RETIREMENT PLANS

12 Months Ended

Dec. 31, 2011

Pension and Other Postretirement Benefits Disclosure [Text Block]

19. Retirement Plans

          The Company provides pension benefits to eligible employees through various defined contribution and defined benefit retirement plans sponsored by the Company, which vary for each subsidiary. Plan assets are invested principally in equity securities and fixed maturities.

(a) Defined contribution plans

          The Company has qualified defined contribution plans which are managed externally and whereby employees and the Company contribute a certain percentage of the employee’s gross compensation (base salary and annual bonus) into the plan each month. The Company’s contribution generally vests over five years. The Company’s expenses for its qualified contributory defined contribution retirement plans were $42.4 million, $37.8 million and $38.6 million at December 31, 2011, 2010 and 2009, respectively.

(b) Defined benefit plans

          The Company maintains defined benefit plans that cover certain employees as follows:

          U.S. Plan

          A qualified non-contributory defined benefit pension plan exists to cover a number of its U.S. employees. This plan also includes a non-qualified supplemental defined benefit plan designed to compensate individuals to the extent that their benefits under the Company’s qualified plan are curtailed due to IRS Code limitations. Benefits are based on years of service and compensation, as defined in the plan, during the highest consecutive three years of the employee’s last ten years of employment. Under these plans, the Company’s policy is to make annual contributions to the plan that are deductible for federal income tax purposes and that meet the minimum funding standards required by law. The contribution level is determined by utilizing the entry age cost method and different actuarial assumptions than those used for pension expense purposes.

          In addition, certain former employees have received benefit type guarantees, not formally a part of any established plan. The liability recorded with respect to these agreements as at December 31, 2011 and 2010 was $3.3 million and $3.0 million, respectively, representing the entire unfunded projected benefit obligations.

          Several assumptions and statistical variables are used in the models to calculate the expenses and liability related to the plans. The Company, in consultation with its actuaries, determines assumptions about the discount rate, the expected rate of return on plan assets and the rate of compensation increase. The table below includes disclosure of these rates on a weighted-average basis, encompassing all the international plans.

	2011			2010
Net Benefit Cost – Weighted-average assumptions for the years ended December 31
Discount rate		5.6	%		6.0	%
Expected long-term rate of return on plan assets		8.0	%		8.0	%
Benefit Obligation – Weighted-average assumptions at December 31
Discount rate		4.4	%		5.6	%

          The U.S. Retirement plan assets at December 31, 2011 and 2010 consist of two mutual funds. The first fund employs a core bond portfolio strategy that seeks maximum current income and price appreciation consistent with the preservation of capital and prudent risk taking with the focus on intermediate –term high quality bonds.

          The second fund seeks long term growth of capital by investing in a diversified group of domestic and international companies. Using a quantitative approach, portfolio managers identify companies that they believe have favorable prospects for above average growth.

          The fair value of the U.S. Plan assets at December 31, 2011 and 2010 was $25.9 million and $25.1 million, respectively. As both of the retirement plan’s investments are mutual funds, they fall within Level 1 in the fair value hierarchy.

          U.K. Plans

          A contributory defined benefit pension plan exists in the U.K., but has been closed to new entrants since 1996. The Scheme has approximately 90 members, of whom approximately 57 are active or deferred members of the Scheme. Benefits are based on length of service and compensation as defined in the Trust Deed and Rules, and the Plan is subject to triennial funding valuations, the most recent of which was conducted in 2010 and was reported in 2011. The $2.7 million deficit is being funded over a 10 year period. Current contribution rates are 24.6% and 3% of pensionable salary for employer and employee respectively.

          The U.K. pension plan assets are held in a separate Trustee administered fund to meet long term liabilities to past and present employees. The table below shows the composition of the Plan’s assets and the fair value of each major category of plan assets as of December 31, 2011 and 2010, as well as the potential returns of the different asset classes. The total of the asset values held in various externally managed portfolios are provided by third party pricing vendors. There is no significant concentration of risk within plan assets.

The assets in the scheme and the expected rates of return were as follows: (U.S. dollars in thousands, except percentages)	Expected Return on Assets for 2011			Value at December 31, 2011		Expected Return on Assets for 2010			Value at December 31, 2010
Equities		7.0	%	$	6,351		7.5	%	$	5,542
Gilts		4.0	%		1,350		4.5	%		1,249
Corporate Bonds		5.5	%		1,381		5.7	%		1,187
Other (cash)		4.0	%		12		4.2	%		254
Total market value of assets				$	9,094				$	8,232

          In addition, during 2003 six members who are still employed by the Company in the U.K. transferred from a defined benefit plan into a defined contribution plan. These employees have a contractual agreement with the Company that provides a “no worse than final salary pension” guarantee in the event that they are employed by the Company until retirement, whereby the Company guarantees to top-up their defined contribution pension to the level of pension that they would have been entitled to receive had they remained in the defined benefit scheme. The pension liability recorded with respect to these individuals was $3.3 million and $3.4 million at December 31, 2011 and 2010, respectively, representing the entire unfunded projected obligation.

          European Plans

          Certain contributory defined benefit pension plans exist in several European countries, most notably Germany, which are closed to new entrants. Benefits are generally based on length of service and compensation defined in the related agreements. Included in the projected obligation amounts of $72.3 million and $66.3 million at December 31, 2011 and 2010, respectively, in the table below, are total unfunded projected obligations in relation to the European defined benefit schemes of $14.6 million and $16.0 million, respectively.

          As a part of the purchase of XL GAPS, the Company acquired certain defined benefit pension liabilities. The related balances are not included in the tables below as the liabilities are insured under an annuity type contract.

          The status of the above mentioned plans at December 31, 2011 and 2010 is as follows:

(U.S. dollars in thousands)	2011			2010
Change in projected benefit obligation:
Projected benefit obligation – beginning of year	$	66,327		$	56,998
Service cost (1)		919			737
Interest cost		3,393			3,021
Actuarial (gain) / loss		3,837			8,197
Benefits and expenses paid		(1,612	)		(1,419	)
Foreign currency losses / (gains)		(597	)		(1,207	)
Projected benefit obligation – end of year	$	72,267		$	66,327

(1) Service costs include cost of living adjustments on curtailed plans.

	2011			2010
Change in plan assets:
Fair value of plan assets – beginning of year	$	33,294		$	29,548
Actual return on plan assets		969			3,695
Employer contributions		1,941			1,295
Benefits and expenses paid		(1,132	)		(995	)
Foreign currency gains (losses)		(116	)		(249	)
Fair value of plan assets – end of year	$	34,956		$	33,294
Funded status – end of year	$	(37,312	)	$	(33,033	)
Accrued pension liability	$	37,312		$	33,033

          The components of the net benefit cost for the years ended December 31, 2011 and 2010 are as follows:

(U.S. dollars in thousands)	2011			2010
Components of net benefit cost:
Service cost	$	919		$	736
Interest cost		3,337			3,021
Expected return on plan assets		(1,558	)		(1,576	)
Amortization of net actuarial loss		373			198
Net benefit cost	$	3,071		$	2,379