Taxation

12 Months Ended

Dec. 31, 2011

Disclosure - Taxation [Abstract]

Taxation

15. Taxation

The Company and its Bermuda domiciled subsidiaries are not subject to Bermuda income or capital gains tax under current Bermuda law. In the event that there is a change in current law such that taxes on income or capital gains are imposed, the Company and its Bermuda domiciled subsidiaries would be exempt from such tax until March 2035 pursuant to the Bermuda Exempted Undertakings Tax Protection Act of 1966.

The Company has subsidiaries and branches that operate in various other jurisdictions around the world that are subject to tax in the jurisdictions in which they operate. The significant jurisdictions in which the Company's subsidiaries and branches are subject to tax are Canada, France, Ireland, Singapore, Switzerland and the United States.

Income tax returns are open for examination for the tax years 2007-2011 inCanada,Ireland, Singapore andSwitzerland, 2008-2011 in the United States and2010-2011 in France. As a global organization, the Company may be subject to a variety of transfer pricing or permanent establishment challenges by taxing authorities in various jurisdictions. While management believes that adequate provision has been made in the Consolidated Financial Statements for any potential assessments that may result from tax examinations for all open tax years, the completion of tax examinations for open years may result in changes to the amounts recognized in the Consolidated Financial Statements.

Income tax expense for the years ended December 31, 2011, 2010 and 2009 was as follows (in thousands of U.S. dollars):

		2011		2010		2009
Current income tax expense
U.S.	$	82,065	$	28,180	$	43,020
Non U.S.		72,268		36,706		47,980
Total current income tax expense	$	154,333	$	64,886	$	91,000
Deferred income tax (benefit) expense
U.S.	$	(36,780)	$	46,988	$	83,583
Non U.S.		(8,112)		4,738		86,837
Total deferred income tax (benefit) expense	$	(44,892)	$	51,726	$	170,420
Unrecognized tax (benefit) expense
U.S.	$	81	$	—	$	(461)
Non U.S.		(40,550)		12,172		1,131
Total unrecognized tax (benefit) expense	$	(40,469)	$	12,172	$	670
Total income tax expense
U.S.	$	45,366	$	75,168	$	126,142
Non U.S.		23,606		53,616		135,948
Total income tax expense	$	68,972	$	128,784	$	262,090

(Loss) income before taxes attributable to the Company's domestic and foreign operations and a reconciliation of the actual income tax rate to the amount computed by applying the effective tax rate of 0% under Bermuda (the Company's domicile) law to (loss) income before taxes was as followsfor the years ended December 31, 2011, 2010 and 2009 (in thousands of U.S. dollars):

		2011		2010		2009
Domestic (Bermuda)	$	(634,310)	$	441,074	$	895,663
Foreign		182,991		540,262		903,281
(Loss) income before taxes	$	(451,319)	$	981,336	$	1,798,944

Reconciliation of effective tax rate (% of (loss) income before taxes)
Expected tax rate	0.0	%	0.0	%	0.0	%
Foreign taxes at local expected tax rates	(7.2)		14.9		14.2
Impact of foreign exchange gains	0.4		(3.4)		(0.4)
Unrecognized tax benefit	9.0		1.2		—
Tax-exempt income and expenses not deductible	(11.6)		(0.7)		(1.2)
Impact of enacted changes in tax laws	—		(1.9)		(0.1)
Foreign branch tax	(5.7)		(0.2)		1.8
Valuation allowance	(1.9)		2.0		—
Other	1.7		1.2		0.3
Actual tax rate	(15.3)	%	13.1	%	14.6	%

Deferred tax assets and liabilities reflect the tax impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Significant components of the net deferred tax assets and liabilities at December 31, 2011 and 2010 were as follows (in thousands of U.S. dollars):

		2011		2010
Deferred tax assets
Discounting of loss reserves and adjustment to life policy reserves	$	84,977	$	62,591
Foreign tax credit carryforwards		15,005		17,845
Tax loss carryforwards		31,823		4,723
Unearned premiums		19,152		20,191
Other deferred tax assets		35,040		9,319
		185,997		114,669
Valuation allowance		(29,201)		(19,642)
Deferred tax assets		156,796		95,027
Deferred tax liabilities
Deferred acquisition costs		42,913		47,152
Goodwill and other intangibles		71,000		73,174
Equalization reserves		104,884		113,293
Unrealized appreciation and timing differences on investments		105,817		82,226
Other deferred tax liabilities		32,397		32,877
Deferred tax liabilities		357,011		348,722
Net deferred tax liabilities	$	(200,215)	$	(253,695)

The net tax assets and liabilities and their components at December 31, 2011 and 2010 were as follows (in thousands of U.S. dollars):

		2011		2010
Net tax assets	$	66,574	$	14,960
Net tax liabilities		(297,153)		(316,325)
Net tax liabilities	$	(230,579)	$	(301,365)
		2011		2010
Net current tax (liabilities) assets	$	(18,074)	$	3,859
Net deferred tax liabilities		(200,215)		(253,695)
Net unrecognized tax benefit		(12,290)		(51,529)
Net tax liabilities	$	(230,579)	$	(301,365)

Realization of the deferred tax asset is dependent on generating sufficient taxable income in future periods. Although realization is not assured, Management believes that it is more likely than not that the deferred tax asset will be realized. The valuation allowance recorded atDecember 31, 2011related to a tax loss carryforward in Singapore, while the valuation allowance recorded atDecember 31, 2010 related to foreign tax credit carryforwards in Ireland of $17.8 million with the balance related to certain tax loss carryforwards.

At December 31, 2011, the deferred tax assets (after valuation allowance) primarily related to foreign tax credit carryforwardsof $9.0 millionin Ireland,which can be carried forward for an unlimited period of time, and deferred foreign tax creditsof $6.0 million in Ireland and the United States. At December 31, 2010, the deferred tax assets (after valuation allowance) related to capital losses in the United States of $2.9 million, which can be carried forward for five years.

The total amount of unrecognized tax benefits for the years ended December 31, 2011, 2010 and 2009 was as follows (in thousands of U.S. dollars):

				Changes in tax		Tax positions		Change as a		Impact of the
				positions taken		taken		result of a lapse		change in
		January 1,		during a prior		during the		of the statute		foreign currency		December 31,
		2011		period		current period		of limitations		exchange rates		2011
Unrecognized tax benefits
	that, if recognized, would
	impact the effective tax rate	$	51,529	$	3,194	$	3,788	$	(47,886)	$	1,254	$	11,879
Interest and penalties
	recognized on the above		—		435		—		—		(24)		411
Total unrecognized tax benefits,
	including interest and penalties	$	51,529	$	3,629	$	3,788	$	(47,886)	$	1,230	$	12,290

				Changes in tax		Tax positions		Change as a		Impact of the
				positions taken		taken		result of a lapse		change in
		January 1,		during a prior		during the		of the statute		foreign currency		December 31,
		2010		period		current period		of limitations		exchange rates		2010
Unrecognized tax benefits
	that, if recognized, would
	impact the effective tax rate	$	41,935	$	13,215	$	2,578	$	(3,254)	$	(2,945)	$	51,529
Interest and penalties
	recognized on the above		544		104		—		(471)		(177)		—
Total unrecognized tax benefits,
	including interest and penalties	$	42,479	$	13,319	$	2,578	$	(3,725)	$	(3,122)	$	51,529

								Change as a		Impact of the
				Changes in		Tax positions		result of		change in
				tax positions		taken		a lapse of		foreign		Unrecognized
		January 1,		taken during a		during the		the statute of		currency		tax benefits		December 31,
		2009		prior period		current period		limitations		exchange rates		of Paris Re		2009
Unrecognized tax benefits
	that, if recognized, would
	impact the effective tax rate	$	39,208	$	2,053	$	21	$	(1,428)	$	623	$	1,458	$	41,935
Interest and penalties
	recognized on the above		559		347		—		(362)		—		—		544
Total unrecognized tax benefits,
	including interest and penalties	$	39,767	$	2,400	$	21	$	(1,790)	$	623	$	1,458	$	42,479

For the years ended December 31, 2011, 2010 and 2009, there were no unrecognized tax benefits that, if recognized, would create a temporary difference between the reported amount of an item in the Company's Consolidated Balance Sheets and its tax basis. The Company recognizes interest and penalties as income tax expense in its Consolidated Statements of Operations.

At December 31, 2011, the total amount of unrecognized tax benefits for which it is reasonably possible to change within twelve months was $1.1 million, which primarily relates to the expected expiration of the statute of limitations related to certain tax positions and various intra-group transactions in Europe.