DERIVATIVE INSTRUMENTS

12 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS [Text Block]

The following table summarizes the balance sheet classification of derivatives recorded at fair value. The notional amount of derivative contracts represents the basis upon which pay or receive amounts are calculated and is presented in the table to quantify the volume of our derivative activities. Notional amounts are not reflective of credit risk.

	At December 31, 2013						At December 31, 2012
	Derivative Notional Amount		Asset Derivative Fair Value(1)		Liability Derivative Fair Value(1)		Derivative Notional Amount		Asset Derivative Fair Value(1)		Liability Derivative Fair Value(1)
Derivatives not designated as hedging instruments
Relating to investment portfolio:
Foreign exchange forward contracts	$	254,023	1,214		1,032		$	287,819	1,067		2,733
Interest rate swaps	281,250		873		—		—		—		—
Relating to underwriting portfolio:
Foreign exchange forward contracts	390,663		4,737		120		476,191		4,771		1,004
Weather-related contracts	24,451		984		815		—		—		—
Total derivatives			$	7,808	$	1,967			$	5,838	$	3,737

(1) Asset and liability derivatives are classified within other assets and other liabilities on the Consolidated Balance Sheets.

Offsetting Assets and Liabilities

Our derivative instruments are generally traded under International Swaps and Derivatives Association master netting agreements, which establish terms that apply to all transactions. In the event of a bankruptcy or other stipulated event, master netting agreements provide that individual positions be replaced with a new amount, usually referred to as the termination amount, determined by taking into account market prices and converting into a single currency. Effectively, this contractual close-out netting reduces credit exposure from gross to net exposure. The table below presents a reconciliation of our gross derivative assets and liabilities to the net amounts presented in our Consolidated Balance Sheets, with the difference being attributable to the impact of master netting agreements.

	December 31, 2013							December 31, 2012
	Gross Amounts		Gross Amounts Offset			Net Amounts(1)		Gross Amounts		Gross Amounts Offset			Net Amounts(1)
Derivative assets	$	9,796	$	(1,988	)	$	7,808	$	6,476	$	(639	)	$	5,838
Derivative liabilities	3,955		(1,988		)	1,967		4,376		(639		)	3,737

(1) Net asset and liability derivatives are classified within other assets and other liabilities on the Consolidated Balance Sheets.

Refer to Note 5 - Investments for information on reverse repurchase agreements.

Fair Value Hedges

During 2012, we sold all available for sale fixed maturities in the portfolios that qualified for hedge accounting and settled all of the associated foreign exchange forward contracts. The hedges were designated and qualified as fair value hedges, resulting in the net impact of the hedges recognized in net realized investment gains (losses).

The following table provides the total impact on earnings of applying hedge accounting for foreign exchange contracts designated as fair value hedges along with the impact of the related hedged investment portfolio for the periods indicated:

Year ended December 31,	2013		2012			2011
Foreign exchange forward contracts	$	—	$	10,853		$	11,682
Hedged investment portfolio	—		(3,099		)	(16,085		)
Hedge ineffectiveness recognized in earnings	$	—	$	7,754		$	(4,403	)

Derivative Instruments not Designated as Hedging Instruments

a) Relating to Investment Portfolio

Foreign Currency Risk

Within our investment portfolio we are exposed to foreign currency risk. Accordingly, the fair values for our investment portfolio are partially influenced by the change in foreign exchange rates. We may enter into foreign currency forward contracts to manage the effect of this foreign currency risk. These foreign currency hedging activities are not designated as specific hedges for financial reporting purposes.

In addition, our external equity investment managers have the discretion to hold foreign currency exposures as part of their total return strategy.

Interest Rate Risk

Our investment portfolio contains a large percentage of fixed maturities which exposes us to significant interest rate risk. As part of our overall management of this risk, we may use interest rate swaps. The interest rate swaps held at December 31, 2013 convert part of our overall fixed rate exposure to a variable rate exposure which effectively reduces the duration of our overall portfolio.

b) Relating to Underwriting Portfolio

Foreign Currency Risk

Our (re)insurance subsidiaries and branches operate in various foreign countries. Consequently, some of our business is written in currencies other than the U.S. dollar and, therefore, our underwriting portfolio is exposed to significant foreign currency risk. We manage foreign currency risk by seeking to match our foreign-denominated net liabilities under (re)insurance contracts with cash and investments that are denominated in such currencies. We may also use derivative instruments, specifically forward contracts and currency options, to economically hedge foreign currency exposures.

Weather Risk

During 2013, we began to write derivative-based risk management products designed to address weather risks with the objective of generating profits on a portfolio basis. The majority of this business consists of receiving a payment at contract inception in exchange for bearing the risk of variations in a quantifiable weather-related phenomenon, such as temperature. Where a client wishes to minimize the upfront payment, these transactions may be structured as swaps or collars. In general, our portfolio of such derivative contracts is of short duration, with contracts being predominantly seasonal in nature. In order to economically hedge a portion of this portfolio, we may also purchase weather derivatives.

The total unrealized and realized gains (losses) recognized in earnings for derivatives not designated as hedges were as follows:

	Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized  in Income on Derivative
		2013			2012			2011
Derivatives not designated as hedging instruments
Relating to investment portfolio:
Foreign exchange forward contracts	Net realized investment gains	$	10,843		$	(9,170	)	$	4,431
Interest rate swaps	Net realized investment gains	(3,112		)	—			—
Relating to underwriting portfolio:
Foreign exchange forward contracts	Foreign exchange gains (losses)	1,690			26,612			33,893
Currency collar options	Foreign exchange gains (losses)	—			—			267
Weather-related contracts	Other insurance related income	1,987			—			—
Total		$	11,408		$	17,442		$	38,591