Insurance float is an important aspect of our property and casualty reinsurance operation. In an insurance or reinsurance operation, float arises because premiums from reinsurance contracts and consideration received for deposit accounting contracts are collected before losses are paid and proceeds are returned on deposit accounting contracts. In some instances, the interval between cash receipts and payments can extend over many years. During this time interval, we invest the cash received and generate investment returns. Although float can be calculated using numbers determined under U.S. GAAP, float is a non-GAAP financial measure and, therefore, there is no comparable U.S. GAAP measure.
allows us to provide a product that is important to most of our reinsurance clients and to earn fee income over time. Because the Catastrophe Fund is capitalized in part by investments from unrelated parties, our financial exposure to the higher volatility and liquidity risks associated with property catastrophe losses is limited to our investment in the Catastrophe Fund, which as of December 31, 2013 was $54.8 million. We anticipate that our property catastrophe exposures will consistently remain relatively low when compared to many other reinsurers with whom we compete and there are no additional guarantees or recourse to us beyond our investment.
In addition, the amount of premiums written may vary from year to year and from period to period as a result of several factors, including changes in market conditions and our view of the long-term profit potential of individual lines of business.
Premiums for retroactive reinsurance contracts, where we have evaluated and concluded that risk transfer has occurred, are earned at the inception of the contract, as all of the underlying loss events covered by these contracts occurred in the past. Any underwriting profit at inception of a retroactive reinsurance contract is deferred and recognised over the estimated future payout of the loss and loss adjustment expenses reserves. Any underwriting loss at inception of a retroactive reinsurance contract is recognised immediately.
Our holdings in asset-backed securities (“ABS”) are substantially invested in residential mortgage-backed securities (“RMBS”). The balance of the ABS positions were held in commercial mortgage-backed securities, collateralized debt obligations and student loan asset-backed securities. These investments are valued using dealer quotes or recognised third-party pricing vendors. All of these classes of ABS are sensitive to changes in interest rates and any resulting change in the rate at which borrowers sell their properties, refinance, or otherwise pre-pay their loans. Investors in these classes of ABS may be exposed to the credit risk of underlying borrowers not being able to make timely payments on loans or the likelihood of borrowers defaulting on their loans. In addition, investors may be exposed to significant market and liquidity risks.
The key inputs for most OTC option contracts include notional, strike price, maturity, payout structure, current foreign exchange forward and spot rates, current market price of underlying and volatility of underlying.
The net underwriting loss from our property and casualty reinsurance segment for the year ended December 31, 2013 was $15.8 million, compared to a net underwriting loss of $28.7 million for the year ended December 31, 2012. The combined ratio for the year ended December 31, 2013 was 107.5% compared to 129.7% for the year ended December 31, 2012.
The change in gross premiums written for the year ended December 31, 2013 compared to the year ended December 31, 2012 was driven by:
We amended two existing contracts to increase coverage resulting in $21.0 million of premium.
For the year ended December 31, 2013, we recorded net investment income of $248.8 million, compared to $136.4 million for the year ended December 31, 2012.
As of December 31, 2013, Third Point Re could pay dividends in 2014 to the Company of approximately $325.9 million (2012 - $206.1 million) without providing an affidavit to the BMA.
Cash flows provided by financing activities for the year ended December 31, 2013 were $386.0 million compared to $228.7 million for the year ended December 31, 2012 and $605.4 million for the period from October 6, 2011 (date of incorporation) to December 31, 2011. The cash flows from financing activities for the year ended December 31, 2013 relate primarily to the net proceeds generated by our IPO and new deposit liability contracts entered into in the year ended December 31, 2013. The cash flows from financing activities for the year ended December 31, 2012 consisted of the receipt of subscriptions receivable, net of costs. The cash flows from financing activities for the period from October 6, 2011 (date of incorporation) to December 31, 2011 consisted of the net proceeds generated from the initial capitalization of the Company.