COMMITMENTS, CONTINGENCIES AND OTHER ITEMS

CONCENTRATION OF CREDIT RISK

Instruments which potentially subject the Company to concentration of credit risk consist principally of investments, including the Company’s equity method investments, cash, premiums receivable and reinsurance balances. The Company limits the amount of credit exposure to any one financial institution and, except for U.S. Government and money market securities, none of the Company’s investments exceeded 10% of shareholders’ equity at December 31, 2018. See “Note 6. Reinsurance”, for information with respect to reinsurance recoverable.

EMPLOYMENT AGREEMENTS

The Board of Directors has authorized the execution of employment agreements between the Company and certain officers. These agreements provide for, among other things, severance payments under certain circumstances, as well as accelerated vesting of options and certain restricted stock grants, upon a change in control, as defined in the employment agreements and the Company’s stock incentive plans.

LETTERS OF CREDIT AND OTHER COMMITMENTS

At December 31, 2018, the Company’s banks have issued letters of credit of $510.6 million in favor of certain ceding companies. In connection with the Company’s Top Layer Re joint venture, Renaissance Reinsurance has committed $37.5 million of collateral to support a letter of credit and is obligated to make a mandatory capital contribution of up to $50.0 million in the event that a loss reduces Top Layer Re’s capital and surplus below a specified level. The letters of credit are secured by cash and investments of similar amounts.

See “Note 8. Debt and Credit Facilities” for additional information related to the Company’s debt and credit facilities.

PRIVATE EQUITY AND INVESTMENT COMMITMENTS

The Company has committed capital to private equity investments, other investments and investments in other ventures of $1.2 billion, of which $686.4 million has been contributed at December 31, 2018. The Company’s remaining commitments to these investments at December 31, 2018 totaled $470.8 million. These commitments do not have a defined contractual commitment date.

INDEMNIFICATIONS AND WARRANTIES

In the ordinary course of its business, the Company may enter into contracts or agreements that contain indemnifications or warranties. Future events could occur that lead to the execution of these provisions against the Company. Based on past experience, management currently believes that the likelihood of such an event is remote.

OPERATING AND CAPITAL LEASES

The Company leases office space under operating leases which expire at various dates through 2027. Future minimum lease payments under existing operating leases are expected to be as follows:




	Minimum lease payments
2019	$	7,137
2020	5,294
2021	4,934
2022	4,225
2023	1,530
After 2023	298
Future minimum lease payments under existing operating leases	$	23,418

The Company’s capital leases primarily relate to office space in Bermuda with an initial lease term of 20 years, ending in 2028, and a bargain renewal option for an additional 30 years. The future minimum lease payments of the Company’s capital leases are detailed below, and relate principally to the transaction noted above, excluding the bargain renewal option.




	Minimum lease payments
2019	$	3,331
2020	3,336
2021	3,336
2022	3,336
2023	2,830
After 2023	12,790
Future minimum lease payments under existing capital leases	$	28,959

LITIGATION

The Company and its subsidiaries are subject to lawsuits and regulatory actions in the normal course of business that do not arise from or directly relate to claims on reinsurance treaties or contracts or direct surplus lines insurance policies. In the Company’s industry, business litigation may involve allegations of underwriting or claims-handling errors or misconduct, disputes relating to the scope of, or compliance with, the terms of delegated underwriting agreements, employment claims, regulatory actions or disputes arising from the Company’s business ventures. The Company’s operating subsidiaries are subject to claims litigation involving, among other things, disputed interpretations of policy coverages. Generally, the Company’s direct surplus lines insurance operations are subject to greater frequency and diversity of claims and claims-related litigation than its reinsurance operations and, in some jurisdictions, may be subject to direct actions by allegedly injured persons or entities seeking damages from policyholders. These lawsuits, involving or arising out of claims on policies issued by the Company’s subsidiaries which are typical to the insurance industry in general and in the normal course of business, are considered in its loss and loss expense reserves which are discussed in “Note 7. Reserve for Claims and Claim Expenses”. In addition, the Company may from time to time engage in litigation or arbitration related to its claims for payment in respect of ceded reinsurance, including disputes that challenge the Company’s ability to enforce its underwriting intent. Such matters could result, directly or indirectly, in providers of protection not meeting their obligations to the Company or not doing so on a timely basis. The Company may also be subject to other disputes from time to time, relating to operational or other matters distinct from insurance or reinsurance claims. Any litigation or arbitration, or regulatory process, contains an element of uncertainty, and the value of an exposure or a gain contingency related to a dispute is difficult to estimate accordingly. Currently, the Company believes that no individual litigation or arbitration to which it is presently a party is likely to have a material adverse effect on its financial condition, business or operations.

ACQUISITION OF TOKIO MILLENNIUM RE

See “Note 20. Acquisition of Tokio Millennium Re” for information related to the obligations of the Company with respect to the TMR Stock Purchase.