Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2012

Fair Value of Financial Instruments

Fair Value of Financial Instruments

NOTE 11. Fair Value of Financial Instruments

OneBeacon carries its financial instruments on its balance sheet at fair value with the exception of its fixed-rate, long-term indebtedness.  For certain financial instruments where quoted market prices are not available, other independent valuation techniques and assumptions are used. Because considerable judgment is used, these estimates are not necessarily indicative of amounts that could be realized in a current market exchange. Certain financial instruments are excluded from disclosure, including insurance contracts, other than financial guarantees and investment contracts.

The fair value of the fixed-rate, long-term indebtedness was estimated by using observable inputs for similar instruments and is considered a Level 2 measurement. Considerable judgment is required to develop such estimates of fair value. Therefore, the estimate provided herein is not necessarily indicative of the amounts that could be realized in a current market exchange.

At September 30, 2012 and December 31, 2011, the fair value of OneBeacon’s Senior Notes (its fixed-rate, long-term indebtedness) was $276.3 million and $277.3 million, respectively, which compared to a carrying value of $269.8 million and $269.7 million, respectively.