Fair Value Measurements

Fair value is defined as the amount that would be received for the sale of an asset or paid to transfer a liability (an exit price), in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The fair values for available for sale investments are generally sourced from third parties. The fair value of fixed income securities is based upon quoted market values where available, "evaluated bid" prices provided by third party pricing services ("pricing services") where quoted market values are not available, or by reference to broker quotes where pricing services do not provide coverage for a particular security. While the Company receives values for the majority of the investment securities it holds from pricing services, it is ultimately management’s responsibility to determine whether the values received and recorded in the financial statements are representative of appropriate fair value measurements.

The Company performs regular reviews of the prices received from our third party valuation sources to assess whether the prices represent a reasonable estimate of the fair value. This process is completed by investment and accounting personnel who are independent of those responsible for obtaining the valuations. The approaches taken by the Company include, but are not limited to, annual reviews of the controls of the external parties responsible for sourcing valuations that are subjected to automated tolerance checks, quarterly reviews of the valuation sources and dates, comparisons of executed sales prices to prior valuations, regular deep dives on a sample of securities across our major asset classes and monthly reconciliations between the valuations provided by external parties and valuations provided by third party investment managers at a portfolio level.

In addition, the Company assesses the effectiveness of valuation controls performed by external parties responsible for sourcing appropriate valuations from third parties on our behalf. The approaches taken by these external parties to gain comfort include, but are not limited to, comparing valuations between external sources, completing recurring reviews of third party pricing services' methodologies and reviewing controls of the third party service providers to support the completeness and accuracy of the prices received. Where broker quotes are the primary source of the valuations, sufficient information regarding the specific inputs utilized by the brokers is generally not available to support a Level 2 classification. The Company obtains the majority of broker quoted values from third party investment managers who perform independent verifications of these valuations using pricing matrices based upon information gathered by market traders. In addition, for the majority of these securities, the Company compares the broker quotes to independent valuations obtained from third party pricing vendors, which may also consist of broker quotes, to assess if the prices received represent reasonable estimates of the fair value.

For further information about the Company's fair value measurements, see Item 8, Note 2(b), "Significant Accounting Policies - Fair Value Measurements," and Item 8, Note 4, "Fair Value Measurements," to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

(a) Fair Value Summary

The following tables set forth the Company’s assets and liabilities that were accounted for at fair value as of June 30, 2016 and December 31, 2015 by level within the fair value hierarchy:



June 30, 2016 (U.S. dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Collateral and Counterparty Netting		Balance at June 30, 2016
Assets
Fixed maturities - Available for Sale ("AFS") - Excluding Life Funds Withheld Assets
U.S. Government and Government-Related/Supported ("U.S. Government")	$	—	$	4,089,832	$	44,256	$	—	$	4,134,088
Corporate - Financials	—		3,682,334		43,637		—		3,725,971
Corporate - Non Financials	—		6,826,428		1,929		—		6,828,357
Residential mortgage-backed securities – Agency ("RMBS - Agency")	—		4,455,615		15		—		4,455,630
Residential mortgage-backed securities – Non-Agency ("RMBS - Non-Agency")	—		288,815		—		—		288,815
Commercial mortgage-backed securities ("CMBS")	—		278,314		—		—		278,314
Collateralized debt obligations ("CDOs")	—		6		17,794		—		17,800
Other asset-backed securities	—		1,036,623		6,855		—		1,043,478
U.S. States and political subdivisions of the States	—		2,635,034		—		—		2,635,034
Non-U.S. Sovereign Government, Provincial, Supranational and Government-Related/Supported ("Non-U.S. Governments")	—		5,607,431		—		—		5,607,431
Total fixed maturities - AFS - Excluding Funds Withheld Assets, at fair value	$	—	$	28,900,432	$	114,486	$	—	$	29,014,918
Equity securities, at fair value	547,218		492,575				—		1,039,793
Short-term investments, at fair value (1)	—		444,301		—		—		444,301
Total investments AFS - Excluding Funds Withheld Assets	$	547,218	$	29,837,308	$	114,486	$	—	$	30,499,012
Fixed maturities - Life Funds Withheld Assets
U.S. Government	$	—	$	12,499	$	—	$	—	$	12,499
Corporate - Financials	—		504,464		—		—		504,464
Corporate - Non Financials	—		1,228,496		—		—		1,228,496
RMBS – Agency	—		686		—		—		686
RMBS – Non-Agency	—		24,252		—		—		24,252
CMBS	—		105,019		—		—		105,019
Other asset-backed securities	—		117,797		—		—		117,797
Non-U.S. Governments	—		850,593		—		—		850,593
Total fixed maturities - AFS - Life Funds Withheld Assets, at fair value	$	—	$	2,843,806	$	—	$	—	$	2,843,806
Total investments - AFS, at fair value	$	547,218	$	32,681,114	$	114,486	$	—	$	33,342,818



June 30, 2016 (U.S. dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Collateral and Counterparty Netting			Balance at June 30, 2016
Fixed maturities - Trading
U.S. Government	$	—	$	18,570	$	—	$	—		$	18,570
Corporate - Financials	—		416,325		—		—			416,325
Corporate - Non Financials	—		592,848		—		—			592,848
RMBS – Agency	—		1,868		—		—			1,868
RMBS – Non-Agency	—		197		—		—			197
CMBS	—		5,223		—		—			5,223
Other asset-backed securities	—		25,965		—		—			25,965
Non-U.S. Governments	—		417,411		—		—			417,411
Total fixed maturities - Trading, at fair value	$	—	$	1,478,407	$	—	$	—		$	1,478,407
Short-term investments, at fair value (1)	—		18,499		—		—			$	18,499
Total investments, Trading	$	—	$	1,496,906	$	—	$	—		$	1,496,906
Cash equivalents (2)	222,533		1,380,044		—		—			1,602,577
Cash equivalents - Life Funds Withheld Assets (2)	—		100,134		—		—			100,134
Other investments (3)	—		912,790		243,238		—			1,156,028
Other assets (4)	—		62,209		19,600		(2,674		)	79,135
Total assets accounted for at fair value	$	769,751	$	36,633,197	$	377,324	$	(2,674	)	$	37,777,598
Liabilities
Funds withheld on GreyCastle life retrocession arrangements (net of future policy benefit reserves recoverable) (5)	$	—	$	900,110	$	—	$	—		$	900,110
Financial instruments sold, but not yet purchased (6)	—		—		—		—			—
Other liabilities (4)	—		22,558		29,436		(2,674		)	49,320
Total liabilities accounted for at fair value	$	—	$	922,668	$	29,436	$	(2,674	)	$	949,430



December 31, 2015 (U.S. dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Collateral and Counterparty Netting		Balance at December 31, 2015
Assets
Fixed maturities - AFS - Excluding Life Funds Withheld Assets
U.S. Government	$	—	$	5,020,574	$	45,063	$	—	$	5,065,637
Corporate - Financials	—		3,508,224		53,685		—		3,561,909
Corporate - Non Financials	—		6,900,259		188		—		6,900,447
RMBS - Agency	—		3,754,894		3,077		—		3,757,971
RMBS - Non-Agency	—		328,540		—		—		328,540
CMBS	—		405,316		—		—		405,316
CDOs	—		2		32,408		—		32,410
Other asset-backed securities	—		1,150,715		17,857		—		1,168,572
U.S. States and political subdivisions of the States	—		2,632,070		—		—		2,632,070
Non-U.S. Government	—		5,251,614		—		—		5,251,614
Total fixed maturities - AFS - Excluding Funds Withheld Assets, at fair value	$	—	$	28,952,208	$	152,278	$	—	$	29,104,486
Equity securities, at fair value	528,581		350,338		—		—		878,919
Short-term investments, at fair value (1)	—		617,390		—		—		617,390
Total investments AFS - Excluding Funds Withheld Assets	$	528,581	$	29,919,936	$	152,278	$	—	$	30,600,795



December 31, 2015 (U.S. dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)		Collateral and Counterparty Netting			Balance at December 31, 2015
Fixed maturities - Life Funds Withheld Assets
U.S. Government	$	—	$	12,742	$	—	$	—		$	12,742
Corporate - Financials	—		598,236		—		—			598,236
Corporate - Non Financials	—		1,308,628		—		—			1,308,628
RMBS – Agency	—		752		—		—			752
RMBS – Non-Agency	—		26,953		—		—			26,953
CMBS	—		122,481		—		—			122,481
Other asset-backed securities	—		149,795		—		—			149,795
Non-U.S. Government	—		933,516		—		—			933,516
Total fixed maturities - AFS - Life Funds Withheld Assets, at fair value	$	—	$	3,153,103	$	—	$	—		$	3,153,103
Total investments - AFS, at fair value	$	528,581	$	33,073,039	$	152,278	$	—		$	33,753,898
Fixed maturities - Trading
U.S. Government	$	—	$	4,990	$	—	$	—		$	4,990
Corporate - Financials	—		335,956		—		—			335,956
Corporate - Non Financials	—		493,621		—		—			493,621
RMBS – Agency	—		368		—		—			368
CMBS	—		4,803		—		—			4,803
Other asset-backed securities	—		25,700		—		—			25,700
Non-U.S. Government	—		370,261		—		—			370,261
Total fixed maturities - Trading, at fair value	$	—	$	1,235,699	$	—	$	—		$	1,235,699
Short-term investments, at fair value (1)	—		60,330		—		—			$	60,330
Total investments, Trading	$	—	$	1,296,029	$	—	$	—		$	1,296,029
Cash equivalents (2)	437,742		830,924		—		—			1,268,666
Cash equivalents - Life Funds Withheld Assets (2)	517		100,757		—		—			101,274
Other investments (3)	—		1,008,176		283,550		—			1,291,726
Other assets (4)	—		69,914		19,400		(3,087		)	86,227
Total assets accounted for at fair value	$	966,840	$	36,378,839	$	455,228	$	(3,087	)	$	37,797,820
Liabilities
Funds withheld on GreyCastle life retrocession arrangements (net of future policy benefit reserves recoverable) (5)	$	—	$	463,915	$	—	$	—		$	463,915
Financial instruments sold, but not yet purchased (6)	347		—		—		—			347
Other liabilities (4)	—		16,304		29,191		(3,087		)	42,408
Total liabilities accounted for at fair value	$	347	$	480,219	$	29,191	$	(3,087	)	$	506,670

____________


(1)	Short-term investments consist primarily of Corporate securities and U.S. and Non-U.S. Government and Government-Related/Supported securities.


(2)	Cash equivalents balances subject to fair value measurement include certificates of deposit and money market funds. Operating cash balances are not subject to recurring fair value measurement guidance.

(3)

The Other investments balance excludes a certain payment obligation. This investment, which totaled $141.7 million as of June 30, 2016 and $141.3 million as of December 31, 2015, is carried at amortized cost. For further information, see Item 8, Note 8, "Other Investments," to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

(4)

Other assets and other liabilities include derivative instruments. The derivative balances included in each category are reported on a gross basis by level with a netting adjustment presented separately in the Collateral and Counterparty Netting column. The fair values of the individual derivative contracts are reported gross in their respective levels based on the fair value hierarchy. For further details regarding derivative fair values and associated collateral received or paid, see Note 7, "Derivative Instruments."

(5)

Funds withheld on GreyCastle life retrocession arrangements (net of future policy benefit reserves recoverable) include balances related to the life retrocession embedded derivative, under which all investment results associated with the Life Funds Withheld Assets related to the GreyCastle Life Retro Arrangements described in Note 1, "Basis of Preparation and Consolidation," accrue to the benefit of GCLR.


(6)	Financial instruments sold, but not yet purchased, represent "short sales" and are included within "Payable for investments purchased" on the balance sheets.

(b) Level 2 Asset Valuations

U.S. Government, Corporate - Financials, Corporate - Non Financials and Non-U.S. Government

Transaction activity inputs utilized in the valuation of fair value hierarchy Level 2 securities within these sub-categories include actual trades, dealer posts, results of bids-wanted, institutional secondary offerings, primary market offerings and Trade Reporting and Compliance Engine ("TRACE") trade feeds. As part of the evaluation process, transaction activity is compared to prior evaluations and necessary adjustments are made accordingly. Market-color inputs include actively quoted benchmark issues, buy-side/evaluator dialogue, sell-side/evaluator dialogue and credit derivative indices.

RMBS - Agency, RMBS - Non-Agency, CMBS, CDO and Other asset-backed securities

As part of the fair valuation process, Level 2 securities in these sub-categories are analyzed by collateral type, deal structure, deal performance and vintage. Market inputs into the valuation process for each sub-category include reported or observed trades, results of bids-wanted, buy-side/sell-side evaluator dialogue, dealer offering and market research reports. Cash flow inputs into the evaluation process include conditional prepayment rates, conditional decay rates, delinquency and loss severity rates. This assumptive data is reviewed and updated using third party reported information to reflect current market convention.

U.S. States and political subdivisions of the States

Transaction activity inputs utilized in the valuation of fair value hierarchy Level 2 securities within this sub-category include client and broker trades, dealer posts, results of bids-wanted, institutional secondary offerings, primary market offerings, and Municipal Securities Rulemaking trade feeds. As part of the evaluation process, transaction activity is compared to prior evaluations and necessary adjustments are made accordingly. Market-color inputs include bids, offerings, two-sided markets, buy-side/evaluator dialogue and sell-side/evaluator dialogue. Credit information inputs include issuer financial statements, default and material event notices, developer reports and liquidation and restructuring analysis.

Equity securities and other investments

Other investment securities generally include investments in thinly traded equity funds and hedge funds. Fair value is determined based upon the most recent net asset values (“NAV’) received from the fund administrators, the nature of the underlying investments in the funds and the frequency of subscriptions or redemptions as dictated by the fund’s governing documents.

Other assets and other liabilities

Other assets and other liabilities primarily include over-the-counter (“OTC”) derivatives, which are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, model calibration to market clearing transactions, broker or dealer quotations or alternative independent pricing sources where an understanding of the inputs utilized in arriving at the valuations is obtained. Where models are used, the selection of a particular model to value an OTC derivative depends upon the contractual terms and specific risks inherent in the instrument as well as the availability of pricing information in the market. The Company generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, prepayment rates and correlations of such inputs. For OTC derivatives that trade in liquid markets, such as generic forwards, interest rate swaps and options, model inputs can generally be verified and model selection does not involve significant management judgment.

There were no significant transfers between Level 1 and Level 2 during each of the three and six months ended June 30, 2016 and 2015.

The tables below present additional information about assets and liabilities measured at fair value on a recurring basis and for which Level 3 inputs were utilized to determine fair value. The tables present a reconciliation of the beginning and ending balances for the three and six months ended June 30, 2016 and 2015 for all financial assets and liabilities measured at fair value using significant unobservable inputs (Level 3) at June 30, 2016 and 2015, respectively. The tables do not include gains or losses that were reported in Level 3 in prior periods for assets that were transferred out of Level 3 prior to June 30, 2016 and 2015, respectively. Gains and losses for assets and liabilities classified within Level 3 in the table below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). Further, it should be noted that the following tables do not take into consideration the effect of offsetting Level 1 and 2 financial instruments entered into by the Company that are either economically hedged by certain exposures to the Level 3 positions or that hedge the exposures in Level 3 positions.

In general, Level 3 assets include securities for which values were obtained from brokers where either significant inputs were utilized in determining the values that were difficult to corroborate with observable market data, or sufficient information regarding the specific inputs utilized by the broker was not available to support a Level 2 classification. Transfers into or out of Level 3 may arise as a result of the valuations utilized by the Company changing between either those provided by independent pricing services that do not contain significant unobservable inputs and other valuations sourced from brokers that are considered Level 3.

Fixed maturities and short-term investments

The Company’s Level 3 assets consist primarily of U.S. Government and Government-Related/Supported, Corporates and CDOs, for which non-binding broker quotes are the primary source of the valuations. Sufficient information regarding the specific inputs utilized by the brokers was not available to support a Level 2 classification. The Company obtains the majority of broker quotes for these securities from third party investment managers who perform independent verifications of these valuations using pricing matrices based upon information gathered by market traders. In addition, for the majority of these securities, the Company compares the broker quotes to independent valuations obtained from third party pricing vendors, which may also consist of broker quotes, to assess if the prices received represent a reasonable estimate of the fair value. Although the Company does not have access to the specific unobservable inputs that may have been used in the fair value measurements of these securities provided by brokers, we would expect that the significant inputs considered are prepayment rates, probability of default, loss severity in the event of default, recovery rates, liquidity premium and reinvestment rates. Significant increases (decreases) in any of those inputs in isolation could result in a significantly different fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates.

The remainder of the Level 3 assets relate primarily to private investments (including funds) and certain derivative positions as described below.

Other investments

Included within the other investments component of the Company’s Level 3 valuations are private investments (including funds) and hedge funds where the Company is not deemed to have significant influence over the investee. The fair value of these investments is based upon net asset values received from the investment manager or general partner of the respective entity. The underlying investments held by the investee that form the basis of the net asset value include assets such as private business ventures and are such that significant Level 3 inputs are utilized in the determination of the individual underlying holding values and, accordingly, the fair value of the Company’s investment in each entity is classified within Level 3. The Company has not adjusted the net asset values received; however, management reviews the values received incorporating factors such as the most recent financial information received, annual audited financial statements and the values at which capital transactions with the investee take place when applying judgment regarding whether any adjustments should be made to the net asset value in recording the fair value of each position. Investments in hedge funds included in other investments utilize strategies including arbitrage, directional, event driven and multi-style. The funds potentially have lockup and gate provisions that may limit redemption liquidity. For further details regarding the nature of other investments and related features, see Item 8, Note 8, "Other Investments," to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

Derivative instruments

Derivative instruments recorded within other liabilities and classified within Level 3 include credit derivatives sold that provide protection on senior tranches of structured finance transactions where the value is obtained directly from the investment bank counterparty and sufficient information regarding the inputs utilized in such valuation was not obtained to support a Level 2 classification and guaranteed minimum income benefits embedded within one reinsurance contract. The majority of inputs utilized in the valuations of these types of derivative contracts are considered Level 1 or Level 2; however, each valuation includes at least one Level 3 input that was significant to the valuation and, accordingly, the values are disclosed within Level 3.

The calculation of the change in fair value of the embedded derivative associated with the GreyCastle Life Retro Arrangements includes the interest income, realized and unrealized gains and losses on Life Funds Withheld Assets and certain related expenses related to the Life Funds Withheld Assets. The fair value of the embedded derivative is included in “Funds withheld on GreyCastle life retrocession arrangements, net of future policy benefit reserves recoverable” on the consolidated balance sheets. The fair value of the embedded derivative is considered a Level 2 valuation.



	Level 3 Assets and Liabilities - Three Months Ended June 30, 2016
(U.S. dollars in thousands)	U.S. Government			Corporate - Financials			Corporate - Non-Financials			RMBS - Agency
Balance, beginning of period	$	44,940		$	43,583		$	181		$	2,853
Realized gains (losses)	(38		)	44			—			—
Movement in unrealized gains (losses)	34			(29		)	1			—
Purchases and issuances	—			39			1,747			—
Sales	—			—			—			—
Settlements	(680		)	—			—			(1		)
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			—			(2,837		)
Balance, end of period	$	44,256		$	43,637		$	1,929		$	15
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	(3	)	$	16		$	1		$	—

(U.S. dollars in thousands)	RMBS - Non Agency			CMBS			CDO			Other asset- backed securities
Balance, beginning of period	$	—		$	—		$	21,729		$	4,200
Realized gains (losses)	—			—			49			(527		)
Movement in unrealized gains (losses)	—			—			473			561
Purchases and issuances	—			—			—			1,072
Sales	—			—			—			—
Settlements	—			—			(4,457		)	(571		)
Transfers into Level 3	—			—			—			3,015
Transfers out of Level 3	—			—			—			(895		)
Balance, end of period	$	—		$	—		$	17,794		$	6,855
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	—		$	—		$	522		$	35

(U.S. dollars in thousands)	Non-U.S. Government			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	—		$	—		$	301,095		$	(9,852	)
Realized gains (losses)	—			—			1,024			—
Movement in unrealized gains (losses)	—			—			(5,740		)	16
Purchases and issuances	—			—			11,374			—
Sales	—			—			—			—
Settlements	—			—			(4,647		)	—
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			(59,868		)	—
Balance, end of period	$	—		$	—		$	243,238		$	(9,836	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	—		$	—		$	(4,716	)	$	16



	Level 3 Assets and Liabilities - Three Months Ended June 30, 2015
(U.S. dollars in thousands)	U.S. Government		Corporate - Financials		Corporate - Non-Financials			RMBS - Agency
Balance, beginning of period	$	—	$	—	$	5,861		$	1,820
Realized gains (losses)	—		—		(140		)	—
Movement in unrealized gains (losses)	—		—		(44		)	(1		)
Purchases and issuances	—		10,000		(123		)	1,297
Sales	—		—		—			—
Settlements	—		—		—			(78		)
Transfers into Level 3	—		—		—			—
Transfers out of Level 3	—		—		—			—
Balance, end of period	$	—	$	10,000	$	5,554		$	3,038
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	—	$	—	$	(184	)	$	(1	)

(U.S. dollars in thousands)	RMBS - Non Agency		CMBS		CDO			Other asset- backed securities
Balance, beginning of period	$	—	$	—	$	496,923		$	2,244
Realized gains (losses)	—		—		224			92
Movement in unrealized gains (losses)	—		—		2,445			8
Purchases and issuances	—		—		11,941			40,628
Sales	—		—		—			—
Settlements	—		—		(27,362		)	(227		)
Transfers into Level 3	—		—		—			—
Transfers out of Level 3	—		—		—			—
Balance, end of period	$	—	$	—	$	484,171		$	42,745
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	—	$	—	$	2,057		$	100

(U.S. dollars in thousands)	Non-U.S. Government		Short-term investments		Other investments			Derivative Contracts - Net
Balance, beginning of period	$	—	$	—	$	190,097		$	(9,606	)
Realized gains (losses)	—		—		1,291			—
Movement in unrealized gains (losses)	—		—		(139		)	(147		)
Purchases and issuances	—		—		66,510			—
Sales	—		—		—			—
Settlements	—		—		(2,087		)	—
Transfers into Level 3	—		—		—			—
Transfers out of Level 3	—		—		—			—
Balance, end of period	$	—	$	—	$	255,672		$	(9,753	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	—	$	—	$	1,152		$	(147	)



	Level 3 Assets and Liabilities - Six Months Ended June 30, 2016
(U.S. dollars in thousands)	U.S. Government			Corporate - Financials			Corporate - Non-Financials			RMBS - Agency
Balance, beginning of period	$	45,063		$	53,685		$	188		$	3,077
Realized gains (losses)	(75		)	97			—			(3		)
Movement in unrealized gains (losses)	627			(68		)	—			7
Purchases and issuances	—			208			1,747			—
Sales	—			—			—			—
Settlements	(1,359		)	—			(6		)	(229		)
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			(10,285		)	—			(2,837		)
Balance, end of period	$	44,256		$	43,637		$	1,929		$	15
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	551		$	31		$	—		$	4

(U.S. dollars in thousands)	RMBS - Non Agency			CMBS			CDO			Other asset- backed securities
Balance, beginning of period	$	—		$	—		$	32,408		$	17,857
Realized gains (losses)	—			—			90			522
Movement in unrealized gains (losses)	—			—			5,730			(2,197		)
Purchases and issuances	—			—			—			1,072
Sales	—			—			—			—
Settlements	—			—			(20,434		)	(12,519		)
Transfers into Level 3	—			—			—			3,015
Transfers out of Level 3	—			—			—			(895		)
Balance, end of period	$	—		$	—		$	17,794		$	6,855
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	—		$	—		$	5,819		$	(1,673	)

(U.S. dollars in thousands)	Non-U.S. Government			Short-term investments			Other investments			Derivative Contracts - Net
Balance, beginning of period	$	—		$	—		$	283,550		$	(9,791	)
Realized gains (losses)	—			—			6,831			—
Movement in unrealized gains (losses)	—			—			(8,457		)	(45		)
Purchases and issuances	—			—			25,153			—
Sales	—			—			—			—
Settlements	—			—			(19,465		)	—
Transfers into Level 3	—			—			15,494			—
Transfers out of Level 3	—			—			(59,868		)	—
Balance, end of period	$	—		$	—		$	243,238		$	(9,836	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	—		$	—		$	(1,626	)	$	(45	)



	Level 3 Assets and Liabilities - Six Months Ended June 30, 2015
(U.S. dollars in thousands)	U.S. Government		Corporate - Financials		Corporate - Non-Financials			RMBS - Agency
Balance, beginning of period	$	—	$	—	$	5,894		$	1,910
Realized gains (losses)	—		—		(141		)	—
Movement in unrealized gains (losses)	—		—		4			(2		)
Purchases and issuances (1)	—		10,000		(123		)	1,297
Sales	—		—		—			—
Settlements	—		—		(80		)	(167		)
Transfers into Level 3	—		—		—			—
Transfers out of Level 3	—		—		—			—
Balance, end of period	$	—	$	10,000	$	5,554		$	3,038
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	—	$	—	$	(136	)	$	—

(U.S. dollars in thousands)	RMBS - Non Agency		CMBS		CDO			Other asset- backed securities
Balance, beginning of period	$	—	$	—	$	687,958		$	5,288
Realized gains (losses)	—		—		260			91
Movement in unrealized gains (losses)	—		—		8,000			10
Purchases and issuances (1)	—		—		11,941			40,628
Sales	—		—		(155,085		)	—
Settlements	—		—		(68,903		)	(3,272		)
Transfers into Level 3	—		—		—			—
Transfers out of Level 3	—		—		—			—
Balance, end of period	$	—	$	—	$	484,171		$	42,745
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	—	$	—	$	4,725		$	100

(U.S. dollars in thousands)	Non-U.S. Government		Short-term investments		Other investments			Derivative Contracts - Net
Balance, beginning of period	$	—	$	—	$	185,083		$	(9,764	)
Realized gains (losses)	—		—		2,593			—
Movement in unrealized gains (losses)	—		—		(1,966		)	11
Purchases and issuances (1)	—		—		73,303			—
Sales	—		—		—			—
Settlements	—		—		(3,341		)	—
Transfers into Level 3	—		—		—			—
Transfers out of Level 3	—		—		—			—
Balance, end of period	$	—	$	—	$	255,672		$	(9,753	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	—	$	—	$	628		$	11

(d) Financial Instruments Not Carried at Fair Value

Authoritative guidance over disclosures about the fair value of financial instruments requires additional disclosure of fair value information for financial instruments not carried at fair value in both interim and annual reporting periods. Certain financial instruments, particularly insurance contracts, are excluded from these fair value disclosure requirements. The carrying values of cash and cash equivalents, accrued investment income, net receivable from investments sold, other assets, net payable for investments purchased, other liabilities and other financial instruments not included below approximated their fair values.

The following table includes financial instruments for which the carrying value differs from the estimated fair values as of June 30, 2016 and December 31, 2015. All of these fair value estimates are considered Level 2 fair value measurements.



	June 30, 2016				December 31, 2015
(U.S. dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets - Other investments	$	141,675	$	153,622	$	141,329	$	154,065
Deposit liabilities	$	1,178,113	$	1,504,030	$	1,168,376	$	1,436,210
Notes payable and debt	2,646,324		2,866,838		2,644,970		2,805,152
Financial Liabilities	$	3,824,437	$	4,370,868	$	3,813,346	$	4,241,362

The Company historically participated in structured transactions. Remaining structured transactions include cash loans supporting project finance transactions, a liquidity facility financing provided to structured project deals and an investment in a payment obligation with an insurance company. These transactions are carried at amortized cost. The fair value of these investments held by the Company is determined through use of internal models utilizing reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data.

Deposit liabilities include obligations under structured insurance and reinsurance transactions. For purposes of fair value disclosures, the Company determined the estimated fair value of the deposit liabilities by assuming a discount rate equal to the appropriate U.S. Treasury rate plus 49.9 basis points and 26.5 basis points as of June 30, 2016 and December 31, 2015, respectively. The discount rate incorporates the Company’s own credit risk into the determination of estimated fair value.

The fair values of the Company’s notes payable and debt outstanding were determined based on quoted market prices.

There are no significant concentrations of credit risk within the Company’s financial instruments as defined in the authoritative guidance over disclosures of fair value of financial instruments not carried at fair value, which excludes certain financial instruments, particularly insurance contracts.