Allowance for expected credit losses

6 Months Ended

Jun. 30, 2020

Credit Loss [Abstract]

Allowance for expected credit losses

Allowance for expected credit losses

Sirius Group 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 Sirius Group's premium receivables and reinsurance recoverables. Sirius Group pools the premium receivables and reinsurance recoverables by counterparty credit rating and applies a credit default rate that is determined based on the studies published by the rating agencies (e.g., A.M. Best, Standard & Poor's ("S&P")). In circumstances where ratings are unavailable, Sirius Group applies an internally developed default rate based on historical experience, reference data including research publications, and other relevant inputs.

To estimate the allowance for expected credit losses, Sirius Group considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic. To the extent the current environment continues beyond our expectations or deteriorates further, we may experience further increases to our allowance for credit losses related to COVID-19.

As of June 30, 2020, Sirius Group's allowance for expected credit losses is as follows:

(in millions)	Gross Assets in Scope		Allowance for Expected Credit Losses
Premiums receivable & Funds held by ceding companies	$	1,126.4	$	10.6
Reinsurance recoverable on unpaid and paid loss	548.3		3.9
MGU Trade receivables(1)	22.8		0.4
Total as of June 30, 2020	$	1,697.5	$	14.9

⁽¹⁾Included as part of Other assets on the Consolidated Balance Sheet

Sirius Group recorded no changes to the allowance for expected credit losses during three and six months ended June 30, 2020.

Sirius Group monitors counterparty credit ratings and macroeconomic conditions, and considers the most current A.M. Best and S&P credit ratings to determine the allowance each quarter. Of the total gross assets in scope as of June 30, 2020, approximately 63% were balances with counterparties rated by either A.M. Best or S&P. Of the total rated, 76% were rated A- or better.