NOTE 8. COMMITMENT AND CONTINGENCIES

Rental Commitments

Future minimum annual rental commitments as of December 31, 2017 under various non-cancellable operating leases for our office facilities, which expire at various dates through 2031, are as follows:

Rental Commitments for Years Ended December 31,
amounts in thousands
2018	$	12,075
2019		11,469
2020		11,395
2021		10,315
2022		9,654
2023-2031		36,296
Total Minimum Operating Lease Payments	$	91,204

We are also liable for additional payments to the landlords for certain annual cost increases. Rent expense for the years ended December 31, 2017, 2016 and 2015 was $13.2 million, $13.2 million and $12.9 million, respectively.

Legal Contingencies

In the ordinary course of conducting business, our Parent Company’s subsidiaries are involved in various legal proceedings. Most of these proceedings consist of claims litigation involving our Parent Company’s subsidiaries as either: (a) liability insurers defending or providing indemnity for third party claims brought against insureds or (b) insurers defending first party coverage claims brought against them. In general, our Company believes we have valid defenses to these cases. Our Company’s management believes that the ultimate liability, if any, with respect to these legal proceedings, after consideration of provisions made for potential losses and cost of defense, will not be material to our Company’s Consolidated Balance Sheets, Statements of Income and Statements of Cash Flows

Share Purchase Agreement

On December 15, 2017, our Company entered into a Share Purchase Agreement with Ackermans & van Haaren NV, a Belgian limited liability company (“AvH”), SIPEF NV, a Belgian limited liability company (“SIPEF”), Mr. Jozef Gielen, an individual (“Gielen”), and Kapimar Comm.V, a Belgian limited liability company (collectively the “Sellers”), pursuant to which our Company agreed to purchase all of the shares of Bracht, Deckers & Mackelbert NV, an insurance underwriting agency organized under the laws of Belgium (“BDM”), and Assurances Continentales – Continentale Verzekeringen NV, an insurance company licensed under the laws of Belgium (“ASCO”). In the proposed transaction, our Company will also acquire Canal Re S.A., a reinsurance company licensed under the laws of the Grand Duchy of Luxembourg and a wholly-owned subsidiary of ASCO (“Canal Re”). As aggregate consideration for the purchase of the shares of BDM and ASCO, our Company will pay EUR 35 million (which is approximately USD $42 million, based on the exchange rate as of December 31, 2017) in cash at the closing of the transaction, which is subject to the satisfaction or waiver of customary closing conditions, including among other things, regulatory approvals from the National Bank of Belgium with respect to the transfer of ASCO shares and from the Luxembourg Insurance Commission with respect to the indirect transfer of the shares of Canal Re.

The Purchase Agreement may be terminated under certain circumstances, including (i) by either our Company or Sellers due to a failure to obtain the necessary regulatory approvals noted above on or before May 31, 2018; or (ii) by either our Company or Sellers if the other party has failed to fulfill its specified conditions to closing the transaction on or before the scheduled date of the closing. In the event that the specified conditions to closing for the Sellers are otherwise satisfied and the Sellers terminate the Purchase Agreement due to a failure by our Company to fulfill its specified conditions to closing, our Company is required to pay the Sellers a termination fee equal to EUR 5 million, (which is approximately USD $6 million, based on the exchange rate as of December 31, 2017). In the event that the specified conditions to closing for our Company are otherwise satisfied and our Company terminates the Purchase Agreement due to a failure by a Seller to fulfill its specified conditions to closing, such Seller is required to pay our Company a termination fee equal to EUR 10 million, (which is approximately USD $12 million, based on the exchange rate as of December 31, 2017). Additionally, the Sellers have agreed to reimburse the Purchaser up to EUR 5 million, (which is approximately USD $6 million, based on the exchange rate as of December 31, 2017) in the event of adverse development of claims incurred prior to December 31, 2016 as measured on December 31, 2019.

Guarantees

On February 16, 2017, our Company entered into a Guarantee, pursuant to which it guaranteed all of the liabilities and obligations of NIIC (the “Guarantee”), to facilitate the issuance of a financial strength rating to NIIC by A.M. Best. The Guarantee would remain effective until all of such liabilities and obligations are discharged, and in the event that our Company does not meet its obligations under the Guarantee, any person who is covered by an insurance policy, certificate of coverage or reinsurance contract issued by NIIC would be a third party beneficiary under the Guarantee. Our Company’s obligations under the Guarantee may be terminated by providing twelve months prior written notice to NIIC. However the obligations of our Company under the Guarantee terminate immediately in the event that (i) the majority of the outstanding voting capital stock in NIIC is sold to any non-affiliated entity; (ii) A.M. Best confirms that NIIC would receive the same financial strength rating as NIC or NSIC, without the benefit of the Guarantee; or (iii) NIIC withdraws its request to be rated by A.M. Best, provided that NIIC has not been downgraded within the prior twelve months.

State Loan and Grant Contingencies

In 2013, the State of Connecticut (“the State”) awarded our Company up to $11.5 million ($8.0 million in loans and $3.5 million in grants) to move our corporate headquarters to Stamford, Connecticut. The loan is non-interest bearing has a term of 10 years and is subject to forgiveness based on our compliance with certain conditions set forth in the agreement with the State. The amount of the loan to be received is dependent on our Company reaching certain milestones for creation of new jobs over a five-year period, and the funds are to be used to offset certain equipment purchases, facility costs, training of employees and other eligible project-related costs. As of December 31, 2017, our Company received $9.9 million of the award ($7.5 million in loans and $2.4 million of the grant) and earned a loan forgiveness credit of $7.0 million with the State. Our Company is recognizing the amount of loan and grants received over the period in which offsetting expenses are recognized. Our Company recognized $1.3 million, $1.4 million and $1.4 million for the years ended December 31, 2017, 2016 and 2015. As of December 31, 2017 and December 31, 2016, our Company has deferred revenue of $4.4 million and $4.8 million, respectively, which is included in Other liabilities on the Consolidated Balance Sheets.