Commitments and Contingencies

ProAssurance is involved in various legal actions related to insurance policies and claims handling including, but not limited to, claims asserted by policyholders. These types of legal actions arise in the Company’s ordinary course of business and, in accordance with GAAP for insurance entities, are considered as a part of the Company’s loss reserving process, which is described in detail under the heading "Losses and Loss Adjustment Expenses” in the Accounting Policies section of Note 1.

On occasion, ProAssurance has entered into financial instrument transactions that may present off-balance sheet credit risk or market risk. These transactions include a short-term loan commitment and commitments to provide funding to non-public investment entities. Under the short-term loan commitment, ProAssurance has agreed to advance funds on a 30 day basis to a counterparty provided there is no violation of any condition established in the contract. ProAssurance had total funding commitments of approximately $297.8 million which primarily represented funding commitments related to non-public investment entities as well as the short-term loan commitment which included the amount at risk if the full short-term loan is extended and the counterparties default. However, the credit risk associated with the short-term loan commitment is minimal as the counterparties to the contract are highly rated commercial institutions and to-date have been performing in accordance with their contractual obligations. Of these total funding commitments, $1.0 million is related to qualified affordable housing project tax credit investments and is expected to be paid as follows: $0.2 million in 2019, $0.3 million in 2020 and 2021 combined, $0.4 million in 2022 and 2023 combined and $0.1 million thereafter.

As a member of Lloyd's, ProAssurance is required to provide capital to support its Lloyd's Syndicates through 2019 of up to $200.0 million, referred to as FAL. The Board, through a non-binding resolution, extended this commitment through 2022. At December 31, 2018, ProAssurance's FAL was comprised of investment securities on deposit with Lloyd's with a carrying value of $142.7 million (see Note 3).

ProAssurance has issued an unconditional revolving credit agreement to the Premium Trust Fund of Syndicate 1729 for the purpose of providing working capital. Permitted borrowings were expanded from £20.0 million to £30.0 million under an amended Syndicate Credit Agreement executed in February 2018. Under the amended Syndicate Credit Agreement advances bear interest at 3.8% annually, and may be repaid at any time but are repayable upon demand after December 31, 2019. As of December 31, 2018, the unused commitment under the Syndicate Credit Agreement approximated £7.1 million (approximately $9.1 million). In January 2019, the Syndicate Credit Agreement was amended to extend the current maturity to December 31, 2020 and to implement an annual auto-renewal feature which allows for ProAssurance to elect to non-renew if notice is given at least 30 days prior to the next auto-renewal date, which is one year prior to the maturity date.

In October 2018, ProAssurance entered into an agreement with a company to provide data analytics services for certain product lines within the Company's HCPL book of business. The agreement contains a minimum two year commitment with optional extension features for an annual fee of approximately $4.8 million per year with additional variable quarterly incentive fees based on service utilization metrics prescribed in the contract. ProAssurance incurred operating expense associated with this agreement of $1.0 million in the fourth quarter of 2018 and as of December 31, 2018, the remaining commitment under this agreement was approximately $8.6 million.

ProAssurance is involved in a number of operating leases, primarily for office space. The following is a schedule of future minimum lease payments for operating leases that had initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2018.



Operating Leases
(In thousands)
2019	$	4,829
2020	4,020
2021	3,557
2022	2,618
2023	1,888
Thereafter	10,212
Total minimum lease payments	$	27,124

ProAssurance incurred rent expense of $7.9 million, $6.7 million and $5.9 million in the years ended December 31, 2018, 2017 and 2016, respectively.