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Derivatives
 12 Months Ended
Dec. 31, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives
The following tables identify the listing currency, fair value and notional amounts of derivative instruments included in the consolidated balance sheets, categorized by primary underlying risk. Balances are presented on a gross basis.
 
As of December 31, 2017
 
 Listing currency (1)
 
 Fair Value
 
 Notional Amounts (2)
Derivative Assets by Primary Underlying Risk
 ($ in thousands)
Credit
 
 
 
 
 
Credit Default Swaps - Protection Purchased
USD
 
$
8,205

 
$
50,593

Total Return Swaps - Long Contracts
EGP
 
25,245

 
25,245

Equity Price
 
 
 
 
 
Contracts for Differences - Long Contracts
BRL / CHF / EUR / USD
 
17,298

 
163,868

Contracts for Differences - Short Contracts
DKK / NOK / SEK / USD
 
4,384

 
31,992

Total Return Swaps - Long Contracts
BRL / USD
 
15,936

 
96,388

Total Return Swaps - Short Contracts
USD
 
1

 
—

Interest Rates
 
 
 
 
 
Interest Rate Swaptions
JPY
 
539

 
64,950

Foreign Currency Exchange Rates
 
 
 
 
 
Foreign Currency Forward Contracts
HKD / JPY
 
1,764

 
511,937

Total Derivative Assets
 
 
$
73,372

 
$
944,973

 
 
 
 
 
 
 
 Listing currency (1)
 
 Fair Value
 
 Notional Amounts (2)
Derivative Liabilities by Primary Underlying Risk
 ($ in thousands)
Credit
 
 
 
 
 
Credit Default Swaps - Protection Purchased
USD
 
$
1,250

 
$
19,418

Credit Default Swaps - Protection Sold
USD
 
2,085

 
2,351

Equity Price
 
 
 
 
 
Contracts for Differences - Long Contracts
BRL / EUR / USD
 
2,200

 
93,200

Contracts for Differences - Short Contracts
DKK / EUR / USD
 
776

 
8,483

Total Return Swaps - Long Contracts
BRL / USD
 
73

 
50,858

Total Return Swaps - Short Contracts
USD
 
1,885

 
52,657

Interest Rates
 
 
 
 
 
Interest Rate Swaptions
JPY
 
70

 
64,482

Foreign Currency Exchange Rates
 
 
 
 
 
Foreign Currency Forward Contracts
BRL / CHF / CNH / EUR / HKD / SAR
 
6,164

 
573,498

Total Derivative Liabilities (free standing)
 
 
$
14,503

 
$
864,947

 
 
 
 
 
 
Embedded derivative liabilities in reinsurance contracts (3)
USD
 
$
171

 
$
20,000

Total Derivative Liabilities (embedded)
 
 
$
171

 
$
20,000

(1)
BRL = Brazilian Real, CHF = Swiss Franc, CNH = Chinese Yuan, DKK = Danish Krone, EGP = Egyptian Pound, EUR = Euro, HKD = Hong Kong Dollar, JPY = Japanese Yen, NOK = Norwegian Krone, SAR = Saudi Arabian Riyal, SEK = Swedish Krona, USD = US Dollar.
(2)
The absolute notional exposure represents the Company’s derivative activity as of December 31, 2017, which is representative of the volume of derivatives held during the period.
(3)
The fair value of embedded derivatives in reinsurance contracts is included in reinsurance balances payable in the consolidated balance sheets.
 
As of December 31, 2016
 
 Listing currency (1)
 
 Fair Value
 
 Notional Amounts (2)
Derivative Assets by Primary Underlying Risk
 ($ in thousands)
Credit
 
 
 
 
 
Credit Default Swaps - Protection Purchased
EUR / USD
 
$
10,905

 
$
84,327

Equity Price
 
 
 
 
 
Contracts for Differences - Long Contracts
EUR / GBP
 
1,765

 
36,879

Total Return Swaps - Long Contracts
BRL / USD
 
617

 
19,140

Total Return Swaps - Short Contracts
JPY
 
183

 
8,696

Interest Rates
 
 
 
 
 
Interest Rate Swaps
GBP / USD
 
2,462

 
195,571

Interest Rate Swaptions
JPY / USD
 
5,354

 
424,816

Sovereign Debt Futures - Short Contracts
USD
 
961

 
107,591

Foreign Currency Exchange Rates
 
 
 
 
 
Foreign Currency Forward Contracts
CAD / CNH / GBP / MXN
 
653

 
47,754

Foreign Currency Options - Purchased
CNH / EUR / HKD / JPY / SAR
 
4,532

 
501,465

Total Derivative Assets
 
 
$
27,432

 
$
1,426,239

 
 
 
 
 
 
 
 
 
 
 
 
 
 Listing currency (1)
 
 Fair Value
 
 Notional Amounts (2)
Derivative Liabilities by Primary Underlying Risk
 ($ in thousands)
Credit
 
 
 
 
 
Credit Default Swaps - Protection Purchased
USD
 
$
3,286

 
$
43,184

Credit Default Swaps - Protection Sold
USD
 
1,952

 
3,943

Equity Price
 
 
 
 
 
Contracts for Differences - Long Contracts
GBP
 
—

 
67

Contracts for Differences - Short Contracts
EUR / ZAR
 
1,106

 
11,424

Total Return Swaps - Long Contracts
USD
 
1,675

 
26,800

Total Return Swaps - Short Contracts
JPY / USD
 
1,302

 
10,095

Interest Rates
 
 
 
 
 
Interest Rate Swaps
GBP
 
722

 
59,115

Interest Rate Swaptions
JPY / USD
 
1,056

 
417,052

Sovereign Debt Futures - Short Contracts
EUR / GBP
 
1,608

 
159,923

Foreign Currency Exchange Rates
 
 
 
 
 
Foreign Currency Forward Contracts
EUR / JPY / SAR
 
2,009

 
214,854

Foreign Currency Options - Sold
CNH / JPY
 
1,334

 
363,840

Total Derivative Liabilities (free standing)
 
 
$
16,050

 
$
1,310,297

 
 
 
 
 
 
Embedded derivative liabilities in reinsurance contracts (3)
USD
 
$
92

 
$
20,000

Total Derivative Liabilities (embedded)
 
 
$
92

 
$
20,000

(1)
BRL = Brazilian Real, CAD = Canadian Dollar, CNH = Chinese Yuan, EUR = Euro,  GBP = British Pound,  HKD = Hong Kong Dollar, JPY = Japanese Yen, MXN = Mexican Peso, SAR = Saudi Arabian Riyal, USD = US Dollar, ZAR = South African Rand.
(2)
The absolute notional exposure represents the Company’s derivative activity as of December 31, 2016, which is representative of the volume of derivatives held during the period.
(3)
The fair value of embedded derivatives in reinsurance contracts is included in reinsurance balances payable in the consolidated balance sheets.


The following table sets forth, by major risk type, the Company’s realized and unrealized gains (losses) relating to derivatives for the years ended December 31, 2017, 2016 and 2015. Realized and unrealized gains (losses) related to free standing derivatives are included in net investment income (loss) in the consolidated statements of income (loss). Realized and unrealized gains (losses) related to embedded derivatives are included in other expenses in the consolidated statements of income (loss).
 
2017
 
2016
 
2015
Free standing Derivatives - Primary Underlying Risk
Realized Gain (Loss)
 
Unrealized Gain (Loss)*
 
Realized Gain (Loss)
 
Unrealized Gain (Loss)*
 
Realized Gain (Loss)
 
Unrealized Gain (Loss)*
Commodity Price
($ in thousands)
Commodities Futures - Long Contracts
$
—

 
$
—

 
$
—

 
$
—

 
$
(1,515
)
 
$
—

Commodity Future Options - Purchased
—

 
—

 
651

 
—

 
(286
)
 
285

Commodity Future Options - Sold
—

 
—

 
—

 
—

 
272

 
(269
)
Credit
 
 
 
 
 
 
 
 
 
 
 
Credit Default Swaps - Protection Purchased
(3,462
)
 
(978
)
 
4,311

 
(6,841
)
 
1,282

 
4,839

Credit Default Swaps - Protection Sold
605

 
(720
)
 
(4,009
)
 
4,149

 
2,071

 
(2,098
)
Total Return Swaps - Long Contracts
72

 
2,000

 
—

 
—

 
—

 
—

Equity Price
 
 
 
 
 
 
 
 
 
 
 
Contracts for Differences - Long Contracts
58,047

 
13,334

 
(4,123
)
 
2,245

 
(6,101
)
 
660

Contracts for Differences - Short Contracts
2,608

 
4,715

 
(253
)
 
(3,579
)
 
8,459

 
2,418

Total Return Swaps - Long Contracts
16,863

 
16,923

 
(6,835
)
 
1,957

 
1,410

 
(2,469
)
Total Return Swaps - Short Contracts
(15,892
)
 
(765
)
 
(4,812
)
 
(1,198
)
 
(1,395
)
 
45

Index
 
 
 
 
 
 
 
 
 
 
 
Index Futures - Long Contracts
—

 
—

 
—

 
—

 
1,144

 
—

Interest Rates
 
 
 
 
 
 
 
 
 
 
 
Bond Futures - Short Contracts
—

 
—

 
—

 
—

 
(2,584
)
 
—

Commodity Futures - Short Contracts
—

 
—

 
(281
)
 
(52
)
 
(580
)
 
194

Fixed Income Swap - Short Contracts
—

 
—

 
(94
)
 
—

 
—

 
—

Interest Rate Swaps
(3,104
)
 
(1,740
)
 
205

 
1,740

 
119

 
—

Interest Rate Swaptions
(354
)
 
(2,056
)
 
(340
)
 
869

 
(771
)
 
(39
)
Sovereign Debt Futures - Short Contracts
(7,798
)
 
647

 
10,519

 
(647
)
 
—

 
—

Treasury Futures - Short Contracts
—

 
—

 
—

 
—

 
(2,734
)
 
280

Foreign Currency Exchange Rates
 
 
 
 
 
 
 
 
 
 
 
Foreign Currency Forward Contracts
(10,470
)
 
(3,048
)
 
(2,747
)
 
(2,261
)
 
21,429

 
(3,334
)
Foreign Currency Options - Purchased
(6,716
)
 
1,164

 
(2,338
)
 
(2,229
)
 
318

 
(1,144
)
Foreign Currency Options - Sold
2,183

 
(80
)
 
617

 
(103
)
 
1,214

 
316

Reinsurance contract derivatives
—

 
—

 
—

 
—

 
30

 
—

 
$
32,582

 
$
29,396

 
$
(9,529
)
 
$
(5,950
)
 
$
21,782

 
$
(316
)
Embedded Derivatives
 
 
 
 
 
 
 
 
 
 
 
Embedded derivatives in reinsurance contracts
$
—

 
$
(79
)
 
$
—

 
$
260

 
$
(5
)
 
$
362

Embedded derivatives in deposit contracts
—

 
—

 
—

 
—

 
2,104

 
—

Total Derivative Liabilities (embedded)
$
—

 
$
(79
)
 
$
—

 
$
260

 
$
2,099

 
$
362

* Unrealized gain (loss) relates to derivatives still held at reporting date.
The Company’s derivative contracts are generally subject to International Swaps and Derivatives Association (“ISDA”) Master Agreements or other similar agreements that contain provisions setting forth events of default and/or termination events (“credit-risk-related contingent features”), including but not limited to provisions setting forth maximum permissible declines in the Company’s net asset value. Upon the occurrence of a termination event with respect to an ISDA Agreement, the Company’s counterparty could elect to terminate the derivative contracts governed by such agreement, resulting in the realization of any net gains or losses with respect to such derivative contracts and the return of collateral held by such party.
The Company obtains/provides collateral from/to various counterparties for OTC derivative and futures contracts in accordance with bilateral collateral agreements. During the year ended December 31, 2017, no termination events were triggered under the ISDA Master Agreements. As of December 31, 2017, the aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position was $3.6 million (December 31, 2016 - $6.1 million) for which the Company posted collateral in the form of cash of $103.0 million (December 31, 2016 - $48.8 million) in the normal course of business. Similarly, the Company held collateral (approximately $3.2 million) in cash from certain counterparties as of December 31, 2017. If the credit-risk-related contingent features underlying these instruments had been triggered as of December 31, 2017 and the Company had to settle these instruments immediately, no additional amounts would be required to be posted that would exceed the settlement amounts of open derivative contracts or in the case of cross margining relationships, the assets in the Company’s prime brokerage accounts are sufficient to offset the derivative liabilities.
The Company’s derivatives do not qualify as hedges for financial reporting purposes and are recorded in the consolidated financial statements on a gross basis and not offset against any collateral pledged or received. Pursuant to ISDA master agreements and other counterparty agreements, the Company and its counterparties typically have the ability to net certain payments owed to each other in specified circumstances. In addition, in the event a party to one of the ISDA master agreements or other derivatives agreements defaults, or a transaction is otherwise subject to termination, the non-defaulting party generally has the right to offset against payments owed to the defaulting party or collateral held by the non-defaulting party.
The Company has pledged cash collateral to counterparties to support the current value of amounts due to the counterparties based on the value of the underlying security. As of December 31, 2017 and 2016, the gross and net amounts of derivative instruments and repurchase and reverse repurchase agreements that are subject to enforceable master netting arrangements or similar agreements were as follows:
 
Gross Amounts not Offset in the Consolidated Balance Sheet
December 31, 2017
Derivative Contracts
Gross Amount (1)
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount
Financial assets, derivative assets and collateral received
($ in thousands)
Counterparty 1
$
167

 
$
167

 
$
—

 
$
—

Counterparty 2
1,343

 
706

 
—

 
637

Counterparty 3
37,313

 
2,705

 
—

 
34,608

Counterparty 4
2,683

 
2,683

 
—

 
—

Counterparty 5
14,798

 
6,647

 
—

 
8,151

Counterparty 6
5,338

 
9

 
2,122

 
3,207

Counterparty 7
1,377

 
—

 
1,100

 
277

Counterparty 8
12,628

 
2,963

 
—

 
9,665

Counterparty 9
703

 
703

 
—

 
—

 
$
76,350

 
$
16,583

 
$
3,222

 
$
56,545

 
 
 
 
 
 
 
 
 
Gross Amounts not Offset in the Consolidated Balance Sheet
December 31, 2017
Derivative Contracts
Gross Amount (2)
 
Financial Instruments
 
Cash Collateral Pledged
 
Net Amount
Financial liabilities, derivative liabilities and collateral pledged
($ in thousands)
Counterparty 1
$
1,340

 
$
167

 
$
1,173

 
$
—

Counterparty 2
706

 
706

 
—

 
—

Counterparty 3
2,705

 
2,705

 
—

 
—

Counterparty 4
3,812

 
2,683

 
1,129

 
—

Counterparty 5
6,647

 
6,647

 
—

 
—

Counterparty 6
9

 
9

 
—

 
—

Counterparty 8
2,963

 
2,963

 
—

 
—

Counterparty 9
1,181

 
703

 
478

 
—

Counterparty 15
836

 
—

 
732

 
104

 
$
20,199

 
$
16,583

 
$
3,512

 
$
104

 
 
 
 
 
 
 
 
Securities sold under an agreement to repurchase

 
 
 
 
 
 
 
Counterparty 4
$
29,618

 
$
29,618

 
$
—

 
$
—

 
$
29,618

 
$
29,618

 
$
—

 
$
—

(1)
The gross amounts of assets presented in the consolidated balance sheets presented above includes the fair value of derivative contract assets as well as gross OTC option contract assets of $3.0 million included in other investments in the consolidated balance sheets.
(2)
The gross amounts of liabilities presented in the consolidated balance sheets presented above includes the fair value of derivative contract liabilities as well as gross OTC option contract liabilities of $5.7 million included in securities sold, not yet purchased in the consolidated balance sheets.
 
Gross Amounts not Offset in the Consolidated Balance Sheet
December 31, 2016
Derivative Contracts
Gross Amount (1)
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount
Financial assets, derivative assets and collateral received
($ in thousands)
Counterparty 1
$
535

 
$
535

 
$
—

 
$
—

Counterparty 2
3,147

 
607

 
—

 
2,540

Counterparty 3
8,652

 
4,760

 
—

 
3,892

Counterparty 4
1,639

 
1,639

 
—

 
—

Counterparty 5
7,336

 
3,027

 
—

 
4,309

Counterparty 6
6,262

 
2,599

 
3,383

 
280

Counterparty 7
227

 
—

 
197

 
30

Counterparty 8
277

 
277

 
—

 
—

Counterparty 9
37

 
37

 
—

 
—

 
$
28,112

 
$
13,481

 
$
3,580

 
$
11,051

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Amounts not Offset in the Consolidated Balance Sheet
December 31, 2016
Derivative Contracts
Gross Amount (2)
 
Financial Instruments
 
Cash Collateral Pledged
 
Net Amount
Financial liabilities, derivative liabilities and collateral pledged
($ in thousands)
Counterparty 1
$
2,959

 
$
535

 
$
2,424

 
$
—

Counterparty 2
607

 
607

 
—

 
—

Counterparty 3
4,760

 
4,760

 
—

 
—

Counterparty 4
3,827

 
1,639

 
2,188

 
—

Counterparty 5
3,027

 
3,027

 
—

 
—

Counterparty 6
2,599

 
2,599

 
—

 
—

Counterparty 8
977

 
277

 
—

 
700

Counterparty 9
822

 
37

 
785

 
—

 
$
19,578

 
$
13,481

 
$
5,397

 
$
700

 
 
 
 
 
 
 
 
Securities lending transactions
 
 
 
 
 
 
 
Counterparty 3
$
302

 
$
302

 
$
—

 
$
—

 
$
302

 
$
302

 
$
—

 
$
—

(1)
The gross amounts of assets presented in the consolidated balance sheets presented above includes the fair value of derivative contract assets as well as gross OTC option contract assets of $0.7 million included in other investments in the consolidated balance sheets.
(2)
The gross amounts of liabilities presented in the consolidated balance sheets presented above includes the fair value of derivative contract liabilities as well as gross OTC option contract liabilities of $3.5 million included in securities sold, not yet purchased in the consolidated balance sheets.