COMMITMENTS AND CONTINGENCIES

Litigation

We are involved in claims-related legal actions arising in the ordinary course of business. We accrue amounts resulting from claims-related legal actions in unpaid losses and LAE during the period that we determine an unfavorable outcome becomes probable and we can estimate the amounts. Management makes revisions to our estimates based on its analysis of subsequent information that we receive regarding various factors, including: (i) per claim information; (ii) company and industry historical loss experience; (iii) judicial decisions and legal developments in the awarding of damages, and (iv) trends in general economic conditions, including the effects of inflation.

At June 30, 2019, we were not involved in any material non-claims-related legal actions.

Commitments to fund partnership investments

We have fully funded two limited partnership investments and have committed to fund our remaining four investments. The amount of unfunded commitments was $2,398,000 and $2,454,000 at June 30, 2019 and December 31, 2018, respectively.

Leases

We, as lessee, have entered into leases of commercial office space of various term lengths. In addition to office space, we lease office equipment and a parking lot under operating leases and vehicles under finance leases. We evaluate if a leasing arrangement exists upon inception of a contract. A contract contains a lease if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. Identified property, plant or equipment for all of our leases are physically distinct and explicitly identified. In addition, we assess whether a contract implicitly contains the right to control the use of a tangible asset that is not already owned.

Our leases expire at various dates and may contain renewal options. Our leases do not contain termination options. The exercise of lease renewal options are at our sole discretion and are only included in the determination of the lease term if we are reasonably certain to exercise the option. Our lease agreements do not contain any material residual value guarantees or restrictive covenants.

Right-of-use assets and lease liabilities are based on the present value of the minimum lease payments over the lease term. As stated in Note 2 to these Notes to Unaudited Condensed Consolidated Financial Statements, we have elected the practical expedient related to lease and non-lease components, as an accounting policy election for our office equipment leases, which allows a lessee to not separate non-lease from lease components and instead account for consideration received in a contract as a single lease component. We have also elected the practical expedients to exclude leases considered to be short-term and with values that fall under our capitalization threshold.

A portion of our lease agreements include variable lease payments which are not recorded in the initial measurement of the lease liability and right-of-use asset balances. For our parking lot lease, base rental payments may be escalated according to annual changes in the Consumer Price Index (CPI). The escalated rental payments based on the estimated CPI at the lease commencement date are included within minimum rental payments; however, changes in CPI are considered variable in nature and are recognized as variable lease costs in the period in which the obligation is incurred. Our office equipment lease agreements may include variable payments based on usage of the equipment.

We utilized discount rates to determine the present value of the lease payments based on information available at the commencement date of the lease. We used an incremental borrowing rate based on factors such as lease term to determine the appropriate present value of future lease payments as the rate implicit in the lease is not always readily available. When determining the incremental borrowing rate, we considered the rate of interest we would pay on a secured borrowing in an amount equal to the lease payments for the underlying asset under similar terms.

The classification of operating and finance lease asset and liability balances within the Unaudited Condensed Consolidated Balance Sheets was as follows:



	Financial Statement Line	June 30, 2019
Assets
Operating lease assets	Other assets	$	414
Financing lease assets	Property and equipment, net	893
Total lease assets		$	1,307

Liabilities
Operating lease liabilities	Operating lease liability	$	397
Financing lease liabilities	Other liabilities	24
Total lease liabilities		$	421

The components of lease expenses were as follows:



	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Operating lease expense	$	48	$	91
Financing lease expense:
Amortization of leased assets	89		146
Short-term lease expense	47		124
Net lease expense	$	184	$	361

At June 30, 2019, future minimum gross lease payments relating to these non-cancellable operating and finance lease agreements were as follows:



	Operating Leases			Finance Leases			Total
Remaining in 2019	$	102		$	65		$	167
2020	176			130			306
2021	133			118			251
2022	45			14			59
2023	22			—			22
Thereafter	1,218			—			1,218
Total undiscounted future minimum lease payments	1,696			327			2,023
Less: Imputed interest	(1,299		)	(303		)	(1,602		)
Present value of lease liabilities	$	397		$	24		$	421

Weighted average remaining lease term and discount rate related to operating and finance leases were as follows:



	June 30, 2019
Weighted average remaining lease term (months)
Operating leases	165
Financing leases	30

Weighted average discount rate
Operating leases	3.97	%
Financing leases	3.27	%

Other cash and non-cash related activities were as follows:



	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Investing cash flows from financing leases	$	116	$	477

Right-of-use assets obtained in exchange for new financing lease liabilities	$	119	$	490

See Note 9 of these Notes to Unaudited Condensed Consolidated Financial Statements for information regarding commitments related to long-term debt, and Note 11 of these Notes to Unaudited Condensed Consolidated Financial Statements for information regarding commitments related to regulatory actions.