Future Policy Benefit Reserves

Net future policy benefit reserves are comprised of the following:



As of December 31 (U.S. dollars in thousands)	2017			2016
Traditional Life	$	756,470		$	737,252
Annuities	2,854,456			2,768,795
Gross future policy benefit reserves	$	3,610,926		$	3,506,047
Reinsurance recoverable - GreyCastle Life Retro Arrangements	(3,191,584		)	(3,072,615		)
Reinsurance recoverable - U.S. Term Life Retro Arrangements	(242,762		)	(270,238		)
Reinsurance recoverable - Other life retrocessions	(8,321		)	(10,997		)
Net future policy benefit reserves	$	168,259		$	152,197

The Company entered into long duration contracts that subject the Company to mortality and morbidity risks and that were accounted for as life premiums earned. Future policy benefit reserves were established using appropriate assumptions for investment yields, mortality, and expenses, including a provision for adverse deviation. The average interest rate used for the determination of the future policy benefits for these contracts was 4.0% at December 31, 2017 and 2016.

Under the terms of the transaction described in Note 1(a), "Significant Accounting Policies - Basis of Preparation and Consolidation," the Company has reinsured $3.2 billion and $3.1 billion at December 31, 2017 and 2016, respectively, of its future policy benefit reserves under the GreyCastle Life Retro Arrangements. The Company continues to own, on a funds withheld basis, assets supporting the GreyCastle Life Retro Arrangements consisting of cash, fixed maturity securities and accrued interest. Based upon the contractual right of offset, the funds withheld liability owing to GCLR is recorded net of future policy benefit reserves recoverable, and is included within "Funds withheld on GreyCastle life retrocession arrangements (net of future policy benefit reserves recoverable)" on the Consolidated Balance Sheets, and is comprised of the following at December 31, 2017 and 2016:



(U.S. dollars in thousands)	2017			2016
Assets held on a funds withheld basis relating to the GreyCastle Life Retro Arrangements	$	4,190,803		$	4,071,583
Reinsurance recoverable from GCLR	(3,191,584		)	(3,072,615		)
Funds withheld on GreyCastle life retrocession arrangements (net of future policy benefit reserves recoverable)	$	999,219		$	998,968

The Company has also reinsured an additional $242.8 million and $270.2 million at December 31, 2017 and 2016, respectively, of its U.S. Term Life future policy benefit reserves ("U.S. Term Life Retro Arrangements"). The Company continues to own, on a funds withheld basis, assets supporting the U.S. Term Life Retro Arrangements. Based upon the contractual right of offset, the funds withheld liability is recorded net of future policy benefit reserves recoverable, and is included within "Reinsurance balances payable" on the Consolidated Balance Sheets.