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Commitments, Contingencies and Other Items
 12 Months Ended
Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]  
Commitments, Contingencies and Other Items 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 the securities of the U.S. Government and U.S. Government related entities, and money market securities, none of the Company’s fixed-maturity and short-term investments exceeded 10% of shareholders’ equity at December 31, 2022. Refer to “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 plan.
Letters of Credit and Other Commitments
At December 31, 2022, the Company’s banks have issued secured and unsecured letters of credit totaling $1.4 billion in favor of certain ceding companies. In connection with the Company’s Top Layer 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’s capital and surplus below a specified level.
Refer to “Note 8. Debt and Credit Facilities” for additional information related to the Company’s debt and credit facilities.
Investment Commitments
The Company has committed capital to direct private equity investments, fund investments, term loans and investments in other ventures of $2.9 billion, of which $1.7 billion has been contributed at December 31, 2022. The Company’s remaining commitments to these investments at December 31, 2022 totaled $1.2 billion. 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.
Leases
The Company’s operating leases primarily relate to office space for its global underwriting platforms principally in Bermuda, Australia, Ireland, Singapore, Switzerland, the U.K. and the U.S. These leases expire at various dates through 2038 with a weighted average lease term of 7.1 years. Included in other assets and other liabilities at December 31, 2022 is a right-to-use asset of $66.6 million and a lease liability of $67.1 million, respectively, associated with the Company’s operating leases (2021 - $22.9 million and $23.1 million, respectively). During 2022, the Company recorded an operating lease expense of $8.8 million included in operating expenses (2021 - $8.4 million).
The Company’s financing 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. Included in other assets and other liabilities at December 31, 2022 is a right-to-use asset of $17.1 million and a lease liability of $22.0 million, respectively, associated with the Company’s finance leases (2021 - $28.0 million and $22.5 million, respectively). During 2022, the Company recorded interest expense of $2.2 million associated with its finance leases (2021 - $2.3 million) included in other income and amortization of its finance leases right-to-use asset of $0.5 million included in operating expenses (2021 - $0.5 million).
Future minimum lease payments under existing operating and finance leases are detailed below, excluding the bargain renewal option on the finance lease related to office space in Bermuda:
Future Minimum Lease Payments
Operating LeasesFinance Leases
2023$7,097 $2,661 
20248,842 2,661 
20258,381 2,661 
20267,791 2,661 
20277,663 2,661 
After 202753,430 2,146 
Future minimum lease payments under existing leases
$93,204 $15,451 
  
Legal Proceedings
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. 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. 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.