growth of our syndicate at Lloyd's which provides us with access to Lloyd's worldwide licenses and an extensive distribution network. During the first quarter of 2016 we commenced writing business through our underwriting division at Lloyd's in China;
The insurance segment underwriting income decreased by $4 million during 2016 compared to 2015. The decrease in underwriting income was primarily driven by an increase in catastrophe and weather-related losses and higher general and administrative expenses partially offset by a decrease in the current accident year loss ratio excluding catastrophe and weather-related losses and an increase in net favorable prior year loss reserve development.
Interest expense and financing costs, primarily related to interest due on our senior notes, in 2016 were consistent to 2015 as there were no significant changes to our debt and financing arrangements. A $24 million decrease in interest expense and financing costs for 2015, compared to 2014, primarily reflected the repayment of the $500 million 5.75% senior unsecured notes which were due on December 1, 2014.
ROACE is calculated by dividing net income available to common shareholders for the year by the average shareholders’ equity determined by using the common shareholders’ equity balances at the beginning and end of the year.
After adjusting for the impact of multi-year contracts and foreign exchange movements, gross premiums written increased by $171 million, or 8% in 2016 compared to 2015. The growth was primarily driven by new business in our liability, marine and other, catastrophe, agriculture, motor and credit and surety lines. In addition, our liability lines increased due to timing differences, our agriculture lines were impacted by a favorable treaty restructuring together with an increased treaty line size, while our credit and surety lines benefited from favorable premium adjustments. These increases were partially offset by a decrease in our property lines, primarily relating to non-renewals, decreases in line sizes on several treaties and the restructuring of a large treaty.
2015 versus 2014: Gross premiums written in 2015 decreased by $155 million or 7% compared to 2014. The decrease was significantly impacted by treaties written on a multi-year basis and foreign exchange movements. During 2015, the segment reported a decrease in the level of multi-year contracts written compared to 2014, resulting in a decrease in gross premiums written of $92 million in 2015 compared to 2014. The decrease in gross written premiums was also significantly impacted by foreign exchange movements in 2015, compared to 2014, as the strengthening of the U.S. dollar drove comparative premium decreases in the treaties denominated in foreign currencies, resulting in a decrease of $74 million in gross premiums written in 2015 compared to 2014.
As a holding company, AXIS Capital has no operations of its own and its assets consist primarily of investments in its subsidiaries. Accordingly, AXIS Capital’s future cash flows depend on the availability of dividends or other statutorily
See 'Underwriting Results - Group - Prior Year Development' for a discussion of the development recognized during the last three years.
We have also invested directly and indirectly (through a fund structure) in CLO-Equities, also known as “cash flow CLOs” in the industry. During 2016, the CLO-Equity market continued to be relatively inactive with only a small number of transactions being observed, particularly as it related to transactions involving our CLO-Equities. Given that all of our direct investments in CLO-Equities are past their reinvestment period, there is uncertainty over the remaining time until maturity. As such our direct investments in CLO-Equities are valued at the lower of the liquidation value and fair values based on an internally developed discounted cash flow model. Our indirect investments in CLO-Equities are valued using a discounted cash flow model prepared by an external manager with similar inputs as our internally developed discounted cash flow model. At December 31, 2016, the estimated fair value for CLO-Equities was $61 million (2015: $65 million).
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2016, 2015 and 2014
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of AXIS Capital Holdings Limited and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
At December 31, 2016, we had $12 million (2015: $12 million) of unfunded commitments as a limited partner in a multi-strategy hedge fund. Once the full amount of committed capital has been called by the General Partner, the assets will not be fully returned until after the completion of the fund's investment term which ends in March, 2019. The General Partner then has the option to extend the term by up to three years.
CMBS include mostly investment-grade bonds originated by non-agencies. The fair values of these securities are determined using a pricing model which uses dealer quotes and other available trade information along with security level characteristics to determine deal specific spreads. As the significant inputs used to price these securities are observable market inputs, the fair values of CMBS are classified as Level 2. Where pricing is unavailable from pricing services, we obtain non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.
At December 31, 2016, senior notes are recorded at amortized cost with a carrying value of $993 million (2015: $992 million) and a fair value of $1,050 million (2015: $1,058 million). The fair values of these notes are based on prices obtained from a third party pricing service and are determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As these spreads and the yields for the risk-free yield curve are observable market inputs, the fair values of senior notes are classified as Level 2.
The reporting of cumulative claims frequency for the reserve classes within our Insurance segment has been measured by counting the number of unique claim references including claim references assigned to nil and nominal case reserves. Claim references are grouped by claimant by loss event for each class of business. For certain insurance facilities and business produced by managing general agents where underlying data is reported to the Company in an aggregated format, the information necessary to provide cumulative claims frequency is not available therefore reporting of claims frequency is deemed to be impracticable.
This reserve class comprises our liability line of business and primarily targets primary and low/mid-level excess and umbrella commercial liability risks in the U.S. wholesale markets. Target industry sectors include construction, manufacturing, transportation and trucking and other services. The delay between the writing of a contract, notification and subsequent settlement of a claim in respect of that contract results in claim payment and reporting patterns that are typically long tail in nature. A consequence of the claim development tail is that this line of business is particularly exposed, amongst a number of uncertainties, to the potential for unanticipated levels of claim inflation relative to that assumed when the contracts were written. Factors influencing claim inflation on this class can include, but are not limited to, underlying economic and medical inflation, judicial inflation, mass tort and changing social trends.
We currently issue restricted stock units to our employees with service conditions, vesting generally over a period of 3 or 4 years. The 3 year awards are subject to cliff vesting or a graded vesting schedule. With the 4 year awards, 25% of the award vests annually. We also grant performance-based stock awards to certain employees, which represent the right to receive a specified number of common shares in the future, based upon the achievement of established performance criteria during the applicable performance period. The awards have a scaled performance metric. At December 31, 2016, we anticipate that the established performance based criteria for these awards are likely to be achieved, and the related expense is based on a review of current and projected performance criteria.
The following table provides a reconciliation of the beginning and ending balance of nonvested restricted stock (including restricted stock units) for the year ended December 31, 2016: