FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2011

Fair Value Disclosures [Text Block]

3. Fair Value Measurements

(a) Fair Value Summary

          The following tables set forth the Company’s assets and liabilities that were accounted for at fair value as of December 31, 2011 and December 31, 2010 by level within the fair value hierarchy (for further information, see Note 2 (b), “Significant Accounting Policies – Fair Value Measurements”:

December 31, 2011 (U.S. dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Collateral and Counterparty Netting			Balance at December 31, 2011
Assets
U.S. Government and Government-Related/Supported	$	—	$	1,990,983	$	—	$	—		$	1,990,983
Corporate (1)		—		10,438,697		23,818		—			10,462,515
Residential mortgage-backed securities – Agency		—		5,347,365		32,041		—			5,379,406
Residential mortgage-backed securities – Non-Agency		—		641,815		—		—			641,815
Commercial mortgage-backed securities		—		974,835		—		—			974,835
Collateralized debt obligations		—		7,751		650,851		—			658,602
Other asset-backed securities		—		969,804		16,552		—			986,356
U.S. States and political subdivisions of the States		—		1,797,378		—		—			1,797,378
Non-U.S. Sovereign Government, Supranational and Government-Related		—		3,298,135		—		—			3,298,135
Total fixed maturities, at fair value	$	—	$	25,466,763	$	723,262	$	—		$	26,190,025
Equity securities, at fair value (2)		239,175		229,022		—		—			468,197
Short-term investments, at fair value (1) (3)		—		359,063		—		—			359,063
Total investments available for sale	$	239,175	$	26,054,848	$	723,262	$	—		$	27,017,285
Cash equivalents (4)		1,686,101		1,068,264				—			2,754,365
Other investments (5)		—		547,598		113,959		—			661,557
Other assets (6)(7)		—		143,622		—		(77,888	)		65,734
Total assets accounted for at fair value	$	1,925,276	$	27,814,332	$	837,221	$	(77,888	)	$	30,498,941
Liabilities
Financial instruments sold, but not yet purchased (8)	$	—	$	20,844	$	—	$	—		$	20,844
Other liabilities (6)(7)		—		16,871		42,644		(809	)		58,706
Total liabilities accounted for at fair value	$	—	$	37,715	$	42,644	$	(809	)	$	79,550

December 31, 2010 (U.S. dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Collateral and Counterparty Netting			Balance at December 31, 2010
Assets
U.S. Government and Government-Related/Supported	$	—	$	2,565,444	$	—	$	—		$	2,565,444
Corporate (1)		—		10,932,105		36,866		—			10,968,971
Residential mortgage-backed securities – Agency		—		5,173,456		30,255		—			5,203,711
Residential mortgage-backed securities – Non-Agency		—		1,016,859		4,964		—			1,021,823
Commercial mortgage-backed securities		—		1,170,884		1,623		—			1,172,507
Collateralized debt obligations		—		12,566		721,572		—			734,138
Other asset-backed securities		—		935,882		24,650		—			960,532
U.S. States and political subdivisions of the States		—		1,360,456		—		—			1,360,456
Non-U.S. Sovereign Government, Supranational and Government-Related		—		3,150,856		3,667		—			3,154,523
Total fixed maturities, at fair value	$	—	$	26,318,508	$	823,597	$	—		$	27,142,105
Equity securities, at fair value (2)		71,284		13,483		—		—			84,767
Short-term investments, at fair value (1) (3)		—		450,681		—		—			450,681
Total investments available for sale	$	71,284	$	26,782,672	$	823,597	$	—		$	27,677,553
Cash equivalents (4)		1,358,619		540,646		—		—			1,899,265
Other investments (5)		—		432,166		133,717		—			565,883
Other assets (6)(7)		—		108,056		7,882		(22,995	)		92,943
Total assets accounted for at fair value	$	1,429,903	$	27,863,540	$	965,196	$	(22,995	)	$	30,235,644
Liabilities
Financial instruments sold, but not yet purchased (8)	$	256	$	21,270	$	—	$	—		$	21,526
Other liabilities (6)(7)		—		13,591		47,077		—			60,668
Total liabilities accounted for at fair value	$	256	$	34,861	$	47,077	$	—		$	82,194

Notes:
(1)	Included within Corporate are certain medium term notes supported primarily by pools of European investment grade credit with varying degrees of leverage. The notes, which are in a gross unrealized loss position, had a fair value of $266.0 million and $454.8 million and an amortized cost of $297.7 million and $504.6 million at December 31, 2011 and 2010, respectively. These notes allow the investor to participate in cash flows of the underlying bonds, including certain residual values, which could serve to either decrease or increase the ultimate values of these notes.
(2)	Included within equity securities are investments fixed income funds of $91.6 million and nil at December 31, 2011 and 2010, respectively.
(3)	Short-term investments consist primarily of Corporate securities and U.S. Government and Government-Related/Supported securities.
(4)	Cash equivalents balances subject to fair value measurement include certificates of deposit and money market funds. Operating cash balances are not subject to fair value measurement guidance.
(5)	The Other investments balance excludes certain structured transactions, including certain investments in project finance transactions, a payment obligation and liquidity financing provided to a structured credit vehicle as a part of a third party medium term note facility. These investments are carried at amortized cost that totaled $323.7 million and $327.7 million at December 31, 2011 and 2010, respectively.
(6)	Other assets and other liabilities include derivative instruments.
(7)	The derivative balances included in each category above are reported on a gross basis by level with a netting adjustment presented separately in the “Collateral and Counterparty Netting” column. The Company often enters into different types of derivative contracts with a single counterparty and these contracts are covered under a netting agreement. In addition, the Company held net cash collateral related to derivative positions of approximately $77.1 million and $23.0 million at December 31, 2011 and 2010, respectively. This balance is included within cash and cash equivalents and the corresponding liability to return the collateral has been offset against the derivative positions within the balance sheet as appropriate under the netting agreement. The fair values of the individual derivative contracts are reported gross in their respective levels based on the fair value hierarchy.
(8)	Financial instruments sold, but not yet purchased represent “short sales” and are included within “Payable for investments purchased” on the balance sheet.

(b) Level 3 Gains and Losses

          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 reflect gains and losses for the twelve month periods ended December 31, 2011 and 2010 for all financial assets and liabilities categorized as Level 3 at December 31, 2011 and 2010, 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 December 31, 2011 and 2010. 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 value 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 primarily 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 observable inputs, or other valuations sourced from brokers which are considered Level 3.

          There were no transfers between Level 1 and Level 2 during the twelve month periods ended December 31, 2011 and 2010.

	Level 3 Assets and Liabilities Year Ended December 31, 2011
(U.S. dollars in thousands)	Corporate			Residential mortgage-backed securities – Agency			Residential mortgage-backed securities – Non Agency			Commercial mortgage-backed securities			Collateralized debt obligations
Balance, beginning of period	$	36,866		$	30,255		$	4,964		$	1,623		$	721,572
Realized gains (losses)		(276	)		(11	)		—			—			(3,458	)
Movement in unrealized gains (losses)		92			(145	)		—			—			2,404
Purchases and issuances		14,840			6,176			—			—			2,379
Sales and settlements		(10,049	)		(4,186	)		—			—			(68,165	)
Transfers into Level 3		2,105			2,655			—			—			1,886
Transfers out of Level 3		(19,760	)		(2,703	)		(4,964	)		(1,623	)		(5,767	)
Fixed maturities to short-term investments classification change		—			—			—			—			—
Balance, end of period	$	23,818		$	32,041		$	—		$	—		$	650,851
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	92		$	(156	)	$	—		$	—		$	(6,431	)

	Level 3 Assets and Liabilities Year Ended December 31, 2011 (Continued)
(U.S. dollars in thousands)	Other asset backed securities			Non-U.S. Sovereign Government and Supranationals and Government- Related			Short-term Investments		Other investments			Derivative Contracts - Net
Balance, beginning of period	$	24,650		$	3,667		$	—	$	133,717		$	(39,195	)
Realized gains (losses)		(849	)		—			—		11,592			—
Movement in unrealized gains (losses)		6,896			—			—		14,108			(3,173	)
Purchases and issuances		—			—			—		12,177			—
Sales and settlements		(9,114	)		—			—		(57,635	)		(276	)
Transfers into Level 3		—			—			—		—			—
Transfers out of Level 3		(5,031	)		(3,667	)		—		—			—
Fixed maturities to short-term investments classification change		—			—			—		—			—
Balance, end of period	$	16,552		$	—		$	—	$	113,959		$	(42,644	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	12,334		$	—		$	—	$	23,391		$	(3,173	)

	Level 3 Assets and Liabilities Year Ended December 31, 2010
(U.S. dollars in thousands)	Corporate			Residential mortgage-backed securities – Agency			Residential mortgage-backed securities – Non Agency			Commercial mortgage-backed securities			Collateralized debt obligations
Balance, beginning of period	$	10,311		$	7,894		$	42,190		$	2,755		$	197,149
Realized gains (losses)		(7,257	)		(360	)		(1,452	)		(908	)		(28,253	)
Movement in unrealized gains (losses)		1,748			(74	)		306			1,062			120,932
Purchases and issuances		20,328			30,689			—			—			—
Sales and settlements		(2,164	)		—			(2,226	)		(685	)		(7,525	)
Transfers into Level 3		14,749			—			5,601			—			471,211
Transfers out of Level 3		(849	)		(7,894	)		(39,455	)		—			(59	)
Fixed maturities to short-term investments classification change		—			—			—			(601	)		(31,883	)
Balance, end of period	$	36,866		$	30,255		$	4,964		$	1,623		$	721,572
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	1,964		$	(74	)	$	(28	)	$	223		$	117,764

	Level 3 Assets and Liabilities Year Ended December 31, 2010 (Continued)
(U.S. dollars in thousands)	Other asset backed securities			Non-U.S. Sovereign Government and Supranationals and Government- Related		Short-term Investments		Other investments			Derivative Contracts - Net
Balance, beginning of period	$	38,179		$	3,217	$	—	$	75,584		$	100,515
Realized gains (losses)		(18,107	)		—		—		3,677			874
Movement in unrealized gains (losses)		14,685			34		—		14,461			57,688
Purchases and issuances		4,356			—		—		15,443			(198,272	)
Sales and settlements		(1,504	)		—		—		(26,180	)		—
Transfers into Level 3		1,355			416		—		18,248			—
Transfers out of Level 3		(14,314	)		—		—		—			—
Fixed maturities to short-term investments classification change		—			—		—		32,484			—
Balance, end of period	$	24,650		$	3,667	$	—	$	133,717		$	(39,195	)
Movement in total gains (losses) above relating to instruments still held at the reporting date	$	8,747		$	34	$	—	$	14,286		$	57,688

(c) Fixed maturities and short-term investments

          During the year ended December 31, 2010, certain collateralized debt obligations (“CDOs”) that were previously classified as Level 2 due to sufficient market data being available to allow a price to be determined and provided by third party pricing vendors, were transferred to Level 3 because third party vendor prices were no longer believed to be the most appropriate pricing source. Broker quotes, for which sufficient information regarding the specific inputs utilized by the broker was not available to support a Level 2 classification, are the primary source of the valuations for these CDO securities.

          The remainder of the Level 3 assets relate to private equity investments where the nature of the underlying assets held by the investee include positions such as private business ventures and are such that significant Level 3 inputs are utilized in the valuation, and certain derivative positions.

(d) Other investments

               Included within the Other investments component of the Company’s Level 3 valuations are private investments and alternative fund investments 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 nature of the underlying investments held by the investee which 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 also incorporates factors such as the most recent financial information received, the values at which capital transactions with the investee take place, and management’s judgment regarding whether any adjustments should be made to the net asset value in recording the fair value of each position. Investments in alternative funds included in Other investments utilize strategies including arbitrage, directional, event driven and multi-style. These funds potentially have lockup and gate provisions which may limit redemption liquidity. See Note 7, “Other Investments,” for further details.

(e) Derivative instruments

               Derivative instruments classified within Level 3 include guaranteed minimum income benefits (“GMIB”) embedded within a certain reinsurance contract and credit derivatives sold providing 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. 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. In addition, see Note 2(h), “Significant Accounting Policies, for a general discussion of types of assets and liabilities that are classified within Level 3 of the fair value hierarchy as well as the Company’s valuation policies for such instruments.

(f) Non-recurring Fair Value Measurement

          During the year ended December 31, 2011, the Company recorded a non-recurring fair value measurement relating to a goodwill impairment charge. This is a Level 3 fair value measurement as it reflected the Company’s own assumptions about the assumptions that market participants would use in valuing the carried goodwill and was determined using a combination of discounted cash flow analysis and market value multiple based methodologies. See Note 8, “Goodwill and Other Intangible Assets” for further information.

(g) 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 at December 31, 2011 and 2010:

	2011				2010
(U.S. dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Fixed maturities, held to maturity	$	2,668,978	$	2,895,668	$	2,728,335	$	2,742,626
Other investments – structured transactions		323,705		297,124		327,686		317,524
Financial Assets	$	2,992,683	$	3,192,792	$	3,056,021	$	3,060,150
Deposit Liabilities	$	1,608,108	$	1,809,812	$	1,684,606	$	1,737,107
Notes payable and debt		2,275,327		2,340,148		2,457,003		2,439,328
Financial Liabilities	$	3,883,435	$	4,149,960	$	4,141,609	$	4,176,435
Redeemable series C preference ordinary shares	$	—	$	—	$	71,900	$	61,115

          The Company historically participated in structured transactions. Remaining structured transactions include cash loans supporting project finance transactions, providing liquidity facility financing 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 161.8 basis points and the appropriate U.S. Treasury rate plus 142.3 basis points at December 31, 2011 and 2010, 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 are determined based on quoted market prices.

          The fair value of the Company’s Redeemable Series C preference ordinary shares outstanding is determined based on indicative quotes provided by brokers. During the third quarter of 2011 all outstanding Redeemable Series C preference ordinary shares were repurchased and canceled. At December 31, 2011, no Redeemable Series C preference ordinary shares were outstanding.

          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.