Allowance for expected credit losses

12 Months Ended

Dec. 31, 2021

15. Allowance for expected credit losses

The Company is exposed to credit losses primarily through sales of its insurance and reinsurance products and services. The financial assets in scope of the current expected credit losses impairment model primarily include the Company’s insurance and reinsurance balances receivable and loss and loss adjustment expenses recoverable. The Company pools these amounts by counterparty credit rating and applies a credit default rate that is determined based on the studies published by the rating agencies (e.g., AM Best, S&P). In circumstances where ratings are unavailable, the Company applies an internally developed default rate based on historical experience, reference data including research publications, and other relevant inputs.

The Company's assets in scope of the current expected credit loss assessment as of December 31, 2021 and December 31, 2020 are as follows:


	December 31, 2021		December 31, 2020
Insurance and reinsurance balances receivable, net (1)	$	1,708.2	$	441.9
Loss and loss adjustment expenses recoverable, net	1,215.3		14.4
Other assets (2)	14.5		—
Total assets in scope	$	2,938.0	$	456.3

(1)No counterparty represented more than 10% of the Company’s total insurance and reinsurance balances receivable as of December 31, 2021.

(2)Relates to MGA trade receivables included in other assets in the Company’s consolidated balance sheets.

The Company’s allowance for expected credit losses was $21.6 million and $0.6 million as of December 31, 2021 and December 31, 2020, respectively. For the year ended December 31, 2021, the Company recorded current expected credit losses of $21.0 million (2020 - $0.6 million and 2019 - $nil). The Company recognized the allowance for credit losses in accordance with ASC 326 upon initial recognition of the Sirius Group assets within the scope of the standard. An allowance of $16.8 million was re-established in the first quarter ended March 31, 2021 as related to Sirius Group assets. These amounts are included in net corporate and other expenses in the consolidated statements of income.

The Company monitors counterparty credit ratings and macroeconomic conditions, and considers the most current AM Best and S&P credit ratings to determine the allowance each quarter. As of December 31, 2021, approximately 67% of the total gross assets in scope were balances with counterparties rated by either AM Best or S&P and, of the total rated, 80% were rated A- or better.