Commitments and Contingencies

9 Months Ended

Sep. 30, 2011

Commitments and Contingencies Disclosure [Text Block]

13. Commitments and Contingencies

          Financial and Other Guarantee Exposures

          As part of the Company’s legacy financial guarantee business, during January 2011, the Company commuted 32 of the 37 of the financial guarantee transactions that were outstanding at December 31, 2010, including the three non-performing transactions referenced below. This commutation eliminated $41.9 million of notional financial guarantee exposure (including principal and interest) for a payment of $22.1 million. The $22.1 million was included in the gross claim liability at December 31, 2010. The Company’s outstanding financial guarantee contracts at September 30, 2011 included the reinsurance of 5 financial guarantee contracts with total insured contractual payments outstanding, all of which is principal, of $130.2 million and having a remaining weighted-average contract period of 24.0 years. These contracts provide credit support for a variety of collateral types with the exposures comprised of a (i) $108.3 million notional financial guarantee on three notes backed by zero coupon bonds and bank perpetual securities; (ii) $14.7 million notional financial guarantee on a collateralized fund obligation and (iii) $7.2 million notional financial guarantee relating to future scheduled repayments on a government-subsidized housing project.

          At September 30, 2011, the total gross claim liability and unearned premiums recorded associated with the Company’s legacy financial guarantee business were $1.4 million and $0.5 million, respectively. At September 30, 2011, there were no reported events of default on these obligations.

          At December 31, 2010, the Company’s outstanding financial guarantee contracts included the reinsurance of 37 financial guarantee contracts with total insured contractual payments outstanding of $204.8 million ($198.7 million of principal and $6.1 million of interest) and having a remaining weighted-average contract period of 13.2 years. These contracts provided credit support for a variety of collateral types. The largest exposures were comprised of (i) $108.3 million notional financial guarantee on three notes backed by zero coupon bonds and bank perpetual securities; (ii) $47.5 million notional financial guarantee on a collateralized fund obligation with a collateral cushion in excess of 60% of the Company’s exposure that is currently being wound-up in an orderly manner; and (iii) the remaining $49.0 million of financial guarantees is comprised of 33 separate transactions with varying forms of underlying collateral, including pre-2000 vintage asset backed securities and municipal government bonds. The underlying financial guarantees are diversified and not individually significant.

          At December 31, 2010, the total gross claim liability and unearned premiums recorded associated with the Company’s legacy financial guarantee business were $23.5 million and $0.6 million, respectively. Of the contracts noted above, three contracts with total insured contractual payments outstanding of $9.8 million had experienced an event of default and were considered by the Company to be non-performing at December 31, 2010, while the remaining were considered to be performing at such date.

          Surveillance procedures to track and monitor credit deteriorations in the insured financial obligations are performed by the primary obligors for each transaction on the Company’s behalf. Information regarding the performance status and updated exposure values is provided to the Company on a quarterly basis and evaluated by management in recording claims reserves.

          Claims and Other Litigation

          If management believes that, based on available information, it is at least reasonably possible that a material loss (or additional material loss in excess of any accrual) will be incurred, the Company discloses an estimate of the possible loss or range of loss, either individually or in the aggregate, as appropriate, if such an estimate can be made, or discloses that an estimate cannot be made. Based on the Company’s assessment as at September 30, 2011, no such disclosures are considered necessary.