Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of location and gross amounts of derivative fair values

The following table summarizes information on the location and gross amounts of derivative fair values contained in the consolidated balance sheets at June 30, 2014 and December 31, 2013:

	June 30, 2014								December 31, 2013
(U.S. dollars in thousands)	Asset Derivative Notional Amount		Asset Derivative Fair Value (1)		Liability Derivative Notional Amount		Liability Derivative Fair Value (1)		Asset Derivative Notional Amount		Asset Derivative Fair Value (1)		Liability Derivative Notional Amount		Liability Derivative Fair Value (1)
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	891,217	$	45,597	$	1,315,385	$	35,265	$	1,005,610	$	26,098	$	2,572,227	$	70,462
Derivatives not designated as hedging instruments:
Investment Related Derivatives:
Interest rate exposure	$	1,295,267	$	259	$	28,090	$	—	$	30,702	$	266	$	10,259	$	8
Foreign exchange exposure	190,870		1,914		105,797		3,004		17,497		12		50,614		680
Credit exposure	4,566		3		14,270		9,988		—		—		340,020		15,128
Financial market exposure	46,645		344		43,468		—		58,232		1,111		14,821		77
Financial Operations Derivatives: (2)
Credit exposure	—		—		41,346		8,930		—		—		44,234		4,190
Other Non-Investment Derivatives:
Guaranteed minimum income benefit contract	50,802		12,453		50,802		12,453		—		—		53,564		14,940
Modified coinsurance funds withheld contracts (3)	65,721		—		5,659,644		—		66,369		—		—		—
Total derivatives not designated as hedging instruments	$	1,653,871	$	14,973	$	5,943,417	$	34,375	$	172,800	$	1,389	$	513,512	$	35,023

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(1) Derivative instruments in an asset or liability position are included within Other assets or Other liabilities, respectively, in the balance sheets on a net basis where the Company has both a legal right of offset and the intentions to settle the contracts on a net basis.

(2) Financial operations derivatives represent interests in variable interest entities as described in Note 12, “Variable Interest Entities".

(3) The fair value movements in derivative assets and liabilities relating to modified coinsurance funds withheld contracts are included within the the associated asset or liability at each period end on the face of the balance sheets. Notional amounts associated with reinsurance agreements under which the Company assumes reinsurance risk are recorded as asset derivative notional amounts. Notional amounts associated with the Life Retro Arrangements under which the Company cedes reinsurance risk are recorded as liability derivative notional amounts.

Summary of gross and net amounts of derivative fair values and associated collateral received or paid

The following table summarizes information on the gross and net amounts of derivative fair values and associated collateral received related to derivative assets or paid relating to derivative liabilities contained in the consolidated balance sheets at June 30, 2014 and December 31, 2013:

							Gross Amounts Not Offset in the Balance Sheets
June 30, 2014 (U.S. dollars in thousands)	Gross Amounts Recognized in the Balance Sheets		Gross Amounts Offset in the Balance Sheets		Net Amounts in the Balance Sheets		Financial Instruments		Cash Collateral		Net Amounts
Derivative Assets	$	60,570	$	1,240	$	59,330	$	—	$	3,160	$	56,170
Derivative Liabilities	$	69,640	$	1,240	$	68,400	$	—	$	—	$	68,400
December 31, 2013 (U.S. dollars in thousands)
Derivative Assets	$	27,487	$	1,342	$	26,145	$	—	$	—	$	26,145
Derivative Liabilities	$	105,485	$	1,342	$	104,143	$	—	$	19,847	$	84,296

Gain (loss) recognized in income attributable to risk of hedged items

The following table provides the total impact on earnings relating to derivative instruments formally designated as fair value hedges along with the impacts of the related hedged items for the three and six months ended June 30, 2014 and 2013:

				Hedged Items - Amount of Gain/(Loss) Recognized in Income Attributable to Risk
Derivatives Designated as Fair Value Hedges: Three Months Ended June 30, 2014 (U.S. dollars in thousands)	Gain/(Loss) Recognized in Income on Derivative				Fixed Maturity Investments			Ineffective Portion of Hedging Relationship - Gain/(Loss)
Interest rate exposure	$	—
Foreign exchange exposure	(9,132		)
Total	$	(9,132	)		$	7,082		$	(2,050	)
Three Months Ended June 30, 2013
(U.S. dollars in thousands)
Interest rate exposure	$	—
Foreign exchange exposure	(5,002		)
Total	$	(5,002	)		$	4,496		$	(506	)
Six Months Ended June 30, 2014
(U.S. dollars in thousands)
Interest rate exposure	$	—
Foreign exchange exposure	(15,663		)
Total	$	(15,663	)		$	15,407		$	(256	)
Six Months Ended June 30, 2013
(U.S. dollars in thousands)
Interest rate exposure	$	—
Foreign exchange exposure	25,243
Total	$	25,243			$	(24,274	)	$	969

Summary of fair value hedges that have been settled and their impact on results

A summary of the fair value hedges that have been settled and their impact on results during the three and six months ended June 30, 2014 and 2013, as well as the remaining balance of fair value hedges and average years remaining to maturity are shown below:

Settlement of Fair Value Hedges - Summary	Fair Value Hedges - Notes Payable and Debt June 30,				Fair Value Hedges - Deposit Liabilities June 30,
(U.S. dollars in thousands, except years)	2014		2013		2014		2013
Cumulative reduction to interest expense	$	20,810	$	16,903	$	90,615	$	29,257
Remaining balance	$	814	$	4,721	$	142,580	$	203,938
Weighted average years remaining to maturity	0.2		1.2		24.0		24.2

Summary of hedges of net investment in foreign operation

The following table provides the weighted average U.S. dollar equivalent of foreign denominated net assets that were hedged and the resulting derivative gain (loss) that was recorded in the Foreign currency translation adjustment, net of tax, account within AOCI for the three and six months ended June 30, 2014 and 2013:

Derivative Instruments Designated as Hedges of the Net Investment in a Foreign Operation - Summary	Three months ended June 30,						Six months ended June 30,
(U.S. dollars in thousands)	2014			2013			2014			2013
Weighted average of U.S. dollar equivalent of foreign denominated net assets	$	2,270,090		$	2,588,385		$	2,478,772		$	2,556,103
Derivative gains (losses)	$	(2,170	)	$	(6,135	)	$	(1,210	)	$	54,479

Summary of net realized and unrealized gains (losses) on derivative instruments

The following table provides the total impact on earnings relating to derivative instruments not formally designated as hedging instruments under authoritative accounting guidance and from the ineffective portion of fair value hedges. The impacts are all recorded through Net realized and unrealized gains (losses) on derivatives in the income statement for the three and six months ended June 30, 2014 and 2013:

Net Realized and Unrealized Gains (Losses) on Derivative Instruments	Three months ended June 30,						Six months ended June 30,
(U.S. dollars in thousands)	2014			2013			2014			2013
Investment Related Derivatives:
Interest rate exposure	$	8,978		$	288		$	9,326		$	489
Foreign exchange exposure	(1,490		)	(2,690		)	1,798			(4,288		)
Credit exposure	411			(1,178		)	7			(1,994		)
Financial market exposure	2,508			(2,736		)	3,378			2,616
Financial Operations Derivatives:
Credit exposure	447			1,087			(4,353		)	1,329
Other Non-Investment Derivatives:
Guaranteed minimum income benefit contract	633			2,306			2,257			6,002
Modified coinsurance funds withheld contract	2,162			(1,676		)	1,252			(2,343		)
Total gain (loss) recognized in income from derivatives not designated as hedging instruments	$	13,649		$	(4,599	)	$	13,665		$	1,811
Amount of gain (loss) recognized in income from ineffective portion of fair value hedges	(2,050		)	(506		)	(256		)	969
Net realized and unrealized gains (losses) on derivative instruments	$	11,599		$	(5,105	)	$	13,409		$	2,780
Net realized and unrealized gains (losses) on life retrocession embedded derivative	$	(17,546	)	$	—		$	(17,546	)	$	—

Summary of credit derivative exposures

An aggregate summary of the credit derivative exposure at June 30, 2014 and December 31, 2013 is as follows:

Financial Operations Derivatives - Credit Exposure Summary: (U.S. dollars in thousands)	June 30, 2014		December 31, 2013
Principal outstanding	$	39,748	$	42,080
Interest outstanding	1,598		2,154
Aggregate outstanding exposure	$	41,346	$	44,234
Total liability recorded	$	8,930	$	4,190
Weighted average contractual term to maturity	3.3 years		3.7 years
Underlying obligations credit rating	CC		CC

Components of Life Retrocession Embedded Derivatives [Table Text Block]

The value of the life retrocession embedded derivative includes the interest income, realized and unrealized gains and losses on Life Funds Withheld Assets and certain related expenses subsequent to May 30, 2014 as follows:

Components of Life Retrocession Embedded Derivative:	May 30 to June 30
(U.S. dollars in thousands)	2014
Interest income	$	(19,944	)
Realized and unrealized gains (losses) on Life Funds Withheld Assets	1,893
Other	505
Net realized and unrealized gains (losses) on life retrocession embedded derivative	$	(17,546	)

Summary of contingent credit features

The aggregate fair value of all derivative agreements containing such rating downgrade provisions that were in a liability position and any collateral posted under these agreements as of June 30, 2014 and December 31, 2013 were as follows:

Contingent Credit Features - Summary: (U.S. dollars in thousands)	June 30, 2014		December 31, 2013
Aggregate fair value of derivative agreements with downgrade provisions in a net liability position	$	6,728	$	47,703
Collateral posted to counterparty	$	—	$	13,260