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Tokio Marine Kiln Catastrophe
Syndicate 0557
Report and Accounts
For the year ended 31 December 2024
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
3
Contents
Directors and advisers
4
Report of the Directors of the managing agent
5
Syndicate 557 annual accounts for the year ended 31 December 2024
10
11
Profit and loss and other comprehensive income
Technical account
general business for the year ended 31 December 2024
14
Profit and loss and other comprehensive income
Non-technical account
general business for the year ended 31 December 2024
15
Balance sheet: assets
as at 31 December 2024
16
Balance sheet: liabilities
as at 31 December 2024
17
for the year ended 31 December 2024
18
Statement of cash flows
for the year ended 31 December 2024
19
Notes to the annual accounts and significant accounting policies
20
Syndicate 557 underwriting year accounts for the 2022 year of account
Report of the Directors of the managing agent
43
44
2022 closed year of account
45
Profit and loss: technical account
general business
for the 36 months ended 31 December 2024
48
Profit and loss: non-technical account
for the 36 months ended 31 December 2024
49
Balance sheet for the 2022 closed year of account
as at 31 December 2024
50
Notes to the underwriting year accounts and significant accounting policies
51
Seven-year summary (unaudited)
59
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
4
Directors and advisers
Managing agent
Syndicate 557
(Syndicate 557), Tokio Marine Kiln Syndicate
1880 (Syndicate 1880), Tokio Marine Combined Syndicate 510
(Syndicate 510) and Tokio Marine Kiln Life Syndicate 308 (Syndicate 308). TMKS is a wholly owned
subsidiary of
Tokio Marine Kiln Group Limited (TMKGL). TMKGL and its subsidiaries are referred to as
Tokio Marine Kiln (TMK).
Inc., Japan (Tokio Marine).
TMKS is authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority
(FCA)
.
Directors
S Batori
C Fuhrmann
V M Gordon-Walker
N I Hutton-Penman
B T Irick
A McNamara
C J G Moulder
R Patel
A M W Shaw
V Syal
D A Torrance (Chair)
M H Trussell
C J B Williams (resigned 31 March 2024)
Company secretary
Investment managers
A Gordon
BlackRock Investment Management (UK) Limited
12 Throgmorton Avenue
Run-off manager
London EC2N 2DL
V Shah
New England Asset Management Limited
Registered office
The Oval-Block 3, Shelbourne Road, Ballsbridge,
20 Fenchurch Street
D04 T8F2, Dublin 4, Ireland
London EC3M 3BY
Registered numbers
Independent auditors
TMKS company number
00729671
PricewaterhouseCoopers LLP
FCA reference number
204909
Chartered Accountants and Statutory Auditors
1041K
7 More London Riverside
London SE1 2RT
Bankers
Barclays Bank plc
Citibank, N.A.
Royal Bank of Canada
J.P. Morgan Europe Limited
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
5
Report of the Directors of the Managing Agent
The Directors of the managing agent (the Board) present their report and audited accounts for the year ended 31
December 2024 under UK Generally Accepted Accounting Practice (GAAP). This report covers Syndicate 557 (the
Syndicate), managed by TMKS. The managing agent
which is in Japan.
The annual report for the managed syndicate is prepared using the annual basis of accounting as required by Statutory
Instrument No. 1950 of 2008, the Insurance Accounts Directive
Syndicate and Aggregate Accounts) Regulations
2008.
Separate underwriting year accounts for the 2022 year of account are also included in this report.
Principal activity
The Syndicate was placed into run-off on 1 September 2022, and as such, its principal activity is administering the risks
which remain in-force.
Results
The result for the 2024 calendar year was a profit of £6.3
performance indicators during the year were as follows:
2024
£m
2023
£m
Gross written premium
(0.5)
0.1
Net earned premium
(0.3)
1.5
Profit for the financial year
6.3
5.0
Investment return
0.4
0.9
Net liabilities
(6.4)
(13.1)
The Syndicate reported a profit of £6.3 million (2023: £5.0 million), driven by improvements in reserves held for
catastrophe losses, most notably Hurricane Ian.
2022 underwriting year of account
The Syndicate made a 2022 closing underwriting year of account loss of £6.3
allocated capacity of £41.3 million (return on capacity (15.2%)) after taking account of operating expenses, foreign
The underwriting year of account was impacted by heightened catastrophe activity, namely weather-related losses from
Hurricane Ian, Winter Storm Elliot and the US Tornadoes throughout 2022.
2025 Outlook
the Syndicate into the
2023 year of account of Syndicate 510, with members participating on the
2022 year of account being
allocated capacity on the 2023 year of account of Syndicate 510.
As at 31 December 2024, the Syndicate has closed. Effectiv
2022 and prior underwriting years of account have been transferred to Syndicate 510
under the terms of a reinsurance to close (RITC) agreement.
Capital management
Capital framework at
The Society of
is a regulated undertaking and subject to supervision by the PRA under the Financial
Services and Markets Act 2000, and in accordance with Solvency II and the Insurance and Reinsurance Undertakings
(Prudential Requirements) (Risk Margin) Regulations 2023.
Within this supervisory framework,
applies capital requirements at member level and centrally to ensure that
complies with Solvency II requirements, and beyond that to meet its own financial strength, licence and ratings
objectives.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
6
Although, as described below,
capital setting processes use a capital requirement set at syndicate level as a
starting point,
capital requirements apply at member level only, not at a syndicate level. Accordingly, the capital
requirement at syndicate level is not disclosed in these report and accounts.
capital setting process
the prospective underwriting year. This amount must be sufficient to cover a 1 in 200-year loss, reflecting uncertainty in
the ultimate run-
Syndicate must also calculate its SCR at the same
confidence level but reflecting uncertainty over a one-year time horizon (one-
Solvency II requirements.
Planning Group.
of underwriting liabiliti
s total capital
requirement is therefore determined by the sha
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
known as the Economic Capital Assessment (ECA). The purpose of this uplift, which is a requirement set by
than Solvency II
Provision of capital by members
Each member may provide capital to meet its ECA either through assets held in trust by
specifically for that
member (Funds at
or as the
share of the members
balances on each syndicate on which it participates.
Accordingly, all of the assets less liabilities of the S
on the
respective balance sheets, represent resources available to meet the
-wide capital uplift applied for 2024 to derive the ECA is 35.0% (2023: 35.0
Capital allocation
The Syndicate has an approved internal model which is used to calculate capital requirements, allocate capital to risk
categories and assess the value of different business and reinsurance strategies. The calculations are based upon
sophisticated mathematical models that reflect the key risks in the business, allowing for the probability of occurrence,
the potential impact should losses occur and the interactions between the different risk types.
The results of the modelling confirm that the majority of capital is required to support insurance risk.
Risk management and risk appetite
There is a comprehensive, enterprise-wide Risk Management Framework (RMF) in place for the management of risk across
the whole of TMK. A key element of this is the Risk Appetite Framework (RAF) which is approved by the Board each year
and lays out the agreed appetite for each area of risk the Syndicate is exposed to.
TMK is exposed to a variety of risks and the Board has developed a strategy for categorising, managing and reporting
these different risks. This high-level categorisation is called the TMK Risk Universe. The Risk Universe is defined
e
includes risks that could positively or negatively impact the business and underpins the RAF, which sets out the parameters
for risk taking.
The RAF ensures that risk taking is aligned to the business strategy by including a set of risk preferences. These are
strategic choices taken by the business to deliver the best result to its stakeholders.
Risk appetites are regularly monitored
with risk metrics supported by qualitative and quantitative data collated by the Risk Management team (RMT) from first-
line teams and are reported quarterly as part of the Own Risk and Solvency Assessment (ORSA) process to the Risk,
Capital & Compliance Committee (RCCC).
In addition, the Syndicate is managed in accordance with the Run-Off Plan considering the duties of the managing agent
-Off Committee and subsequently, the Audit
Committee.
The principal risks facing the Syndicate, known as Tier 1 risks, are: Solvency, Liquidity, and Reputational. The Syndicate
also has exposure to the following Tier 2 risks: Run-off, Insurance, Market, Counterparty Credit, Operational and
Regulatory.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
7
Tier 1 risks:
Solvency risk
This is the risk of non-
Syndicate has enough capital to meet demands as they
fall due.
Solvency risk is driven by exposure to several other risks such as Insurance, Market, Credit and Operational. These risks
and their mitigants are described later in this section.
Liquidity risk
This is the risk of the Syndicate being unable to meet liabilities in a timely manner due to the lack of liquid resources.
To mitigate liquidity risk, the Treasury team reviews syndicate cash flow projections quarterly, and also stress tests them
against Realistic Disaster Scenarios. In the event of a catastrophe loss of a significant size, the Syndicate has the ability to
take advantage of outstanding claims advances from its major reinsurers. The Syndicate also has the ability to make cash
calls on its members in order to manage liquidity.
Reputational risk
adverse effects such as brand
damage or litigation.
In the modern digital era, reputational risk and the subsequent threat to
strong brand is becoming more significant.
Loss of confidence from regulators or capital providers could cause long-term harm to the business.
In light of this, all staff are made aware of their responsibilities to clients and other stakeholders.
Tier 2 risks:
Run-off risk
The Syndicate ceased writing new risks in 2022 and was placed into run-off. The 2022 and prior underwriting years of the
Syndicate have closed into Syndicate 510 by way of RITC on 31 December 2024.
Run-off risk is the risk of failing to manage the run-off of the Syndicate efficiently and effectively, in the best interests of
all members and avoiding any detriment to policyholders. The various risks associated with the run-off include reputational
risk, regulatory risk and the impact it may have from a resourcing perspective in terms of the potential for distraction
from business-as-usual activities.
These risks require careful management and are a key priority for the business. It is clearly stated in the run-off plan that
the managing agent will manage the run-
the Lloyds Oversight Principles, and with full regard to its duties and obligations as a managing agent. A Run-Off
Committee is in place to oversee the management of the run-off and this reports into the Audit Committee.
Insurance risk
This is the risk of loss arising from the inherent uncertainties as to the occurrence, amount and timing of insurance liabilities.
Insurance risk is sub-divided into several categories which include reinsurance risk and reserving risk.
Reinsurance risk
This is the risk that reinsurance purchased to protect the gross account does not respond as intended due to, inter alia,
mismatch with gross losses; poorly worded contracts; reinsurer counterparty risk; or exhaustion of reinsurance limits.
Reinsurance is used to protect capital against underwriting risk volatility, either as a result of large catastrophes or from
the severity of losses on individual policies.
Reserving risk
This is the risk that reserves held on the balance sheet will be inadequate to meet the net amount payable when insurance
liabilities crystallise and is exacerbated due to the inherent uncertainty of knowing the ultimate timing and quantum of
liabilities incurred.
Claims provisions represent estimates, based on both the run-
and judgement and on the Internal Rese
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
8
settlement and administration costs of claims incurred. A variety of estimation techniques are used, generally based upon
statistical analyses of historical loss development patterns, to assist in the establishment of appropriate claims reserves.
In addition, the estimates are subject to independent review by external actuaries, who sign an annual Statement of
Actuarial Opinion on the sufficiency of the reserves for the Syndicate.
policy is to reserve on a consistent
basis with a reasonable margin for prudence. Claims run-off tables are used to monitor the history of reserve adequacy,
and these show a trend of predominantly positive run-off since they were first prepared in 2001.
Market risk
This is the risk that arises from fluctuations in values of, or income from, assets, interest rates or exchange rates. Assets
are held as a result of underwriting activities either in premium trust funds or as capital support. On-going investment
strategy, investment objectives and the management of risks arising from investments are agreed by the Investment
Committee in line with the Prudent Person Principle, as outlined in the Solvency II Directive.
The Syndicate monitors its cash-flow on a daily basis and reviews its cash-flow forecasts, foreign currency exposures and
asset-liability matching regularly.
Counterparty credit risk
This is the risk of loss if another party fails to meet its financial obligations, including failure to meet them in a timely
manner.
The Syndicate is exposed to two types of credit risk: reinsurer credit risk and investment credit risk. Credit exposure and
aggregate exposure to reinsurers are managed by the Outwards Reinsurance team. The team monitors the credit ratings
of all reinsurers used. The Investment Committee regularly
management of which is outsourced to investment managers who manage the portfolios within permitted counterparty
limits.
Operational risk
This is the risk that errors caused by people/culture, processes or systems/IT lead to losses to the Syndicate.
The Board seeks to manage this risk by the recruitment of high calibre staff and providing them with ongoing, high-quality
training. Operational risks are reviewed on a regular basis with departmental heads responsible for identifying, assessing
and controlling operational risks effectively, as well as attesting to the effectiveness of these controls on a regular basis.
This forms the Risk and Control Self-Assessment (RCSA) process which is supported by the RMT who independently assess
key risks and controls on a regular basis.
There is a strong risk reporting and risk governance system in place to ensure effective risk management of operational
risk. This is underpinned by the RMF and the RAF.
The RCCC reviews the most material elements of the operational risk
profile quarterly, in line with the RMF. Attention is paid to how the risks from cyber security threats are managed by the
Information Security Group.
The Board is aware of its fiduciary responsibilities to capital providers across each of its four managed syndicates and is
careful to ensure equity between them. Potential conflicts of interest between capital providers are managed through the
Conflicts Committee, which reports to the Board.
Regulatory risk
This is the risk of loss owing to a breach of regulatory requirements or failure to respond to regulatory change.
The Board
market by overseas regulators, particularly in respect of US and Canadian regulated business. The Compliance function
is responsible for monitoring compliance with regulation and monitoring of regulatory change. The Compliance framework
outlines the broad regulatory and compliance structure that applies to all staff.
The nature of
business exposes the managing agent to controls and sanctions which regulate international
trade. Processes and controls are in place to screen and monitor transactions against relevant requirements to ensure
compliance with them.
Directors
The Directors of the managing agent who served during the year ended 31 December 2024, as well as any subsequent
changes, are listed under the section
and advisers
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
9
Post balance sheet events
These are discussed in note 21 of the annual accounts.
Disclosure of information to the auditors
As far as each person who was a Director of the managing agent at the date of approving this report is aware, there is
no relevant audit information, which is information needed by the auditors in connection with their report, of which the
auditors are unaware. Having made enquiries of fellow Directors of the managing agent and the Syndicate
s auditors,
each Director has taken all the steps that they are obliged to take as a Director in order to make themselves aware of
any relevant audit information and to establish that the auditors are aware of that information.
Independent auditors
PricewaterhouseCoopers LLP will not be reappointed as the Syndicate's auditors as the Syndicate has closed into Syndicate
510 with effect from 1 January 2025.
Approved by the Board of Directors
A M W Shaw
Chief Executive Officer
Tokio Marine Kiln Syndicates Limited
5 March 2025
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
10
Statement of Managing A
Responsibilities
The managing agent is responsible for preparing the Syndicate annual report and annual accounts in accordance with
applicable law and regulations.
The Insurance Accounts Directive
Syndicate and Aggregate Accounts) Regulations 2008
requires the managing agent to prepare syndicate annual accounts for each syndicate at 31 December each year, in
accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable law). The 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
annual accounts, the managing agent is required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable United Kingdom accounting standards have been followed, subject to any material
departures disclosed and explained in the annual accounts; and
prepare the annual accounts on the going concern basis for each syndicate unless it is intended for the Syndicate to
cease operations, or it has no realistic alternative but to do so.
The managing agent is responsible for keeping proper accounting records which disclose with reasonable accuracy at any
time the financial position of each syndicate and enable it to ensure that the Syndicate annual accounts comply with the
2008 Regulations. It is also responsible for safeguarding the assets of each syndicate and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The managing agent is responsible for the maintenance and integrity of the corporate and financial information included
on its website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The managing agent is responsible for the preparation and review of the iXBRL tagging that has been applied to the
maintaining systems, processes and internal controls to result in tagging that is free from material non-compliance with
The Directors of the managing agent confirm that they have complied with the above requirements in preparing the
Syndicate
annual accounts.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
11
Independent auditors’ report to the members of Syndicate 557
Report on the audit of the syndicate annual accounts
Opinion
In our opinion, 557’s syndicate annual accounts:
●
give a true and fair view of the state of the syndicate’s affairs as at 31 December 2024 and of its profit and cash
flows for the year then ended;
●
have been properly prepared 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 applicable law); and
●
have been prepared in accordance with the requirements of The Insurance Accounts Directive (Lloyd’s Syndicate
and Aggregate Accounts) Regulations 2008 and the requirements within the Lloyd’s Syndicate Accounts
Instructions version 2.0 as modified by the Frequently Asked Questions issued by Lloyd’s version 1.1 (“the Lloyd’s
Syndicate Instructions”).
We have audited the syndicate annual accounts included within the Report and Accounts
(the “Annual Report”), which
comprise: the Balance sheet: assets and the Balance sheet: liabilities as at 31 December 2024; Profit and loss and other
comprehensive income: technical account – general business, Profit and loss and other comprehensive income: non-
technical account – general business, the Statement of cash flows and the Statement of changes in members’ balances
for the year then ended; and the notes to the syndicate annual accounts, which include a description of the significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”), The Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, the Lloyd’s Syndicate Instructions and
other applicable law. Our responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the
audit of the syndicate annual accounts
section of our report. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the syndicate in accordance with the ethical requirements that are relevant to our audit of
the syndicate annual accounts in the UK, which includes the FRC’s Ethical Standard, as applicable to other entities of
public interest, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were
not provided.
Other than those disclosed in note 4, we have provided no non-audit services to the syndicate in the period under audit.
Emphasis of matter – Basis of preparation and closure of syndicate
Without modifying our opinion, we draw attention to note 21 which explains that the 2022 year of account of the syndicate
has closed and all assets and liabilities transferred to the 2023 year of account of Syndicate 510 by reinsurance to close.
The Syndicate has no successor year of account.
As a result, the Syndicate is no longer a going concern. The reinsurance to close occurs in the normal course of business
for a syndicate year of account at the 36 months stage of development. The syndicate annual accounts have therefore
been prepared on a basis other than going concern where the recorded assets and liabilities represent the amounts that
would be realised and discharged in the normal course of business were the going concern basis adopted.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the syndicate annual accounts and
our auditors’ report thereon. The Managing Agent is responsible for the other information. Our opinion on the syndicate
annual accounts does not cover the other information and, accordingly, we do not express an audit opinion or, except to
the extent otherwise explicitly stated in this report, any form of assurance thereon.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
1
2
In connection with our audit of the syndicate annual accounts, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the syndicate annual accounts or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material
inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material
misstatement of the syndicate annual accounts or a material misstatement of the other information. 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 based on these responsibilities.
With respect to the
Report of the Directors of the managing agent
(the “Managing Agent’s Report”), we also considered
whether the disclosures required by The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts)
Regulations 2008 have been included.
Based on our work undertaken in the course of the audit, The Insurance Accounts Directive (Lloyd’s Syndicate and
Aggregate Accounts) Regulations 2008 requires us also to report certain opinions and matters as described below.
Managing Agent’s Report
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 year ended 31 December 2024 is consistent with the syndicate annual accounts and has been prepared in
accordance with applicable legal requirements.
In light of the knowledge and understanding of the syndicate and its environment obtained in the course of the audit, we
did not identify any material misstatements in the Managing Agent’s Report.
Responsibilities for the syndicate annual accounts and the audit
Responsibilities of the Managing Agent for the syndicate annual accounts
As explained more fully in the
Statement of managing agent’s responsibilities, the Managing Agent is responsible for the
preparation of the syndicate annual accounts in accordance with the applicable framework and for being satisfied that
they give a true and fair view. The Managing Agent is also responsible for such internal control as they determine is
necessary to enable the preparation of syndicate annual accounts that are free from material misstatement, whether due
to fraud or error.
In preparing the syndicate annual accounts, the Managing Agent is responsible for assessing the syndicate’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis
of accounting unless the syndicate is unable to continue to realise its assets and discharge its liabilities in the ordinary
course of business
.
Auditors’ responsibilities for the audit of the syndicate annual accounts
Our objectives are to obtain reasonable assurance about whether the syndicate annual accounts as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors’ 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 accounts.
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.
Based on our understanding of the syndicate and industry, we identified that the principal risks of non-compliance with
laws and regulations related to breaches of regulatory principles, such as those governed by the Prudential Regulation
Authority and the Financial Conduct Authority, and those regulations set by the Council of Lloyd’s, and we considered the
extent to which non-compliance might have a material effect on the syndicate annual accounts. We also considered those
laws and regulations that have a direct impact on the syndicate annual accounts such as The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the Lloyd’s Syndicate Instructions. We evaluated
management’s incentives and opportunities for fraudulent manipulation of the syndicate annual accounts (including the
risk of override of controls), and determined that the principal risks were related to the posting of inappropriate journals
and management bias in accounting estimates. Audit procedures performed by the engagement team included:
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
13
•
Discussions with management, internal audit and the risk and compliance functions, including consideration of
known or suspected instances of non-compliance with laws and regulation and fraud;
•
Challenging assumptions and judgements made by management in their significant accounting estimates, in
particular in relation to valuation of the IBNR component of claims outstanding, reinsurance to close and pipeline
premium income;
•
Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations
impacting revenue, journals posted by senior management and/or those posted late in the year end close process;
and
•
Reviewing relevant meeting minutes including those of the Conflicts Committee, Risk, Capital & Compliance
Committee and Audit Committee and correspondence with regulatory authorities, including Lloyd’s of London and
the Prudential Regulation Authority.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances
of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the
syndicate annual accounts. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
A further description of our responsibilities for the audit of the syndicate annual accounts is located on the FRC’s website
at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the syndicate’s members as a body in accordance
with part 2 of The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and for no
other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent
in writing.
Other required reporting
Under The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 we are required
to report to you if, in our opinion:
●
we have not obtained all the information and explanations we require for our audit; or
●
adequate accounting records have not been kept by the Managing Agent in respect of the syndicate; or
●
certain disclosures of Managing Agent remuneration specified by law are not made; or
●
the syndicate annual accounts are not in agreement with the accounting records.
We have no exceptions to report arising from this responsibility.
Other matter
We draw attention to the fact that this report may be included within a document to which iXBRL tagging has been applied.
This auditors’ report provides no assurance over whether the iXBRL tagging has been applied in accordance with section
2 of the Lloyd’s Syndicate Instructions version 2.0.
Matthew Nichols (Senior statutory auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
5 March 2025
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
14
Profit and loss and other comprehensive income
Technical account
general business for the year ended 31 December 2024
Note
2024
2023
Gross premiums written
3
(539 )
Outward reinsurance premiums
(252 )
Premiums written, net of reinsurance
(379 )
(111 )
Change in the gross provision for unearned premiums
8
8
(9 )
(1,114 )
Net change in provisions for unearned premiums
Earned premiums, net of reinsurance
(347 )
Allocated investment return transferred from the non-technical
account
7
Claims paid:
-
Gross amount
8
(6,817 )
(22,051 )
-
8
Net claims paid
(5,964 )
(17,632 )
Change in the provision for claims:
-
Gross amount
8
-
8
(1,747 )
(4,850 )
Net change in provisions for claims
Claims incurred, net of reinsurance
Net operating expenses
4,5,6
(789 )
(955 )
Balance on the technical account
general business
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
15
Profit and loss and other comprehensive income
Non-technical account
general business for the year ended 31 December 2024
Note
2024
2023*
Balance on the technical account
general business
Investment income
7
Realised gains on investments
7
Unrealised gains on investments
7
Total investment return
Allocated investment return transferred to the general business
technical account
(412 )
(902 )
(Loss)/gain on foreign exchange
(79 )
Other charges
(10 )
Profit for the financial year
Total comprehensive income for the year
*Please refer to the Restatement of comparative information section in note 1.1.
The Syndicate ceased underwriting with effect from 1 September 2022 and therefore there are no component parts of the
business to be separately classified and disclosed as discontinued.
There is no other comprehensive income. Accordingly, a separate statement of other comprehensive income has not been
provided.
The notes to the annual accounts and significant accounting policies form part of these annual accounts.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
16
Balance sheet: Assets
as at 31 December 2024
Note
2024
2023
Financial investments
19
Deposits with ceding undertakings
Investments
Provision for unearned premiums
8
Claims outstanding
8,9
Debtors arising out of reinsurance operations
10
Other debtors
11
Debtors
Cash at bank and in hand
12
Other (Overseas deposits)
Other assets
Deferred acquisition costs
14
Prepayments and accrued income
Total assets
The notes to the annual accounts and significant accounting policies form part of these annual accounts.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
17
Balance sheet - Liabilities
As at 31 December 2024
Note
2024
2023
(6,415 )
(13,071 )
Total capital and reserves
(6,415 )
(13,071 )
Provision for unearned premiums
Claims outstanding
8,9
Technical provisions
Creditors arising out of reinsurance operations
15
Other creditors including taxation and social security
16
Creditors
Accruals and deferred income
Reinsurers
share of deferred acquisition costs
14
Total liabilities
Total liabilities, capital and reserves
The annual accounts, which comprise the Profit and loss and other comprehensive income: technical account
general
business, Profit and loss and other comprehensive income: non-technical account
general business, Balance sheet:
assets, Balance sheet: liabilities, Statement of changes in members
balances, Statement of cash flows and Notes to the
annual accounts and significant accounting policies, were approved by the Board of Tokio Marine Kiln Syndicates Limited
on 5 March 2025 and were signed on its behalf by:
R Patel
Deputy Chief Executive Officer & Chief Financial Officer
Tokio Marine Kiln Syndicates Limited
5 March 2025
The notes to the annual accounts and significant accounting policies form part of these annual accounts.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
18
Statement of changes in
balances
for the year ended 31 December 2024
2024
2023
(13,071 )
(17,699 )
Total comprehensive income for the year
Payments of
(378 )
Losses collected from
(6,415 )
(13,071 )
Members participate on syndicates by reference to years of account and their ultimate result, assets and liabilities are
assessed with reference to policies incepting in that year of account in respect of their membership of a particular year.
The notes to the annual accounts and significant accounting policies form part of these annual accounts.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
19
Statement of cash flows
For the year ended 31 December 2024
2024
2023
Restated*
Cash flows from operating activities:
Profit for the financial year
Decrease in gross technical provisions
(14,880 )
(30,142 )
Decrease in reinsurers' share of gross technical provisions
Decrease in debtors
(Decrease)/increase in creditors
(1,363 )
Movement in other assets/liabilities
(271 )
Investment return
(412 )
(902 )
Foreign exchange
Net cash flows from operating activities
(6,062 )
(14,609 )
Cash flows from investing activities:
Purchase of equity and debt instruments
(606 )
(3,204 )
Sale of equity and debt instruments
Investment income received
Net cash flows from investing activities
Cash flows from financing activities:
Distribution of profit
(378 )
Collection of losses
Net cash flows from financing activities
(378 )
Net increase/(decrease) in cash and cash equivalents
(3,574 )
Cash and cash equivalents at beginning of year
Foreign exchange losses on cash and cash equivalents
(14 )
(11 )
Cash and cash equivalents at the end of year
*Please refer to the Restatement of comparative information section in note 1.1.
The notes to the annual accounts and significant accounting policies form part of these annual accounts.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
20
Notes to the annual accounts and significant accounting policies
1.
Accounting policies
1.1
Statement of compliance
Syndicate and Aggregate Accounts) Regulations 2008 and Accounting Standards in the United Kingdom, including Financial
, and
Instructions Version 2.0 as modified by the Frequently Asked Questions Version 1.1
. The general result
is determined on an annual basis of accounting.
These annual accounts are prepared under the historical cost convention, as modified by the recognition of certain financial
assets and liabilities measured at fair value.
The preparation of annual accounts requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Syndicate accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the annual accounts, are disclosed in
note 2.
These annual accounts are presented in pounds sterling, which is the functional currency of the Syndicate. All amounts
have been rounded to the nearest thousand pounds, unless otherwise stated.
Restatement of comparative information
During 2024, Lloyd's introduced changes to the syndicate accounts process to rationalise and standardise financial
reporting across the market. As a result, certain comparative information has been restated to ensure consistency with
current year presentation and compliance with the Lloyd's Syndicate Accounts Instructions. The changes comprise:
a) Reclassification and Aggregation changes
Certain financial statement line items have been reclassified whilst the underlying amounts remain unchanged. To align
with Lloyd's reporting requirements whilst maintaining FRS 102 compliance, certain items have been aggregated or
disaggregated within the financial statements and related notes. This includes the presentation of realised and unrealised
gains and losses on investments, which are now shown on a disaggregated basis in the
rofit and loss and other
comprehensive income: non-technical account
b) Correction of error
During the review of financial statement presentation, it was identified that certain short-term, highly liquid cash
equivalents as defined under paragraph 7.2 of FRS 102 had been omitted from the opening and closing cash equivalents
in the Statement of cash flows. The restated Statement of cash flows is shown below:
Statement of cash flows
2023
£
Restatement
£
2023
(restated)
£
Net cash flows from operating activities
(14,609)
-
(14,609)
Purchase of equity and debt instruments
(3,204)
-
(3,204)
Sale of equity and debt instruments
18,134
(4,220)
13,914
Investment income received
703
-
703
Net cash flows from investing activities
15,633
(4,220)
11,413
Net cash flows from financing activities
(378)
-
(378)
Net increase/(decrease) in cash and cash equivalents
646
(4,220)
(3,574)
Cash and cash equivalents at beginning of year
786
6,523
7,309
Foreign exchange on cash and cash equivalents
(11)
-
(11)
Cash and cash equivalents at the end of the year
1,421
2,303
3,724
The reclassification and aggregation changes in (a) above have been applied retrospectively and had no impact on
previously reported profit, total comprehensive income, total assets, total liabilities, or total capital and reserves.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
21
The restatement in (b) above increased the overall cash and cash equivalents reported in the Statement of cash flows by
£2,303,000 but did not impact the overall asset position recognised in the Balance sheet: assets account.
1.2
New standards and amendments
The Syndicate has applied FRS 102 and FRS 103 as issued in September 2024, which reflects the amendments made
since the previous editions were issued in 2022.
FRS 102 is subject to a periodic review at least every five years. In December 2022, the Financial Reporting Council
published its periodic review of amendments to FRS 102 (FRED 82). The proposed effective date for these amendments
is accounting periods beginning on or after 1 January 2026, with early application permitted (provided all amendments
are applied at the same time).
The proposed amendments within FRED 82 are focussed on updating accounting requirements to reflect changes in
International Financial Reporting Standards (IFRS), particularly with respect to the following:
The proposed basis for revenue accounting will align to IFRS 15 Revenue from Contracts with Customers, and a
five-step model for revenue recognition, with appropriate simplifications.
The proposed basis for lease accounting will align to IFRS 16 Leases, and an on-balance-sheet model, with
appropriate simplifications.
The Syndicate has not applied any amendments from FRED 82 for the year ended 31 December 2024. The proposed
effective date for these amendments are for accounting periods beginning on or after 1 January 2026 and are therefore
not relevant to this Syndicate.
funds are intended primarily to cover circumstances where syndicate assets prove insufficient to meet participating
resource 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 by way of such
AL to meet liquidity requirements
or to settle losses.
1.4
Going concern
The Syndicate has entered into a RITC arrangement with Syndicate 510 in respect of the 2022 and prior years of account.
The Syndicate has no remaining open or run-off years of account. On this basis the Syndicate is no longer considered a
going concern and management have prepared these accounts under a basis other than going concern. There is no impact
on the carrying value of the assets and liabilities recorded in the balance sheet.
1.5
Summary of accounting policies
The significant accounting policies adopted in the preparation of the annual accounts are set out below. They have been
applied consistently to all periods presented in these annual accounts.
a. Product classification
Insurance contracts are defined as those containing significant insurance risk at the inception of the contract, or those
where at the inception of the contract there is a scenario with commercial substance where the level of insurance risk
may be significant. The significance of insurance risk is dependent on both the probability of an insured event and the
magnitude of its potential effect.
b. Premiums written
Inwards premiums written comprise premiums on contracts incepting during the financial year as well as adjustments
made in the year to premiums on contracts incepting in prior accounting periods. Premiums in respect of insurance
contracts underwritten under facilities such as binding authorities, lineslips or consortia arrangements are estimated based
on information provided by the broker, past underwriting experience and prevailing market conditions. The estimates are
updated on a regular basis. It is assumed that the majority of risks incept evenly across the period of the facility; however
bespoke writing patterns are used for a small number of facilities. Therefore, only the proportion of risks incepted at the
year-end date are reported as written. Premiums are shown gross of brokerage payable and exclude taxes and duties
levied on them. Estimates are made for pipeline premiums on a risk-by-risk basis, representing the difference between
written and signed (premium processed for future settlement) premium, which is held on the balance sheet as an asset.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
22
Outwards reinsurance premiums are accounted for in the same accounting period as the premiums for the related direct
or inwards business being reinsured.
c. Earned premiums
Inwards and outwards earned premium represents the amount of written premium deemed to have been exposed to loss
according to defined earnings patterns. The earning patterns are based primarily on time apportionment, with an
adjustment for the risk profile of certain classes of business, particularly those exposed to seasonal weather-related
events. The provision for unearned premium comprises the proportion of gross premiums written which is estimated to
be earned after the balance sheet date.
Reinstatement premiums arise on both inwards and outwards policies when a loss has been incurred on a policy and there
is a clause which requires the reinstatement of the policy with the payment of a further premium by the policyholder.
They are recognised as written and earned in full at the date of the event giving rise to the reinstatement premium.
Outwards reinstatement premiums payable in the event of a claim being made are charged to the same year of account
as that to which the recovery is credited.
d. Claims paid and incurred
Paid claims represent all claims paid during the year and include claims handling expenses.
Claims incurred comprise paid claims and changes in the provisions for outstanding claims, including provisions for claims
incurred but not reported (IBNR) and related expenses, together with any adjustments to claims from previous years.
e. Claims provisions and related recoveries
Gross claims incurred comprise the estimated cost of all claims occurring during the year, whether reported or not,
including related direct and indirect claims handling costs and adjustments to claims outstanding from previous years.
Provision is made at the year-end for the estimated cost of claims incurred but not settled at the balance sheet date,
including outstanding claims estimated on a case-by-case basis and also the cost of claims IBNR. The estimated cost of
claims includes expenses to be incurred in settling claims. All reasonable steps are taken to ensure that appropriate
information regarding claims exposures is obtained. However, given the uncertainty in establishing claims provisions, it
is likely that the final outcome will prove to be different from the original liability established. All claims provisions are
reported on an undiscounted basis.
Reinsurance recoveries are accounted fo
share of provisions for claims is based on estimated amounts for gross claims incurred, net of estimated irrecoverable
amounts.
f. Provision for unexpired risks
Provision is made for any deficiencies arising when unearned premiums, net of associated acquisition costs, are insufficient
to meet expected claims and expenses after taking into account future investment return on the investments supporting
the unearned premiums provision. The expected claims are calculated having regard only to events that have occurred
Unexpired risks surpluses and deficits are offset where business classes are managed together and a provision is made if
an aggregate deficit arises. The unexpired risks provision is included within other technical provisions.
All reasonable steps are taken to ensure that the appropriate information regarding claims exposures is obtained. The
calculation is based upon statistical analyses of historical experience, which assumes that the development pattern of
premiums and claims will be similar to past experience. Allowance is made, however, for changes or uncertainties which
may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce
when compared with the cost of previously settled claims. Therefore, given the uncertainty in establishing a provision for
unexpired risks, it is likely that the final outcome will prove to be different from the original liability established.
g. Net operating expenses and personal expenses
Net operating expenses comprise the cost of acquiring business including commission, profit commission and reinsurance
commission income as well as the staff costs and other expenses attributable to underwriting operations.
profit commission,
subscriptions. Net operating expenses and personal expenses are recognised on the accruals basis and represent the
expenses incurred on underwriting operations.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
23
h. Finance costs
Finance costs comprise interest paid and bank charges together with facility fees on letters of credit and are recorded in
the period in which they are incurred.
i. Acquisition costs
Acquisition costs, comprising commission and other costs related to the acquisition of new insurance contracts are deferred
to the extent that they are attributable to premiums unearned at the balance sheet date. Where inwards business is ceded
to an outwards proportional reinsurance treaty, an estimate of the relevant proportion of the inwards acquisition costs is
calculated and deferred in line with the outwards unearned premium at the balance sheet date.
Deferred acquisition costs, representing the proportion of commission and other acquisition costs that relate to unearned
premium on policies in force at the year-end, are charged over the period in which related premiums are earned. Deferred
acquisition costs are reviewed by category of business at the end of each reporting period and are written off where they
are no longer considered to be recoverable.
j. Foreign currencies
Functional and presentation currency
Items included in the annual accounts are measured using the currency of the primary economic environment in which
the Syndicate operates (the functional currency). The annual accounts are presented in pounds sterling which is also the
functional currency of the Syndicate.
Transactions and balances
Foreign currency transactions are recorded in the functional currency using the exchange rates prevailing at the dates of
the transactions or an appropriate average rate of exchange. At each period end foreign currency monetary items are
translated using the closing rate. For this purpose, all assets and liabilities arising from insurance contracts (including
unearned premiums, deferred acquisition costs and unexpired risks provisions) are monetary items.
Foreign exchange gains and losses resulting from the settlement of transactions and from the measurement at year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the non-technical
account.
Exchange rates used are as follows:
2024
2023
Start of
period
rate
End of
period
rate
Average
rate
Start of
period rate
End of
period rate
Average
rate
Sterling
Euro
US dollar
Canadian dollar
Australian dollar
Japanese Yen
The distributable result on closing a year of account, usually at 36 months, is calculated using the exchange rates
prevailing at the date of closure.
k. Financial investments
Financial instruments are initially recorded at cost, which equates to fair value, and subsequently carried at fair value
through profit or loss.
Financial instruments that are designated as fair value through profit or loss are classified using a fair value hierarchy
that reflects the significance of the inputs used in these measurements.
Level 1: the fair value of financial instruments is derived using unadjusted quoted prices in an active market for
identical assets or liabilities at the measurement date. These instruments include government bonds and securities
using quoted prices in an active market.
Level 2: the fair value of financial instruments is derived using inputs other than quoted prices included within
level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
24
These instruments include regularly traded government agency bonds, supranational bonds, corporate bonds,
money market and open-ended funds.
Level 3: financial instruments are derived from inputs that are not observable. Unobservable inputs are used to
measure fair value to the extent that relevant observable inputs are not available and may include internal data
or models. Assumptions from market participants may be used to formulate the valuation of certain assets and
liabilities.
All regular purchases of financial investments are recognised on the trade date, being the date the Syndicate commits to
purchase the asset. All regular sales of financial investments are recognised at the earlier of the trade date and maturity
date.
A financial asset is derecognised when the contractual right to receive cash flows expires or where they have been
transferred and the Syndicate has also substantially transferred all risks and rewards of ownership. A financial liability is
derecognised once the obligation under the liability is discharged, cancelled or expires.
l. Derivative financial instruments
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are
subsequently re-measured at their fair value. Changes in the fair value are recognised immediately in the profit and loss
account. Fair values are obtained from quoted market prices in active markets, including recent market transactions. All
derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
The best evidence of the fair value of a derivative at initial recognition is the transaction price (i.e. the fair value of the
consideration given or received) unless the fair value of that instrument is evidenced by comparison with other observable
current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation
technique whose variables include only data from observable markets.
m. Debtors and creditors arising out of direct and reinsurance operations
Debtors and creditors arising out of direct and reinsurance operations are initially recognised at transaction price and are
subsequently carried at the recoverable amount. The carrying value is reviewed for impairment whenever events or
circumstances indicate that the carrying amount is greater than the recoverable amount, with the impairment adjustment
recorded in the profit and loss account. Debtors arising out of direct insurance and reinsurance operations are stated net
of specific provisions against doubtful debts which are made on the basis of reviews conducted by management.
n. Other debtors and creditors
Any other debtors and creditors are recognised initially at transaction price and subsequently carried at the recoverable
amount. The carrying value of other debtors is reviewed for impairment whenever events or circumstances indicate that
the carrying amount is greater than the recoverable amount, with the impairment adjustment recorded in the profit and
loss account. All other debtors and creditors are due within one year, unless otherwise stated.
o. Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand, deposits held at call with banks and other short-term highly
liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of
changes in value.
Bank overdrafts, when applicable, are shown within borrowings in current liabilities. These are measured at cost less any
allowance for impairment.
p. Overseas deposits
Overseas deposits are lodged as a condition of conducting underwriting business in certain countries. These are initially
recorded at cost, which equates to fair value, and subsequently carried at fair value through profit or loss.
q. Investment return
Investment return comprises all investment income, realised investment gains and losses and movements in unrealised
gains and losses, net of investment management expenses, including interest. Realised gains and losses on investments
carried at fair value through profit or loss are calculated as the difference between sale proceeds and the fair value at the
previous balance sheet date, or purchase price if acquired during the year. Unrealised gains and losses on investments
represent the difference between the fair value at the balance sheet date and the fair value at the previous balance sheet
date, or purchase price if acquired during the year.
Investment return on general business is initially recorded in the non-technical account. A transfer is made from the non-
technical account to the technical account. Investment return has been wholly allocated to the technical account as all
investments relate to the technical account.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
25
r. Investment yield
The calendar year investment yield is calculated as the ratio o
expressed as a percentage. Aggregate investment return is the total amount of net appreciation/losses, investment
income and accrued interest received during the year, after deducting investment management costs but before deducting
tax. Average funds available is the average value of all investments (including accrued interest), deposits and surplus
cash at the beginning of the year and at each quarter-end revalued at market prices.
s. Taxation
Under Schedule 19 of the Finance Act 1993 the Syndicate does not pay UK taxation, its profits being allocated and assessed
to tax on its members in direct proportion to their capacity.
The Syndicate pays various overseas direct and premium based taxes, the majority of which are allocable to its members
in direct proportion to their capacity and which can be claimed by members either as double tax relief or as an expense
against tax liabilities.
t. Pension costs
TMK operates a defined contribution scheme. A defined contribution plan is a pension plan under which a fixed contribution
is paid into a separate entity. Once the contributions have been paid TMK has no further payment obligations. Pension
contributions relating to syndicate staff are charged to the Syndicate and included within net operating expenses.
u. Profit commission
Profit commission is charged by the managing agent at a rate of 17.5% of profit subject to the operation of a two-year
deficit clause. Final settlement to the managing agent is made when the year of account closes; normally at 36 months.
Profit commission is estimated on an ultimate basis for each year of account and accrued by the Syndicate on a straight-
line basis to the extent it is probable (more likely than not) that the Syndicate will be required to transfer economic
benefits in settlement.
v. Provisions
A provision is recognised when the Syndicate has a present legal or constructive obligation, as a result of a past event,
that is expected to result in an outflow of resources. A provision is recognised when a reliable estimate of the amount of
the obligation can be made.
w. Current and non-current disclosure
For each asset and liability line item that combines amounts expected to be recovered or settled (a) no more than 12
months after the year-end date and (b) more than 12 months after the year-end date, the relevant note discloses the
amount expected to be recovered or settled after more than 12 months.
x. Contingencies
Contingent liabilities arise as a result of past events when either it is not probable that there will be an outflow of resources
or that the amount cannot be reliably measured at the reporting date or when the existence will be confirmed by the
occurrence or non-occurrence of uncertain future events not wholly within the S
are disclosed in the annual accounts unless the probability of an outflow of resources is remote.
y. Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet only when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the
assets and settle the liability simultaneously.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
26
2.
Use of critical accounting estimates and judgements in applying accounting policies
The preparation of the annual accounts requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Syndicate
a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the annual
accounts are those listed below.
COVID-19
The Directors are aware of the heightened estimation uncertainty in reserving for estimated losses
arising from COVID-
19 due to the unique nature of the loss. Management have a robust reserving
approach which supports the held reserves at the year-end date.
Incurred
but
not
reported
claims (IBNR)
The estimation of claims IBNR is generally subject to a greater degree of uncertainty than the
estimation of the cost of settling claims already notified to the S
yndicate, where more information
about the claim event is generally available. In calculating the estimated cost of unpaid claims,
the
Syndicate uses a variety of estimation techniques, generally based upon statistical analyses of
historical experience, which assumes that the development pattern of the current claims will
be
consistent with past experience. Allowance is made, however, for changes or uncertainties which may
create distortions in the underlying statistics or which might cause the cost of unsettled claims to
increase or reduce when compared with the cost of previously settled claims including:
changes in processes which might accelerate or slow down the development and/or recording of
paid or incurred claims compared with the statistics from previous periods;
changes in the legal environment;
the effects of inflation;
changes in the mix of business;
the impact of large losses; and
movements in industry benchmarks.
A component of these estimation techniques is usually the estimation of the cost of notified but not
paid claims. In estimating the cost of these,
regard is given to the claim circumstance as reported,
any information available from loss adjusters and information on the cost of settling claims with similar
characteristics in previous periods.
Large claims affecting each relevant business class are
generally assessed separately, either measured
on a case-by-case basis or projected separately, in order to allow for the possible distorting effect of
the development and incidence of these large claims.
Where possible, multiple techniques are adopted in
order to estimate the required level of provisions.
This assists in giving greater understanding of the trends inherent in the data being projected. The
projections given by the various methodologies also assist in setting the range of possible outcomes.
The most appropriate estimation technique is selected taking into account the characteristics of the
business class and the extent of the development of each accident year. The amount of salvage and
subrogation recoveries is separately identified and, where material, reported as an asset.
The Directors consider that the provisions for gross claims and related reinsurance recoveries are fairly
stated on the basis of 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. Adjustments to the amounts of claims provisions established in prior years
are reflected in the report and accounts for the period in which
the adjustments are made. The
methods used, and the estimates made, are reviewed regularly.
Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the
amounts that will be recoverable from reinsurers based upon the g
ross provisions and having due
regard to collectability. An estimate of the future cost of indirect claims handling is calculated as a
percentage of the claims reserves held at the balance sheet date.
Reinsurance
occurrence of the claim and the claim being reported. For short tail risks, the costs of claims notified
to the Syndicate at the year-end date are estimated on a case-by-
case basis to reflect the individual
circumstances of each claim. The ultimate expected cost of claims is projected from this data by
reference to statistics which show how estimates of claims incurred in previous periods have developed
over time to reflect changes in the underlying estimates of the cost of notified claims and late
notifications.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
27
Written
premium &
Pipeline
premium
Written premium is reported according to management estimation of when premium will be written.
An estimate of premiums written during the year that have not yet been notified by the financial year-
end (pipeline premium) is made on a risk-by-
risk basis. The pipeline premium is booked as written
and an assessment is made of the related unearned premium provision and an estimate of claims
incurred but not reported in respect of the earned element. Pipeline premium of £1,103,000 (2023
:
£2,839,000) was recognised as an asset on the balance sheet at 31 December 2024.
For delegated authority business,
the underwriters estimate how much business will attach to a facility
based on information provided by the broker, using
trading conditions of the market. This estimate is updated on a regular basis. It is assumed that risks
attaching to the master facility incept evenly across the period of the facility and therefore only
the
proportion of risks which have incepted to the master facility by the year-
end date are reported within
written premium in these report and accounts.
Earned
premium
Earned premium is estimated based on assumptions of how each risk is earned according
to its method
of placement and class of business. Each risk falling within a class of business is earned according to
the estimated pattern applying to that class of business, which takes into account the class
characteristics including exposure to seasonal weather-
related events. This approach is applied
consistently year-on-year.
The earning of premiums is based primarily on time apportionment, with an adjustment for the risk
profile of certain classes of business particularly those exposed to seasonal weather-related events.
Provision
for
unexpired
risks
All reasonable steps are taken to ensure that the appropriate information regarding claims exposures
is obtained. The calculation is based upon statistical analyses of historical experience, which ass
umes
that the development pattern of premium and claims will be similar to past experience. However,
given the uncertainty in establishing a provision for unexpired risks, it is likely that the final outcome
will prove to be different from the original liability established.
Reinsurance
recoverable
Reinsurance is deemed to be fully recoverable unless there is reason to doubt its recoverability. In
these circumstances specific provisions are made based on the expected proportional recovery and
the credit risk profile of the counterparties.
Financial
investments
Financial investments are carried in the balance sheet at fair value. Market valuations of funds are
obtained from fund administrators. The fair value of Level 3 financial instruments, which
are those
where no active market exists or where quoted prices are not otherwise available,
is determined by
using valuation techniques. To the extent that valuations are
based on models or inputs that are
unobservable in the market, the determination of f
air value requires more judgement and accordingly,
those instruments will require a greater degree of judgement to be exercised during valuation.
3.
Segmental analysis
All business previously written by the Syndicate related to inwards reinsurance. All business was concluded in the UK. The
total commission payable on direct business was £nil (2023: £nil).
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
28
4.
Net operating expenses
2024
2023
Acquisition costs
(16)
4
Change in deferred acquisition costs
1
55
Administrative expenses
803
799
Reinsurance commissions and profit participations
1
97
Net operating expenses
789
955
2024
2023
s for the audit of these financial
statements
89
77
F
s and its associates in respect of
other services pursuant to legislation
36
33
All other services
30
36
Total
155
146
The charge incurred for other services pursuant to legislation relates to the audit and
returns. The charge incurred for all other services in 2024 relates to the provision of a statement of actuarial opinion on
the reserves and an
assurance engagement
over these financial statements.
Audit fees are billed combined for the TMK Group and the Syndicate and are paid by a fellow subsidiary of TMKGL. A
recharge of audit fees is made to the Syndicate.
5.
Staff costs
The Syndicate and its managing agent have no employees. Staff are employed by Tokio Marine Kiln Insurance Services
Limited (TMKIS). The following amounts were recharged to the Syndicate in respect of salary costs and are included within
administrative expenses:
2024
2023
Wages and salaries
312
310
Social security costs
78
80
Total
390
390
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
29
6.
Key management personnel compensation
The Directors of TMKS received the following aggregate remuneration in relation to their work on the Syndicate:
2024
2023
Emoluments
257
194
Of the above amount £53,000 (2023: £52,000) was charged to the Syndicate as an expense, with the remainder borne
by other group entities.
The run-off manager received the following remuneration charged as a syndicate expense:
2024
2023
Emoluments
41
37
7.
Investment return
2024
2023*
Interest and similar income
From financial instruments designated at fair value through the profit or loss
Interest and similar income
289
502
Interest on cash at bank
24
13
Other income from investments
From financial instruments designated at fair value through the profit or loss
Gains on the realisation of investments
117
193
Losses on the realisation of investments
(18)
(5)
Unrealised gains on investments
-
207
Unrealised losses on investments
-
(8)
Total investment return
412
902
Transferred to the technical account from the non-technical account
412
902
*Please refer to the Restatement of comparative information section in note 1.1.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
30
8.
Technical provisions
The reconciliation of the opening and closing provision for claims outstanding is as follows:
Gross
Reinsurance
Net
2024
Claims outstanding
Balance at 1 January
28,048
(2,816)
25,232
Claims paid during the year
(6,817)
853
(5,964)
Expected cost of current year claims
(390)
(106)
(496)
Change in estimates of prior year provisions
(7,639)
1,000
(6,639)
Foreign exchange adjustments
7
(5)
2
Balance at 31 December
13,209
(1,074)
12,135
2023*
Balance at 1 January
55,358
(7,933)
47,425
Claims paid during the year
(22,051)
4,419
(17,632)
Expected cost of current year claims
1,721
(239)
1,482
Change in estimates of prior year provisions
(4,956)
670
(4,286)
Foreign exchange adjustments
(2,024)
267
(1,757)
Balance at 31 December
28,048
(2,816)
25,232
*Please refer to the Restatement of comparative information section in note 1.1.
The reconciliation of the opening and closing provision for unearned premiums is as follows:
Gross
Reinsurance
Net
2024
Unearned premiums
Balance at 1 January
41
(9)
32
Premiums written in the year
(539)
160
(379)
Premiums earned during the year
498
(151)
347
Foreign exchange adjustments
-
-
-
Balance at 31 December
-
-
-
2023
Balance at 1 January
2,873
(1,155)
1,718
Premiums written in the year
141
(252)
(111)
Premiums earned during the year
(2,906)
1,366
(1,540)
Foreign exchange adjustments
(67)
32
(35)
Balance at 31 December
41
(9)
32
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
31
9.
Claims development
Within the calendar year technical result, a surplus of £6,639,000 (2023: surplus of £4,287,000) relates to the
reassessment of net claims incurred for previous accident years.
The following tables show the development of gross and net claims incurred including IBNR and the claims handling
provision over the last ten years. The claims development tables are prepared on an underwriting year of account basis,
and therefore reflect the pattern of earned premium and risk exposure over a number of years. All figures are shown
converted at current year-end rates.
Gross:
2015
2016
2017
2018
2019
2020
2021
2022
Pure underwriting year
at end of underwriting year
3,509
6,858
26,192
13,226
4,619
20,126
21,056
32,657
one year later
4,428
6,626
22,951
12,685
15,808
22,283
21,261
31,268
two years later
3,830
6,131
21,905
12,376
15,350
23,060
20,967
26,327
three years later
3,514
5,810
21,782
12,559
12,312
23,133
20,072
four years later
3,206
5,772
21,215
11,505
12,125
24,035
five years later
3,173
5,710
20,487
11,402
9,754
six years later
3,181
5,617
19,878
11,004
seven years later
3,130
5,596
19,411
eight years later
3,101
5,565
nine years later
3,101
Estimate of gross claims reserve
3,101
5,565
19,411
11,004
9,754
24,035
20,072
26,327
Less: gross claims paid
(3,060)
(5,510)
(19,215)
(10,774)
(8,707)
(19,454)
(17,528)
(22,600)
Gross claims reserve
41
55
196
230
1,047
4,581
2,544
3,727
Net:
2015
2016
2017
2018
2019
2020
2021
2022
Pure underwriting year
at end of underwriting year
3,509
6,858
26,192
13,226
4,619
20,126
17,579
26,159
one year later
4,428
6,626
22,951
12,685
15,808
22,283
17,887
25,055
two years later
3,830
6,130
21,905
12,376
15,350
22,944
17,713
21,099
three years later
3,514
5,809
21,782
12,559
12,312
23,017
16,755
four years later
3,206
5,772
21,215
11,505
12,125
23,898
five years later
3,173
5,709
20,487
11,402
9,754
six years later
3,181
5,608
19,878
11,004
seven years later
3,130
5,588
19,411
eight years later
3,101
5,557
nine years later
3,101
Estimate of net claims reserve
3,101
5,557
19,411
11,004
9,754
23,898
16,755
21,099
Less: net claims paid
(3,060
)
(5,510)
(19,215
)
(10,774
)
(8,707
)
(19,317
)
(14,515)
(18,130
)
Net claims reserve
41
47
196
230
1,047
4,581
2,240
2,969
Gross
Reinsurance
Net
Estimated balance to pay
12,421
(1,070)
11,351
2014 and prior years of account
788
(4)
784
Outstanding claims reserve
13,209
(1,074)
12,135
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
32
10.
Debtors arising out of reinsurance operations
2024
2023*
Due within one year
1,350
3,828
Total
1,350
3,828
*Please refer to the Restatement of comparative information section in note 1.1.
11.
Other debtors
2024
2023*
Other related party balances (non-syndicate)
2
2
Other
7
15
Total
9
17
*Please refer to the Restatement of comparative information section in note 1.1.
12. Cash and cash equivalents
2024
£000
2023
£000
Cash at bank and in hand
567
1,421
Short term deposits with credit institutions
6,145
2,303
Total cash and cash equivalents
6,712
3,724
Included within cash and cash equivalents are the following amounts which are not available for use by the Syndicate:
2024
2023
Short term deposits with credit institutions
4
4
13. Analysis of net debt
At 1 January
2024
Cash flows
Fair value and
exchange
movements
At 31
December
2024
Cash and cash equivalents
3,724
3,002
(14)
6,712
Total
3,724
3,002
(14)
6,712
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
33
14.
Deferred acquisition costs
The reconciliation of the opening and closing deferred acquisition costs is as follows:
Gross
Reinsurance
Net
2024
Balance at 1 January
1
(1)
-
Incurred deferred acquisition costs
(16)
1
(15)
Amortised deferred acquisition costs
15
(1)
14
Foreign exchange movements
-
1
1
Balance at 31 December
-
-
-
2023
Balance at 1 January
57
(76)
(19)
Incurred deferred acquisition costs
4
170
174
Amortised deferred acquisition costs
(59)
(97)
(156)
Foreign exchange movements
(1)
2
1
Balance at 31 December
1
(1)
-
15.
Creditors arising out of reinsurance operations
The following balances are included within creditors arising out of reinsurance operations:
2024
2023
Due within one year
353
219
Total
353
219
16.
Other creditors including taxation and social security
The following balances are included within other creditors:
2024
2023*
Inter-syndicate balances
2,013
3,597
Other related party balances (non-syndicates)
154
67
Total
2,167
3,664
*Please refer to the Restatement of comparative information section in note 1.1.
17.
Off-balance sheet items
The Syndicate has not been party to an arrangement, which is not reflected in its balance sheet, where material risks and
benefits arise for the Syndicate.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
34
18.
Related parties
F
rom/to
related parties
TMKS/
TMKIS
2024
Profit and loss
Gross Premiums written
(443)
-
Claims Paid: gross amount
(6,791)
-
Net operating expenses
-
(26)
Balance sheet
Technical provisions: claims outstanding
1
(12,781)
-
2023
Profit and loss
Gross Premiums written
141
-
Claims Paid: gross amount
(21,989)
-
Net operating expenses
-
2
Balance sheet
Technical provisions: claims outstanding
1
(27,606)
-
1
Notified claims
From/to related parties
TMKS manages the Syndicate alongside Syndicates 510 and 1880. All transactions between the managed syndicates were
TMKS
Profit commission is estimated on an ultimate basis for each year of account and accrued by the Syndicate on a straight-
line basis to the extent it is probable (more likely than not) that the Syndicate will be required to transfer economic
benefits, final settlement to the managing agent is paid when the year of account is closed after three years.
Managing agen
fees were paid by the Syndicate to Tokio Marine Kiln Syndicates Limited.
TMKIS
Expenses were paid to TMKIS (a fellow subsidiary of TMKGL) for expenses paid on behalf of the Syndicate.
19.
Financial Investments
Carrying Value
Cost
2024
£000
2023
£000
2024
£000
2023
£000
Shares and other variable yield securities and units in unit trusts
6,141
2,299
6,141
2,299
Debt securities and other fixed income securities
-
8,332
-
8,051
Total financial investments
6,141
10,631
6,141
10,350
2024
£000
2023
£000
Financial assets measured at fair value through profit or loss
6,141
10,631
Total financial investments
6,141
10,631
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
35
20.
Risk management
Details of the S
Risk Management Framework are given in the report of the Directors of the managing agent.
a)
Insurance risk
Claims sensitivity analysis
The following table shows the impact of a ±5.0% sensitivity on claims outstanding
net and gross of reinsurance and
represents the impact on both the profit and loss for the year and member
balances.
2024
+5.0%
-5.0%
Claims outstanding
gross of reinsurance
660
(660)
Claims outstanding
net of reinsurance
607
(607)
2023
Claims outstanding
gross of reinsurance
1,402
(1,402)
Claims outstanding
net of reinsurance
1,262
(1,262)
b)
Financial risk
The Syndicate is exposed to a range of financial risks through its financial assets and financial liabilities. In particular, the
key financial risk is that the proceeds from financial assets are not sufficient to fund the obligations arising from insurance
policies and investment contracts as they fall due. The most important components of this financial risk are credit risk,
liquidity risk and market risk (including interest rate risk and currency risk).
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
36
Credit risk
For details of the management of the S
credit risk please refer to the Report of the Directors of the managing
agent. The following table provides information regarding credit risk exposures of the Syndicate by classifying assets
according to the Standard &
credit rating of the counterparties. Where a security has no credit rating, the rating of
the issuer is used.
AAA
£000
AA
£000
A
£000
BBB
£000
Other
£000
Not rated
£000
Total
£000
2024
Shares and other variable yield securities and
units in unit trusts
6,055
-
-
-
-
86
6,141
Debt securities and other fixed income securities
-
-
-
-
-
-
-
Deposits with ceded undertakings
-
-
4
-
-
-
4
655
-
3
-
-
416
1,074
Debtors arising out of reinsurance operations
151
-
-
-
-
1,199
1,350
Cash at bank and in hand
-
-
567
-
-
-
567
Other (Overseas deposits)
-
-
2
-
167
-
169
Other debtors and accrued interest
-
-
-
-
-
9
9
Total
6,861
-
576
-
167
1,710
9,314
2023*
Shares and other variable yield securities and
units in unit trusts
1,833
-
-
-
-
467
2,300
Debt securities and other fixed income securities
308
3,309
3,333
1,135
-
246
8,331
Deposits with ceded undertakings
-
-
4
-
-
-
4
1,495
-
2
-
-
1,319
2,816
Debtors arising out of reinsurance operations
403
-
-
-
-
3,425
3,828
Cash at bank and in hand
-
-
1,421
-
-
-
1,421
Other (Overseas deposits)
1
9
2
2
156
5
175
Other debtors and accrued interest
-
-
-
-
-
27
27
Total
4,040
3,318
4,762
1,137
156
5,489
18,902
*Please refer to the Restatement of comparative information section in note 1.1.
In respect of the
share of claims, there are collateralised agreements with reinsurers, which comprise letters
of credit and trust accounts totalling US $nil (2023: US $nil).
The largest potential reinsurer credit exposure to the Syndicate at 31 December 2024 was £834,000 with Greenlight
Reinsurance Ltd., an A- A.M. Best rated security (2023: £2,198,000 with Greenlight Reinsurance Ltd.). The Outwards
Reinsurance team review the level of this exposure and take appropriate action where necessary. This includes obtaining
a letter of credit for all reinsurers, related parties included, where credit worthiness is low or concentration in one
counterparty is high.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
37
An aged analysis of financial assets past due is shown below:
Neither past
due nor
impaired
assets
Past due but
not impaired
assets
Total
2024
£000
£000
£000
Shares and other variable yield securities and units in unit trusts
6,141
-
6,141
Debt securities and other fixed income securities
-
-
-
Deposits with ceded undertakings
4
-
4
1,074
-
1,074
Debtors arising out of reinsurance operations
1,296
54
1,350
Cash at bank and in hand
567
-
567
Other (Overseas deposits)
169
-
169
Other debtors and accrued interest
9
-
9
Total
9,260
54
9,314
Neither past
due nor
impaired
assets
Past due but
not impaired
assets
Total
2023*
£000
£000
£000
Shares and other variable yield securities and units in unit trusts
2,300
-
2,300
Debt securities and other fixed income securities
8,331
-
8,331
Deposits with ceded undertakings
4
-
4
outstanding
2,816
-
2,816
Debtors arising out of reinsurance operations
3,482
346
3,828
Cash at bank and in hand
1,421
-
1,421
Other (Overseas deposits)
175
-
175
Other debtors and accrued interest
27
-
27
Total
18,556
346
18,902
*Please refer to the Restatement of comparative information section in note 1.1.
For assets to be classified as past-due the contractual payments are in arrears by more than 30 days. An impairment
adjustment is recorded in the profit and loss: non-technical account for assets impaired. The Syndicate operates mainly
on a
past-due nor impaired
and when evidence is available, sufficient collateral will be obtained for
-
due and
assets. An impairment assessment will also be performed if applicable.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
38
An analysis of assets past due but not impaired is included below:
Past due but not impaired
0-3
months
past due
3-6
months
past due
6-12
months
past due
Greater
than 1
year past
due
Total
2024
£000
£000
£000
£000
£000
Debtors arising out of reinsurance operations
54
-
-
-
54
Total
54
-
-
-
54
2023
Debtors arising out of reinsurance operations
346
-
-
-
346
Total
346
-
-
-
346
Liquidity risk
For details of the management of the S
liquidity risks please refer to the Report of the Directors of the managing
agent.
The following table analyses the financial liabilities and claims outstanding into their relevant maturity groups based on
the remaining period at the year-end date to their contractual maturities or expected settlement dates. The projected
settlement of claims outstanding is modelled using actuarial techniques. These estimates assume that future claims
settlement patterns will be broadly similar to those experienced in the past.
No
maturity
stated
0-1 yrs
1-3 yrs
3-5 yrs
>5 yrs
Total
2024
£000
£000
£000
£000
£000
£000
Claims outstanding
-
4,018
4,158
2,087
2,946
13,209
Creditors
-
2,520
-
-
-
2,520
Other credit balances
-
-
-
-
-
-
Total
-
6,538
4,158
2,087
2,946
15,729
2023*
Claims outstanding
-
10,281
8,642
4,142
4,983
28,048
Creditors
-
3,883
-
-
-
3,883
Other credit balances
-
42
-
-
-
42
Total
-
14,206
8,642
4,142
4,983
31,973
*Please refer to the Restatement of comparative information section in note 1.1.
Foreign currency market risk
For further details of the management of the S
market risk please refer to the Report of the Directors of the
managing agent.
The Syndicate maintains bank accounts, investment portfolios and claims reserves in pounds sterling, US dollars, and
Canadian dollars (the
closing currencies). Additionally, bank accounts are maintained in Euros. Transactions arising
in other currencies are translated to the
closing currencies as they occur. The majority of the S
financial
assets are denominated in the same currencies as its insurance liabilities and thus the developing profit or loss that
remains embedded within the Syndicate gives rise to the main currency exposure. The profit or loss is distributed, or
settled, in accordance with
rules using a combination of pounds sterling and US dollars after deduction of the
member level charges.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
39
Investment strategy is recommended and agreed by the Investment Committee. The Syndicate currency exposure and
future cash flows are monitored and shortfalls addressed by foreign currency transactions, hedges or cash calls on
members.
A substantial proportion of the S
business was written in currencies other than pounds sterling, in particular US
dollars. The S
business is therefore exposed to changes in exchange rates and there is no assurance that foreign
currency risk mitigation initiatives which the Syndicate undertakes will be successful in preventing any losses due to such
changes.
Sterling
US dollar
Euro
Canadian
dollar
Other
Total
2024
£000
£000
£000
£000
£000
£000
Investments
2
6,057
-
86
-
6,145
Reinsurers' share of technical provisions
155
915
-
4
-
1,074
Debtors
550
792
-
17
-
1,359
Other assets
284
12
273
-
167
736
Prepayments and accrued income
-
-
-
-
-
-
Total assets
991
7,776
273
107
167
9,314
Technical provisions
(5,159)
(7,963)
-
(87)
-
(13,209)
Creditors
150
(2,627)
-
(43)
-
(2,520)
Accruals and deferred income
-
-
-
-
-
-
Total liabilities
(5,009)
(10,590)
-
(130)
-
(15,729)
Total capital and reserves
4,018
2,814
(273)
23
(167)
6,415
2023
Investments
2
10,166
-
467
-
10,635
Reinsurers' share of technical provisions
822
1,966
-
37
-
2,825
Debtors
737
3,084
-
24
-
3,845
Other assets
1,116
175
145
-
160
1,596
Prepayments and accrued income
1
-
-
-
-
1
Total assets
2,678
15,391
145
528
160
18,902
Technical provisions
(5,929)
(22,033)
-
(127)
-
(28,089)
Creditors
9,376
(13,117)
-
(142)
-
(3,883)
Accruals and deferred income
(1)
-
-
-
-
(1)
Total liabilities
3,446
(35,150)
-
(269)
-
(31,973)
Total capital and reserves
(6,124)
19,759
(145)
(259)
(160)
13,071
Exchange rate sensitivity analysis
The analysis below is performed for possible movements in key variables, with all other variables held constant, showing
the impact on the result and net assets. The correlation of variables will have a significant effect in determining the
ultimate impact. However, to isolate and demonstrate the effect due to changes in variables, each variable has been
changed on an individual basis.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
40
The following table gives an indication of the impact on the result and net assets or liabilities of a ten percent change in
the relative strength of the pound sterling against the value of the US dollar and Canadian dollar, excluding the effect of
hedges.
2024
Impact on
results
before tax
£000
2024
Impact on
balances
£000
2023
Impact on
results before
tax
£000
2023
Impact on
balances
£000
Currency risk
10 percent increase in GBP/USD exchange rate
313
313
2,195
2,195
10 percent increase in GBP/CAD exchange rate
3
3
(29)
(29)
10 percent decrease in GBP/USD exchange rate
(313)
(313)
(2,195)
(2,195)
10 percent decrease in GBP/CAD exchange rate
(3)
(3)
29
29
Interest rate market risk
For further details of the management of the S
market risk please refer to the Report of the Directors of the
managing agent.
The Syndicate holds investments in its balance sheet and the performance of its investment portfolio may have an effect
on the result. The income derived by the Syndicate from its investments, and the capital value of its investments, may
fall as well as rise. Therefore, changes in interest rates, credit ratings and other economic variables could substantially
affect the S
profitability.
The use of financial derivatives is governed by the S
policies approved by the Investment Committee, which
provides written principles on the use of financial derivatives. More information is available in the
value
in part (c) of this note.
Interest rate sensitivity analysis
The analysis below is performed for possible movements in key variables with all other variables held constant, showing
the impact on the result. The correlation of variables will have a significant effect in determining the ultimate impact.
However, to isolate and demonstrate the effect due to changes in variables, each variable has been changed on an
individual basis. It should be noted that movements in these variables are linear.
2024
Impact on
results
before tax
£000
2024
Impact on
balances
£000
2023
Impact on
results before
tax
£000
2023
Impact on
balances
£000
Interest rate risk
+ 50 basis points shift in yield curves
-
-
(72)
(72)
- 50 basis points shift in yield curves
-
-
72
72
Capital management
Disclosures on capital management can be found in the Report of the Directors of the managing agent.
Tokio Marine Kiln Catastrophe Syndicate 557
Report and accounts for the year ended 31 December 2024
41
c) Fair value estimation
Financial instruments that are fair valued through profit and loss are classified using a fair value hierarchy that reflects
the significance of the inputs used in these measurements.
Level 1 financial instruments comprise government bonds and securities which have been valued at fair value
using quoted prices in an active market.
Level 2 financial instruments are less regularly traded government agency bonds, supranational bonds, corporate
bonds, money market and open-ended funds. These fair values have been derived from market observable
inputs.
The fair value for level 3 financial instruments is derived from inputs that are not observable. The Syndicate held
no level 3 securities as at 31 December 2024.
its level in the fair value hierarchy:
Level 1
Level 2
Total
2024
£000
£000
£000
Shares and other variable yield securities and units in unit trusts
-
6,141
6,141
Debt securities and other fixed income securities
-
-
-
Total
-
6,141
6,141
2023*
Shares and other variable yield securities and units in unit trusts
-
2,299
2,299
Debt securities and other fixed income securities
588
7,744
8,332
Total
588
10,043
10,631
*Please refer to the Restatement of comparative information section in note 1.1.
21.
Post balance sheet events
On the 10 February 2025, the Board of TMKS approved the closure of the
2022 and prior underwriting years
of account, via a RITC agreement, into the 2023 year of account of Syndicate 510. The Syndicate has no successor year
of account.
There are no other post balance sheet events to report.
42
Tokio Marine Kiln Syndicate 557
Underwriting Year Accounts for the 2022 Year of Account
Tokio Marine Kiln Catastrophe Syndicate 557
Underwriting Year Accounts for the 2022 Year of Account
43
Report of the Directors of the managing agent
The managing agent presents its report at 31 December 2024 for the 2022 closed year of account. This report is prepared
in accordance with the
Syndicate Accounting Byelaw (No. 8 of 2005). It accompanies the underwriting year and
run-off accounts prepared on an underwriting year basis of accounting as required by Statutory Instrument No. 1950 of
2008, Regulation 5 of the Insurance Accounts Directive
Syndicate and Aggregate Accounts) Regulations 2008.
2022 underwriting year of account
The Syndicate made a 2022 closing underwriting year of account loss of £6.3
allocated capacity of £41.3 million (return on capacity (15.2%)) after taking account of operating expenses, foreign
The underwriting year of account was impacted by heightened catastrophe activity, namely weather-related losses from
Hurricane Ian, Winter Storm Elliot and the US Tornadoes throughout 2022.
Post balance sheet events
There are no post balance sheet events to report.
Disclosure of information to the auditors
As far as each person who was a Director of the managing agent at the date of approving this report is aware, there is
no relevant audit information, which is information needed by the auditors in connection with their report, of which the
auditors are unaware. Having made enquiries of fellow Directors of the managing agent and the S
auditors,
each Director has taken all the steps that they are obliged to take as a Director in order to make themselves aware of
any relevant audit information and to establish that the auditors are aware of that information.
Independent auditors
PricewaterhouseCoopers LLP will not be reappointed as the Syndicate's auditors as the Syndicate has closed into Syndicate
510 with effect from 1 January 2025.
Approved by the Board of Directors
A M W Shaw
Chief Executive Officer
Tokio Marine Kiln Syndicates Limited
5 March 2025
Tokio Marine Kiln Catastrophe Syndicate 557
Underwriting Year Accounts for the 2022 Year of Account
44
Statement of managing
responsibilities
The Insurance Accounts Directive
Syndicate and Aggregate Accounts) Regulations 2008
require the managing agent to prepare syndicate underwriting year accounts at 31 December in respect of any
underwriting year which is being closed by RITC which give a true and fair view of the result of the underwriting year at
closure. Detailed requirements in respect of the underwriting year accounts are set out in the
Syndicate Accounting
Byelaw (No. 8 of 2005).
In preparing the Syndicate underwriting year accounts, the managing agent is required to:
select suitable accounting policies which are applied consistently and where there are items which affect more than
one year of account, ensure a treatment which is equitable between the members of the syndicate affected. In
particular, the amount charged by way of premium in respect of the RITC shall, where the reinsuring members and
reinsured members are members of the same syndicate for different years of account, be equitable between them,
having regard to the nature and amount of the liabilities reinsured;
take into account all income and charges relating to a closed year of account without regard to the date of receipt
or payment;
make judgements and estimates that are reasonable and prudent; and
state whether applicable UK accounting standards have been followed, subject to any material departures disclosed
and explained in the underwriting year accounts.
The managing agent is responsible for keeping proper accounting records which disclose with reasonable accuracy at any
time the financial position of each syndicate and enable it to ensure that each syndicate underwriting year accounts
comply with the 2008 Regulations. It is also responsible for safeguarding the assets of each syndicate and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
The managing agent is responsible for the maintenance and integrity of the corporate and financial information included
on its website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The managing agent is responsible for the preparation and review of the iXBRL tagging that has been applied to the
Syndicate Accounts in accordan
maintaining systems, processes and internal controls to result in tagging that is free from material non-compliance with
aud or error.
The Directors of the managing agent confirm that they have complied with the above requirements in preparing the
Syndicate underwriting year accounts.
Tokio Marine Kiln Catastrophe Syndicate 557
Underwriting Year Accounts for the 2022 Year of Account
45
Independent auditors’ report to the members of Syndicate 557 - 2022
closed year of account
Report on the audit of the syndicate underwriting year
financial statements
Opinion
In our opinion, 557’s syndicate underwriting year financial statements for the 2022 year of account for the 36 months
ended 31 December 2024 (the “underwriting year financial statements”):
●
give a true and fair view of the state of the syndicate’s affairs as at 31 December 2024 and of its result
for the
2022 closed year of account;
●
have been properly prepared 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 applicable law); and
●
have been prepared in accordance with the requirements of The Insurance Accounts Directive (Lloyd’s Syndicate
and Aggregate Accounts) Regulations 2008 and the Lloyd’s Syndicate Accounting Byelaw (No. 8 of 2005).
We have audited the underwriting year financial statements included within the Underwriting Year Accounts for the 2022
Year of Account, which comprise: the Balance sheet for the 2022 closed year of account as at 31 December 2024; the
Profit and loss: technical account - general business and the Profit and loss: non-technical account for the 36 months
ended 31 December 2024; and the notes to the underwriting year financial statements which include a description of the
significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”), including ISA (UK)
800, and The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and other
applicable law. Our responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the audit of
the underwriting year financial statements
section of our report. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the syndicate in accordance with the ethical requirements that are relevant to our audit of
the underwriting year financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to other
entities of public interest, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Emphasis of matter – Basis of preparation
Without modifying our opinion, we draw attention to note 1 of the underwriting year financial statements, which describes
the basis of preparation. In particular, as these underwriting year financial statements relate to a closed underwriting
year of account, matters relating to going concern are not relevant to these underwriting year financial statements. The
underwriting year financial statements are prepared in accordance with a special purpose framework for the specific
purpose as described in the
Use of this report
paragraph below. As a result, the underwriting year financial statements
may not be suitable for another purpose.
Reporting on other information
The other information comprises all of the information in the Underwriting Year Accounts other than the underwriting year
financial statements and our auditors’ report thereon. The Managing Agent is responsible for the other information. Our
opinion on the underwriting year financial statements does not cover the other information and, accordingly, we do not
express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the underwriting year financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the underwriting year
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify
an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether
there is a material misstatement of the underwriting year financial statements or a material misstatement of the other
Tokio Marine Kiln Catastrophe Syndicate 557
Underwriting Year Accounts for the 2022 Year of Account
4
6
information. 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 based on these responsibilities.
Responsibilities for the underwriting year financial statements and the
audit
Responsibilities of the Managing Agent for the underwriting year financial statements
As explained more fully in the Statement of managing agent’s responsibilities, the Managing Agent is responsible for the
preparation of the underwriting year financial statements in accordance with the applicable framework and for being
satisfied that they give a true and fair view of the result for the 2022
closed year of account. The Managing Agent is also
responsible for such internal control as they determine is necessary to enable the preparation of underwriting year financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors’ responsibilities for the audit of the underwriting year financial statements
Our objectives are to obtain reasonable assurance about whether the underwriting year financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditors’ 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 underwriting year financial statements.
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.
Based on our understanding of the syndicate and industry, we identified that the principal risks of non-compliance with
laws and regulations related to breaches of regulatory principles, such as those governed by the Prudential Regulation
Authority and the Financial Conduct Authority, and those regulations set by the Council of Lloyd’s, and we considered the
extent to which non-compliance might have a material effect on the underwriting year financial statements. We also
considered those laws and regulations that have a direct impact on the underwriting year financial statements such as
The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008. We evaluated
management’s incentives and opportunities for fraudulent manipulation of the underwriting year financial statements
(including the risk of override of controls), and determined that the principal risks were related to the posting of
inappropriate journals and management bias in accounting estimates. Audit procedures performed by the engagement
team included:
●
Discussions with management, internal audit and the risk and compliance functions, including consideration of
known or suspected instances of non-compliance with laws and regulation and fraud;
●
Challenging assumptions and judgements made by management in their significant accounting estimates, in
particular in relation to valuation of the IBNR component of claims outstanding, reinsurance to close and pipeline
premium income;
●
Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations
impacting revenue, journals posted by senior management and/or those posted late in the year end close
process; and
●
Reviewing relevant meeting minutes including those of the Conflicts Committee, Risk, Capital & Compliance
Committee and Audit Committee and correspondence with regulatory authorities, including Lloyd’s of London and
the Prudential Regulation Authority.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances
of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the
underwriting year financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery
or intentional misrepresentations, or through collusion.
A further description of our responsibilities for the audit of the underwriting year financial statements is located on the
FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Tokio Marine Kiln Catastrophe Syndicate 557
Underwriting Year Accounts for the 2022 Year of Account
4
7
Use of this report
This report, including the opinions, has been prepared for and only for the syndicate’s members as a body in accordance
with part 2 of The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and Part
C of the Lloyd’s Syndicate Accounting Byelaw (No. 8 of 2005) and for no other purpose. We do not, in giving these
opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Under The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the Lloyd’s
Syndicate Accounting Byelaw (No. 8 of 2005), we are required to report to you if, in our opinion:
●
we have not obtained all the information and explanations we require for our audit; or
●
adequate accounting records have not been kept by the Managing Agent in respect of the syndicate; or
●
the underwriting year financial statements are not in agreement with the accounting records.
We have no exceptions to report arising from this responsibility.
Matthew Nichols (Senior statutory auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
5 March 2025
Tokio Marine Kiln Catastrophe Syndicate 557
Underwriting Year Accounts for the 2022 Year of Account
48
Profit and loss: technical account - general business
for the 36 months ended 31 December 2024
Note
2022
Syndicate allocated capacity
41,280
Earned premiums, net of reinsurance
Gross premiums written
3
25,232
Outward reinsurance premiums
(8,472)
Earned premiums, net of reinsurance
16,760
Reinsurance to close premium receivable, net of reinsurance
4
13,968
Allocated investment return transferred from the non-technical account
544
Total technical income
31,272
Claims incurred, net of reinsurance
Claims paid:
-
Gross amount
(26,151)
-
4,664
Reinsurance to close premium payable, net of reinsurance
4
(11,162)
Claims incurred, net of reinsurance
(32,649)
expenses
(310)
Net operating expenses
5,6
(4,831)
Total technical charges
(37,790)
Balance on the technical account for general business
(6,518)
The notes to the underwriting year accounts and significant accounting policies form part of these underwriting year
accounts.
Tokio Marine Kiln Catastrophe Syndicate 557
Underwriting Year Accounts for the 2022 Year of Account
49
Profit and loss: non-technical account
for the 36 months ended 31 December 2024
Note
2022
Balance on the technical account for general business
(6,518)
Investment income
8
760
Unrealised losses on investments
(179)
Investment expenses and charges
8
(37)
Allocated investment return transferred to the general business technical account
(544)
Other charges
(10)
Non-technical foreign exchange gain
266
(6,262)
(153)
Amounts due from members
(6,415)
There is no other comprehensive income. Accordingly, a separate statement of other comprehensive income has not
been provided.
The notes to the underwriting year accounts and significant accounting policies form part of these underwriting year
accounts.
Tokio Marine Kiln Catastrophe Syndicate 557
Underwriting Year Accounts for the 2022 Year of Account
50
Balance sheet for the 2022 closed year of account
as at 31 December 2024
Note
2022
Assets
Investments
Other financial investments
9
6,141
Deposits with ceding undertakings
4
Debtors
Debtors arising out of direct insurance operations
(1,100)
Debtors arising out of reinsurance operations
1,350
Other debtors
9
Reinsurance recoveries anticipated on gross reinsurance to close premium
payable to close the account
4
947
Other assets
Cash at bank and in hand
567
Overseas deposits
169
Total assets
8,087
Liabilities
Amounts due from members
(6,415)
Reinsurance to close premium payable to close the account - gross amount
4
12,109
Creditors
Creditors arising out of reinsurance operations
226
Other creditors
2,167
Total liabilities
8,087
The underwriting year accounts, which comprise the Profit and loss: technical account - general business, Profit and loss:
non-technical account, Balance sheet for the 2022 closed year of account and Notes to the underwriting year accounts
and significant accounting policies, were approved by the Board of Tokio Marine Kiln Syndicates Limited on
5 March 2025 and were signed on its behalf by:
R Patel
Deputy Chief Executive Officer & Chief Financial Officer
Tokio Marine Kiln Syndicates Limited
5 March 2025
The notes to the underwriting year accounts and significant accounting policies form part of these underwriting year
accounts.
Tokio Marine Kiln Catastrophe Syndicate 557
Underwriting Year Accounts for the 2022 Year of Account
51
Notes to the underwriting year accounts and significant accounting
policies
1.
Accounting policies
1.1
Statement of compliance
These underwriting year accounts
Syndicate and Aggregate Accounts) Regulations 2008
and Accounting Standards in the United Kingdom, including
ons Version 2.0 as modified by the
These underwriting year accounts are prepared under the historical cost convention, as modified by the recognition of
certain financial assets and liabilities measured at fair value.
The preparation of underwriting year accounts requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Syndicate accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the underwriting
year accounts, are disclosed in note 2.
Members participate on a syndicate by reference to a year of account and each syndicate year of account is a separate
annual venture. These accounts relate to the 2022 year of account which has been closed by RITC at 31 December 2024.
Consequently, the balance sheet represents the assets and liabilities of the 2022 year of account at the date of closure.
The underwriting account reflects the transactions of that year of account during the three-year period until closure. These
underwriting year accounts cover the three years from the date of inception of the 2022 year of account to the date of
closure. Accordingly, this is the only reporting period and so corresponding amounts are not shown.
These underwriting year accounts are presented in pounds sterling, which is the functional currency of the Syndicate. All
amounts have been rounded to the nearest thousand pounds, unless otherwise stated.
1.2
New
standards
and amendments
The Syndicate has applied FRS 102 and FRS 103 issued in September 2024, which reflects the amendments made since
the previous editions were issued in 2022.
FRS 102 is subject to a periodic review at least every five years. In December 2022, the Financial Reporting Council
published its periodic review of amendments to FRS 102 (FRED 82). The proposed effective date for these amendments
is accounting periods beginning on or after 1 January 2026. These underwriting year accounts relate to a closed
underwriting year of account, and as such, matters relating to future accounting periods are not relevant.
Every member is re
funds are intended primarily to cover circumstances where syndicate assets prove insufficient to meet participating
resource 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 underwriting year accounts by way
of such capital resources. However, the manag
requirements or to settle losses.
1.4
Going concern
These underwriting year accounts relate to a closed underwriting year of account, matters relating to going concern are
not relevant. The underwriting year accounts are prepared for and only for the S
Accounting Byelaw (No. 8 of 2005).
1.5
Summary of accounting policies
The significant accounting policies adopted in the preparation of the underwriting year accounts are set out below. They
have been applied consistently to all periods presented in these underwriting year accounts.
Tokio Marine Kiln Catastrophe Syndicate 557
Underwriting Year Accounts for the 2022 Year of Account
52
a. Product classification
Insurance contracts are defined as those containing significant insurance risk at the inception of the contract, or those
where at the inception of the contract there is a scenario with commercial substance where the level of insurance risk
may be significant. The significance of insurance risk is dependent on both the probability of an insured event and the
magnitude of its potential effect.
b. Premiums written
Inwards premiums written comprise premiums on contracts incepting during the financial year as well as adjustments
made in the year to premiums on contracts incepting in prior accounting periods. Premiums in respect of insurance
contracts underwritten under facilities such as binding authorities, lineslips or consortia arrangements are estimated based
on information provided by the broker, past underwriting experience and prevailing market conditions. The estimates are
updated on a regular basis. It is assumed that the majority of risks incept evenly across the period of the facility; however
bespoke writing patterns are used for a small number of facilities. Therefore, only the proportion of risks incepted at the
year-end date are reported as written. Premiums are shown gross of brokerage payable and exclude taxes and duties
levied on them. Estimates are made for pipeline premiums on a risk-by-risk basis, representing the difference between
the written and signed premium, which is held on the balance sheet as an asset.
Outwards reinsurance premiums are accounted for in the same accounting period as the premiums for the related direct
or inwards business being reinsured.
Gross premiums are allocated to years of account on the basis of the inception date of the policy. Premiums written under
binding authorities, lineslips or consortium arrangements are allocated to the year of account into which the arrangement
incepts. Additional and return premiums follow the year of account of the original premium. Estimates are made for
pipeline premiums, representing premiums written but not reported to the Syndicate by the reporting date.
c. Earned premiums
Inwards and outwards earned premium represents the amount of written premium deemed to have been exposed to loss
according to defined earnings patterns. The earning patterns are based primarily on time apportionment, with an
adjustment for the risk profile of certain classes of business, particularly those exposed to seasonal weather-related
events. The provision for unearned premium comprises the proportion of gross premiums written which is estimated to
be earned after the balance sheet date.
Reinstatement premiums arise on both inwards and outwards policies when a loss has been incurred on a policy and there
is a clause which requires the reinstatement of the policy with the payment of a further premium by the policyholder.
They are recognised as written and earned in full at the date of the event giving rise to the reinstatement premium.
Outwards reinstatement premiums payable in the event of a claim being made are charged to the same year of account
as that to which the recovery is credited.
d. Claims paid and incurred
Paid claims represent all claims paid during the year and include claims handling expenses.
Claims incurred comprise paid claims and changes in the provisions for outstanding claims, including provisions for claims
incurred but not reported (IBNR) and related expenses, together with any adjustments to claims from previous years.
e. Claims provisions and related recoveries
Gross claims incurred comprise the estimated cost of all claims occurring during the year, whether reported or not,
including related direct and indirect claims handling costs and adjustments to claims outstanding from previous years.
Provision is made at the year-end for the estimated cost of claims incurred but not settled at the balance sheet date,
including outstanding claims estimated on a case-by-case basis and also the cost of claims IBNR. The estimated cost of
claims includes expenses to be incurred in settling claims. All reasonable steps are taken to ensure that appropriate
information regarding claims exposures is obtained. However, given the uncertainty in establishing claims provisions, it
is likely that the final outcome will prove to be different from the original liability established. All claims provisions are
reported on an undiscounted basis.
Reinsurance recoveries are accounted for in the same period as the incurred claims for the related business. The
ased on estimated amounts for gross claims incurred, net of estimated
irrecoverable amounts.
The net RITC premium is determined on the basis of estimated cost of claims incurred but not settled at the balance sheet
date and expenses to be incurred in settling claims, net of estimated collectible reinsurance recoveries and future premium
relating to the closed year of account and all priors of account reinsured therein.
Tokio Marine Kiln Catastrophe Syndicate 557
Underwriting Year Accounts for the 2022 Year of Account
53
f. Provision for unexpired risks
Provision is made for any deficiencies arising when unearned premiums, net of associated acquisition costs, are insufficient
to meet expected claims and expenses after taking into account future investment return on the investments supporting
the unearned premiums provision. The expected claims are calculated having regard only to events that have occurred
Unexpired risks surpluses and deficits are offset where business classes are managed together and a provision is made if
an aggregate deficit arises. The unexpired risks provision is included within other technical provisions.
All reasonable steps are taken to ensure that the appropriate information regarding claims exposures is obtained. The
calculation is based upon statistical analyses of historical experience, which assumes that the development pattern of
premiums and claims will be similar to past experience. Allowance is made, however, for changes or uncertainties which
may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce
when compared with the cost of previously settled claims. Therefore, given the uncertainty in establishing a provision for
unexpired risks, it is likely that the final outcome will prove to be different from the original liability established.
g. Net operating expenses and personal expenses
Net operating expenses comprise the cost of acquiring business including commission, profit commission and reinsurance
commission income as well as the staff costs and other expenses attributable to underwriting operations.
profit commission,
subscriptions. Net operating expenses and personal expenses are recognised on the accruals basis and represent the
expenses incurred on underwriting operations.
Commission and brokerage are charged to the year of account to which the relevant policy is allocated.
h. Finance costs
Finance costs comprise interest paid and bank charges together with facility fees on letters of credit and are recorded in
the period in which they are incurred.
i. Acquisition costs
Acquisition costs, comprising commission and other costs related to the acquisition of new insurance contracts are deferred
to the extent that they are attributable to premiums unearned at the balance sheet date. Where inwards business is ceded
to an outwards proportional reinsurance treaty, an estimate of the relevant proportion of the inwards acquisition costs is
calculated and deferred in line with the outwards unearned premium at the balance sheet date.
Deferred acquisition costs, representing the proportion of commission and other acquisition costs that relate to unearned
premium on policies in force at the year-end, are charged over the period in which related premiums are earned. Deferred
acquisition costs are reviewed by category of business at the end of each reporting period and are written off where they
are no longer considered to be recoverable.
j. Foreign currencies
Functional and presentation currency
Items included in the underwriting year accounts are measured using the currency of the primary economic environment
in which the Syndicate operate (the functional currency). The underwriting year accounts are presented in pounds sterling
which is also the functional currency of the Syndicate.
Transactions and balances
Foreign currency transactions are recorded in the functional currency using the exchange rates prevailing at the dates of
the transactions or an appropriate average rate of exchange. At each period end foreign currency monetary items are
translated using the closing rate. For this purpose, all assets and liabilities arising from insurance contracts (including
unearned premiums, deferred acquisition costs and unexpired risks provisions) are monetary items.
Foreign exchange gains and losses resulting from the settlement of transactions and from the measurement at year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the non-technical
account.
Exchange rates used are as follows:
2022 calendar
year average
2023 calendar
year average
2024 calendar
year average
Date of RITC
US dollar
1.24
1.24
1.28
1.25
Canadian dollar
1.61
1.68
1.75
1.80
The distributable result on closing a year of account, usually at 36 months, is calculated using the exchange rates
prevailing at the date of closure.
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k. Financial investments
The Syndicate has chosen to
Financial instruments are initially recorded at cost, which equates to fair value, and subsequently carried at fair value
through profit or loss.
Financial instruments that are designated as fair value through profit or loss are classified using a fair value hierarchy
that reflects the significance of the inputs used in these measurements.
Level 1: the fair value of financial instruments is derived using unadjusted quoted prices in an active market for
identical assets or liabilities at the measurement date. These instruments include government bonds and securities
using quoted prices in an active market.
Level 2: the fair value of financial instruments is derived using inputs other than quoted prices included within
level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.
These instruments include regularly traded government agency bonds, supranational bonds, corporate bonds,
money market and open-ended funds.
Level 3: financial instruments are derived from inputs that are not observable. Unobservable inputs are used to
measure fair value to the extent that relevant observable inputs are not available and may include internal data
or models. Assumptions from market participants may be used to formulate the valuation of certain assets and
liabilities.
All regular purchases of financial investments are recognised on the trade date, being the date the Syndicate commits to
purchase the asset. All regular sales of financial investments are recognised at the earlier of the trade date and maturity
date.
A financial asset is derecognised when the contractual right to receive cash flows expires or where they have been
transferred and the Syndicate has also substantially transferred all risks and rewards of ownership. A financial liability is
derecognised once the obligation under the liability is discharged, cancelled or expires.
l. Derivative financial instruments
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are
subsequently re-measured at their fair value. Changes in the fair value are recognised immediately in the profit and loss
account. Fair values are obtained from quoted market prices in active markets, including recent market transactions. All
derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
The best evidence of the fair value of a derivative at initial recognition is the transaction price (i.e. the fair value of the
consideration given or received) unless the fair value of that instrument is evidenced by comparison with other observable
current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation
technique whose variables include only data from observable markets.
m. Debtors and creditors arising out of direct and reinsurance operations
Debtors and creditors arising out of direct and reinsurance operations are initially recognised at transaction price and are
subsequently carried at the recoverable amount. The carrying value is reviewed for impairment whenever events or
circumstances indicate that the carrying amount is greater than the recoverable amount, with the impairment adjustment
recorded in the profit and loss account. Debtors arising out of direct insurance and reinsurance operations are stated net
of specific provisions against doubtful debts which are made on the basis of reviews conducted by management.
n. Other debtors and creditors
Any other debtors and creditors are recognised initially at transaction price and subsequently carried at the recoverable
amount. The carrying value of other debtors is reviewed for impairment whenever events or circumstances indicate that
the carrying amount is greater than the recoverable amount, with the impairment adjustment recorded in the profit and
loss account. All other debtors and creditors are due within one year, unless otherwise stated.
o. Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand, deposits held at call with banks and other short-term highly
liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of
changes in value.
Bank overdrafts, when applicable, are shown within borrowings in current liabilities. These are measured at cost less any
allowance for impairment.
p. Overseas deposits
Overseas deposits are lodged as a condition of conducting underwriting business in certain countries. These are initially
recorded at cost, which equates to fair value, and subsequently carried at fair value through profit or loss.
Tokio Marine Kiln Catastrophe Syndicate 557
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q. Investment return
Investment return comprises all investment income, realised investment gains and losses and movements in unrealised
gains and losses, net of investment management expenses, including interest. Realised gains and losses on investments
carried at fair value through profit or loss are calculated as the difference between sale proceeds and the fair value at the
previous balance sheet date, or purchase price if acquired during the year. Unrealised gains and losses on investments
represent the difference between the fair value at the balance sheet date and the fair value at the previous balance sheet
date, or purchase price if acquired during the year.
Investment return on general business is initially recorded in the non-technical account. A transfer is made from the non-
technical account to the general business technical account. Investment return has been wholly allocated to the technical
account as all investments relate to the technical account.
Investment return that is not specific to a year of account is allocated based on the proportion of the assets generating
that return held by each year of account.
r. Investment yield
The calendar year investment yield is ca
expressed as a percentage. Aggregate investment return is the total amount of net appreciation/losses, investment
income and accrued interest received during the year, after deducting investment management costs but before deducting
tax. Average funds available is the average value of all investments (including accrued interest), deposits and surplus
cash at the beginning of the year and at each quarter-end revalued at market prices.
s. Taxation
Under Schedule 19 of the Finance Act 1993 the Syndicate does not pay UK taxation, its profits being allocated and
assessed to tax on its members in direct proportion to their capacity.
The Syndicate pays various overseas direct and premium based taxes, the majority of which are allocable to its members
in direct proportion to their capacity and which can be claimed by members either as double tax relief or as an expense
against tax liabilities.
t. Pension costs
TMK operates a defined contribution scheme. A defined contribution plan is a pension plan under which a fixed contribution
is paid into a separate entity. Once the contributions have been paid TMK has no further payment obligations. Pension
contributions relating to syndicate staff are charged to the Syndicate and included within net operating expenses.
u. Profit commission
Profit commission is charged by the managing agent at a rate of 17.5% of profit subject to the operation of a two-year
deficit clause. Final settlement to the managing agent is made when the year of account closes; normally at 36 months.
v. Provisions
A provision is recognised when the Syndicate has a present legal or constructive obligation, as a result of a past event,
that is expected to result in an outflow of resources. A provision is recognised when a reliable estimate of the amount of
the obligation can be made.
w. Current and non-current disclosure
For each asset and liability line item that combines amounts expected to be recovered or settled (a) no more than 12
months after the year-end date and (b) more than 12 months after the year-end date, the relevant note discloses the
amount expected to be recovered or settled after more than 12 months.
x. Contingencies
Contingent liabilities arise as a result of past events when either it is not probable that there will be an outflow of resources
or that the amount cannot be reliably measured at the reporting date or when the existence will be confirmed by the
occurrence or non-occurrence of uncertain future events not wholly within the S
are disclosed in the underwriting year accounts unless the probability of an outflow of resources is remote.
y. Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet only when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the
assets and settle the liability simultaneously.
Tokio Marine Kiln Catastrophe Syndicate 557
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56
2.
Use of critical accounting estimates and judgements in applying accounting policies
The preparation of the underwriting year accounts requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Syndicate
a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the underwriting
accounts are those listed below.
Incurred but
not reported
claims (IBNR)
The estimation of claims IBNR is generally subject to a greater degree of uncertainty than the
estimation of the cost of settling claims already notified to the Syndicate
, where more information
about the claim event is generally available. In calculating the estimated cost of unpaid claims, t
he
Syndicate
uses a variety of estimation techniques, generally based upon statistical analyses of
historical experience, which assu
mes that the development pattern of the current claims will be
consistent with past experience. Allowance is made, however, for changes or uncertainties which
may create distortions in the underlying statistics or which might cause the cost of unsettled cl
aims
to increase or reduce when compared with the cost of previously settled claims including:
changes in processes which might accelerate or slow down the development and/or recording
of paid or incurred claims compared with the statistics from previous periods;
changes in the legal environment;
the effects of inflation;
changes in the mix of business;
the impact of large losses; and
movements in industry benchmarks.
A component of these estimation techniques is usually the estimation of the cost of notif
ied but not
paid claims. In estimating the cost of these, regard is given to the claim circumstance as reported,
any information available from loss adjusters and information on the cost of settling claims with
similar characteristics in previous periods.
Large claims affecting each relevant business class are generally assessed separately, either
measured on a case-by-case
basis or projected separately, in order to allow for the possible distorting
effect of the development and incidence of these large claims.
Where possible, multiple techniques are adopted in order to estimate the required level of provisions.
This assist
s in giving greater understanding of the trends inherent in the data being projected. The
projections given by the various methodologies also assist in setting the range of possible outcomes.
The most appropriate estimation technique is selected taking int
o account the characteristics of the
business class and the extent of the development of each accident year. The amount of salvage and
subrogation recoveries is separately identified and, where material, reported as an asset.
The Directors consider that t
he provisions for gross claims and related reinsurance recoveries are
fairly stated on the basis of 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. Adjustments to the amounts of claims provisions established
in prior years are reflected in the report and accounts
for the period in which the adjustments are
made. The methods used, and the estimates made, are reviewed regularly.
Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the
amounts that will be recoverable from reinsurers based upon the gross provisions and having due
regard to collectability. An esti
mate of the future cost of indirect claims handling is calculated as a
percentage of the claims reserves held at the balance sheet date.
Reinsurance
occurrence of the claim and the claim being reported. For short tail risks, the costs of claims notified
to the Syndicate at the year-end date are estimated on a case-by-case
basis to reflect the individual
circumstances of each claim. The ultimate expecte
d cost of claims is projected from this data by
reference to statistics which show how estimates of claims incurred in previous periods have
developed over time to reflect changes in the underlying estimates of the cost of notified claims and
late notifications.
COVID-19
The Directors are aware of the heightened estimation uncertainty in reserving for estimated losses
arising from COVID-
19 due to the unique nature of the loss. Management have a robust reserving
approach which supports the held reserves at the year-end date.
Tokio Marine Kiln Catastrophe Syndicate 557
Underwriting Year Accounts for the 2022 Year of Account
57
Provision for
unexpired
risks
All reasonable steps are taken to ensure that the appropriate information regarding claims exposures
is obtained. The calculation is based upon statistical analyses of historical experience, which
assumes
that the development pattern of premium and claims will be similar to past experience. However,
given the uncertainty in establishing a provision for unexpired risks, it is likely that the final outcome
will prove to be different from the original liability established.
Reinsurance
recoverable
Reinsurance is deemed to be fully recoverable unless there is reason to doubt its recoverability. In
these circumstances specific provisions are made based on the expected proportional recovery and
the credit risk profile of the counterparties.
Financial
investments
Financial investments are carried in the balance sheet at fair value. Market valuations of funds are
obtained from fund administrators. The fair value of Level 3 financial instruments, which
are those
where no active market exists or where quoted prices are not otherwise available,
is determined by
using valuation techniques. To the extent that valuations are
based on models or inputs that are
unobservable in the market, the determination of f
air value requires more judgement and
accordingly, those instruments will require a greater degree of judgement to be exercised during
valuation.
3.
Segmental analysis
All business written by the Syndicate is inwards reinsurance. All business was concluded in the UK.
4.
Reinsurance to close premium
Reported
IBNR
Total
Reinsurance to close premium receivable, net of reinsurance
Gross reinsurance to close premium receivable
5,204
9,018
14,222
Reinsurance recoveries anticipated
(333)
79
(254)
4,871
9,097
13,968
Reinsurance to close premium payable, net of reinsurance
Gross reinsurance to close premium payable
4,870
7,239
12,109
Reinsurance recoveries anticipated
(516)
(431)
(947)
4,354
6,808
11,162
The RITC is effected to the 2023 year of account of Syndicate 510.
5.
Net operating expenses
Acquisition costs
brokerage and commission
481
Acquisition costs - other
68
Administrative expenses
4,749
Reinsurance commissions and profit participations
(467)
4,831
Fees payable to the S
s for the audit of the Syndicate accounts
78
Other services pursuant to legislation
33
All other services
38
149
The charge incurred for other services pursuant to legislation relates to the audit and review of the S
returns. The charge incurred for all other services relates to the provision of statement of actuarial opinion on the reserves.
Tokio Marine Kiln Catastrophe Syndicate 557
Underwriting Year Accounts for the 2022 Year of Account
58
Audit fees are billed combined for the TMK Group and the Syndicate and are paid by a fellow subsidiary of TMKGL. A
recharge of audit fees is made to the Syndicate.
6.
Staff costs
The Syndicate and its managing agent have no employees. Staff were employed by Tokio Marine Kiln Insurance Services
Limited (TMKIS). The following amounts were recharged to the 2022 year of account in respect of salary costs and are
included within administrative expenses:
Wages and salaries
1,978
Social security costs and pension costs
506
2,484
7.
Analysis of technical result
2021 & prior
2022
Total
Technical account balance excluding investment return
and operating expenses
2,825
(4,280)
(1,455)
Brokerage and commission on gross premium
15
(496)
(481)
2,840
(4,776)
(1,936)
8.
Investment return
Investment income
Income from investments
576
Realised gains on investments
184
760
Investment expenses and charges
Investment management expenses, including interest
(1)
Realised losses on investments
(36)
(37)
Investment return for the 2022 year of account is recognised in the 2022, 2023 and 2024 calendar years.
9.
Other financial investments
Fair value
Purchase
Price
Shares and other variable yield securities
6,141
6,141
6,141
6,141
10.
Off-balance sheet items
The Syndicate has not been party to an arrangement, which is not reflected in its balance sheet, where material risks and
benefits arise for the Syndicate.
11.
Post balance sheet events
There are no post balance sheet events to report.
