Reinsurance Balances Recoverable

3 Months Ended

Mar. 31, 2016

REINSURANCE BALANCES RECOVERABLE

The following tables provide the total reinsurance balances recoverable as at March 31, 2016 and December 31, 2015:



	March 31, 2016
	Non-life Run-off			Atrium		StarStone			Life and Annuities		Total
Recoverable from reinsurers on unpaid:
Outstanding losses	$	550,849		$	7,337	$	175,986		$	21,691	$	755,863
IBNR	443,499			16,899		127,775			301		588,474
Fair value adjustments	(17,252		)	2,013		(4,368		)	—		(19,607		)
Total reinsurance reserves recoverable	977,096			26,249		299,393			21,992		1,324,730
Paid losses recoverable	59,943			653		16,246			644		77,486
	$	1,037,039		$	26,902	$	315,639		$	22,636	$	1,402,216



	December 31, 2015
	Non-life Run-off			Atrium		StarStone			Life and Annuities		Total
Recoverable from reinsurers on unpaid:
Outstanding losses	$	587,164		$	6,772	$	182,076		$	22,786	$	798,798
IBNR	465,211			16,581		123,732			306		605,830
Fair value adjustments	(17,628		)	2,499		(6,025		)	—		(21,154		)
Total reinsurance reserves recoverable	1,034,747			25,852		299,783			23,092		1,383,474
Paid losses recoverable	72,213			430		16,568			1,319		90,530
	$	1,106,960		$	26,282	$	316,351		$	24,411	$	1,474,004

Our insurance and reinsurance run-off subsidiaries, prior to acquisition, used retrocessional agreements to reduce their exposure to the risk of insurance and reinsurance assumed. On an annual basis, both Atrium and StarStone purchase a tailored outwards reinsurance program designed to manage their risk profiles. The majority of Atrium’s and StarStone's third-party reinsurance cover is with highly rated reinsurers or is collateralized by letters of credit.

The fair value adjustments, determined on acquisition of insurance and reinsurance subsidiaries, are based on the estimated timing of loss and LAE recoveries and an assumed interest rate equivalent to a risk free rate for securities with similar duration to the acquired reinsurance recoverables plus a spread for credit risk, and are amortized over the estimated recovery period, as adjusted for accelerations in timing of payments as a result of commutation settlements.

As of March 31, 2016 and December 31, 2015, we had reinsurance balances recoverable of approximately $1.4 billion and $1.5 billion, respectively. The decrease of $71.8 million in reinsurance balances recoverable was primarily a result of cash collections made during the three months ended March 31, 2016 in our Non-life Run-off and StarStone segments.

Top Ten Reinsurers



	March 31, 2016												December 31, 2015
	Non-life Run-off		Atrium		StarStone		Life and Annuities		Total		% of Total		Non-life Run-off		Atrium		StarStone		Life and Annuities		Total		% of Total
Top ten reinsurers	$	695,558	$	21,671	$	145,437	$	12,851	$	875,517	62.4	%	$	713,743	$	21,394	$	155,171	$	13,254	$	903,562	61.3	%
Other reinsurers > $1 million	334,176		4,468		168,201		8,370		515,215		36.8	%	383,898		4,253		158,417		8,363		554,931		37.6	%
Other reinsurers < $1 million	7,305		763		2,001		1,415		11,484		0.8	%	9,319		635		2,763		2,794		15,511		1.1	%
Total	$	1,037,039	$	26,902	$	315,639	$	22,636	$	1,402,216	100.0	%	$	1,106,960	$	26,282	$	316,351	$	24,411	$	1,474,004	100.0	%

Seven of the top ten external reinsurers, as at March 31, 2016 and December 31, 2015, were all rated A- or better, with the remaining three being non-rated reinsurers from which $316.3 million was recoverable (December 31, 2015: $337.6 million recoverable from three reinsurers). For the three non-rated reinsurers, we hold security in the form of pledged assets in trust or letters of credit issued to us in the full amount of the recoverable. As at March 31, 2016, reinsurance balances recoverable of $164.5 million (December 31, 2015: $165.6 million) related to Lloyd’s syndicates and represented 10% or more of total reinsurance balances recoverable. Lloyd’s is rated ‘A+’ by Standard & Poor’s and ‘A’ by A.M. Best.

Provisions for Uncollectible Reinsurance Recoverables

We remain liable to the extent that retrocessionaires do not meet their obligations under these agreements, and therefore, we evaluate and monitor concentration of credit risk among our reinsurers. Provisions are made for amounts considered potentially uncollectible.

The following table shows our reinsurance balances recoverable by rating of reinsurer and our provisions for uncollectible reinsurance balances recoverable ("provisions for bad debt") as at March 31, 2016 and December 31, 2015. The provisions for bad debt all relate to the Non-life Run-off segment.



	March 31, 2016								December 31, 2015
	Gross		Provisions for Bad Debt		Net		Provisions as a % of Gross		Gross		Provisions for Bad Debt		Net		Provisions as a % of Gross
Reinsurers rated A- or above	$	1,009,343	$	44,551	$	964,792	4.4	%	$	1,051,927	$	46,969	$	1,004,958	4.5	%
Reinsurers rated below A-, secured	366,540		—		366,540		—	%	388,399		—		388,399		—	%
Reinsurers rated below A-, unsecured	233,277		162,393		70,884		69.6	%	244,005		163,358		80,647		66.9	%
Total	$	1,609,160	$	206,944	$	1,402,216	12.9	%	$	1,684,331	$	210,327	$	1,474,004	12.5	%

- Definition

The entire disclosure pertaining to the existence, magnitude and information about insurance that has been ceded to or assumed from another insurance company, including the methodologies and assumptions used in determining recorded amounts.

+ References + Details