RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2023

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

At September 30, 2023, the Company had invested $6 million in a loan to Eagle Point Credit Management LLC, which is majority-owned by Trident IX L.P., a Stone Point private equity fund.

At September 30, 2023, the Company had invested $5 million in cumulative preferred shares of Aspida Holdings Ltd. The $5 million investment was syndicated to the Company by Stone Point.

At September 30, 2023, the Company had invested $11 million in Monarch Point Re (refer to Note 3 'Investments'), a newly created collateralized reinsurer which is jointly sponsored by the Company and Stone Point.

Retrocession Agreement with Monarch Point Re

On September 22, 2023 (the "closing date"), the Company entered into an agreement, with an effective date of January 1, 2023, to retrocede a diversified portfolio of casualty reinsurance business to Monarch Point Re.

The agreement covers losses both on a prospective basis and on a retroactive basis therefore, the Company has bifurcated the prospective and retroactive elements of the agreement and is accounting for each element separately.

Retroactive element

Reinsurance premiums of $119 million were allocated to the retroactive element of the agreement which was deemed to have met the established criteria for retroactive reinsurance accounting. At the closing date, the Company recognized acquisition costs of $33 million and a loss expense of $7 million in the consolidated statement of operations associated with the retroactive element of the agreement. In addition, the Company recognized reinsurance recoverable on unpaid losses of $76 million and reinsurance recoverable on paid losses of $4 million in the consolidated balance sheets associated with the retroactive element of the agreement (refer to Note 6 'Reserve for Losses and Loss Expenses').

Prospective element

For the nine months ended September 30, 2023, the Company ceded reinsurance premiums of $244 million to Monarch Point Re. At September 30, 2023, the amount of ceded reinsurance payable included in insurance and reinsurance balances payable was $195 million in the consolidated balance sheets.

This transaction was conducted at market rates consistent with negotiated arms-length contracts.

Loan to Monarch Point Re

On September 25, 2023, the Company advanced an amount of $156 million to Monarch Point Re. This loan will be repaid in a manner consistent with the timing of amounts due to Monarch Point Re under the retrocession agreement. At September 30, 2023, an amount of $29 million was repaid and was treated as a non-cash activity in the consolidated statement of cash flows. The loan is expected to be repaid in full by November 15, 2025. The loan balance receivable at September 30, 2023 of $127 million is included in other assets in the consolidated balance sheets.

Interest on this loan is payable for this period at a rate of 5.7%. Interest related to this loan was received in advance and is included in other liabilities in the consolidated balance sheets.