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Reinsurance and Other Monoline Exposures (Tables)
 9 Months Ended
Sep. 30, 2018
Insurance [Abstract]  
Effects of Reinsurance on Statement of Operations
Effect of SGI Transaction
As of June 1, 2018

 
 
Commutation
 
Assumption
 
Total
 
 
(in millions)
Cash
 
$
20

 
$
343

 
$
363

 
 
 
 
 
 
 
Premiums receivable/payable, net of commissions
 
$
16

 
$
45

 
$
61

Unearned premium reserve, net
 
(56
)
 
(319
)
 
(375
)
Credit derivative liability, net
 
—

 
(68
)
 
(68
)
Other
 
2

 
(1
)
 
1

Impact to net assets (liabilities), excluding cash
 
$
(38
)
 
$
(343
)
 
$
(381
)
 
 
 
 
 
 
 
Commutation loss
 
$
18

 
$
—

 
$
18

Effect of Reinsurance on Statement of Operations

 
Third Quarter
 
Nine Months
 
2018
 
2017
 
2018
 
2017
 
(in millions)
Premiums Written:
 
 
 
 
 
 
 
Direct
$
57

 
$
46

 
$
192

 
$
227

Assumed (1)
(7
)
 
(1
)
 
324

 
8

Ceded (2)
1

 
27

 
14

 
37

Net
$
51

 
$
72

 
$
530

 
$
272

Premiums Earned:
 
 
 
 
 
 
 
Direct
$
127

 
$
186

 
$
400

 
$
516

Assumed
19

 
6

 
33

 
20

Ceded
(4
)
 
(6
)
 
(10
)
 
(24
)
Net
$
142

 
$
186

 
$
423

 
$
512

Loss and LAE:
 
 
 
 
 
 
 
Direct
$
18

 
$
231

 
$
53

 
$
377

Assumed
1

 
(1
)
 
(7
)
 
(1
)
Ceded
(2
)
 
(7
)
 
(3
)
 
(22
)
Net
$
17

 
$
223

 
$
43

 
$
354

 ____________________
(1)    Negative assumed premiums written were due to changes in expected debt service schedules.

(2)    Positive ceded premiums written were due to commutations and changes in expected debt service schedules.
Exposure by Reinsurer
Exposure to Reinsurers and Other Monolines (1) 

 
As of
September 30, 2018
 
As of
December 31, 2017
 
(in millions)
Due (To) From:
 
 
 
Assumed premium, net of commissions
$
86

 
$
53

Ceded premium, net of commissions
(27
)
 
(42
)
Assumed expected loss to be paid
(46
)
 
(71
)
Ceded expected loss to be paid
15

 
29

Outstanding Exposure:
 
 
 
Financial guaranty
 
 
 
Ceded par outstanding (2)
2,463

 
4,434

Assumed par outstanding
17,625

 
8,383

Second-to-pay insured par outstanding (3)
6,858

 
6,605

Non-financial guaranty exposure (see Note 4)
 
 
 
Ceded
239

 
159

Assumed
1,085

 
974

____________________
(1)
The total collateral posted by all non-affiliated reinsurers required to post, or that had agreed to post, collateral as of September 30, 2018 and December 31, 2017 was approximately $85 million and $118 million, respectively. Such collateral is posted (i) in the case of certain reinsurers not authorized or "accredited" in the U.S., in order for the Company to receive credit for the liabilities ceded to such reinsurers, and (ii) in the case of certain reinsurers authorized in the U.S., on terms negotiated with the Company.

(2)
Of the total par ceded to unrated or BIG rated reinsurers, $237 million and $296 million is rated BIG as of September 30, 2018 and December 31, 2017, respectively.

(3)
The par on second-to-pay exposure where the ratings of the primary insurer and underlying transaction are both BIG and/or not rated is $163 million and $204 million as of September 30, 2018 and December 31, 2017, respectively. Second-to-pay insured par outstanding represents transactions the Company has insured that are insured directly by another monoline financial guaranty insurer and where the Company’s obligation to pay under its insurance of such transactions arises only if both the underlying insured obligation and the primary financial guarantor insurer default. The Company underwrites such transactions based on the underlying insured obligation without regard to the primary insurer.
Schedule of Commutations and Cancellations of Reinsurance Contracts
Commutations of Ceded Reinsurance Contracts

 
Third Quarter
 
Nine Months
 
2018
 
2017
 
2018
 
2017
 
(in millions)
Increase (decrease) in net unearned premium reserve
$
4

 
$
62

 
$
64

 
$
80

Increase (decrease) in net par outstanding
224

 
3,455

 
1,457

 
4,628

Commutation gains (losses)
1

 
255

 
(16
)
 
328