Note 22. Commitments and contingencies

Concentrations of credit risk

Sirius Group underwrites a significant amount of its reinsurance business through reinsurance intermediaries that represent the ceding company. There is credit risk associated with payments of (re)insurance balances to Sirius Group in regards to these brokers’ ability to fulfill their contractual obligations. These intermediaries are fairly large and well established, and there are no indications they are financially distressed.

During the years ended December 31, 2018, 2017, and 2016, Sirius Group received its gross reinsurance premiums written from three major, third-party reinsurance intermediaries as detailed in the following table:


Gross written premium by intermediary	2018		2017		2016
AON Corporation and subsidiaries	26	%	22	%	22	%
Guy Carpenter & Company and subsidiaries	18	%	18	%	18	%
WT Butler and Co. Ltd.	10	%	10	%	8	%
Total	54	%	50	%	48	%

Geographic Concentration

The following table shows Sirius Group’s net written premiums by geographic region based on the location of the ceding company for the years ended December 31, 2018, 2017, and 2016:


(Millions)	2018		2017		2016
United States	$	794.7	$	563.1	$	463.0
Europe		276.5		262.3		258.9
Canada, the Caribbean, Bermuda and Latin America		103.6		111.4		88.3
Asia and Other		182.3		153.4		127.9
Total	$	1,357.1	$	1,090.2	$	938.1

Sirius Group conducts a significant portion of its business outside of the United States. As a result, a significant portion of Sirius Group’s assets, liabilities, revenues, and expenses are denominated in currencies other than the U.S. dollar and are therefore subject to foreign currency risk. Sirius Group’s foreign currency risk cannot be eliminated entirely and significant changes in foreign exchange rates may adversely affect Sirius Group’s results of operations and financial condition.

Sirius Group’s foreign operations are subject to legal, political, and operational risks that may be greater than those present in the United States. As a result, certain of Sirius Group’s operations at these foreign locations could be temporarily or permanently disrupted.

Lloyd’s Central Fund

The Lloyd’s Central Fund is available to satisfy claims if a member of Lloyd’s is unable to meet its obligations to policyholders. Sirius Group has an obligation to pay contributions to the Lloyd’s Central Fund each year based on gross written premium. For 2019, Sirius Group estimates the Lloyd’s Central Fund contributions to be $0.6 million (based on the December 31, 2018 GBP to USD exchange rate) which is 0.35% of gross written premium. The Council of Lloyd’s have the power to levy an additional contribution on members if it considered necessary, and the maximum additional contribution is currently 3% of capacity.

Leases

Sirius Group leases certain office space under non-cancellable operating leases that expire on various dates. The future annual minimum rental payments required under non-cancellable leases for office space are as follows:


	Future
(Millions)	Payments
2019	$	10.4
2020		9.2
2021		7.6
2022		6.8
2023 and after		6.1
Total	$	40.1

Total rental expense for the years ended December 31, 2018, 2017, and 2016 was $11.7 million, $10.2 million, and $6.2 million, respectively. Sirius Group also has various other lease obligations, which are not significant in the aggregate.

Legal Proceedings

Sirius Group, and the insurance and reinsurance industry in general, are routinely subject to claims related litigation and arbitration in the normal course of business, as well as litigation and arbitration that do not arise from, or are directly related to, claims activity. Sirius Group estimates of the costs of settling matters routinely encountered in claims activity are reflected in the reserves for unpaid loss and LAE. (See Note 5.)

Sirius Group considers the requirements of ASC 450, Contingencies (“ASC 450”), when evaluating its exposure to non-claims related litigation and arbitration. ASC 450 requires that accruals be established for litigation and arbitration if it is probable that a loss has been incurred and it can be reasonably estimated. ASC 450 also requires that litigation and arbitration be disclosed if it is probable that a loss has been incurred or it there is a reasonable possibility that a loss may have been incurred.