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AXIS Syndicate 1686
Syndicate Annual Reports and Accounts
for the year ended 31 December 2025
For Tagging convenience:
Both for Profit & Loss, Balance Sheet
Current Period
1 January 2025 - 31 December 2025
Prior Period
1 January 2024 - 31 December 2024
Functional Currency
USD
Presentational Currency
USD
PAGE
DIRECTORS AND ADMINISTRATION
2
ACTIVE UNDERWRITER'S REPORT
3
MANAGING AGENT'S REPORT
4
- 8
STATEMENT OF MANAGING AGENT'S RESPONSIBILITIES
9
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SYNDICATE 1686
10
- 13
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
14
- 15
STATEMENT OF CHANGES IN MEMBERS' BALANCES
15
BALANCE SHEET - ASSETS
16
BALANCE SHEET - LIABILITIES
17
STATEMENT OF CASH FLOWS
18
NOTES TO THE FINANCIAL STATEMENTS
19 - 45
AXIS SYNDICATE 1686
CONTENTS
________________________________________________________________________________________________________
_____________________________________________________________________________________________________1
MANAGING AGENT
DIRECTORS
Stephen Cane (Chairman)*
* Independent
Tadeusz Dziurman*
Non-Executive
James Mollett
Elanor Hardwick*
John Owen
Axel Theis*
Toby Read
Sara Farrup (appointed 3 March 2025)
COMPANY SECRETARY
Leena Modi
MANAGING AGENT'S REGISTERED OFFICE
52 Lime Street
London
EC3M 7AF
United Kingdom
MANAGING AGENT'S REGISTERED NUMBER
08702952
ACTIVE UNDERWRITER
Toby Read
SOLICITORS
Willkie Farr & Gallagher (UK) LLP
27th Floor, Citypoint
1 Ropemaker Street
London
EC2Y 9AW
United Kingdom
AUDITOR
Deloitte LLP
2 New Street Square
London
EC4A 3HQ
United Kingdom
PRINCIPAL BANKERS
Citibank NA
RBC Dexia
Citigroup Centre
Investor Services
33 Canada Square
155 Wellington Street W
Canary Wharf
Toronto, Ontario
London, E14 5LB
M5V 3K7
United Kingdom
Canada
AXIS SYNDICATE 1686
DIRECTORS AND ADMINISTRATION
________________________________________________________________________________________________________
_____________________________________________________________________________________________________2
Syndicate 1686 (the Syndicate) is a Lloyd’s Syndicate of AXIS Capital Holdings Limited (ACHL), the Bermuda based
holding company for the AXIS group of companies (AXIS). The Syndicate is managed by AXIS Managing Agency Limited
(AMAL). ACHL is the Syndicate’s sole capital provider with 100% ownership of AXIS Corporate Capital UK Limited
(ACCUKL) and AXIS Corporate Capital UK II Limited (ACCUKIIL) through other, wholly owned, legal entities. The
Syndicate commenced underwriting for contracts incepting from 1 January 2014 onwards.
For the financial year ended 31 December 2025, the Syndicate achieved gross premiums written of USD 2,240.1m,
representing growth of 14% over 2024.
Growth was spread over a number of larger Specialty classes where AXIS has
strong leadership positions, in particular the Syndicate saw strong production through its Construction, Political Risks,
Marine War and Marine Specie businesses.
On the delegated portfolio the Syndicate continued to deliver profitable growth
in its UK and International Property Binder businesses as well as increased Transaction Liability premiums due to elevated
global M&A activity.
The Syndicate executed on its 2025 plan to scale its multi-line Portfolio Solutions business and also
saw growth through strategic initiatives, including most notably the launch of its AXIS Capacity Solutions business which
will develop and manage accretive structured strategic partner initiatives to accompany the Syndicate’s existing portfolio.
Financial year 2025’s activities continue to underpin the Syndicate’s long-term goal of sustainable top quartile underwriting
performance at Lloyd's. In 2025 the Syndicate produced an underwriting profit of USD 172.9m (2024: profit of USD
174.6m).
The Syndicate's Net Combined Ratio for the year is 89.1%, which is a 1.3pt deterioration over 2024.
The
Syndicate’s underlying performance, which is measured excluding the impact of losses arising from natural catastrophes,
has remained robust, further evidencing the success of its multi-year performance improvement plan and repositioning of
the portfolio.
Pricing conditions, whilst beginning to show signs of softening in some lines, have remained strong during
2025 and have supported continued growth across a number of premium adequate markets.
As anticipated, risk adjusted rate change began to deteriorate during 2025, falling from peaks after a number of years of
compounding rate improvement.
Overall risk adjusted rate change for the Syndicate was -3.8% against a plan of -4.8%, but
with accelerating rate pressure in a number of lines, in particular Property and other short tail asset classes.
After many
years of rate improvements, the Syndicate portfolio continues to be broadly price adequate across almost all lines and the
focus is now on cycle management to balance rate against trend and maintain underwriting profitability.
Performance management of the Syndicate is continuously practised given the dynamic nature of the insurance market.
Disciplined remediation decisions, together with growth in target business lines has delivered consistent profitable net
combined ratios.
The advent of new distribution models in Lloyd’s through multi-line Portfolio Solutions and innovative
capital structures can provide complementary new business opportunities, which, when coupled with a continued focus on
underwriting excellence, investments in our talent and data and analytics, will enable the Syndicate to deliver sustained
profitable underwriting performance into 2026 and beyond.
Toby Read
Active Underwriter
Date: 19 February 2026
AXIS SYNDICATE 1686
ACTIVE UNDERWRITER'S REPORT
___________________________________________________________________________________________________
_____________________________________________________________________________________________________3
The directors of the Managing Agent, AMAL, present their annual report for the Syndicate for the year ended 31 December
2025.
This annual report is prepared using the annual basis of accounting as required by Statutory Instrument No 1950 of 2008,
The Insurance Accounts Directive (Lloyd's Syndicate and Aggregate Accounts) Regulations 2008 (Lloyd's Regulations
2008) and in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards FRS 102 “The Financial Reporting Standards applicable in the UK and Ireland” and FRS 103 “Insurance
Contracts”) and applicable law.
This annual report is also prepared in accordance with the Lloyd’s Syndicate Accounts Instructions Version 3.1 as modified
by the Frequently Asked Questions Version 1.1 issued by Lloyd’s.
This annual report has been iXBRL tagged in accordance with the Lloyd's XBRL taxonomy Version 2.0, as issued by
Lloyd's.
RESULTS
The results of the Syndicate are set out on pages 14 and 15.
PRINCIPAL ACTIVITY AND REVIEW OF THE BUSINESS
The Syndicate’s principal activity is the underwriting of direct insurance and reinsurance business in the Lloyd’s market.
The Syndicate predominately writes marine, property, terrorism, professional lines, casualty, accident and health, political
risk and reinsurance.
The Syndicate's key financial performance indicators during the year were as follows:
2025
2024
Change
USD '000
USD '000
%
Gross written premium
2,240,053
1,966,873
13.9 %
Net written premium
1,737,550
1,570,196
10.7 %
Net earned premium
1,571,605
1,420,864
10.6 %
Other technical income, net of reinsurance
728
904
(19.7)%
Net claims
(763,088)
(667,372)
14.3 %
Acquisition costs
(468,824)
(428,110)
9.5 %
Operating costs
(167,507)
(151,680)
10.4 %
Net technical result (excl. investment return)
172,913
174,606
(1.0)%
Net loss ratio
48.6 %
47.0 %
Net acquisition ratio
29.8 %
30.1 %
Net expense ratio
10.7 %
10.7 %
Combined ratio
89.1 %
87.8 %
On 25 March 2025, regulatory approval was granted for the Syndicate to complete a loss portfolio transfer (LPT)
reinsurance agreement with
Enstar Group Limited. The agreement covers reinsurance segment reserves predominantly
attributable to casualty portfolios related to 2021 and prior years of account.
The LPT reinsurance agreement is provided by
Enstar's wholly owned subsidiary, Cavello Bay Reinsurance Limited.
The income statement includes USD 60.6m of reinsurance premium for the LPT and USD 61.4m of reinsurance recoveries
in net claims. The combined ratio of 89.1% includes the impact of the LPT. Excluding the effect of the LPT the combined
ratio would be 89.5%. The net claims ratio has reduced by 1.9% from 50.5% to 48.6% as a result of the LPT with net
acquisition and net expense ratios' increasing by 1.1% and 0.4% respectively.
AXIS SYNDICATE 1686
MANAGING AGENT'S REPORT
______________________________________________________________________________________________________
_____________________________________________________________________________________________________4
PRINCIPAL ACTIVITY AND REVIEW OF THE BUSINESS (continued)
Climate Change
AXIS remains focused on addressing the impact of climate change. AXIS has an Environmental Working Group, which
includes AMAL representation, to ensure that the potential risks from climate change are identified and then managed as
part of the Enterprise Risk Management framework.
Additionally AXIS has developed a plan to ensure that the exposures
in its managed syndicate are systematically assessed and monitored as appropriate, reviewing its underwriting strategy and
potential impact in light of climate related risks as detailed in note 20 on page 31.
AXIS continues to assess and understand its impact as a company and as a business on the climate.
AXIS’ policy limiting
thermal coal and oil sands underwriting and investment came into effect on 1 January 2020. Further details on the group
wide energy and carbon reduction initiative have been documented in the Corporate Citizenship section of the AXIS Capital
Holdings annual report which can be obtained from the AXIS website.
The Managing Agent is required to address the energy reporting requirements in relation to streamlined energy and carbon
reporting. These reporting requirements for AMAL are consolidated within the streamlined energy and carbon reporting
section of the AXIS Specialty UK Holdings Limited annual accounts.
Energy Transition Syndicate 2050
In 2024 AXIS established a new Syndicate dedicated to providing insurance solutions that support the global energy
transition to net zero.
AXIS Energy Transition Syndicate 2050 commenced underwriting on 1 April 2024 and provides a
range of specialty insurance coverages to companies, organisations and countries solely related to assets or activities that are
playing a contributory role in the global transition away from carbon based technologies.
The syndicate is managed by
AMAL.
FUTURE DEVELOPMENTS
Both ACCUKL and ACCUKIIL participated on the 2023 and 2024 years of account of Syndicate 1686.
The 2025 year of
account is wholly aligned to ACCUKIIL, and ACCUKIIL will continue to be the sole corporate member for the 2026 year
of account.
The Syndicate will distribute profits in respect of the 2023 year of account to ACCUKL and ACCUKIIL in June 2026.
AXIS SYNDICATE 1686
MANAGING AGENT'S REPORT
______________________________________________________________________________________________________
_____________________________________________________________________________________________________5
PRINCIPAL RISKS AND UNCERTAINTIES
The Syndicate's principal risks are insurance (underwriting and reserving), credit, market, liquidity and operational risks that
arise as a result of doing business.
Insurance risk
Insurance risk is the inherent uncertainty as to the occurrence, amount and timing of insurance liabilities transferred to the
Syndicate through the underwriting process. The two main components are underwriting risk and reserve risk.
Underwriting risk represents the risk that premiums will not be sufficient to cover future incurred losses. Underwriting risk
is managed through rigorous protocols, including peer review and underwriting guidelines, which provide a framework for
consistent pricing and risk analysis while ensuring alignment to the risk appetites and limits. The Syndicate also mitigates
underwriting risk through the purchase of reinsurance.
Reserving risk represents the risk that loss reserves established to cover losses already incurred are insufficient. The
estimation of reserves is subject to uncertainty due to the fact that the settlement of claims that have arisen before the
balance sheet date is dependent on future events and developments. There are many factors that would cause loss reserves to
increase or decrease, which include, but are not limited to, emerging claims and coverage issues, changes in the legislative,
regulatory, social and economic environment and unexpected changes in loss inflation. The Syndicate seeks to mitigate
reserving risk by, among other things, diligently monitoring claims and maintaining a structured process and control
framework for determining carried reserves.
The Syndicate’s approved business plan sets out targets for volumes, pricing, line sizes and retention by class of business.
The AMAL Board then monitors performance against the business plan throughout the year. The Managing Agent also
mitigates insurance risk through the purchase of reinsurance.
Within insurance risk, the Syndicate recognises the following further sub categories of this risk:
1.
Natural peril catastrophe risk, including climate change impacts
2.
Man-made catastrophe risk
3.
Reserving risk
4.
Claims handling risk
5.
Pricing risk
For further details on these risks refer to note 20.
Credit risk
Credit risk represents the risk of incurring financial loss due to the diminished creditworthiness (reduced financial strength
and ultimately, possible default) of the Syndicate’s third-party counterparties.
The key aspect of credit risk is the risk of
default by one or more of the Syndicate’s reinsurers or intermediaries such as brokers and coverholders. The AMAL
Board’s policy is that the Syndicate will only reinsure with approved reinsurers, supported by collateralisation where
required. The AXIS Capital Reinsurance Security Committee monitors reinsurer ratings and is required to approve all new
reinsurers before business is placed with them. The Syndicate also recognises the credit risk related to its premium
receivables, including those from brokers and other intermediaries. In order to mitigate this risk, the Syndicate's credit
control team monitors aged receivables contractually due from these counterparties, and follows up with them to ensure they
are promptly paid.
Market risk
Market risk is the risk that financial instruments may be negatively impacted by movements in financial market prices or
rates such as equity prices, interest rates, credit spreads and foreign exchange rates. Fluctuations in market rates primarily
affect the investment portfolio. Through asset and liability management, the Managing Agent aims to ensure that risks
influence both the economic value of investments and underwriting liabilities in the same way, thus mitigating the effect of
market fluctuations.
The Syndicate supplements its asset-liability management with various internal policies and limits.
AXIS SYNDICATE 1686
MANAGING AGENT'S REPORT
______________________________________________________________________________________________________
_____________________________________________________________________________________________________6
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Liquidity risk
Liquidity risk is the risk that the Syndicate may not have sufficient financial resources to meet its obligations when they fall
due, or would have to incur excessive costs to do so. The Managing Agent aims to ensure that the Syndicate maintains
adequate liquidity to meet its liquidity needs under both normal and stressed conditions, such as following a catastrophic
event. The Managing Agent manages liquidity through risk limits which define the minimum percentage of the Syndicate’s
cash and investments to mature within a defined time frame, in addition to undertaking stress testing to ensure that the
Syndicate would be able to withstand extreme loss events and still remain liquid. AXIS Specialty Finance Plc provides a
credit facility to the Syndicate to ensure that it can meet liquidity requirements even under extreme circumstances.
The
Syndicate also provides an inter-syndicate loan facility to Syndicate 2050 to ensure that it can meet liquidity requirements.
Operational risk
Operational risk represents the risk of both financial and non-financial loss as a result of inadequate processes, system
failures, human error or external events, including but not limited to direct or indirect financial loss, reputational damage,
customer dissatisfaction, legal and regulatory penalties or impacts from third parties including coverholders or third-party
administrators (TPA). The Syndicate manages operational risks through sound corporate and risk governance and
transaction type operational risks are managed through the application of process controls throughout the business which are
reviewed on a regular basis. In testing these controls, AXIS undertakes regular underwriting and claim peer audits,
supplemented by the work of the internal audit team. A risk register, capturing all known significant operational risks faced
by the Syndicate and the associated risk assessments, is periodically reviewed by the Risk Committee of the Board.
The Managing Agent also considers regulatory risk.
Regulatory risk represents the risk arising from failure to comply with
legal, statutory or regulatory obligations, including applicable laws, rules, and codes of conduct applicable to business
activities. The Managing Agent is required to comply with the requirements of the Financial Conduct Authority (FCA),
Prudential Regulatory Authority (PRA) and Lloyd’s. Lloyd’s requirements include those imposed on the Lloyd’s market by
overseas regulators, particularly in respect of US situs business.
The Managing Agent has a Compliance Officer who monitors business activity and regulatory developments and assesses
any effects on the Syndicate.
The Syndicate has no appetite for failing to treat customers fairly. The Syndicate manages and
monitors its conduct risk through a suite of risk indicators and reporting metrics as part of its documented conduct risk
framework.
For a more detailed analysis of the insurance and financial risks faced by the Syndicate and how these risks are managed
refer to note 20.
DIRECTORS
Details of the directors of the Managing Agent that served during the year and up to the date of signing of the Syndicate
annual accounts are provided on page 2.
GOING CONCERN
As detailed in note 24: Funds at Lloyd's, the Syndicate's Economic Capital Assessment (ECA) is supported by Funds at
Lloyd's (FAL) primarily provided by affiliate companies, AXIS Specialty Limited (ASL) and ACCUKIIL own funds. These
funds are intended primarily to cover circumstances where Syndicate assets prove insufficient to meet participating
members' underwriting liabilities. The Managing Agent is able to make a call on the members' FAL to meet liquidity
requirements or to settle losses if required.
The directors have a reasonable expectation that the Syndicate has adequate resources to continue in operational existence
for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the annual financial statements.
Further details regarding the adoption of the going concern basis can be found in note 1.
DISCLOSURE OF INFORMATION TO THE AUDITOR
So far as each person who was a director of the Managing Agent at the date of approving the report is aware, there is no
relevant audit information, being information needed by the Syndicate auditor in connection with the auditor's report, of
which the auditor are unaware. Each director has taken all the steps that he or she ought to have taken as a director to
become aware of any relevant audit information and to establish that the Syndicate's auditor are aware of that information.
AXIS SYNDICATE 1686
MANAGING AGENT'S REPORT
______________________________________________________________________________________________________
_____________________________________________________________________________________________________7
EVENTS SINCE FINANCIAL YEAR END
There have been no significant events affecting the Syndicate since the financial year end other than those highlighted in the
future developments section.
INDEPENDENT AUDITOR
Deloitte LLP acted as the Syndicate’s auditor during the year under review. Pursuant to Section 14(2) of Schedule 1 of the
Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, the auditor will be deemed
reappointed and Deloitte LLP will therefore continue in office.
SYNDICATE ANNUAL GENERAL MEETING
In accordance with the Syndicate Meetings (Amendment No 1) Byelaw (No 18 of 2000) the Managing Agent does not
propose holding an annual meeting this year. Objections to this proposal or the intention to reappoint the auditor for a
further 12 months can be made by Syndicate members within 21 days of the issue of these financial statements.
On behalf of the Board
James Mollett
Finance Director
Date: 19 February 2026
AXIS SYNDICATE 1686
MANAGING AGENT'S REPORT
______________________________________________________________________________________________________
_____________________________________________________________________________________________________8
The directors of the Managing Agent are responsible for preparing the Syndicate annual accounts in accordance with
applicable law and regulations.
The Insurance Accounts Directive (Lloyd's Syndicate and Aggregate Accounts) Regulations 2008 require the Managing
Agent to prepare Syndicate annual accounts at 31 December each year in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards) including FRS 102, the Financial Reporting
Standard applicable in the UK and Republic of Ireland and FRS 103 "Insurance Contracts", and applicable laws. The
Managing Agent is also required to prepare the Syndicate annual accounts in accordance with the Lloyd’s Syndicate
Accounts Instructions Version 3.1 as modified by the Frequently Asked Questions Version 1.1 issued by Lloyd’s.
The Syndicate annual accounts are required by law to give a true and fair view of the state of affairs of the Syndicate as at
that date and of its profit or loss for that year.
In preparing the Syndicate annual accounts, the Managing Agent is required to:
•
select suitable accounting policies and then apply them consistently, subject to changes arising on the adoption of
new accounting standards in the year;
•
make judgements and estimates that are reasonable and prudent;
•
state whether applicable accounting standards have been followed, subject to any material departures disclosed and
explained in the Syndicate annual accounts; and
•
prepare the Syndicate annual accounts on the basis that the Syndicate will continue to write future business unless
it is inappropriate to presume that the Syndicate will do so.
The directors of the Managing Agent are responsible for keeping adequate accounting records which disclose with
reasonable accuracy at any time the financial position of the Syndicate and enable it to comply with the Insurance Accounts
Directive (Lloyd's Syndicate and Aggregate Accounts) Regulations 2008. They are also responsible for the system of
internal control, for safeguarding the assets of the Syndicate and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors of the Managing Agent are responsible for the preparation and review of the iXBRL tagging that has been
applied to the Syndicate Accounts in accordance with the instructions issued by Lloyd’s, including designing, implementing
and maintaining systems, processes and internal controls to result in tagging that is free from material non-compliance with
the instructions issued by Lloyd’s, whether due to fraud or error.
The directors of the Managing Agent are responsible for the maintenance and integrity of the corporate and financial
information included on the holding company's website. Legislation in the United Kingdom governing the preparation and
dissemination of annual accounts may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge the syndicate accounts, including the iXBRL tagging applied to these
accounts, comply with the requirements of the Lloyd's Syndicate Accounts Instructions version 3.1 as modified by the
Frequently Asked Questions version 1.1 issued by Lloyd's.
James Mollett
Finance Director
Date: 19 February 2026
AXIS SYNDICATE 1686
STATEMENT OF MANAGING AGENT'S RESPONSIBILITIES
________________________________________________________________________________________________________
_____________________________________________________________________________________________________9
Report on the audit of the syndicate annual financial statements
Opinion
In our opinion the syndicate annual financial statements of Syndicate 1686 (the ‘syndicate’):
•
give a true and fair view of the state of the syndicate’s affairs as at 31 December 2025 and of its profit for the year
then ended;
•
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice,
including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic
of Ireland”; and
•
have been prepared in accordance with the requirements of The Insurance Accounts Directive (Lloyd’s Syndicate
and Aggregate Accounts) Regulations 2008 and sections 1 and 5 of the Syndicate Accounts Instructions Version
3.1
as modified by the Frequently Asked Questions Version 1.1 issued by Lloyd’s (the “Lloyd’s Syndicate
Accounts Instructions”).
We have audited the syndicate annual financial statements which comprise:
•
the statement of profit or loss and other comprehensive income;
•
the balance sheet;
•
the statement of changes in members’ balances;
•
the statement of cash flows; and
•
the related notes 1 to 29
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom
Accounting Standards, including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK
and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)), applicable law and the
Lloyd’s Syndicate Accounts Instructions. Our responsibilities under those standards are further described in the auditor's
responsibilities for the audit of the syndicate annual financial statements section of our report.
We are independent of the syndicate in accordance with the ethical requirements that are relevant to our audit of the
syndicate annual financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical
Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the managing agent’s use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the syndicate’s ability to continue in operations for a period
of at least twelve months from when the syndicate financial statements are authorised for issue.
Our responsibilities and the responsibilities of the managing agent with respect to going concern are described in the
relevant sections of this report.
Other information
The other information comprises the information included in the annual report, other than the syndicate annual financial
statements and our auditor’s report thereon. The managing agent is responsible for the other information contained within
the annual report. Our opinion on the syndicate annual financial statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the syndicate annual financial statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material misstatement themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
AXIS SYNDICATE 1686
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SYNDICATE 1686
________________________________________________________________________________________________________
_____________________________________________________________________________________________________10
Responsibilities of managing agent
As explained more fully in the managing agent’s responsibilities statement, the managing agent is responsible for the
preparation of the syndicate annual financial statements and for being satisfied that they give a true and fair view, and for
such internal control as the managing agent determines is necessary to enable the preparation of syndicate annual financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the syndicate annual financial statements, the managing agent is responsible for assessing the syndicate’s
ability to continue in operation, disclosing, as applicable, matters related to the syndicate’s ability to continue in operation
and to use the going concern basis of accounting unless the managing agent intends to cease the syndicate’s operations, or
has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the syndicate annual financial statements
Our objectives are to obtain reasonable assurance about whether the syndicate annual financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these syndicate annual financial statements.
A further description of our responsibilities for the audit of the syndicate annual financial statements is located on the FRC’s
website at:
www.frc.org.uk/auditorsresponsibilities
. This description forms part of our auditor’s report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud is detailed below.
We considered the nature of the syndicate and its control environment, and reviewed the syndicate’s documentation of their
policies and procedures relating to fraud and compliance with laws and regulations. We also enquired of management, those
charged with governance and internal audit about their own identification and assessment of the risks of irregularities
.
We obtained an understanding of the legal and regulatory frameworks that the syndicate operates in, and identified the key
laws and regulations that:
•
had a direct effect on the determination of material amounts and disclosures in the financial statements. These
included the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, the
Lloyd’s Syndicate Accounting Byelaw (no. 8 of 2005) and the Lloyd’s Syndicate Accounts Instructions; and
•
do not have a direct effect on the financial statements but compliance with which may be fundamental to the
syndicate’s ability to operate or to avoid a material penalty. These included
the requirements of Solvency UK.
We discussed among the audit engagement team including relevant internal specialists such as actuarial and IT specialists
regarding the opportunities and incentives that may exist within the organisation for fraud and how and where fraud might
occur in the financial statements.
As a result of performing the above, we identified the greatest potential for fraud
in the following areas, and our procedures
performed to address them are described below:
•
Valuation of certain IBNR technical provisions classes, including long tail classes, incorporates assumptions and
methodologies requiring significant management judgement and therefore there is potential for management bias
.
There is also a risk of overriding controls by making late adjustments to the technical provisions.
In response to these risks, we performed the following:
â—¦
Engaged our actuarial specialists to:
â–ª
Challenge and assess the appropriateness of the methodology and assumptions used by the syndicate’s
actuarial function;
â–ª
Carry out independent reserve estimations for selected classes of business;
â–ª
Perform benchmarking analysis for the development patterns for selected classes of business; and
â–ª
Support our audit of the catastrophe reserves, by examining management’s reserving exercise and
performing benchmarking analysis over reserving for known significant market-wide catastrophe losses
over more recent years of account.
In support of the above work, we also tested the relevant controls around the data, models and assumptions used to
determine the syndicate’s reserves and tested the integrity of the data used in the actuarial calculations by agreeing it to the
underlying syndicate records. We also tested for late adjustments to the technical provisions.
AXIS SYNDICATE 1686
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SYNDICATE 1686
________________________________________________________________________________________________________
_____________________________________________________________________________________________________11
•
Estimation of pipeline premiums requires significant management judgement and therefore there is potential for
management bias through manipulation of core assumptions. In response our testing included:
â–ª
Testing the relevant controls over the calculation and judgements made in determining the estimate;
â–ª
Reviewing the evidence and support used by management in making the estimate, ensuring this remains
relevant to the nature of the estimate;
â–ª
comparing management’s model results to an independently created in house model to ensure the output
was accurate and free from manipulation; and
â–ª
comparing management’s estimates on prior year policies against actual premiums received to support the
accuracy of the estimate.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of
management override. In addressing the risk of fraud through management override of controls, we tested the
appropriateness of journal entries and other adjustments; assessed whether the judgements made in making accounting
estimates are indicative of a potential bias; and evaluated the business rationale of any significant transactions that are
unusual or outside the normal course of business.
In addition to the above, our procedures to respond to the risks identified included the following:
•
reviewing financial statement disclosures by testing to supporting documentation to assess compliance with
provisions of relevant laws and regulations described as having a direct effect on the financial statements;
•
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of
material misstatement due to fraud;
•
enquiring of management, internal audit and in-house legal counsel concerning actual and potential litigation and
claims, and instances of non-compliance with laws and regulations; and
•
reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing
correspondence with Lloyd’s and the Prudential Regulation Authority (PRA).
Report on other legal and regulatory requirements
Opinions on other matters prescribed by The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate
Accounts) Regulations 2008 and the Lloyd’s Syndicate Accounts Instructions
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the managing agent’s report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
•
the managing agent’s report has been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the syndicate and its environment obtained in the course of the audit, we
have not identified any material misstatements in the managing agent’s report.
Matters on which we are required to report by exception
Under The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 we are required to
report in respect of the following matters if, in our opinion:
•
the managing agent in respect of the syndicate has not kept adequate accounting records; or
•
the syndicate annual financial statements are not in agreement with the accounting records; or
•
we have not received all the information and explanations we require for our audit.
We have nothing to report in respect of these matters.
Use of our report
This report is made solely to the syndicate’s members, as a body, in accordance with regulation 10 of The Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008. Our audit work has been undertaken so
that we might state to the syndicate’s members those matters we are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
syndicate’s members as a body, for our audit work, for this report, or for the opinions we have formed.
AXIS SYNDICATE 1686
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SYNDICATE 1686
________________________________________________________________________________________________________
_____________________________________________________________________________________________________12
As required by the Lloyd’s Syndicate Accounts Instructions, these financial statements will form part of the Electronic
Format Annual Syndicate Accounts filed with the Council of Lloyd’s and published on the Lloyd’s website. This auditors’
report provides no assurance over whether the Electronic Format Annual Syndicate Accounts have been prepared in
compliance with Section 2 of the Lloyd’s Syndicate Accounts Instructions. We have been engaged to provide assurance on
whether the Electronic Format Annual Syndicate Accounts has been prepared in compliance with Section 2 of the Lloyd’s
Syndicate Accounts Instructions and will report privately to the directors of the managing agent and the Council of Lloyd’s
on this.
Kirstie Hanley (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
19
th
February 2026
AXIS SYNDICATE 1686
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SYNDICATE 1686
________________________________________________________________________________________________________
_____________________________________________________________________________________________________13
Financial
year ended
Financial
year ended
31 December
31 December
2025
2024
Notes
USD '000
USD '000
Gross premiums written
3
Outward reinsurance premiums
(502,503 )
(396,677 )
Premiums written, net of reinsurance
Changes in unearned premium
Change in the gross provision for unearned premiums
4
(208,231 )
(149,025 )
Change in the provision for unearned premiums, reinsurers’ share
4
(307 )
Net change in provisions for unearned premiums
(165,945 )
(149,332 )
Earned premiums, net of reinsurance
Allocated investment return transferred from the non-technical account
9
Other technical income, net of reinsurance
1,745,354
1,480,058
Claims paid
Gross amount
4
(766,257 )
(679,601 )
Reinsurers’ share
4
Net claims paid
(515,863 )
(473,065 )
Change in the provision for claims
Gross amount
4
(292,122 )
(195,093 )
Reinsurers’ share
4
Net change in provisions for claims
(247,225 )
(194,307 )
Claims incurred, net of reinsurance
(763,088 )
(667,372 )
Net operating expenses
5
(636,332 )
(579,790 )
Balance on the technical account - general business
AXIS SYNDICATE 1686
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME:
TECHNICAL ACCOUNT - GENERAL BUSINESS
FOR THE YEAR ENDED 31 DECEMBER 2025
________________________________________________________________________________________________________
_____________________________________________________________________________________________________14
Financial
year ended
Financial
year ended
31 December
31 December
2025
2024
Notes
USD '000
USD '000
Balance on the technical account - general business
Investment income
9
Realised gains/(losses) on investments
9
(5,451 )
Unrealised gains/(losses) on investments
9
(16,491 )
Investment expenses and charges
9
(2,709 )
(2,020 )
Total investment return
Allocated investment return transferred to the general business technical
account
(173,020 )
(58,290 )
345,933
232,896
Gain/(loss) on foreign exchange
(55,663 )
PROFIT FOR THE FINANCIAL YEAR
All amounts arise from continuing activities.
There were no recognised gains or losses other than those included in the statement of comprehensive income.
There is no
other comprehensive income as the Syndicate's functional and presentational currency is the US Dollar (USD).
The accompanying notes from page 19 to 45 form an integral part of these financial statements.
STATEMENT OF CHANGES IN MEMBERS' BALANCES
Financial
year ended
Financial
year ended
31 December
31 December
2025
2024
USD '000
USD '000
Members' balances brought forward at 1 January
Total comprehensive income/(loss) for the year
Losses collected in relation to distribution on closure of underwriting year
Payments of profit to members' personal reserve funds
(73,562 )
(91,336 )
Other
Members' balances carried forward at 31 December
AXIS SYNDICATE 1686
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME:
NON - TECHNICAL ACCOUNT -
GENERAL BUSINESS
FOR THE YEAR ENDED 31 DECEMBER 2025
________________________________________________________________________________________________________
_____________________________________________________________________________________________________15
2025
2024
Notes
USD '000
USD '000
ASSETS
Investments
Financial investments
11
Deposits with ceding undertakings
Reinsurers' share of technical provisions
Provision for unearned premiums
4
Claims outstanding
4
Debtors
Debtors arising out of direct insurance operations
12
Debtors arising out of reinsurance operations
13
Other debtors
14
Other assets
Cash at bank and in hand
15
Prepayments and accrued income
Accrued interest and rent
Deferred acquisition costs
4
Other prepayments and accrued income
TOTAL ASSETS
AXIS SYNDICATE 1686
BALANCE SHEET - ASSETS
AS AT 31 DECEMBER 2025
________________________________________________________________________________________________________
_____________________________________________________________________________________________________16
2025
2024
Notes
USD '000
USD '000
MEMBERS' BALANCE
Total capital and reserves
Members' balances
LIABILITIES
Technical provisions
Provision for unearned premiums
4
Claims outstanding
4
Creditors
Creditors arising out of direct insurance operations
17
Creditors arising out of reinsurance operations
18
Other creditors including taxation and social security
19
Accruals and deferred income
TOTAL LIABILITIES
TOTAL LIABILITIES, CAPITAL AND RESERVES
The Syndicate financial statements were approved by the Board of AXIS Managing Agency Limited on 17 February 2026
and were signed on its behalf by:
___________________________________
James Mollett
Finance Director
19 February 2026
AXIS SYNDICATE 1686
BALANCE SHEET - LIABILITIES
AS AT 31 DECEMBER 2025
________________________________________________________________________________________________________
_____________________________________________________________________________________________________17
2025
2024
USD'000
USD'000
Profit for the financial year
Adjustments:
Increase in gross technical provisions
(Increase) / decrease in reinsurers' share of gross technical provisions
(100,027 )
(Increase) / decrease in debtors
(169,820 )
(Decrease) / increase in creditors
(81,250 )
Movement in other assets/liabilities
(71,714 )
(11,097 )
Investment return
(173,020 )
(58,290 )
Foreign exchange
(20,029 )
Other
Net cash flows from operating activities
Cash flows from investing activities
Purchase of equity and debt instruments
(2,748,495 )
(1,813,575 )
Sale of equity and debt instruments
Investment income received
Other
Net cash flows from investing activities
(366,436 )
(377,429 )
Cash flows from financing activities
Distribution of profit
(73,562 )
(91,337 )
Net cash flows from financing activities
(73,562 )
(91,337 )
Net increase / (decrease) in cash and cash equivalents
(10,068 )
(47,096 )
Cash and cash equivalents at the beginning of the year
Foreign exchange on cash and cash equivalents
(22,805 )
Cash and Cash equivalents at the end of the year
15
AXIS SYNDICATE 1686
STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
________________________________________________________________________________________________________
_____________________________________________________________________________________________________18
1.
BASIS OF PREPARATION
Statement of compliance
The annual report and accounts have been prepared on a going concern basis and in compliance with the Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and FRS 102 “The Financial Reporting
Standard applicable in the UK and Republic of Ireland” (FRS 102) and FRS 103 "Insurance Contracts" (FRS 103), being
applicable UK GAAP accounting standards, and in accordance with the provisions of Schedule 3 of the Large and Medium-
sized Companies and Groups (Accounts and Reports) Regulations relating to insurance companies and the Lloyd’s
Syndicate Accounts Instructions Version 3.1 as modified by the Frequently Asked Questions Version 1.1 issued by Lloyd’s.
This annual report has been iXBRL tagged in accordance with the Lloyd's XBRL taxonomy Version 2.0, as issued by
Lloyd's.
The annual report and accounts are prepared under the historical cost convention except for certain financial instruments
which are measured at fair value. The annual report and accounts are prepared in USD which is the functional and
presentational currency of the Syndicate. The annual report and accounts are presented in thousands of US Dollars (USD
'000) unless otherwise stated.
The directors regard AXIS Capital Holdings Limited, a company incorporated in Bermuda, as the ultimate parent of
Syndicate 1686.
Going concern
The Syndicate's business activities, performance and position along with the objectives, policies and processes for managing
its principal risks and uncertainties are set out in the Managing Agent’s Report on pages 4-8. As detailed in note 24, the
Syndicate's ECA is supported by FAL primarily provided by affiliate companies, ASL and ACCUKIIL own funds. There is
no material uncertainty regarding the Syndicate’s ability to meet its liabilities as they fall due. The directors believe that the
Syndicate is well positioned to manage its business risks successfully in the current economic environment.
The directors
have continued to review the business plans, liquidity and operational resilience of the Syndicate.
As such, the directors
have a reasonable expectation that the Syndicate has adequate resources to continue in operational existence for the
foreseeable future and continue to adopt the going concern basis of accounting in preparing the annual financial statements.
Restatement of note 3, analysis of underwriting result
In note 3 of the 2024 financial statements, the reinsurance balances were presented excluding USD 57.2m of reinsurance
commissions.
As such, the 2024 comparatives have been restated to present the correct reinsurance balance and total.
The
restatement is presentational and only impacts note 3.
It does not affect the balance sheet or statement of profit or loss.
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________19
2.
SUMMARY OF ACCOUNTING POLICIES
Technical result
The technical result is determined on an annual basis whereby the incurred cost of claims, commission and related expenses
are charged against the earned proportion of premiums, net of reinsurance and related investment income as follows:
Premiums and acquisition costs
Premiums written are recorded in accordance with the terms of the underlying policies. Premiums are earned over the period
during which the Syndicate is exposed to the underlying risk which is generally one to two years with the exception of
multi-year contracts. Unearned premiums represent the portion of premiums written which is applicable to the unexpired
risks under contracts in force.
Acquisition costs vary with and are directly related to the acquisition of insurance contracts and consist primarily of fees and
commissions paid to brokers. Deferred acquisition costs represent the proportion of acquisition costs which will be
expensed in subsequent accounting periods; the deferral is calculated in the same manner as the unearned premiums
provision. Certain reinsurance commissions and profit participations are also included within expenses for the acquisition of
insurance contracts and are deferred in line with unearned premium.
Under FRS 103, unearned premiums and deferred
acquisition costs are monetary assets. These are therefore valued at the closing exchange rate at the balance sheet date and
any foreign currency gains or losses are recognised in the Statement of Comprehensive Income: Non-technical account.
Reinsurance
In the normal course of business, the Syndicate purchases reinsurance protection to limit its ultimate losses from
catastrophic events and to reduce its loss aggregation risk.
Reinsurance premiums ceded are expensed over the reinsurance
coverage period, the exception to this being the loss portfolio transfer
detailed on page 4 which has been fully expensed in
the 2025 period as it relates to existing losses on 2021 and prior underwriting years. Unearned reinsurance premiums
represent the portion of premiums ceded applicable to the unexpired term of the contracts in force.
The Syndicate also participates in a number of group-purchased global reinsurance treaties for certain risks. The premiums
paid to our reinsurers (i.e. outward reinsurance premiums) are expensed over the coverage period. The reinsurers' share of
provision for unearned premiums represents the portion of premiums ceded applicable to the unexpired term of the contract
in force. Outstanding reinsurance commitments relating to subsequent instalments are disclosed in note 26.
Reinsurance recoverables are presented net of a reserve for uncollectible reinsurance. Risk attaching contracts cover claims
that relate to underlying policies written during the terms of such contracts. Loss occurring contracts cover all claims that
occur during the life of the reinsurance contract.
The method for determining the reinsurance recoverable on unpaid losses
and loss expenses involves actuarial estimates and assumptions. Unpaid losses and loss expenses include an amount
determined from individual case estimates and loss reports, and an amount based on past experience, for losses incurred but
not reported. Based on reinsurance coverage, the Syndicate determines the amount of recoverables for unpaid losses and
loss expenses.
Reinsurance commission
Reinsurance commission income is earned over the period in which the related premiums are expensed.
Critical accounting estimates and judgments and key sources of estimation uncertainty
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect
the amounts reported for assets and liabilities as at the statement of financial position date and the amounts reported for
revenues and expenses during the year. Management have not identified any critical accounting judgements.
The estimates and associated assumptions are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from those estimates. Estimates and judgments are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only
that period, or in the period of the revision and future periods if the revision affects both current and future periods.
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________20
2.
SUMMARY OF ACCOUNTING POLICIES (continued)
Critical accounting estimates and judgments and key sources of estimation uncertainty (continued)
Management considers the following areas to be those where judgements, estimates and assumptions have had the most
significant effect on the amounts recognised in the annual accounts.
a.
Insurance contract technical provisions
Estimates need to be made both for the expected ultimate cost of claims reported at the reporting date and for the expected
ultimate cost of claims incurred but not reported ("IBNR"), at the reporting date. A variety of actuarial methods are utilised
in estimating the ultimate costs of claims and claims expenses, including the expected loss ratio, Bornhuetter-Ferguson and
chain ladder methods. Shorter tailed lines for example property are more volatile and experience indication is generally
adopted for all underwriting years including the current year, with more weight given to experience based methods. In
contrast for the longer tailed lines, the initial expected loss ratio is generally recommended for the most recent underwriting
years unless there has been materially outsized loss experience compared to expectations greater than the normal volatility
that would be associated with the early stage of development.
In these cases, weighting an experience-based indication is an
option or using a blend of case handler method and the loss ratio.
The provision for claims outstanding is assessed on an individual case basis and is based on the estimated ultimate cost of
each claim notified but not settled by the statement of financial position date. The IBNR provision and related handling
costs are considered for each class of business by using a range of standard actuarial techniques and include an implicit
allowance for claims which are incurred but not reported as well as deteriorations of claims currently incurred. The methods
used, and the estimates made, are reviewed regularly.
The two main critical assumptions with regards to claims provisions are 1) it is assumed unless there is information to the
contrary past development is a reasonable predictor of future claims development and 2) the rating and other models used
are fair reflections of the underlying business. The directors consider the provisions for gross claims and related reinsurance
recoveries are fairly stated based on the information currently available to them. However, the ultimate liability will vary as
a result of subsequent information and events and this may result in significant adjustments to the amounts provided.
Further information is provided in note 20 (c).
b.
Estimates of premiums
Written premiums are recorded in accordance with the terms of the underlying policies and earned over the policy period.
Estimated premium income in respect of facility contracts includes an estimate of the underlying business attaching to each
facility at the statement of financial position date. Of the total gross written premiums of USD 2,240.1m, 46.1% (2024: USD
1,966.9m, 43.1%) is written under delegated authorities where premiums are declared in to the Syndicate in arrears thus
requiring an estimate of any material undeclared premium be made.
The main assumption underlying these estimates is that
past premium development can be used to project future premium development. The directors consider whether the
estimates of future premium are fairly stated on the basis of the information available currently to them. However, the
ultimate receivable will vary as a result of subsequent information or events and this may result in significant adjustments.
c.
Profit commissions
Insurance profit commissions are made up of accruals on open market and delegated portfolios.
Included in the Syndicate’s
profit commission accrual balance is an estimation of profit commission payable.
The calculation uses an estimate for the
future profitability of the delegated agreements based on the expected loss ratio of the contracts.
The expected loss ratio can
vary over time and as such, commission payable may vary as the contracts develop.
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________21
2.
SUMMARY OF ACCOUNTING POLICIES (continued)
Claims incurred
Reserves for losses and loss expenses represent an estimate of the unpaid portion of the ultimate liability for losses and loss
expenses for insured events that have occurred at or before the balance sheet date. The balance reflects both claims that have
been reported (case reserves) and IBNR. These amounts are reduced for estimated amounts of salvage and subrogation
recoveries.
Reserves for losses and loss expenses are reviewed on a quarterly basis. Case reserves are primarily established
based on amounts reported from insureds, reassured and/or brokers. Management estimates IBNR after reviewing detailed
actuarial analyses and applying informed judgement regarding qualitative factors that may not be fully captured in the
actuarial estimates. A variety of actuarial methods are utilised in this process, including the Expected Loss Ratio,
Bornhuetter-Ferguson and chain ladder methods. The Syndicate estimate is highly dependent on management's critical
judgement as to which method(s) are most appropriate for a particular accident year and class of business. The Syndicate's
historical claims data is often supplemented with industry benchmarks when applying these methodologies.
At each reporting date, liability adequacy tests are performed at a year of account level and reviewed to ensure the adequacy
of the liabilities from insurance and reinsurance contracts net of deferred acquisition costs. In performing these tests, current
best estimates are used of future contractual cash flows, claims handling and administrative expenses as well as investment
income from the assets backing such liabilities.
This analysis is performed for AXIS as a whole and looks at insurance and
reinsurance by class of business and entity to determine whether there is a deficiency. A provision is established for any
deficiency for losses arising from liability adequacy tests (unexpired risk provision).
Any adjustments to previous reserves
for losses and loss expenses estimates are recognised in the period they are determined. While management believes that
reserves for losses and loss expenses are adequate, this estimate requires a significant judgement and new information,
events or circumstances may result in ultimate losses that are materially greater or less than provided for in the balance
sheet.
Financial instruments
Financial instruments are measured in accordance with FRS 102 section 11 and section 12.
Financial assets are measured at fair value with fair value changes recognised immediately in the profit and loss account.
For this purpose, listed investments are stated at bid-market value and deposits with credit institutions and overseas deposits
are stated at cost. Unlisted investments for which a market exists are stated at the average price at which they were traded on
the balance sheet date or the last trading day before that date.
The Syndicate uses the following hierarchy for determining the fair value of financial instruments by valuation technique:
•
Level 1: the quoted (unadjusted) prices in active markets for identical assets or liabilities that the Syndicate can
access at the measurement date
•
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are
observable, either directly or indirectly
•
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based
on observable market data
Investment return comprises all investment income, realised investment gains and losses and movements in unrealised gains
and losses, net of investment expenses, charges and interest.
Realised and unrealised gains and losses arising from changes in the fair value of investments are presented in the Statement
of Profit and Loss in the period in which they arise. Investment income includes interest income on fixed income securities
and dividend income on equity securities. Dividend and interest income is recognised when earned. Investment management
and other related expenses are shown separately to the net change in fair value. These expenses are recognised when
incurred.
Allocation of investment return transferred from the non-technical to the technical account
Investment income is initially recorded in the non-technical income statement. The income is transferred in full to the
general business technical account to reflect the investment return on funds supporting underwriting business.
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________22
2.
SUMMARY OF ACCOUNTING POLICIES (continued)
Taxation
Under Schedule 19 of the Finance Act 1993 Managing Agents are not required to deduct basic rate income tax from
Syndicate trading income. In addition, all UK basic rate income tax (currently at 25%, 2024: 25%) deducted from Syndicate
investment income is recoverable by Managing Agents and consequently the distribution made to members or their
members’ agents is gross of tax. Capital appreciation falls within trading income and is also distributed gross of tax.
Foreign exchange
The Syndicate's functional currency and presentational currency is the US Dollar (USD).
Monetary assets and liabilities denominated in foreign currencies are converted into the functional currency at the prevailing
rate of exchange ruling at the balance sheet date and revenues and costs are converted at the rate prevailing at the date of
transaction. Non-monetary assets and liabilities denominated in foreign currencies have been recorded at historical rates.
Profits and losses arising from foreign currency transactions and on settlement of accounts receivable and payable in foreign
currencies are dealt with through the Statement of Comprehensive Incomes: Non-technical account.
Pension
The staff utilised by the Syndicate are employed by an affiliate entity which operates a defined contribution scheme.
Pension costs relating to staff performing duties are charged to the Syndicate and included within net operating expenses.
Syndicate operating expenses
Costs incurred by the Managing Agent exclusively for the Syndicate are charged to the Syndicate on an accrual basis.
Expenses which are incurred jointly for the Managing Agent and the Syndicate are apportioned between the Managing
Agent and the Syndicate depending on the amount of work performed, resources used and volume of business transacted.
In 2025, the Managing Agent charged a Managing Agent fee of 0.025% (2024: 0.025%) of Syndicate capacity.
Deposits with ceding undertakings
Deposits with ceding undertakings are funds held by Lloyd's Europe on behalf of the Syndicate to settle Part VII claims.
These funds are held at amortised cost in the balance sheet.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and investments with maturities of three months or less from the
acquisition date that are subject to an insignificant risk of changes in fair value and are used by the Syndicate in the
management of its short term commitments.
3.
ANALYSIS OF UNDERWRITING RESULT
An analysis of the underwriting result before investment return is set out below:
Gross
Gross
Gross
Gross
premiums
premiums
claims
operating Reinsurance Underwriting
written
earned
incurred
Expenses
balance
result
2025
2025
2025
2025
2025
2025
Direct insurance:
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
Accident and health
(35,383 )
(31,011 )
(1,470 )
Marine, aviation and transport
(87,829 )
(5,865 )
Fire and other damage to property
(54,458 )
Third party liability
(19,284 )
Miscellaneous
(35,418 )
(14,725 )
Total direct insurance
(75,517 )
Reinsurance acceptances
(20,538 )
Total
(96,055 )
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________23
3.
ANALYSIS OF UNDERWRITING RESULT (continued)
The table below is an additional disclosure for Lloyd's reporting purposes and is included to facilitate the classification of the
above segments into the Lloyd's aggregate classes of business.
Gross
Gross
Gross
Gross
premiums
premiums
claims
operating Reinsurance Underwriting
written
earned
incurred
Expenses
balance
result
2025
2025
2025
2025
2025
2025
Additional analysis
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
Fire and damage to property of
which is:
Specialities
(6,316 )
(12,683 )
(4,906 )
Energy
(1,501 )
(2,107 )
(1,611 )
Third party liability of which is:
Energy
Gross
Gross
Gross
Gross
Premiums
Premiums
Claims Operating Reinsurance Underwriting
Written
Earned
Incurred
Expenses
Balance
result
2024
2024
2024
2024
2024
2024
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
Direct insurance:
Restated
Restated
Restated
Accident and health
(39,100 )
(31,942 )
(1,370 )
Marine, aviation and transport
(86,836 )
(98,192 )
(28,872 )
Fire and other damage to property
(41,119 )
Third party liability
(40,731 )
Miscellaneous
(24,365 )
(14,748 )
(2,371 )
Total direct insurance
(114,461 )
Reinsurance acceptances
(18,047 )
Total
(132,508 )
Refer to note 1 for the background of the restatement of 2024 reinsurance balance.
This restatement only impacts this note
disclosure above and does not impact the primary statements.
Gross
Gross
Gross
Gross
premiums
premiums
claims
operating Reinsurance Underwriting
written
earned
incurred
Expenses
balance
result
2024
2024
2024
2024
2024
2024
Additional analysis
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
Fire and damage to property of
which is:
Specialities
(11,863 )
(14,433 )
(7,180 )
Energy
(5,564 )
(3,921 )
(1,761 )
Third party liability of which is:
Energy
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________24
3.
ANALYSIS OF UNDERWRITING RESULT (continued)
The gross premiums written for direct insurance by underwriting location of risk is presented in the table below:
2025
2024
USD'000
USD'000
United Kingdom
European Union Member States
US
Rest of the world
Total gross premiums written
4.
INSURANCE ASSETS AND LIABILITIES
Technical provisions
2025
2024
Gross
Reinsurance
Gross
Reinsurance
provisions
assets
Net
provisions
assets
Net
Unearned premiums
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
Balance at 1 January
(255,294 )
(257,742 )
Premiums written during the year
(502,503 )
(396,677 ) 1,570,196
Premiums earned during the year
(2,031,822 )
(1,817,848 )
Foreign exchange movements
(3,837 )
(29,113 )
(26,972 )
Balance at 31 December
(301,417 )
(255,294 )
2025
2024
Gross
Reinsurance
Gross
Reinsurance
provisions
assets
Net
provisions
assets
Net
Claims outstanding
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
Balance at 1 January
(712,220 ) 1,701,622
(715,248 ) 1,547,270
Claims paid during the year
(766,257 )
(515,863 )
(679,601 )
(473,065 )
Expected cost of current year claims
(304,755 )
(194,065 )
Change in estimates of prior year
provisions
(56,455 )
(46,991 )
(6,758 )
(13,257 )
(20,015 )
Foreign exchange movements
(9,007 )
(43,769 )
(39,955 )
Balance at 31 December
(766,124 ) 2,037,157
(712,220 ) 1,701,622
2025
2024
Gross
Reinsurance
Gross
Reinsurance
assets
liabilities
Net
assets
liabilities
Net
Deferred acquisition costs
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
Balance at 1 January
(45,261 )
(41,111 )
Incurred deferred acquisition costs
(89,527 )
(61,733 )
Amortised deferred acquisition costs
(537,696 )
(468,822 )
(485,264 )
Foreign exchange movements
(855 )
(4,462 )
(4,039 )
Balance at 31 December
(66,770 )
(45,261 )
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________25
5.
NET OPERATING EXPENSES
2025
2024
USD'000
USD'000
Acquisition costs
Change in deferred acquisition costs
(57,123 )
(29,756 )
Administrative expenses
Members' standard personal expenses
Reinsurance commissions and profit participation
(68,871 )
(57,154 )
Net operating expenses
Members' standard personal expenses include Lloyd's subscriptions, Central Fund contributions and Managing Agent's fees.
Included in administrative expenses are salary costs for services to the Syndicate provided by employees of AXIS group
companies.
Total commissions for direct insurance business for the year amounted to:
2025
2024
USD'000
USD'000
Total commission for direct insurance business
This includes acquisitions, renewals, collections service companies and portfolio management commissions.
6.
AUDITOR'S REMUNERATION
Administrative expenses in note 5 i
nclude:
2025
2024
Auditors' remuneration
USD'000
USD'000
Fees payable to the Syndicate's auditor for the audit of these financial
statements
Fees payable to the Syndicate's auditor and its associates in respect of
other services pursuant to legislation
896
786
Fees payable to Deloitte LLP for the audit of the annual accounts of AXIS Managing Agency Limited are USD 33.8k
(2024: USD 28.9k).
Fees payable for audit-related assurance services provided to the Managing Agent are USD 17.3k
(2024: 15.7k). There were no other fees payable for the provision of other non-audit services.
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________26
7.
KEY MANAGEMENT PERSONNEL COMPENSATION
The directors of the Managing Agency are employed by related group Companies. The directors of AMAL received the
following aggregate remuneration charged to the Syndicate.
2025
2024
USD'000
USD'000
Directors' emoluments
Fees
The Active Underwriter received the following aggregate remuneration during the year charged to the Syndicate.
2025
2024
USD'000
USD'000
Emoluments
8.
STAFF NUMBERS AND COSTS
The Syndicate and AMAL have no employees.
Staff are employed by AXIS service companies.
The number of staff
below, analysed by category, represents the total number of staff available to the managing agency in order to service all of
its Lloyd's business including Syndicate 1686.
2025
2024
Administration and finance
Underwriting
Claims
Investments
Total
Administration and Finance includes all ancillary support staff including Operations, Finance, Actuarial, Legal and Risk.
The following amounts were recharges by AXIS service companies to the Syndicate in respect of payroll costs.
2025
2024
USD'000
USD'000
Wages and salaries
Social security costs
Other pension costs
Other
Total
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________27
9.
INVESTMENT RETURN
2025
2024
Interest and similar income
USD'000
USD'000
From financial instruments designated at fair value through profit or loss
Interest and similar income
Other income from investments
From financial instruments designated at fair value through profit or loss
Gains on the realisation of investments
Losses on the realisation of investments
(24,446 )
(24,019 )
Unrealised gains on investments
Unrealised losses on the investments
(24,021 )
Investment management expenses
(2,709 )
(2,020 )
Total investment return
Transferred to the technical account from the non-technical account
10.
DISTRIBUTION AND OPEN YEARS OF ACCOUNT
A distribution to members of USD 274.5m will be proposed in relation to the 2023 closing year of account (2024: USD
73.6m distribution in relation to the 2022 closing year of account).
11.
FINANCIAL INVESTMENTS
Carrying value
Cost
2025
2024
2025
2024
USD'000
USD'000
USD'000
USD'000
Shares and other variable yield securities and units in
unit trusts
Debt securities and other fixed income securities
Loans and deposits with credit institutions
Total financial investments
Amounts included within shares and other variable securities include collective investment schemes/unit trusts where funds
are invested in a single entity which invests in other underlying investments. These are treated as cash instruments with the
carrying value and purchase price being the same.
The syndicate has no listed investments.
The table below presents an
analysis of financial investments by their measurement classification
2025
2024
USD'000
USD'000
Financial assets measured at fair value through profit or loss
Financial assets measured at fair value as available for sale
Financial assets measured at amortised cost
Total financial investments
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________28
11.
FINANCIAL INVESTMENTS (continued)
The following table shows financial investments recorded at fair value analysed between the three levels in the fair value
hierarchy.
The
table
excludes
deposits
with
ceding
undertakings
which
are
valued
as
level
3.
Level 1
Level 2
Level 3
Total
USD'000
USD'000
USD'000
USD'000
As at 31 December 2025
Shares and other variable yield securities and units in
unit trusts
Debt securities and other fixed income securities
Loans and deposits with credit institutions
Total financial investments
Level 1
Level 2
Level 3
Total
USD'000
USD'000
USD'000
USD'000
As at 31 December 2024
Shares and other variable yield securities and units in
unit trusts
Debt securities and other fixed income securities
Loans and deposits with credit institutions
Total financial investments
Included in the level 1 category are financial assets that are measured by reference to published quotes in an active market.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an
exchange, dealer, broker, industry syndicate, pricing service or regulatory agency and those prices represent actual and
regularly occurring market transactions on an arm's length basis.
Included in the level 2 category are financial assets measured using a valuation technique based on assumptions that are
supported by prices from observable current market transactions. For example, assets for which pricing is obtained via
pricing services but where prices have not been determined in an active market, financial assets with fair values based on
broker quotes, investments in private equity funds with fair values obtained via fund managers and assets that are valued
using the Syndicate's own models whereby the significant inputs into the assumptions are market observable.
Included in the level 3 category are financial instruments measured at fair value.
The loan to Lloyd's Central fund has been
classified as a level 3 asset stated at fair value.
The fair valuation for the loan is derived based on a valuation model.
The
loan to Lloyd's Central Fund was fully repaid during 2025.
12.
DEBTORS ARISING OUT OF DIRECT INSURANCE OPERATIONS
2025
2024
USD'000
USD'000
Due within one year
Due after one year
Total
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________29
13.
DEBTORS ARISING OUT OF REINSURANCE OPERATIONS
2025
2024
USD'000
USD'000
Due within one year
Due after one year
Total
14.
OTHER DEBTORS
2025
2024
USD'000
USD'000
Inter-syndicate balances
Total
15.
CASH AND CASH EQUIVALENTS
2025
2024
USD'000
USD'000
Cash at bank and in hand
Deposits with credit institutions
Total cash and cash equivalents
Only financial investments with maturities of three months or less that are used by the Syndicate in the management of its
short-term commitments are included in cash at bank and in hand.
16.
ANALYSIS OF NET DEBT
At 1
Fair value
At 31
January
Cash
and exchange
Non-cash
December
2025
flows
Acquired
movements
changes
2025
Cash and cash equivalents
(10,068 )
Other
Total
(10,068 )
17.
CREDITORS ARISING OUT OF DIRECT INSURANCE OPERATIONS
2025
2024
USD'000
USD'000
Due within one year
Due after one year
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________30
18.
CREDITORS ARISING OUT OF REINSURANCE OPERATIONS
2025
2024
USD'000
USD'000
Due within one year
Due after one year
19.
OTHER CREDITORS
2025
2024
USD'000
USD'000
Other related party balances (non-syndicates)
Other liabilities
Other related party balances relates to amounts payable to AXIS group companies.
At 31 December 2025, the Syndicate
had a USD 390.0m (2024: USD 390.0m) flexible facility agreement with AXIS Specialty Finance Plc to ensure that it can
meet liquidity requirements even in the most extreme circumstances. The outstanding loan balance is disclosed under other
liabilities and this is nil as at 31 December 2025 (2024: USD nil). Any loans drawn and outstanding under the facility would
be repayable on demand.
20.
RISK MANAGEMENT
a) Governance framework
The risk and financial management framework aims to balance the risk to members' capital from events that might
otherwise prevent the Syndicate from meeting its policyholder obligations, with the returns to its members. The directors
recognise the critical importance of having efficient and effective risk management systems in place.
The Managing Agent utilises the AXIS Group risk management function for the Syndicate with a dedicated Chief Risk
Officer (CRO) and clear terms of reference from the AMAL Board, its committees and sub committees, including the
oversight and reporting of agreed service level risk management activities. AMAL supplements this with a clear
organisational structure with documented delegated authorities and responsibilities from the main
AMAL Board to the
Syndicate which performs the underwriting activities. Lastly, the AMAL policy Framework sets its standards, risk
management and control and business conduct.
The AMAL Board Risk Committee reviews, approves and monitors risk strategy, risk appetite and key risk limits and
receives regular reports from the Risk Function to ensure any significant risk issues are being addressed by management.
The AMAL Board Risk Committee approves the risk management policies and meets regularly to approve any commercial,
regulatory and organisational requirements of such policies. These policies define the identification of risk and its
interpretation to ensure the appropriate quality and diversification of assets, align underwriting and reinsurance strategy to
the Syndicate goals, and specify reporting requirements. The AMAL Board places significant emphasis on the assessment
and documentation of risks and controls, including the articulation of the Syndicate's risk appetite.
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________31
20.
RISK MANAGEMENT (continued)
b)
Capital management objectives, policies and approach
Capital framework at Lloyd's
The Society of Lloyd's (Lloyd's) is a regulated undertaking and subject to the supervision of the Prudential Regulatory
Authority (PRA) under the Financial Services and Markets Act 2000.
Within the supervisory framework, Lloyd's applies
capital requirements at member level and centrally to ensure that Lloyd's com
plies with Solvency UK Insurance Capital
Requirements (Solvency UK), and beyond that to meet its own financial strength, license and ratings objectives.
Although
Lloyd's capital setting processes use a capital requirement set at Syndicate level as a starting point, the requirement to meet
Solvency UK and Lloyd's capital requirements apply at overall and member level only respectively, not at Syndicate level.
Accordingly, the capital requirement in respect of the Syndicate is not disclosed in these annual report and accounts.
In
order to meet Lloyd's requirements, each Syndicate is required to calculate its Solvency Capital Requirement (SCR) for the
prospective underwriting year. This amount must be sufficient to cover a 1 in 200 year loss, reflecting uncertainty in the
ultimate run-off of underwriting liabilities (SCR 'to ultimate'). The Syndicate must also calculate its SCR at the same
confidence level but reflecting uncertainty over a one year time horizon (one year SCR) for Lloyd's to use in meeting
Solvency UK requirements. The SCRs of each Syndicate are subject to review by Lloyd's and approval by the Lloyd's
Capital and Planning Group.
A Syndicate may be comprised of one or more underwriting members of Lloyd's. Each member is liable for its own share of
underwriting liabilities on the Syndicate on which it is participating but not other members' shares. Accordingly, the capital
requirement that Lloyd's sets for each member operates on a similar basis. Each member's SCR shall thus be determined by
the sum of the members' share of the Syndicate SCR 'to ultimate'. Where a member participates on more than one Syndicate,
a credit for diversification is provided to reflect the spread of risk, but consistent with determining an SCR which reflects
the capital requirement to cover a 1 in 200 year loss 'to ultimate' for that member. Over and above this, Lloyd's applies a
capital uplift to the members' capital requirement, known as the Economic Capital Assessment (ECA). The purpose of this
uplift, which is a Lloyd's not a Solvency UK requirement, is to meet Lloyd's financial strength, license and ratings
objectives. The capital uplift applied for 2026 is 35% (2025: 35%) of the member's SCR to ultimate.
Provision of capital by members
Each member may provide capital to meet its ECA either by assets held in trust by Lloyd's specifically for that member
(Funds at Lloyd's) assets held within and managed within a Syndicate (Funds in Syndicate) or as the member's share of the
members' balances on each Syndicate on which it participates. The Syndicate's ECA is supported by FAL primarily
provided by ASL and ACCUKIIL own funds.
c) Insurance risk management
Insurance risk is the inherent uncertainty as to the occurrence, amount and timing of insurance liabilities transferred to the
Syndicate through the underwriting process.
The insurance risk category encompasses underwriting risks in all relevant lines of business.
The two main components are
underwriting risk and reserving risk. Underwriting risk represents the risk that premiums will not be sufficient to cover
future incurred losses.
Reserving risk represents the risk that loss reserves established to cover losses already incurred are
insufficient.
Underwriting risk
Underwriting risk is managed through the Syndicate underwriting risk governance framework. A key component of this is
the peer review process which allows for a collaborative review of risk and pricing by management, and ensures
underwriting is within established protocols and guidelines. Underwriting guidelines are in place to provide a framework for
consistent pricing and risk analysis and to ensure alignment to the Syndicate's risk appetite. Limits are set on underwriting
capacity, and cascade authority to individuals based on their specific roles and expertise. Tiered appetites have been set for
each line of business, with considerations of exposure from each line on the basis of (1) Aggregate (2) Occurrence and (3)
Risk and Clash losses.
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________32
20.
RISK MANAGEMENT (continued)
c) Insurance risk management (continued)
Underwriting risk (continued)
Another key component of the Syndicate mitigation of underwriting risk is the purchase of reinsurance.
AXIS Capital has a
centralised Ceded Reinsurance department which coordinates external treaty reinsurance purchasing across the AXIS Group
under the terms of the AXIS Group Reinsurance Management Strategy (REMS) and is overseen by the Reinsurance
Purchasing Group, in conjunction with the Reinsurance Security Committee.
The AMA Board annually reviews and adopts
the strategy defined in the REMS and ensures that this aligns with the reinsurance assumed in the syndicate planning
process and the Syndicate Business Forecast.
Reserving risk
The estimation of reserves is subject to uncertainty due to the fact that the settlement of claims that have arisen before the
balance sheet date is dependent on future events and developments.
There are many factors that would cause loss reserves
to increase or decrease, which include, but are not limited to emerging claims and coverage issues, changes in the
legislative, regulatory, social and economic environment and unexpected changes in loss inflation.
The reserves for losses and loss expenses (loss reserves) are calculated in accordance with actuarial practice based on
substantiated assumptions, methods and assessments. The assumptions are regularly reviewed and updated including
adjusting current and projected inflation rates to reflect prevailing views. Application of AXIS Group-wide reserving policy
and standards of practice ensures a substantially reliable and consistent procedure.
AMAL engage a Signing Actuary to
provide an annual Statement of Actuarial Opinion (SAO) on the Syndicate's worldwide technical provisions, both gross and
net of reinsurance and for each open year of account.
The following sections set the key sub categories of insurance risk recognised by the Syndicate and how they are managed:
Natural peril catastrophe risk
Natural catastrophes such as earthquakes, storms and floods represent a challenge for risk management due to their
accumulation potential and volatility. In managing natural catastrophe risk, the internal risk tolerance framework for the
Syndicate aims to limit the impact to its capital position from an aggregation of natural peril catastrophe events. The Board-
approved risk limit for natural catastrophes sets out the maximum acceptable losses for the Syndicate calibrated to near term
and tail events. There have been no breaches of the Syndicate’s natural catastrophe risk limits during the year.
The Syndicate is potentially exposed to physical risks from climate change, primarily through our underwriting of property
insurance covering weather-related perils. Climate change may expose the Syndicate to an increased frequency and / or
severity of weather losses. There is a risk that the Syndicate pricing of these perils or the management of the associated
aggregations does not appropriately allow for changes in climate. Over the longer term, climate change may have an impact
on the economic viability of these lines of business if suitable adjustment in price and coverage cannot be achieved. The
Syndicate may also be exposed to losses stemming from climate-related litigation in liability lines, should the insured face
such litigation.
AXIS Capital has in place an Environmental Working Group which includes representation from the Syndicate, to ensure
that the potential risks and opportunities from climate change are identified and then managed in line with the standard risk
Additionally, AMAL also has in place a Climate Change Risk Appetite Statement to ensure that associated risks are
managed in line with the Syndicate's standard risk management framework. The Syndicate will continue to assess all
climate change related threats and opportunities, reviewing and adjusting existing risk appetites to ensure they remain
appropriate, reflecting the most recent scientific consensus and the AXIS Group’s strategic agenda on climate change.
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________33
20.
RISK MANAGEMENT (continued)
c) Insurance risk management (continued)
Man-made catastrophe risk
Consistent with the management of natural peril catastrophe exposures, a similarly focused and analytical approach is taken
for the management of man-made catastrophes. Man-made catastrophes include such risks as train collisions, aeroplane
crashes, cyber risks or terrorism. For these, risks vendor models (where available) are used with bespoke modelling,
scenario analysis, underwriting judgment and expertise.
This allows the Syndicate to take advantage of business
opportunities related to man-made catastrophe exposures particularly where it can measure and limit the risk sufficiently as
well as obtain risk-adequate pricing.
Limits are set and monitored in respect of key accumulations from man-made perils.
As an example of this approach, an assessment of terrorism risk is based on a mixture of qualitative and quantitative data
(e.g. for estimating property damage, business interruption, mortality and morbidity subsequent to an attack of a predefined
magnitude), which is used to control, limit and manage aggregate terrorism exposure. Commercially available vendor
modelling and bespoke modelling tools are used to measure accumulations around potential terrorism accumulation zones
on a deterministic and probabilistic basis. The results of modelling are supplemented with underwriting judgment.
Claims handling risk
In accepting risk, the Syndicate is committing to the payment of claims and therefore these risks must be understood and
controlled. The Claims teams include a diverse group of experienced professionals, including claims adjusters and legal
professionals. The Syndicate also uses approved external service providers, such as independent adjusters and appraisers,
surveyors, accountants, investigators and specialist legal firms, as appropriate. The Syndicate maintains claims handling
guidelines and claims reporting control and escalation procedures in the claims departments. Large claims matters are
reviewed during claims meetings.
Pricing risk
Premiums for (re)insurance contracts are intended to cover expected claim costs
and claim associated expenses
, acquisition
costs, operating costs, and an adequate level of profit margin commensurate to the risk being assumed. Premium amounts
are typically agreed upfront,
but may not cover the actual future costs due to unexpected factors such as social, economic
and legal environments, as well as uncertainty surrounding frequency and severity of claims.
The Syndicate mitigates premium risk in its portfolio through four main levers. Firstly, a vigilant and cautious approach is
taken on claims cost trends, and these assumptions are reviewed regularly and frequently. Secondly, in some of the contracts
loss and / or exposure adjustment features that flex premium and / or acquisition costs are included in response to higher
than expected exposures and / or claim costs.
Thirdly, underwriting action and reinsurance protection are employed to
minimise volatility in claims experience by managing aggregation of limits and by maintaining balance between portfolio
margin and limits deployed. Most importantly, active cycle management is exercised whereby the Syndicate grows the
portfolio at times when pricing is in surplus and shrinks the portfolio at times when pricing is in deficit.
Sensitivity analysis of the reserves for unpaid losses and loss expenses
Expected loss ratios are a key assumption in the estimate of ultimate losses for business at an early stage of development.
All else remaining equal, a higher expected loss ratio would result in a higher ultimate loss estimate. Assumed loss
development patterns are another significant assumption in estimating the loss reserves.
The following analysis is performed for reasonably possible movements in key assumptions with all other assumptions held
constant, showing the impact on gross and net claims outstanding, profit and members' balances.
The risk variable for the
analysis below is a five percent increase or decrease in the Syndicate's reserves and the subsequent impact on the members'
balance.
General insurance business sensitivities as at 31 December 2025
+5.0%
-5.0%
USD'000
USD'000
Claims outstanding - gross of reinsurance
(140,164 )
Claims outstanding - net of reinsurance
(101,858 )
General insurance business sensitivities as at 31 December 2024
+5.0%
-5.0%
USD'000
USD'000
Claims outstanding - gross of reinsurance
(120,692 )
Claims outstanding - net of reinsurance
(85,081 )
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________34
20.
RISK MANAGEMENT (continued)
c) Insurance risk management (continued)
Claims development table
The tables below show the Syndicate's cumulative incurred claims development, including both claims notified and incurred but
not reported for each underwriting year, together with the cumulative payments to date on a gross and net of reinsurance basis at
the balance sheet date.
Pure
Underwriting
Year
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Total
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
Estimate of gross claims:
At end of
underwriting year
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Estimate of gross
claims reserve
Provision in respect
of prior years
Less gross claims
paid
(1,089,494 )
(1,352,276 )
(1,413,159 ) (741,489 ) (603,618 ) (523,693 ) (414,350 ) (325,413 ) (206,720 ) (43,198 ) (6,713,410 )
Gross Claims
Reserve
Pure
Underwriting
Year
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Total
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000
USD'000 USD'000
USD'000
Estimate of net claims:
At end of
underwriting year
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight year later
Nine year later
Estimate of net
claims reserve
Provision in respect
of prior years
Less net claims
paid
(725,876 ) (696,694 ) (683,017 ) (527,897 ) (410,058 ) (406,670 ) (325,887 ) (268,374 ) (168,945 ) (37,066 ) (4,250,484 )
Net Claims
Reserve
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________35
20.
RISK MANAGEMENT (continued)
c) Insurance risk management
(continued)
Claims development table (continued)
The uncertainty associated with the ultimate claims experience of an underwriting year is greatest when the underwriting year is at
an early stage of development and the margin for future experience potentially being more adverse than assumed is at its highest.
As claims develop, and the ultimate cost of the claims becomes more certain, the relative level of margin should decrease. Due,
however, to the uncertainty inherent in the claims estimation process, initial reserves may not always be sufficient. The Syndicate
has translated estimated outstanding claims at a consistent rate of exchange as determined at the balance sheet date.
d)
Financial risk
The Syndicate monitors and manages the financial risks relating to the operations of the Syndicate encompassing credit risk,
liquidity risk, market risk, currency risk and interest rate risk.
i)
Credit risk
Credit risk represents the risk of incurring financial loss due to the diminished creditworthiness (eroding credit rating and,
ultimately, default) of our third party counterparties. The key areas of exposure to credit risk for the Syndicate are from its
reinsurance program and amounts due from policyholders and intermediaries.
It should be noted that credit risk in relation to the Syndicate’s investment portfolio is addressed under the market risk framework,
along with the other risks relating to the investment portfolio. The Syndicate’s investment policy prevents material investment in
other counterparties (e.g. reinsurers) to avoid concentrations of risk.
Risk from the underwriting of credit (re)insurance products is addressed through the underwriting risk framework described above.
Checks are in place to limit any concentrations of risk between (re)insurance, investments and other counterparty exposures.
The
following sections discuss specific components of credit risk.
Reinsurance recoverable assets
Within the reinsurance purchasing activities the Syndicate is exposed to the credit risk of a reinsurer failing to meet its obligations
under the reinsurance contracts. To help mitigate this, all reinsurance purchasing is subject to financial security requirements
specified by the Reinsurance Security Committee. The Reinsurance Security Committee maintains a list of approved reinsurers,
performs credit risk assessments for potential new reinsurers, regularly monitors approved reinsurers with consideration for events
which may have a material impact on their creditworthiness, recommends counterparty tolerance levels for different types of ceded
business and monitors concentrations of credit risk. This assessment considers a wide range of individual attributes, including a
review of the counterparty’s financial strength, industry position and other qualitative factors.
Premium receivables
The largest credit risk exposure to receivables is from brokers and other intermediaries; the risk arises where they collect premiums
from customers or pay claims to customers on behalf of the Syndicate. There are policies and standards in place to manage and
monitor credit risk from intermediaries with a focus on day-to-day monitoring of the largest positions.The tables below show the
maximum exposure to credit risk (including an analysis of financial assets exposed to credit risk) for the components of the
statement of financial position. The maximum exposure is shown gross, before the effect of mitigation through collateral
agreements.
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________36
20.
RISK MANAGEMENT (continued)
d)
Financial risk (continued)
i)
Credit risk (continued)
The Syndicate has debtors arising from direct insurance and reinsurance operations that are past due but not impaired at the
reporting date.
An analysis of the carrying amounts of past due or impaired debtors is presented below.
2025
USD'000
Neither past
Past due
Gross value
due nor
but not
of impaired
impaired assets
impaired assets
assets
Total
Shares and other variable yield securities and units in
unit trusts
Debt securities and other fixed income securities
Loans and deposits with credit institutions
Reinsurers' share of claims outstanding
Debtors arising out of direct insurance operations
Debtors arising out of reinsurance operations
Other debtors and accrued interest
Cash at bank and in hand
Deposits with ceding undertakings
Total
2024
USD'000
Neither past
Past due
Gross value
due nor
but not
of impaired
impaired assets
impaired assets
assets
Total
Shares and other variable yield securities and units in
unit trusts
Debt securities and other fixed income securities
Loans and deposits with credit institutions
Reinsurers' share of claims outstanding
Debtors arising out of direct insurance operations
Debtors arising out of reinsurance operations
Other debtors and accrued interest
Cash at bank and in hand
Deposits with ceding undertakings
Total
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________37
20.
RISK MANAGEMENT (continued)
d)
Financial risk (continued)
i)
Credit risk (continued)
The table below sets out the age analysis of financial assets that are past due but not impaired at the balance sheet date.
2025
USD'000
Greater
0-3 months
3-6 months
6-12 months
than 1 year
past due
past due
past due
past due
Total
Shares and other variable yield securities and
units in unit trusts
Debt securities and other fixed income securities
Loans and deposits with credit institutions
Reinsurers' share of claims outstanding
Debtors arising out of direct insurance operations
Debtors arising out of reinsurance operations
Other debtors and accrued interest
Cash at bank and in hand
Deposits with ceding undertakings
Total
2024
USD'000
Greater
0-3 months
past due
6-12 months
than 1 year
past due
past due
past due
Total
Shares and other variable yield securities and
units in unit trusts
Debt securities and other fixed income securities
Loans and deposits with credit institutions
Reinsurers' share of claims outstanding
Debtors arising out of direct insurance operations
Debtors arising out of reinsurance operations
Other debtors and accrued interest
Cash at bank and in hand
Deposits with ceding undertakings
Total
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________38
20.
RISK MANAGEMENT (continued)
d)
Financial risk (continued)
i)
Credit risk (continued)
The table below provides information regarding the credit risk exposure of the Syndicate at 31 December 2024 by classifying
assets according to independent credit ratings of the counterparties. AAA is the highest possible rating. Assets that fall outside the
range of AAA to BBB are classified as speculative grade and have not been rated.
2025
USD'000
Not
AAA
AA
A
BBB
Other
rated
Total
Shares and other variable yield securities
and units in unit trusts
Debt securities & other fixed income
securities
Loans and deposits with credit institutions
Reinsurers share of claims outstanding
Debtors arising out of direct insurance
operations
Debtors arising out of reinsurance
operations
Cash at bank and in hand
Deposits with ceding undertakings
Other debtors and accrued interest
Total
2024
USD'000
Not
AAA
AA
A
BBB
Other
rated
Total
Shares and other variable yield securities
and units in unit trusts
Debt securities & other fixed income
securities
Loans and deposits with credit institutions
Reinsurers share of claims outstanding
Debtors arising out of direct insurance
operations
Debtors arising out of reinsurance
operations
Cash at bank and in hand
Deposits with ceding undertakings
Other debtors and accrued interest
Total
It is the Syndicate's policy to maintain accurate and consistent risk ratings across its credit portfolio. This enables management to
focus on the applicable risks and the comparison of credit exposures across all lines of business.
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________39
20.
RISK MANAGEMENT (continued)
d)
Financial risk (continued)
ii)
Liquidity risk
Liquidity risk is the risk that there would not be sufficient liquid financial resources to meet liabilities or payment obligations when
they fall due, or the Syndicate would have to incur excessive costs to do so. As an insurer, the core business generates liquidity
primarily through premium receipts and investment income. Exposure to liquidity risk stems mainly from the need to cover
potential extreme loss events. To manage this risk, a range of liquidity policies and measures are in place including maintaining
cash and cash equivalents and high quality, liquid investment portfolios to meet expected outflows, as well as those that could
result from a range of potential stress events. The Managing Agency further undertakes stress testing to ensure that the Syndicate
would be able to withstand extreme loss events and still remain liquid. In addition, AXIS Specialty Finance Plc provides a USD
390.0m credit facility (2024: USD 390.0m) to the Syndicate to ensure that it can meet liquidity requirements even in extreme
circumstances.
The Syndicate also provides a USD 150.0m (2024: USD 150.0m) inter-syndicate loan agreement to AXIS
Syndicate 2050 to ensure that it can meet liquidity requirements.
The table below summarises the maturity profile of the Syndicate's financial and insurance liabilities based on remaining
undiscounted contractual obligations or expected future undiscounted cashflows, including interest payable. Repayments which are
subject to notice are treated as if notice were to be given immediately.
2025
USD'000
More than 5
Undiscounted net cash flows
0-1 year
1-3 years
3-5 years
years
Total
Claims outstanding
Creditors
Total
2024
USD'000
More than 5
Undiscounted net cash flows
0-1 year
1-3 years
3-5 years
years
Total
Claims outstanding
Creditors
Total
iii)
Market risk
Market risk is the risk that financial instruments may be negatively impacted by movements in financial market prices or rates such
as equity prices, interest rates, credit spreads and foreign exchange rates. Fluctuations in market rates primarily affect the
investment portfolio. Credit risk associated with investments is also managed in the market risk framework.
Through asset and liability management, the Syndicate aims to ensure that risks influence both the economic value of investments
and underwriting liabilities in the same way, thus mitigating the effect of market fluctuations. For example, important features of
liabilities are reflected, such as maturity patterns and currency structures, on the asset side of the balance sheet by acquiring
investments with similar characteristics.
Asset-liability management is supplemented with various internal policies and limits. As part of the strategic asset allocation
process, different asset strategies are simulated and stressed in order to assess an appropriate portfolio (given return objectives and
risk constraints). The management of asset classes is centralised to control aggregation of risk, and provide a consistent approach to
constructing portfolios as well as the selection process of external asset managers. Limits are set on the concentration of
investments by single issuers and certain asset classes and on the level of illiquid investments. Further, the Syndicate's investment
guidelines do not permit the use of leverage in any of the fixed maturity portfolios.
Investment portfolios are stress tested using historical and hypothetical scenarios to analyse the impact of unusual market
conditions and to ensure potential investment losses remain within risk appetite.
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________40
20.
RISK MANAGEMENT (continued)
d)
Financial risk (continued)
iii)
Market risk (continued)
The table below summarises the exposure of the financial assets and liabilities to foreign currency exchange risk at the reporting
date, as follows:
2025
USD'000
Canadian
Australian
Japanese
Sterling
US dollar
Euro
dollar
dollar
Yen
Other
Total
Investments
Reinsurers' share of technical provisions
Debtors
Other assets
Prepayments and accrued income
Total Assets
Technical provisions
(593,640 ) (2,483,549 ) (330,104 )
(254,134 )
(359,322 )
(13,980 ) (137,449 ) (4,172,179 )
Creditors
(467,423 )
(68 )
(2,035 )
(441,698 )
Accruals and deferred income
(2,815 )
(59,490 )
(8,476 )
(488 )
(6 )
(71,267 )
Total Liabilities
(578,198 ) (3,010,462 ) (338,648 )
(256,656 )
(353,547 )
(13,678 ) (133,955 ) (4,685,143 )
Total capital and reserves
(732,169 )
(11,480 )
(480,828 )
2024
USD'000
Canadian
Australian
Japanese
Sterling
US dollar
Euro
dollar
dollar
Yen
Other
Total
Investments
Reinsurers' share of technical provisions
Debtors
Other assets
Prepayments and accrued income
Total Assets
Technical provisions
(492,704 ) (2,179,153 )
(236,285
(203,730 )
(287,792 )
(13,510 ) (125,612 )
(3,538,786 )
Creditors
(15,234 ) (371,601 ) (12,551 )
(3,589 )
(22 )
Accruals and deferred income
(1,787 )
(41,515 ) (4,702 )
(502 )
(13 )
(48,512 )
Total Liabilities
(509,725 ) (2,592,269 )
(253,538
(207,821 )
(285,948 )
(13,532 ) (125,538 )
(3,988,371 )
Total capital and reserves
(77,058 )
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________41
20.
RISK MANAGEMENT (continued)
d)
Financial risk (continued)
iii)
Market risk (continued)
The Syndicate regularly reviews its currency position taking into consideration the underlying currency of the Syndicate's
obligations and invests its assets proportionately across these currencies so as to protect the solvency of the Syndicate, against
variation in foreign exchange rates.
The Syndicate's underwriting capacity is supported by FAL held by its members – which includes the funding of underwriting
deficits. When each year of account closes, the Syndicate calls on members to fund losses or distributes profits as applicable.
Sensitivity to changes in foreign exchange rates
The table below gives an indication of the impact on profit of a percentage change in the relative strength of the US Dollar against
the value of Sterling, Canadian Dollar, Euro, Australian Dollar and Japanese Yen simultaneously. The analysis is based on the
information at the financial year end.
iv)
Currency risk
Impact on profit and members' balance
2025
2024
USD'000
USD'000
US Dollar Weakens
10% against other currencies
(21,705)
(7,765)
20% against other currencies
(43,409)
(15,531)
US Dollar Strengthens
10% against other currencies
21,705
7,765
20% against other currencies
43,409
15,531
v)
Interest rate risk
The Syndicate is exposed to interest rate risk through its investment portfolio and cash and cash equivalents.
The Syndicate holds
investments in its balance sheet and the performance of its investment portfolio may have an effect on the result. Changes in
interest rates would have an impact on the financial results however AXIS group mitigates this risk by aligning the portfolio
duration to offset the economic impact on the liability duration.
Insurance liabilities are not discounted and therefore not exposed to interest rate risk.
USD'000
2025
2025
2024
2024
Impact on
Impact on
Impact on
Impact on
results
members'
results
members'
before tax
balances
before tax
balances
Interest rate risk
+ 50 basis points shift in yield curves
(37,427 )
(37,427 )
(29,680 )
(29,680 )
- 50 basis points shift in yield curves
The method used for deriving sensitivity information and significant variables did not change from the previous period.
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________42
21.
REINSURANCE ASSETS
The Syndicate purchases reinsurance to reduce the risk of exposure to loss. Purchased reinsurance cover generally can be
categorised as: facultative, excess of loss and quota share. Facultative covers are typically individual risk purchases. Excess of loss
covers provide a contractually set amount of cover after an excess point has been reached. This excess point can be based on the
size of an industry loss or a fixed monetary amount. Generally, these covers are purchased on a package policy basis, and they may
provide cover for a number of lines of business within one contract. Quota share covers provide a proportional amount of coverage
from the first dollar of loss.
All of these reinsurance covers provide for recovery of a portion of losses and loss reserves from reinsurers. Under its reinsurance
security policy, the Syndicate predominantly cedes business with reinsurers rated A- or better by Standard & Poors and/or AM
Best. The Syndicate remains liable to the extent that reinsurers do not meet their obligations under these agreements either due to
solvency issues, contractual disputes or some other reason. Included within reinsurance losses recoverable as at 31 December 2025
were amounts of USD 4.0m (2024: USD 31.2m ) recoverable from a group company. Included within the provision for unearned
premiums ceded as at 31 December 2025 is an amount of USD 12.3m (2024: USD 11.4m) ceded to a group company.
In 2024 an internal quota share agreement was entered into by the Syndicate to cede energy transition related credit insurance,
political risk and capital risk solutions project finance business from Syndicate 1686 to Syndicate 2050.
This agreement applied to
policies written or renewed during the term commencing 1 April 2024 until 31 December 2024.
The agreement automatically
renews for subsequent annual periods commencing 1 January unless otherwise cancelled and as such has continued for 2025.
22.
RELATED PARTIES
AMAL has operated as the Managing Agent for the Syndicate since 4 August 2017.
Since this date AMAL has been a wholly
owned subsidiary of AXIS Specialty UK Holdings Limited.
In 2025, the Managing Agent, AMAL, charged the Syndicate a
management fee of USD 0.6m (2024: USD 0.5 m) based on 0.025%
(2024: 0.025%) of the Syndicate's capacity.
Harrington Re Ltd. (Harrington Re), a direct, wholly-owned subsidiary of Harrington Reinsurance Holdings Limited (Harrington),
is a Class 4 Bermuda based reinsurance company jointly sponsored by AXIS Capital and The Blackstone Group L.P. Harrington
and Harrington Re commenced operations during 2016. AXIS Ventures Limited, a subsidiary of AXIS Capital, owns 23% (2024:
22%) of the common equity of Harrington and has the ability to exercise significant influence over Harrington Re and therefore it
is considered a related party. In the normal course of business, the Syndicate enters into certain reinsurance transactions with
Harrington Re.
These are in line with comparable market terms and conditions.
During the year ended 31 December 2025, the Syndicate recognised the following amounts in relation to transactions with
Harrington Re:
2025
2024
USD'000
USD'000
Outwards reinsurance premiums
(17,713) (17,207)
Change in the provision for unearned premiums - reinsurers' share
(1,316)
589
Change in the provision for claims - reinsurers' share
2,081
2,736
Acquisition costs
3,067
3,229
Change in deferred acquisition costs
485
(219)
At 31 December 2025, the following balances were outstanding in relation to transactions with Harrington Re:
2025
2024
USD'000
USD'000
Reinsurers' share of technical provisions
21,735
30,344
Deferred acquisition costs
(2,007)
(2,492)
Debtors / (creditors) arising out of direct insurance operations
2,779
(9,867)
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________43
22.
RELATED PARTIES (continued)
In 2023 AXIS partnered with Stone Point Capital to launch Monarch Point Re, a newly created collateralised reinsurer. On 22
September 2023, the Syndicate entered into an agreement, with an effective date of 1 January 2023, to retrocede a diversified
portfolio of casualty reinsurance business to Monarch Point Re Limited ("Monarch Point Re").
Monarch Point Re are a
collateralised reinsurer, structured as a Bermuda Monetary Authority collateralised insurer.
In the normal course of business, the
Syndicate enters into certain reinsurance transactions with Monarch Point Re.
These are in line with comparable market terms and
conditions.
During the year ended 31 December 2025, the Syndicate recognised the following amounts in relation to transactions with
Monarch Point Re:
2025
2024
USD'000
USD'000
Outwards reinsurance premiums
(24,851) (20,615)
Change in the provision for unearned premiums - reinsurers' share
300
2,725
Other technical income, net of reinsurance
727
788
Claims paid, reinsurers' share
1,599
330
Change in the provision for claims, reinsurers' share
2,336
901
Reinsurance commissions
4,772
3,520
At 31 December 2025, the following balances were outstanding in relation to transactions with Monarch Point Re:
2025
2024
USD'000
USD'000
Reinsurers' share of technical provisions
21,900
19,948
Deferred acquisition costs
(3,002)
(3,336)
Debtors / (creditors) arising out of reinsurance operations
(7,648)
(2,310)
This transaction was conducted at market rates consistent with negotiated arms-length contracts.
23.
DISCLOSURE OF INTERESTS
Managing Agent's interest
During 2025 AMAL was the Managing Agent for AXIS Syndicate 1686. The financial statements of the Managing Agent can be
obtained by application to the Registered Office (see page 2).
24.
FUNDS AT LLOYD'S
Every member is required to hold capital at Lloyd's which is held in trust and known as FAL. These funds are intended primarily to
cover circumstances where Syndicate assets prove insufficient to meet participating members' underwriting liabilities.
The level of FAL that Lloyd's requires a member to maintain is determined by Lloyd's based on PRA requirements and rating
criteria. FAL has regard to a number of factors including the nature and amount of risk to be underwritten by the member and the
assessment of the reserving risk in respect of business that has been underwritten. Since FAL is not under the management of the
Managing Agent, no amount has been shown in these annual accounts in respect of such capital resources. However, the Managing
Agent is able to make a call on the members' FAL to meet Syndicate liquidity requirements or to settle losses as required.
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________44
25.
OFF BALANCE SHEET ITEMS
The Syndicate has not been party to any arrangement which is not reflected in its statement of financial position, where material
risks and benefits arise for the Syndicate.
26.
COMMITMENTS AND CONTINGENCIES
Reinsurance purchase commitments
During 2025, the Syndicate participated in a number of group-purchased global reinsurance policies on the Marine, Terrorism and
Property lines of business. Deposit reinsurance premiums are typically contractually due on a quarterly basis in advance. At 31
December 2025, the Syndicate has an outstanding reinsurance purchase commitment of USD 16.7m (2024: USD 12.3m).
27.
POST BALANCE SHEET EVENTS
The Syndicate conducts a review of events subsequent to the balance sheet date through to the date the financial statements are
signed to determine whether there are such events requiring recognition or disclosure in the financial statements.
28.
FOREIGN EXCHANGE RATES
The following currency exchange rates have been used for principal foreign currency transactions:
2025
2024
Start of
End of
Average
Start of
End of
Average
period rate
period rate
Rate
period rate
period rate
Rate
Sterling
US dollar
Euro
Canadian dollar
Australian dollar
Japanese Yen
29.
APPROVAL OF ANNUAL REPORT AND ACCOUNTS
The annual report and accounts were approved by the Board of Directors on 17 February 2026.
AXIS SYNDICATE 1686
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2025
_________________________________________________________________________________________________
_____________________________________________________________________________________________________45