Basis Of Presentation

9 Months Ended

Sep. 30, 2020

Basis Of Presentation [Abstract]

Basis Of Presentation

2. BASIS OF PRESENTATION

The unaudited interim consolidated financial statements of the Company as of September 30, 2020 and

December 31, 2019 and for the three and nine months ended September 30, 2020 and 2019 include all

adjustments, consisting of normal recurring accruals, which, in the opinion of management, are necessary for a

fair statement of the results on an interim basis. Certain financial information, which is normally included in

annual financial statements prepared in accordance with accounting principles generally accepted in the United

States of America (“GAAP”), has been omitted since it is not required for interim reporting purposes. The

December 31, 2019 consolidated balance sheet data was derived from audited financial statements but does not

include all disclosures required by GAAP. The results for the three and nine months ended September 30, 2020

and 2019 are not necessarily indicative of the results for a full year. These financial statements should be read in

conjunction with the audited consolidated financial statements and notes thereto for the years ended December

31, 2019, 2018 and 2017 included in the Company’s most recent Form 10-K filing.

The Company consolidates the results of operations and financial position of all voting interest entities ("VOE")

in which the Company has a controlling financial interest and all variable interest entities ("VIE") in which the

Company is considered to be the primary beneficiary. The consolidation assessment, including the

determination as to whether an entity qualifies as a VIE or VOE, depends on the facts and circumstance

surrounding each entity. 

The preparation of financial statements in conformity with GAAP requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities (and disclosure of contingent assets and

liabilities) at the date of the financial statements and the reported amounts of revenues and expenses during the

reporting period. Ultimate actual results could differ, possibly materially, from those estimates. This is

particularly true given the fluid and continuing nature of the COVID-19 pandemic. This is an ongoing event and

so is the Company’s evaluation and analysis. While the Company’s analysis considers all aspects of its

operations, it does not take into account legal, regulatory or legislative intervention that could retroactively

mandate or expand coverage provisions. Given the uncertainties in the current public health and economic

environment, there could be an adverse impact on results for the Property & Casualty industry and the Company

for the remainder of the year. The impact is dependent on the shape and length of the economic recovery.

With recent changes in executive management and organizational structure, the Company manages its

reinsurance and insurance operations as autonomous units and key strategic decisions are based on the

aggregate operating results and projections for these segments of business. Accordingly, effective January 1,

2020, the Company revised it reporting segments to Reinsurance Operations and Insurance Operations. This

replaces the previous reported segments of U.S. Reinsurance, International (reinsurance), Bermuda

(reinsurance) and Insurance. The prior year presented segment information has been reformatted to reflect this

change. 

All intercompany accounts and transactions have been eliminated. 

Certain reclassifications and format changes have been made to prior years’ amounts to conform to the 2020

presentation. 

Application of Recently Issued Accounting Standard Changes. 

Modernization of Regulation S-K Disclosures. 

In August 2020, the Securities and Exchange Commission (“SEC”)

issued Final Rule Release #33-10825 which addresses the modernization of the disclosure requirements for

business, legal proceeding and risk factor disclosures in Regulation S-K filings. Rule #33-10825 will become

effective for all financial reports filed after November 9, 2020 (30 days after its publication in the Federal

Register) and will be adopted by the Company in the fourth quarter of 2020 for implementation within its 2020

10-K filings.

Accounting for Income Taxes

. In December 2019, The Financial Accounting Standards Board (“FASB”) issued ASU

2019-12, which provides simplification of existing guidance for income taxes, including the removal of certain

exceptions related to recognition of deferred tax liabilities on foreign subsidiaries. The guidance is effective for

annual reporting periods beginning after December 15, 2020 and interim periods within that annual reporting

period. The Company is currently evaluating the impact of the adoption of ASU 2019-12 on its financial

statements.

Simplification of Disclosure Requirements. 

In August 2018, the SEC issued Final Rule Release #33-10532 (“the

Rule”) which addresses the simplification of the SEC’s disclosure requirements for quarterly and annual financial

reports. The main changes addressed by the Rule that are applicable to the Company are 1) elimination of the

requirement to disclose dividend per share information on the face of the Statements of Operations and

Comprehensive Income (Loss) and 2) a new requirement to disclose changes in equity by line item with subtotals

for each interim reporting period on the Statements of Changes in Shareholders’ Equity. The Rule became

effective for all financial reports filed after November 5, 2018 (30 days after its publication in the Federal

Register), except for the additional requirement for the Statements of Changes in Shareholders’ Equity which

was to be implemented for first quarter 2019 reporting. The Company has adopted the portions of the Rule that

became effective November 5, 2018. The portion of the Rule related to the new requirement for the Statements

of Changes in Shareholders’ Equity was adopted by the Company in the first quarter of 2019.

Accounting for Cloud Computing Arrangement. 

In August 2018, FASB issued ASU 2018-15, which outlines

accounting for implementation costs of a cloud computing arrangement that is a service contract. This guidance

requires that implementation costs of a cloud computing arrangement that is a service contract must be

capitalized and expensed in accordance with the existing provisions provided in Subtopic 350-40 regarding

development of internal use software. In addition, any capitalized implementation costs should be amortized

over the term of the hosting arrangement. The guidance is effective for annual reporting periods beginning after

December 15, 2019 and interim periods within that annual reporting period. The Company adopted the guidance

as of January 1, 2020. The adoption of ASU 2018-15 did not have a material impact on the Company’s financial

statements.

Accounting for Long Duration Contracts. 

In August 2018, FASB issued ASU 2018-12, which discusses changes to

the recognition, measurement and presentation of long duration contracts. The main provisions of this guidance

address the following: 1) In determining liability for future policy benefits, companies must review cash flow

assumptions at least annually and the discount rate assumption at each reporting period date 2) Amortization of

deferred acquisition costs has been simplified to be in constant level proportion to either premiums, gross

profits or gross margins 3) Disaggregated roll forwards of beginning and ending liabilities for future policy

benefits are required. The guidance was originally effective for annual reporting periods beginning after

December 15, 2020 and interim periods within that annual reporting period. However, FASB issued ASU 2019-09

in November 2019 which defers the effective date of ASU 2018-12 until annual reporting periods beginning after

December 15, 2021. The Company is currently evaluating the impact of the adoption of ASU 2018-12 on its

financial statements.

Accounting for Impact on Income Taxes due to Tax Reform. 

In December 2017, the SEC issued Staff Accounting

Bulletin (“SAB”) 118 which provides guidance on the application of FASB Accounting Standards Codification

(“ASC”) Topic 740, Income Taxes, due to the enactment of TCJA. SAB 118 became effective upon release. The

Company has adopted the provisions of SAB 118 with respect to measuring the tax effects for the modifications

to the determination of tax basis loss reserves. In 2018, the Company recorded adjustments to the amount of

tax expense it recorded in 2017 with respect to the TCJA as estimated amounts were finalized, which did not

have a material impact on the Company’s financial statements.

Amortization of Bond Premium. 

In March 2017, FASB issued ASU 2017-08 which outlines guidance on the

amortization period for premium on callable debt securities. The new guidance requires that the premium on

callable debt securities be amortized through the earliest call date rather than through the maturity date of the

callable security. The guidance is effective for annual and interim reporting periods beginning after December

15, 2018. The Company adopted the guidance effective January 1, 2019. The adoption of ASU 2017-08 did not

have a material impact on the Company’s financial statements.

Valuation of Financial Instruments. 

In June 2016, FASB issued ASU 2016-13 (and has subsequently issued related

guidance and amendments in ASU 2019-11 and ASU 2019-10 in November 2019) which outline guidance on the

valuation of and accounting for assets measured at amortized cost and available for sale debt securities. The

new guidance requires the carrying value of assets measured at amortized cost, including reinsurance and

premiums receivables to be presented as the net amount expected to be collected on the financial asset

(amortized cost less an allowance for credit losses valuation account). The allowance reflects expected credit

losses of the financial asset which considers available information using a combination both historical

information, current market conditions and reasonable and supportable forecasts. For available -for-sale debt

securities, the guidance modified the previous other than temporary impairment model, now requiring an

allowance for estimated credit related losses rather than a permanent impairment, which will be limited to the

amount by which fair value is below amortized cost. The guidance is effective for annual and interim reporting

periods beginning after December 15, 2019. The Company adopted the guidance effective January 1, 2020, on a

modified retrospective basis. The adoption resulted in a cumulative reduction of $

4,214

 thousand in retained

earnings, net of tax, which is disclosed separately within the Consolidated Statements of Shareholders’ Equity.

Leases

. In February 2016, FASB issued ASU 2016-02 (and subsequently issued ASU 2018-11 in July, 2018) which

outline new guidance on the accounting for leases. The new guidance requires the recognition of lease assets

and lease liabilities on the balance sheets for most leases that were previously deemed operating leases and

required only lease expense presentation in the statements of operations. The guidance is effective for annual

and interim reporting periods beginning after December 15, 2018. The Company adopted ASU 2016-02 effective

January 1, 2019 and elected to utilize a cumulative -effect adjustment to the opening balance of retained

earnings for the year of adoption. Accordingly, the Company’s reporting for the comparative periods prior to

adoption continue to be presented in the financial statements in accordance with previous lease accounting

guidance. The Company also elected to apply the package of practical expedients applicable to the Company in

the updated guidance for transition for leases in effect at adoption. The Company did not elect the hindsight

practical expedient to determine the lease term of existing leases (e.g. The Company did not re -assess lease

renewals, termination options nor purchase options in determining lease terms). The adoption of the updated

guidance resulted in the Company recognizing a right-of-use asset of $

69,869

 thousand as part of

other assets

and a lease liability of $

77,270

 thousand as part of

other liabilities

 in the consolidated balance sheet at the time

of adoption, as well as de-recognizing the liability for deferred rent that was required under the previous

guidance. The cumulative effect adjustment to the opening balance of retained earnings was

zero

. The adoption

of the updated guidance did not have a material effect on the Company’s results of operations or liquidity. 

Any issued guidance and pronouncements, other than those directly referenced above, are deemed by the

Company to be either not applicable or immaterial to its financial statements.