the accounting guidance for derivative instruments and hedging activities, the balance sheet location of the Company’s embedded derivative instruments is determined
| by the location of the related host contract.
As of December 31, 2015, the total fair value of the Company’s derivative assets, after counterparty netting of $1 million, was $19 million, of which $14 million was reported within “Other assets” and “Other Assets” presented under “Assets of consolidated variable interest entities” on the Company’s consolidated balance sheets. Embedded derivatives of $5 million were reported within “Medium-term notes” on the Company’s consolidated balance sheets. As of December 31, 2015, t he total fair value of the Company’s derivative liabilities, after counterparty netting of $1 million and cash collateral posted by the Company of $31 million, was $374 m illion, of which $359 million was reported within “Derivative liabilities” and “Derivative liabilities” presented under “Liabilities of consolidated variable interes t entities” on the Company’s consolidated balance sheets. Embedded derivatives o f $15 million were reported within “Medium-term notes” on the Company’s consolidated balance sheets. The following table presents the total fair value of the Company’s derivative assets and liabilities by instrument and balance sheet loca tion, before counterparty netting and posting of cash collateral, as of December 31, 2015:
In millions |  |  |  |  | Derivative Assets (1) |  | Derivative Liabilities (1)
|  |  |  | Notional |  |  |  |  |  |  |  |  |  |
|  |  |  | Amount |  |  |  | Fair |  |  |  | Fair
Derivative Instruments |  |  | Outstanding |  | Balance Sheet Location |  | Value |  | Balance Sheet Location |  | Value
Not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |
| Insured credit default swaps |  | $ | 3,208 |  | Other assets |  | $ | - |  | Derivative liabilities |  | $ | (85)
| Insured swaps |  |  | 3,786 |  | Other assets |  |  | - |  | Derivative liabilities |  |  | (3)
| Interest rate swaps |  |  | 1,153 |  | Other assets |  |  | 4 |  | Derivative liabilities |  |  | (240)
| Interest rate swaps-VIE |  |  | 899 |  | Other assets-VIE |  |  | - |  | Derivative liabilities-VIE |  |  | (45)
| Interest rate swaps-embedded |  |  | 396 |  | Medium-term notes |  |  | 5 |  | Medium-term notes |  |  | (15)
| Currency swaps-VIE |  |  | 83 |  | Other assets-VIE |  |  | 11 |  | Derivative liabilities-VIE |  |  | -
| All other |  |  | 83 |  | Other assets |  |  | - |  | Derivative liabilities |  |  | (18)
| All other-VIE |  |  | 241 |  | Other assets-VIE |  |  | - |  | Derivative liabilities-VIE |  |  | -
| All other-embedded |  |  | 10 |  | Other investments |  |  | - |  | Other investments |  |  | -
Total non-designated derivatives |  | $ | 9,859 |  |  |  | $ | 20 |  |  |  | $ | (406)
__________ |  |  |  |  |  |  |  |  |  |  |  |  |
(1) - In accordance with the accounting guidance for derivative instruments and hedging activities, the balance sheet location of the Company’s embedded derivative instruments is determined
| by the location of the related host contract.
T h e f ol l owin g t able p r e s en t s t h e e f f e ct o f d e r i v a t i ve i n s t r u m en t s o n t h e c o n s olida t e d s t a t e m en t s o f ope r a t ion s f o r t h e years ended December 31, 2016, 2015 and 2014:
In millions |  |  |  |  |  |  |  |  |  |
Derivatives Not Designated as |  |  |  | Years Ended December 31,
Hedging Instruments |  | Location of Gain (Loss) Recognized in Income on Derivative |  | 2016 |  | 2015 |  | 2014
Insured credit default swaps |  | Unrealized gains (losses) on insured derivatives |  | $ | 21 |  | $ | 157 |  | $ | 888
Insured credit default swaps |  | Realized gains (losses) and other settlements on insured derivatives |  |  | (40) |  |  | (28) |  |  | (413)
Interest rate swaps |  | Net gains (losses) on financial instruments at fair value and foreign exchange |  |  | (11) |  |  | (108) |  |  | (78)
Interest rate swaps-VIE |  | Net gains (losses) on financial instruments at fair value and foreign exchange-VIE |  |  | 8 |  |  | 31 |  |  | -
Currency swaps-VIE |  | Net gains (losses) on financial instruments at fair value and foreign exchange-VIE |  |  | 9 |  |  | 10 |  |  | 11
All other |  | Unrealized gains (losses) on insured derivatives |  |  | - |  |  | - |  |  | 15
All other |  | Net gains (losses) on financial instruments at fair value and foreign exchange |  |  | (2) |  |  | 7 |  |  | 6
All other |  | Realized gains (losses) and other settlements on insured derivatives |  |  | - |  |  | - |  |  | (31)
Total |  |  |  | $ | (15) |  | $ | 69 |  | $ | 398

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
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