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DERIVATIVE INSTRUMENTS
 9 Months Ended
Sep. 30, 2023
Summary of Derivative Instruments [Abstract]  
DERIVATIVE INSTRUMENTS DERIVATIVE INSTRUMENTS
From time to time, the Company may enter into derivative instruments such as futures, options, swaps, forward contracts and other derivative contracts primarily to manage its foreign currency exposure, obtain exposure to a particular financial market, for yield enhancement, or for trading and to assume risk. The Company’s derivative instruments can be exchange traded or over-the-counter, with over-the-counter derivatives generally traded under International Swaps and Derivatives Association master agreements, which establish the terms of the transactions entered into with the Company’s derivative counterparties. In the event a party becomes insolvent or otherwise defaults on its obligations, a master agreement generally permits the non-defaulting party to accelerate and terminate all outstanding transactions and net the transactions’ marked-to-market values so that a single sum in a single currency will be owed by, or owed to, the non-defaulting party. Effectively, this contractual close-out netting reduces credit exposure from gross to net exposure. Where the Company has entered into master netting agreements with counterparties, or the Company has the legal and contractual right to offset positions, the derivative positions are generally netted by counterparty and are reported accordingly in other assets and other liabilities.
The Company is not aware of the existence of any credit-risk related contingent features that it believes would be triggered in its derivative instruments that are in a net liability position at September 30, 2023.
The tables below show the gross and net amounts of recognized derivative assets and liabilities at fair value, including the location on the consolidated balance sheets of the Company’s principal derivative instruments:
Derivative Assets
At September 30, 2023Gross Amounts of Recognized AssetsGross Amounts Offset in the Balance Sheet Net Amounts of Assets Presented in the Balance SheetBalance Sheet LocationCollateral ReceivedNet Amount
Derivative instruments not designated as hedges
Interest rate futures$6,819 $— $6,819 Other assets$— $6,819 
Foreign currency forward contracts (1)
1,745 — 1,745 Other assets— 1,745 
Foreign currency forward contracts (2)
4,365 — 4,365 Other assets— 4,365 
Credit default swaps3,650 — 3,650 Other assets— 3,650 
Total derivative instruments not designated as hedges16,579 — 16,579 — 16,579 
Derivative instruments designated as hedges
Foreign currency forward contracts (3)
1,654 — 1,654 Other assets— 1,654 
Total$18,233 $— $18,233 $— $18,233 
Derivative Liabilities
At September 30, 2023Gross Amounts of Recognized LiabilitiesGross Amounts Offset in the Balance Sheet Net Amounts of Liabilities Presented in the Balance SheetBalance Sheet LocationCollateral PledgedNet Amount
Derivative instruments not designated as hedges
Interest rate futures$7,139 $— $7,139 Other liabilities$6,984 $155 
Foreign currency forward contracts (1)
17,956 — 17,956 Other liabilities— 17,956 
Foreign currency forward contracts (2)
508 — 508 Other liabilities— 508 
Credit default swaps9,893 — 9,893 Other liabilities9,893 — 
Total derivative instruments not designated as hedges35,496 — 35,496 16,877 18,619 
Derivative instruments designated as hedges
Foreign currency forward contracts (3)
61 — 61 Other liabilities— 61 
Total$35,557 $— $35,557 $16,877 $18,680 
(1)Contracts used to manage foreign currency risks in underwriting and non-investment operations.
(2)Contracts used to manage foreign currency risks in investment operations.
(3)Contracts designated as hedges of net investments in a foreign operation.
Derivative Assets
At December 31, 2022Gross Amounts of Recognized AssetsGross Amounts Offset in the Balance Sheet Net Amounts of Assets Presented in the Balance SheetBalance Sheet LocationCollateral ReceivedNet Amount
Derivative instruments not designated as hedges
Interest rate futures$387 $— $387 Other assets$— $387 
Foreign currency forward contracts (1)
31,755 — 31,755 Other assets— 31,755 
Foreign currency forward contracts (2)
11,866 — 11,866 Other assets— 11,866 
Credit default swaps413 — 413 Other assets— 413 
Total derivative instruments not designated as hedges44,421 — 44,421 — 44,421 
Total$44,421 $— $44,421 $— $44,421 
Derivative Liabilities
At December 31, 2022Gross Amounts of Recognized LiabilitiesGross Amounts Offset in the Balance Sheet Net Amounts of Liabilities Presented in the Balance SheetBalance Sheet LocationCollateral PledgedNet Amount
Derivative instruments not designated as hedges
Interest rate futures$1,685 $— $1,685 Other liabilities$209 $1,476 
Foreign currency forward contracts (1)
1,160 — 1,160 Other liabilities— 1,160 
Foreign currency forward contracts (2)
2,165 — 2,165 Other liabilities— 2,165 
Credit default swaps1,055 — 1,055 Other liabilities100 955 
Equity futures323 — 323 Other liabilities— 323 
Total derivative instruments not designated as hedges6,388 — 6,388 309 6,079 
Derivative instruments designated as hedges
Foreign currency forward contracts (3)
1,193 — 1,193 Other liabilities— 1,193 
Total$7,581 $— $7,581 $309 $7,272 
(1)Contracts used to manage foreign currency risks in underwriting and non-investment operations.
(2)Contracts used to manage foreign currency risks in investment operations.
(3)Contracts designated as hedges of net investments in a foreign operation.
The location and amount of the gain (loss) recognized in the Company’s consolidated statements of operations related to its principal derivative instruments are shown in the following table:
Location of gain (loss)
recognized on derivatives		Amount of gain (loss) recognized on
derivatives
Three months ended September 30,20232022
Derivative instruments not designated as hedges
Interest rate futures (1)
Net realized and unrealized gains (losses) on investments$28,366 $(40,245)
Foreign currency forward contracts (2)
Net foreign exchange gains (losses)(23,686)(32,346)
Foreign currency forward contracts (3)
Net foreign exchange gains (losses)(10,938)6,576 
Foreign currency option contractsNet foreign exchange gains (losses)— 208 
Credit default swaps (1)
Net realized and unrealized gains (losses) on investments2,228 24 
Total return swaps (1)
Net realized and unrealized gains (losses) on investments— (6)
Equity futures (4)
Net realized and unrealized gains (losses) on investments— (16,594)
WarrantsNet realized and unrealized gains (losses) on investments— 1,241 
Total derivative instruments not designated as hedges(4,030)(81,142)
Derivative instruments designated as hedges
Foreign currency forward contracts (5)
Accumulated other comprehensive income (loss)1,818 4,925 
Total$(2,212)$(76,217)
Location of gain (loss)
recognized on derivatives		Amount of gain (loss) recognized on
derivatives
Nine months ended September 30,20232022
Derivative instruments not designated as hedges
Interest rate futures (1)
Net realized and unrealized gains (losses) on investments$6,819 $(83,731)
Foreign currency forward contracts (2)
Net foreign exchange gains (losses)(14,041)(105,103)
Foreign currency forward contracts (3)
Net foreign exchange gains (losses)(25,729)14,747 
Foreign currency option contractsNet foreign exchange gains (losses)— (236)
Credit default swaps (1)
Net realized and unrealized gains (losses) on investments(27,186)(6,450)
Total return swaps (1)
Net realized and unrealized gains (losses) on investments— (6)
Equity futures (4)
Net realized and unrealized gains (losses) on investments(1,928)(73,000)
WarrantsNet realized and unrealized gains (losses) on investments— 1,241 
Total derivative instruments not designated as hedges(62,065)(252,538)
Derivative instruments designated as hedges
Foreign currency forward contracts (5)
Accumulated other comprehensive income (loss)3,357 9,219 
Total$(58,708)$(243,319)
(1)Fixed income related derivatives included in net realized and unrealized gains (losses) on investment-related derivatives. See “Note 3. Investments” for additional information.
(2)Contracts used to manage foreign currency risks in underwriting and non-investment operations.
(3)Contracts used to manage foreign currency risks in investment operations.
(4)Equity related derivatives included in net realized and unrealized gains (losses) on investment-related derivatives. See “Note 3. Investments” for additional information.
(5)Contracts designated as hedges of net investments in a foreign operation.
Derivative Instruments Not Designated as Hedges
Interest Rate Derivatives
The Company uses interest rate futures and swaps within its portfolio of fixed maturity investments to manage its exposure to interest rate risk, which may result in increasing or decreasing its exposure to this risk.
Interest Rate Futures
The fair value of interest rate futures is determined using exchange traded prices. At September 30, 2023, the Company had $2.2 billion of notional long positions and $1.5 billion of notional short positions of primarily U.S. treasury, Eurozone and Japanese government bond futures contracts (December 31, 2022 - $2.4 billion and $0.5 billion, respectively, primarily of U.S. treasury futures contracts).
Foreign Currency Derivatives
The Company’s functional currency is the U.S. dollar. The Company writes a portion of its business in currencies other than U.S. dollars and may, from time to time, experience foreign exchange gains and losses in the Company’s consolidated financial statements. The impact of changes in exchange rates on the Company’s assets and liabilities denominated in currencies other than the U.S. dollar, excluding non-monetary assets and liabilities, are recognized in the Company’s consolidated statements of operations.
Underwriting and Non-investments Operations Related Foreign Currency Contracts
The Company’s foreign currency policy with regard to its underwriting operations is generally to enter into foreign currency forward and option contracts for notional values that approximate the foreign currency liabilities, including claims and claim expense reserves and reinsurance balances payable, net of any cash, investments and receivables held in the respective foreign currency. The Company’s use of foreign currency forward and option contracts is intended to minimize the effect of fluctuating foreign currencies on the value of non-U.S. dollar denominated assets and liabilities associated with its underwriting operations. The Company may determine not to match a portion of its projected underwriting related assets or liabilities with underlying foreign currency exposure with investments in the same currencies, which would increase its exposure to foreign currency fluctuations and potentially increase the impact and volatility of foreign exchange gains and losses on its results of operations. The fair value of the Company’s underwriting operations related foreign currency contracts is determined using indicative pricing obtained from counterparties or broker quotes. At September 30, 2023, the Company had outstanding underwriting related foreign currency contracts of $763.6 million in notional long positions and $151.0 million in notional short positions, denominated in U.S. dollars (December 31, 2022 - $861.7 million and $172.4 million, respectively).
Investment Portfolio Related Foreign Currency Forward Contracts
The Company’s investment operations are exposed to currency fluctuations through its investments in non-U.S. dollar fixed maturity investments, short term investments and other investments. From time to time, the Company may employ foreign currency forward contracts in its investment portfolio to either assume foreign currency risk or to economically hedge its exposure to currency fluctuations from these investments. The fair value of the Company’s investment portfolio related foreign currency forward contracts is determined using an interpolated rate based on closing forward market rates. At September 30, 2023, the Company had outstanding investment portfolio related foreign currency contracts of $339.1 million in notional long positions and $75.8 million in notional short positions, denominated in U.S. dollars (December 31, 2022 - $225.6 million and $86.3 million, respectively).
Credit Derivatives
The Company’s exposure to credit risk is primarily due to its fixed maturity investments, short term investments, premiums receivable and reinsurance recoverable. From time to time, the Company may purchase credit derivatives to manage its exposures in the insurance industry, and to assist in managing the credit risk associated with ceded reinsurance. The Company also employs credit derivatives in its investment portfolio to either assume credit risk or manage its credit exposure.
Credit Default Swaps
The fair value of the Company’s credit default swaps is determined using industry valuation models, broker bid indications or internal pricing valuation techniques. The fair value of these credit default swaps can change based on a variety of factors including changes in credit spreads, default rates and recovery rates, the correlation of credit risk between the referenced credit and the counterparty, and market rate inputs such as interest rates. At September 30, 2023, the Company had outstanding credit default swaps of $1.0 billion in notional positions to hedge credit risk and $19.5 million in notional positions to assume credit risk, denominated in U.S. dollars (December 31, 2022 - $953.4 million and $13.1 million, respectively).
Total Return Swaps
The fair value of the Company’s total return swaps is determined using broker-dealer bid quotations, market-based prices from pricing vendors or valuation models. At September 30, 2023 and December 31, 2022, the Company had no outstanding total return swaps.
Equity Derivatives
Equity Futures
From time to time, the Company uses equity derivatives in its investment portfolio to either assume equity risk or hedge its equity exposure. The fair value of the Company’s equity futures is determined using market-based prices from pricing vendors. At September 30, 2023, the Company had no notional positions of equity futures, denominated in U.S. dollars (December 31, 2022 - $116.0 million notional long position).
Derivative Instruments Designated as Hedges of Net Investments in Foreign Operations
Foreign Currency Derivatives
Hedges of Net Investments in Foreign Operations
One of the Company’s subsidiaries currently uses a non-U.S. dollar functional currency. The Company, from time to time, enters into foreign exchange forwards to hedge non-U.S. dollar functional currencies, on an after-tax basis, from changes in the exchange rate between the U.S. dollar and these currencies. As of September 30, 2023 and 2022, this included the Australian dollar net investment in a foreign operation. These foreign exchange forward contracts were formally designated as hedges of its investment in subsidiaries with non-U.S. dollar functional currencies and there was no ineffectiveness in these transactions.
The table below provides a summary of derivative instruments designated as hedges of net investments in a foreign operation, including the weighted average U.S. dollar equivalent of foreign denominated net (liabilities) assets that were hedged and the resulting derivative gains (losses) that are recorded in foreign currency translation adjustments, net of tax, within accumulated other comprehensive income (loss) on the Company’s consolidated statements of changes in shareholders’ equity:
Three months endedNine months ended
September 30,
2023		September 30,
2022		September 30,
2023		September 30,
2022
Weighted average of U.S. dollar equivalent of foreign denominated net assets (liabilities) $57,216 $65,599 $58,779 $76,839 
Derivative gains (losses) (1)
$1,818 $4,925 $3,357 $9,219 
(1)Derivative gains (losses) from derivative instruments designated as hedges of the net investment in a foreign operation are recorded in foreign currency translation adjustments, net of tax, within accumulated other comprehensive income (loss) on the Company’s consolidated statements of changes in shareholders’ equity.