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Retirement Plans
 12 Months Ended
Dec. 31, 2012
Compensation And Retirement Disclosure [Abstract]  
Retirement plans

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 $53.6 million, $42.4 million and $37.8 million at December 31, 2012, 2011 and 2010, 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. The plan was curtailed in 2002 and was closed to new entrants at that time. Under the terms of the curtailment, existing plan participants were no longer entitled to earn additional defined benefits for future services performed after the curtailment date; however, accrued benefits are eligible for annual cost-of-living increases. 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 both December 31, 2012 and 2011 was $3.3 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.

Net Benefit Cost - Weighted-average assumptions for the years ended December 31 2012 2011
Discount rate  4.4%  5.6%
Expected long-term rate of return on plan assets  8.0%  8.0%
Benefit Obligation - Weighted-average assumptions at December 31      
Discount rate  4.0%  4.4%

The U.S. Plan assets at December 31, 2012 and 2011 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, 2012 and 2011 was $29.8 million and $25.9 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 scheme exists in the U.K. (the “Scheme”), but has been closed to new entrants since 1996. The Scheme has approximately 90 members, of whom approximately 55 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 Scheme is subject to triennial funding valuations, the most recent of which was conducted in 2010 and was reported in 2011. The $4.5 million deficit is being funded over a ten-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 Scheme's assets and the fair value of each major category of plan assets as of December 31, 2012 and 2011, as well as the potential returns of the different asset classes. The totals 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:

  Expected Weighted Expected Weighted
  Return on Value at Return on Value at
 Assets for December 31, Assets for December 31,
(U.S. dollars in thousands, except percentages)2012 2012 2011 2011
Equities 6.8% $6,149  7.0% $6,351
Gilts 3.0%  1,700  4.0%  1,350
Corporate Bonds 4.7%  1,566  5.5%  1,381
Other (cash) 3.5%  68  4.0%  12
Total market value of assets   $9,483    $9,094

In addition, during 2003 six members, five of whom 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 $3.5 million and $3.3 million at December 31, 2012 and 2011, 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 $83.1 million and $72.3 million at December 31, 2012 and 2011, respectively, in the table below, are total unfunded projected obligations in relation to the European defined benefit schemes of $18.5 million and $14.6 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 all the Company's retirement plans at December 31, 2012 and 2011 is as follows:

Change in projected benefit obligation:      
(U.S. dollars in thousands) 2012 2011
Projected benefit obligation - beginning of year $72,267 $66,327
Service cost (1)  1,291  919
Interest cost  3,557  3,393
Actuarial (gain)/loss  7,922  3,837
Benefits and expenses paid  (2,069)  (1,612)
Foreign currency (gains)/losses  1,086  (597)
Settlements  (971)  -
Projected benefit obligation - end of year $83,083 $72,267

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

Change in plan assets:      
(U.S. dollars in thousands) 2012 2011
Fair value of plan assets - beginning of year $34,956 $33,294
Actual return on plan assets  3,101  969
Employer contributions  2,133  1,941
Benefits and expenses paid  (1,258)  (1,132)
Foreign currency gains/(losses)  381  (117)
Fair value of plan assets - end of year $39,313 $34,955
Funded status - end of year $(43,770) $(37,312)
Accrued pension liability $43,770 $37,312

The components of the net benefit cost for the years ended December 31, 2012 and 2011 are as follows:

Components of net benefit cost:      
(U.S. dollars in thousands) 2012 2011
Service cost $1,291 $919
Interest cost  3,557  3,337
Expected return on plan assets  (3,028)  (1,558)
Amortization of net actuarial loss  915  373
Transfer from AOCI  3,363  -
Net benefit cost $6,098 $3,071