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Derivative Instruments
 9 Months Ended
Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
9. DERIVATIVE INSTRUMENTS
The following tables summarize the gross fair values of individual derivative instruments and the impact of legal rights of offset as reported in the Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019:
Gross
Amounts of
Recognized
Assets /
Liabilities		Gross
Amounts
Offset in the
Consolidated
Balance Sheet		Net Amounts
of Assets/
Liabilities
Presented in the Consolidated
Balance Sheet		Gross Amount
of Collateral
Received /
Pledged Not
Offset in the
Consolidated
Balance Sheet		Net
Amount
September 30, 2020:
Derivative Assets:
Interest rate swaps$95 $— $94 $— $94 
Total non-VIE derivative assets$95 $— $95 $— $95 
Derivative Liabilities:
Credit derivatives$1 $— $1 $— $1 
Interest rate swaps125 — 125 124 1 
Total non-VIE derivative liabilities$126 $— $126 $124 $2 
Variable Interest Entities Derivative Assets:
Currency swaps$53 $— $53 $— $53 
Total VIE derivative assets$53 $— $53 $— $53 
Variable Interest Entities Derivative Liabilities:
Interest rate swaps$1,771 $— $1,771 $— $1,771 
Total VIE derivative liabilities$1,771 $— $1,771 $— $1,771 
December 31, 2019:
Derivative Assets:
Interest rate swaps$75 $— $75 $— $75 
Total non-VIE derivative assets$75 $— $75 $— $75 
Derivative Liabilities:
Interest rate swaps89 — 90 89 1 
Total non-VIE derivative liabilities$90 $— $90 $89 $1 
Variable Interest Entities Derivative Assets:
Currency swaps$52 $— $52 $— $52 
Total VIE derivative assets$52 $— $52 $— $52 
Variable Interest Entities Derivative Liabilities:
Interest rate swaps$1,657 $— $1,657 $— $1,657 
Total VIE derivative liabilities$1,657 $— $1,657 $— $1,657 
Amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are not offset against fair value amounts recognized for derivative instruments on the Unaudited Consolidated Balance Sheets. The amounts representing the right to reclaim cash collateral and posted margin, recorded in “Other assets” were $1 and $36 as of September 30, 2020 and December 31, 2019, respectively. There were no amounts held representing an obligation to return cash collateral as of September 30, 2020 and December 31, 2019.
The following tables summarize the location and amount of gains and losses of derivative contracts in the Unaudited Consolidated Statements of Total Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019:
Location of Gain or (Loss)
Recognized in Consolidated
Statements of Total
Comprehensive Income (Loss)		Amount of Gain or (Loss) Recognized in Consolidated Statement of Total Comprehensive Income (Loss)
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Non-VIE derivatives:
Credit derivativesNet gains (losses) on derivative contracts$— $1 $(1)$1 
Interest rate swapsNet gains (losses) on derivative contracts7 (1)(20)(11)
Futures contractsNet gains (losses) on derivative contracts— (10)(41)(52)
Total Non-VIE derivatives
$7 $(10)(61)(61)
Variable Interest Entities:
Currency swapsIncome (loss) on variable interest entities$(10)$10 7 6 
Interest rate swapsIncome (loss) on variable interest entities(4)(166)(177)(272)
Total Variable Interest Entities(14)(156)(170)(266)
Total derivative contracts$(7)$(166)$(231)$(327)

Credit Derivatives:
Credit derivatives, which are privately negotiated contracts, provide the counterparty with credit protection against the occurrence of a specific event such as a payment default or bankruptcy relating to an underlying obligation. Credit derivatives issued are insured by Ambac Assurance. The outstanding credit derivative transaction at September 30, 2020, does not include ratings based collateral-posting triggers or otherwise require Ambac to post collateral regardless of Ambac’s ratings or the size of the mark to market exposure to Ambac.
Our credit derivatives were written on a “pay-as-you-go” basis. Similar to an insurance policy, pay-as-you-go provides that Ambac pays interest shortfalls on the referenced transaction as they are incurred on each scheduled payment date, but only pays principal shortfalls upon the earlier of (i) the date on which the assets designated to fund the referenced obligation have been disposed of and (ii) the legal final maturity date of the referenced obligation.
Ambac maintains internal credit ratings on its guaranteed obligations, including credit derivative contracts, solely to indicate management’s view of the underlying credit quality of the guaranteed obligations. The gross principal notional outstanding for credit derivative contracts was $293 and $280 as of September 30, 2020 and December 31, 2019, respectively, all of which had internal Ambac ratings of AA in both periods.
Interest Rate Derivatives:
Ambac, through its subsidiary Ambac Financial Services (“AFS”), uses interest rate swaps, US Treasury futures contracts and other derivatives, to provide a partial economic hedge against the effects of rising interest rates elsewhere in the Company, including on Ambac’s financial guarantee exposures. Additionally, AFS provided interest rate swaps to states, municipalities and their authorities, asset-backed issuers and other entities in connection with their financings. As of September 30, 2020 and December 31, 2019, the notional amounts of AFS’s derivatives were as follows:
Notional
Type of DerivativeSeptember 30,
2020		December 31,
2019
Interest rate swaps—receive-fixed/pay-variable$240 $332 
Interest rate swaps—pay-fixed/receive-variable726 1,261 
US Treasury futures contracts—short240 755 

Derivatives of Consolidated Variable Interest Entities
Certain VIEs consolidated under the Consolidation Topic of the ASC entered into derivative contracts to meet specified purposes within the securitization structure. The notional for VIE derivatives outstanding as of September 30, 2020 and December 31, 2019, were as follows:
Notional
Type of VIE DerivativeSeptember 30,
2020		December 31,
2019
Interest rate swaps—receive-fixed/pay-variable$1,164 $1,194 
Interest rate swaps—pay-fixed/receive-variable1,103 1,176 
Currency swaps298 329 
Credit derivatives— 9 

Contingent Features in Derivatives Related to Ambac Credit Risk
Ambac’s over-the-counter interest rate swaps are centrally cleared when eligible. Certain interest rate swaps remain with professional swap-dealer counterparties and direct customer counterparties. These non-cleared swaps are generally executed under standardized derivative documents including collateral support and master netting agreements. Under these agreements, Ambac is required to post collateral in the event net unrealized losses exceed predetermined threshold levels. Additionally, given
that Ambac Assurance is no longer rated by an independent rating agency, counterparties have the right to terminate the swap positions.
As of September 30, 2020 and December 31, 2019, the net liability fair value of derivative instruments with contingent features linked to Ambac’s own credit risk was $124 and $89, respectively, related to which Ambac had posted cash and securities as collateral with a fair value of $144 and $109, respectively. All such ratings-based contingent features have been triggered requiring maximum collateral levels to be posted by Ambac while preserving counterparties’ rights to terminate the contracts. Assuming all such contracts terminated on September 30, 2020, settlement of collateral balances and net derivative liabilities would result in a net receipt of cash and/or securities by Ambac. If counterparties elect to exercise their right to terminate, the actual termination payment amounts will be determined in accordance with derivative contract terms, which may result in amounts that differ from market values as reported in Ambac’s financial statements.