Commission File Number 001-35039

THIRD POINT REINSURANCE LTD.

(Exact name of registrant as specified in its charter)

Bermuda		98-1039994
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
3 Waterloo Lane Pembroke, Bermuda, HM 08		(441) 542 3300
(Address of principal executive offices and zip code)		(Registrant’s telephone number)

Large accelerated filer	x	Accelerated filer	¨	Non-accelerated filer	¨	Smaller reporting company	¨	Emerging growth company	¨

•	results of operations fluctuate and may not be indicative of our prospects;

•	more established competitors;

•	losses exceeding reserves;

•	highly cyclical property and casualty reinsurance industry;

•	downgrade or withdrawal of ratings by rating agencies;

•	significant decrease in our capital or surplus;

•	dependence on key executives;

•	dependence on letter of credit facilities that may not be available on commercially acceptable terms;

•	inability to service our indebtedness;

•	limited cash flow and liquidity due to our indebtedness;

•	inability to raise necessary funds to pay principal or interest on debt;

•	potential lack of availability of capital in the future;

•	credit risk associated with the use of reinsurance brokers;

•	future strategic transactions such as acquisitions, dispositions, mergers or joint ventures;

•	dependence on Third Point LLC to implement our investment strategy;

•	decline in revenue due to poor performance of our investment portfolio;

•	risks associated with our investment strategy being greater than those faced by competitors;

•	termination by Third Point LLC of our investment management agreements;

•	potential conflicts of interest with Third Point LLC;

•	losses resulting from significant investment positions;

•	credit risk associated with the default on obligations of counterparties;

•	ineffective investment risk management systems;

•	fluctuations in the market value of our investment portfolio;

•	trading restrictions being placed on our investments;

•	limited termination provisions in our investment management agreements;

•	limited liquidity and lack of valuation data on our investments;

•	U.S. and global economic downturns;

•	specific characteristics of investments in mortgage-backed securities and other asset-backed securities, in securities of issues based outside the U.S., and in special situation or distressed companies;

•	loss of key employees at Third Point LLC;

•	Third Point LLC’s compensation arrangements may incentivize investments that are risky or speculative;

•	increased regulation or scrutiny of alternative investment advisers affecting our reputation;

•	suspension or revocation of our reinsurance licenses;

•	potentially being deemed an investment company under U.S. federal securities law;

•	failure of reinsurance subsidiaries to meet minimum capital and surplus requirements;

•	changes in Bermuda or other law and regulation that may have an adverse impact on our operations;

•	Third Point Re and/or Third Point Re BDA potentially becoming subject to U.S. federal income taxation;

•	potential characterization of Third Point Re and/or Third Point Re BDA as a passive foreign investment company;

•	subjection of our affiliates to the base erosion and anti-abuse tax;

•	potentially becoming subject to U.S. withholding and information reporting requirements under the Foreign Account Tax Compliance Act; and

•	other risks and factors listed under “Item 1A. Risk Factors” and elsewhere in this Annual Report.

PART I.

Item 1. Business

Overview

We are a holding company domiciled in Bermuda. Through our reinsurance subsidiaries, we provide specialty property and casualty reinsurance products to insurance and reinsurance companies on a worldwide basis. Our goal is to deliver attractive equity returns to our shareholders by combining profitable reinsurance underwriting with superior investment management provided by Third Point LLC, our investment manager. We believe that our reinsurance and investment strategy differentiates us from our competitors.

	2017							2016							2015
	Amount				Percentage of Total			Amount				Percentage of Total			Amount				Percentage of Total
	($ in thousands)
Property	$	136,999			21.4	%		$	98,334			15.9	%		$	114,215			16.2	%
Workers’ Compensation	33,194				5.2	%		56,069				9.1	%		64,534				9.2	%
Auto	43,424				6.7	%		91,626				14.8	%		64,831				9.2	%
Other Casualty	193,141				30.1	%		65,355				10.6	%		106,145				15.1	%
Casualty	269,759				42.0	%		213,050				34.5	%		235,510				33.5	%
Credit & Financial Lines	34,324				5.4	%		118,707				19.2	%		62,923				9.0	%
Multi-line	63,665				9.9	%		187,283				30.4	%		181,747				25.9	%
Other Specialty	27,522				4.3	%		—				—	%		(1		)		—	%
Specialty	125,511				19.6	%		305,990				49.6	%		244,669				34.9	%
Total prospective reinsurance contracts	532,269				83.0	%		617,374				100.0	%		594,394				84.6	%
Retroactive reinsurance contracts	109,351				17.0	%		—				—	%		108,064				15.4	%
Total property and casualty reinsurance	641,620				100.0	%		617,374				100.0	%		702,458				100.0	%
Catastrophe risk management	—				—	%		—				—	%		(44		)		—	%
	$	641,620			100.0	%		$	617,374			100.0	%		$	702,414			100.0	%

•	target markets where capacity and alternatives are underserved or capacity constrained;

•	employ strict underwriting discipline;

•	select reinsurance opportunities with favorable economics over the life of the contract; and

•	potentially offer lines and geographies that are not identified in this Form 10-K.

•	creative solutions that address the specific business needs of our clients;

•	rapid and substantive responses to structuring and pricing quote requests;

•	financial security; and

•	clear indication of risks we will and will not underwrite.

•	require our clients to maintain a meaningful risk position in their business;

•	pay our clients a commission based upon their actual expenses and offer an additional commission as an incentive based upon profitability;

•	include deficit carry-forward provisions in our multi-year contracts that allows us to potentially offset underwriting losses from one year to the next;

•	charge the client a premium for reinstatement of the amount of reinsurance coverage to the full amount reduced as a result of a reinsurance loss payment, which we refer to as a reinstatement premium;

•	require specific levels of rate increases on the underlying insurance policies; and

•	for contracts on which we offer an interest credit on funds we hold, credit interest income on actual cash received into a notional experience account whereby the experience account is credited to the ceding company at the maturity of the contract if underwriting results are realized as initially expected.

•	the client’s and industry historical loss data and current market conditions;

•	the business purpose served by a proposed contract;

•	the client’s pricing and underwriting strategies;

•	the expected duration for claims to fully develop;

•	the geographic areas in which the client is doing business and its market share;

•	the reputation and financial strength of the client;

•	the reputation and expertise of the broker;

•	proposed contract terms and conditions; and

•	reports provided by independent industry specialists.

•

Composition of Investments : At least 60% of the investment portfolio will be held in debt or equity securities (including swaps) of publicly traded companies (or their subsidiaries) and governments of the OECD high income countries, asset-backed securities, cash, cash equivalents and gold and other precious metals. Except with the prior written consent of the Investment and Finance Committee, none of the assets in the investment portfolio will be held in illiquid investments traditionally considered “venture capital” or private equity investments. In addition, no investments in third party managed funds or other investment vehicles will be made without the consent of the Investment and Finance Committee.

•	Concentration of Investments : Other than cash, cash equivalents and United States government obligations, no single investment in the investment portfolio will constitute more than 15% of the portfolio.

•	Liquidity : Assets will be invested in such fashion that Third Point Re BDA and Third Point Re USA have a reasonable expectation that it can meet any of its liabilities as they become due. We review the liquidity of the portfolio on a periodic basis.

•	Net Exposure Limits : The net position (long positions less short positions) may not exceed 1.5 times net asset value for more than 10 trading days in any 30-trading day period.

•	a material violation of applicable law relating to Third Point LLC’s investment related business;

•	Third Point LLC’s fraud, gross negligence, willful misconduct or reckless disregard of its obligations under the Agreement;

•	a material breach by Third Point LLC of our investment guidelines or any other material breach of the Agreement, which, in either case, if such breach is reasonably capable of being cured, is not cured within a 15-day period;

•	a conviction or, a plea of guilty or nolo contendere to a felony or a crime affecting the investment related business of Third Point LLC by certain senior officers of Third Point LLC;

•	any act of fraud, material misappropriation, material dishonesty, embezzlement, or similar conduct relating to Third Point LLC’s investment related business; or

•	a formal administrative or other legal proceeding before the SEC, the CFTC, the FINRA, or any other U.S. or non-U.S. regulatory or self-regulatory organization against Third Point LLC; or certain key personnel which would likely have a material adverse effect on us.

	2017				2016				2015
	($ in thousands)
Management fees - Third Point LLC	$	36,733			$	7,110			$	6,362
Management fees - Founders (1)	—				35,321				36,053
Performance fees - Third Point Advisors LLC (before loss carryforward)	93,978				17,276				7,061
Performance fees - loss carryforward	—				—				(6,199		)
	$	130,711			$	59,707			$	43,277

Investment Portfolio

The following tables present the total long, short and net exposure of our consolidated investment portfolio as managed by Third Point LLC, as of December 31, 2017 and 2016 by strategy and geography:  

	2017									2016
	Long			Short			Net			Long			Short			Net
Equity
Consumer	18	%		(5	)%		13	%		7	%		—	%		7	%
Energy & Utility	6	%		(2	)%		4	%		2	%		—	%		2	%
Financial	15	%		(3	)%		12	%		10	%		(1	)%		9	%
Healthcare	14	%		(2	)%		12	%		16	%		(1	)%		15	%
Industries & Commodities	28	%		(4	)%		24	%		16	%		(1	)%		15	%
Technology, Media and Telecommunications	14	%		—	%		14	%		10	%		(3	)%		7	%
Market Hedges	3	%		(9	)%		(6	)%		2	%		—	%		2	%
Total Equity	98	%		(25	)%		73	%		63	%		(6	)%		57	%
Credit
Distressed	2	%		—	%		2	%		3	%		—	%		3	%
Performing	2	%		(1	)%		1	%		10	%		(4	)%		6	%
Government	2	%		—	%		2	%		6	%		—	%		6	%
Asset Backed Securities (1)	10	%		(3	)%		7	%		12	%		(3	)%		9	%
Total Credit	16	%		(4	)%		12	%		31	%		(7	)%		24	%
Other
Risk Arbitrage	7	%		(2	)%		5	%		9	%		—	%		9	%
Macro	—	%		—	%		—	%		1	%		(17	)%		(16	)%
Private (2)	3	%		—	%		3	%		3	%		—	%		3	%
Total Other	10	%		(2	)%		8	%		13	%		(17	)%		(4	)%
	124	%		(31	)%		93	%		107	%		(30	)%		77	%

	2017									2016									2015
	Long			Short			Net			Long			Short			Net			Long			Short			Net
Equity	21.5	%		(4.6	)%		16.9	%		1.5	%		(2.9	)%		(1.4	)%		(2.5	)%		(0.8	)%		(3.3	)%
Credit	0.7	%		(0.6	)%		0.1	%		6.4	%		(0.4	)%		6.0	%		1.5	%		0.5	%		2.0	%
Other	1.8	%		(1.1	)%		0.7	%		0.5	%		(0.9	)%		(0.4	)%		(1.0	)%		0.7	%		(0.3	)%
Net investment return on investments managed by Third Point LLC	24.0	%		(6.3	)%		17.7	%		8.4	%		(4.2	)%		4.2	%		(2.0	)%		0.4	%		(1.6	)%
S&P 500 Total Return Index							21.8	%								12.0	%								1.4	%

(1)	Past performance is not necessarily indicative of future results.

•

Our investment accounts include collateral accounts securing letters of credit and reinsurance trust accounts securing various reinsurance contract obligations.  These collateral assets include cash and cash equivalents and government securities and may be invested in foreign currencies other than U.S. dollar.  The unrealized gains and losses on these investments, net investment income from the interest earned as well as foreign exchange gains and losses on these assets will contribute to differences in our returns compared to other funds that Third Point LLC manages.

•

Our investment guidelines contain restrictions on our ability to invest in private securities as compared to the investment guidelines of other funds that Third Point LLC manages.  Our ability to invest in private securities is subject to approval by the Investment and Finance Committee of the Board of Directors.  As a result, we may have different exposures to certain private investments compared to other funds that Third Point LLC manages.

•	We invest in certain securities whereby Third Point LLC has a board position in the company or may otherwise be restricted from trading in the particular security that can prohibit Third Point LLC from re-balancing our investment accounts, which may result in different returns in our investment accounts compared to other funds that Third Point LLC manages.

•	the performance of our investment portfolio;

•	reinsurance contract pricing;

•	our assessment of the quality of available reinsurance opportunities;

•	the volume and mix of reinsurance products we underwrite;

•	loss experience on our reinsurance liabilities; and

•	our ability to assess and integrate our risk management strategy properly.

•	price of reinsurance coverage;

•	the general reputation and perceived financial strength of the reinsurer;

•	relationships with reinsurance brokers;

•	terms and conditions of products offered;

•	ratings assigned by independent rating agencies;

•	speed of claims payment and reputation; and

•	the experience and reputation of the members of our underwriting team in the particular lines of reinsurance we seek to underwrite.

•	the lapse of time from the occurrence of an event to the reporting of the claim and the ultimate resolution or settlement of the claim;

•	the diversity of development patterns among different types of reinsurance treaties; and

•	heavier reliance on the client for information regarding claims.

•	if we change our business practices from our organizational business plan in a manner that no longer supports A.M. Best’s initial rating;

•	if unfavorable financial or market trends impact us;

•	if losses exceed loss reserves;

•	if we are unable to retain our senior management and other key personnel;

•	if our investment portfolio incurs significant losses; or

•	if A.M. Best alters its capital adequacy assessment methodology in a manner that would adversely affect the rating of Third Point Re BDA or Third Point Re USA.

•	requiring us to dedicate a substantial portion of cash flow from operations to the payment of interest on, and principal of, our debt, which will reduce the amounts available to fund working capital, the expansion of our business and other general corporate purposes;

•	increasing our vulnerability to adverse changes in general economic, industry and market conditions, and exposing us to the risk of increased interest rates;

•	obligating us to additional restrictive covenants that may reduce our ability to take certain corporate actions or obtain further debt or equity financing;

•	making it more difficult for us to make payments on our existing or future obligations;

•	limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and

•	placing us at a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.

•	fund liquidity needs caused by underwriting or investment losses;

•	replace capital lost in the event of significant reinsurance losses or adverse reserve developments;

•	satisfy letters of credit, guarantee bond requirements or other capital requirements that may be imposed by our clients or by regulators;

•	meet rating agency or regulatory capital requirements; or

•	respond to competitive pressures.

•	the historical performance of funds managed by Third Point LLC should not be considered indicative of the future results that should be expected from our investment portfolio; and

•	the returns of funds managed by Third Point LLC have benefited historically from investment opportunities and general market conditions that currently may not exist and may not repeat themselves, and there can be no assurance that Third Point LLC will be able to avail itself of profitable investment opportunities in the future.

•	a material violation of applicable law relating to Third Point LLC’s advisory business;

•	Third Point LLC’s fraud, gross negligence, willful misconduct or reckless disregard of its obligations under the relevant investment management agreement;

•	a material breach by Third Point LLC of our investment guidelines that is not cured within a 15-day period;

•	a conviction or, a plea of guilty or nolo contendere to a felony or a crime affecting the asset management business of Third Point LLC by certain senior officers of Third Point LLC;

•	any act of fraud, material misappropriation, material dishonesty, embezzlement, or similar conduct against or involving us by senior officers of Third Point LLC; or

•	a formal administrative or other legal proceeding before the SEC, the CFTC, FINRA, or any other U.S. or non-U.S. regulatory or self-regulatory organization against Third Point LLC or certain key personnel which would likely have a material adverse effect on us.

•	Third Point LLC is entitled to a management fee of 1.5% annually, charged monthly, based on net assets under management; and

•	TP GP is entitled to performance compensation based on the appreciation, including unrealized appreciation, in the value of our investment portfolio equal to 20% of net profits, subject to a loss carryforward provision.

•	maintain a minimum level of capital, surplus and liquidity;

•	satisfy solvency standards;

•	restrict the payment of dividends and distributions;

•	deliver notification to the BMA of changes in ownership of our common shares beyond and between certain thresholds specified in the Insurance Act;

•	maintain a principal office and appoint and maintain a principal representative in Bermuda; and

•	provide for the performance of certain periodic examinations of Third Point Re BDA and Third Point Re USA and their financial condition.

•	industry or general market conditions;

•	domestic and international economic factors unrelated to our performance;

•	changes in our clients’ needs;

•	new regulatory pronouncements and changes in regulatory guidelines;

•	lawsuits, enforcement actions and other claims by third parties or governmental authorities;

•	actual or anticipated fluctuations in our quarterly operating results;

•	changes in securities analysts' estimates of our financial performance or lack of research and reports by industry analysts;

•	action by institutional shareholders or other large shareholders (including the Founders), including future sales;

•	speculation in the press or investment community;

•	investor perception of us and our industry;

•	changes in market valuations or earnings of similar companies;

•	announcements by us or our competitors of significant contracts, acquisitions or strategic partnerships;

•	any future sales of our common shares or other securities; and

•	additions or departures of key personnel.

•	a holder of our shares would be able to enforce, in the courts of Bermuda, judgments of United States courts against persons who reside in Bermuda based upon the civil liability provisions of the United States federal securities laws;

•	a holder of our shares would be able to enforce, in the courts of Bermuda, judgments of United States courts based upon the civil liability provisions of the United States federal securities laws;

•	a holder of our shares would be able to bring an original action in the Bermuda courts to enforce liabilities against us or our directors and officers who reside outside the United States based solely upon United States federal securities laws.

•	the material facts as to such interested director’s relationship or interests were disclosed or were known to the Board of Directors and the Board of Directors had in good faith authorized the transaction by the affirmative vote of a majority of the disinterested directors;

•	such material facts were disclosed or were known to the shareholders entitled to vote on such transaction and the transaction were specifically approved in good faith by vote of the majority of shares entitled to vote thereon; or

•	the transaction were fair as to the corporation as of the time it was authorized, approved or ratified. Under Delaware law, the interested director could be held liable for a transaction in which the director derived an improper personal benefit.

•	provide the right of shareholders to act by majority written consent for so long as the Lead Investors and the Loeb Entities collectively hold at least 35% of our issued and outstanding common shares;

•	establish a classified Board of Directors;

•	require advance notice of shareholders’ proposals in connection with annual general meetings;

•	authorize our board to issue “blank cheque” preferred shares;

•	prohibit us from engaging in a business combination with a person who acquires at least 15% of our common shares for a period of three years from the date such person acquired such common shares unless board and shareholder approval is obtained prior to the acquisition;

•	require that directors only be removed from office for cause by majority shareholder vote once the Lead Investors and the Loeb Entities cease to collectively hold at least 35% of our issued and outstanding shares;

•	allow each of Kelso and Pine Brook to appoint one director for so long as they hold not less than 25% of the number of shares respectively held as of December 22, 2011;

•	require a supermajority vote of shareholders to effect certain amendments to our memorandum of association and bye-laws; and

•	provide a consent right on the part of Kelso, Pine Brook and Daniel S. Loeb to any amendments to our bye-laws or memorandum of association which would have a material adverse effect on their rights for so long as they hold not less than 25% of the number of shares respectively held as of December 22, 2011.

PART II