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Polo Managing Agency Limited
Lloyd’s Syndicate
Annual Report and Accounts for the year ended
2
Contents
Directors and Administration
..........................................................................................................
3
Managing agent’s report
................................................................................................................
4
Statement of Managing Agent’s Responsibilities
...........................................................................
8
Independent Auditors
'
Report to the Member of
Syndicate
1975
....................................................
9
Statement of profit or loss and other comprehensive income
.......................................................
13
Balance sheet
–
(Assets)
.............................................................................................................
15
Balance sheet (cont’d) –
(Liabilities)
............................................................................................
16
Statement of cash flows
..............................................................................................................
17
Notes to the financial statements
.................................................................................................
18
3
Directors and Administration
Managing agent
Syndicate 1975. PMA is a wholly owned subsidiary of Marco Capital Holdings (UK) Limited ("MCHL").
Directors
Directors who served at PMA during the year or up until the date the Report & Accounts were signed are as
follows:
P D Andrews - Chief Executive Officer
M J Bishop - Finance Director
I J Bremner - Chair, Non-Executive Director
K D Curtis - Non-Executive Director
J A Hummerston - Director of Underwriting (Resigned 19/02/2025)
P M Laws - Compliance Director
(Resigned 26/4/2024)
C E Layton - Director of Underwriting (Appointed 03/01/2025)
S Minshall - Non-Executive Director
R M Richardson-Bunbury - Chief Actuary
M Sebold-Bender
–
Non-Executive Director
P R Smith - Managing Director
Z Szalkai - Non-Executive Director
P I Wooldridge - Chief Operations Officer
Company Secretary
P M Laws (Appointed 26/4/2024)
Managing agent’s registered office
'Grange Park'
Bishop's Cleeve
Cheltenham
Gloucestershire
United Kingdom
GL52 8YQ
Managing agent’s registered number
03935227
Bankers
Barclays Bank - London
1 Churchill Place
London
E14 5HP
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London SE1 2RT
Statement of actuarial opinion signing actuary
PricewaterhouseCoopers LLP
4
Managing agent’s report
The Directors of PMA, the Managing Agent, present their report for Syndicate 1975 ("the Syndicate") for the
year ended 31 December 2024.
Principal activities
The Syndicate writes specialist insurance and reinsurance across a broad range of medical professional liability
and healthcare lines and was approved by Lloyd’s to commence underwriting at 1
st
January 2018.
It was previously announced that the Syndicate would cease underwriting with effect from 31 December 2022.
At the end of 2024 the Syndicate Reinsured to Close (“RITC”) into Syndicate 1254, effective 1 January 2025.
As such, the Syndicate is no longer considered to be a Going Concern, and the financial statements have been
prepared on a basis other than Going Concern.
The managing agent’s strategic report includes information primarily relating to a review of the business and a
description of principal risks and uncertainties, although there is more extensive disclosure of risk management
on pages 25 to 33.
Review of the business
In the calendar year 2022, net insurance risk for Syndicate 1975 was reduced to nil through a number of risk
transfer mechanisms put in place. At Q4 2021, a Loss Portfolio Transfer (“LPT”) with Medical Professional
Mutual Insurance Company (“MPMIC”) of the 2018 and 2019 underwriting years (“UWYs”) was placed to
reinsure out the remaining net liabilities. At Q2 2022, the LPT was extended to 2020 and 2021 UWYs, and a
100% Quota Share (“QS”) with MPMIC with a retrospective 1 January 2022 inception was incorporated.
This QS is placed on a funds withheld basis. The LPT is also placed on a funds withheld basis. The reinsurance
premium paid on the LPT and QS transactions in 2022 was £115.5m.
Key Performance Indicators
The managing agent considers the following to be the key performance indicators for the Syndicate:
2024
2023
£m
£m
Net operating expenses
7.6
4.0
Loss for the year
5.3
1.1
Results
The result for the year is a loss of £5.3m (2023: £1.1m).
The final year of account actuals (“YOA”) are as follows:
2022 YOA Actual
£m
Gross premiums written
50.2
Loss
8.7
The net combined ratio is no longer a useful indicator of the Syndicate results due to the quota share
arrangement which distorts the net premium base. The last underwriting year of account was 2022 and with the
Syndicate in run-off, management focus has been placed on the result and maintenance of adequate liquidity.
Changes in regulatory requirements are closely monitored by the managing agent and are considered in the
run-off of the portfolio.
5
Managing agent’s report (continued)
Principal risks and uncertainties
The Managing Agent sets the Syndicate's risk appetite annually, which is approved by the Agency as part of the
Syndicate’s business planning process. The PMA Risk Committee meets at least quarterly to oversee the risk
management framework, which includes the review of the risk profile as reflected in the risk register, and
monitoring performance against risk appetite using a series of key risk indicators. The principal risk and
uncertainties facing the Syndicate are as follows:
Insurance risk
Insurance risk includes the risks that a policy will be written for too low a premium or provide inappropriate cover
(underwriting risk), that the frequency or severity of insured events will be higher than expected (claims risk), or
that estimates of claims subsequently prove to be insufficient (reserving risk). The Syndicate manages
insurance risk through the approved business plan, which sets out targets for volumes, pricing, line sizes and
retention by class of business. The Syndicate monitors performance against the business plan through the year
and reviews pricing on an ongoing basis depending on market conditions. Reserve adequacy is monitored by
the PMA Actuarial team and Syndicate Management Committee ("SMC"), which meets quarterly.
Credit risk
The key aspect of credit risk is reinsurance counterparty risk, which is the risk of default by one or more of the
Syndicate’s reinsurers and intermediaries. The Syndicate’s policy is that it will only reinsure with approved
reinsurers, supported by collateralisation where required.
Market risk
Market risk exposure impacting the Syndicate relates to fluctuations in interest rates or exchange rates. The
Syndicate is exposed to foreign exchange movements as a result of mismatches between the currencies in
which assets and liabilities are denominated. The syndicate’s functional currency is GBP.
The Agency’s policy is to maintain received income or incurred expenditure in the core currencies in which they
were received or paid. Any surplus or deficit in the functional currency would be subject to review by the SMC.
Liquidity risk
This is the risk that the Syndicate will not be able to meet its liabilities as they fall due owing to a shortfall in
cash or can only meet obligations at excessive cost. To mitigate this risk the Syndicate reviews cash flow
projections regularly and ensures that, where needed, the Syndicate has no additional liquidity facilities in place
but could explore these options if required, or it could utilise the option of a cash call from the capital provider.
Operational risk
This is the risk that errors caused by people, processes, systems and external events lead to losses to the
Syndicate. The Managing Agent seeks to manage this risk through the use of an operational risk and control
framework, detailed procedures manual, thorough training program and a structured program of testing of
processes and systems by internal audit. Business continuity and disaster recovery plans are in place and are
regularly updated and tested.
6
Managing agent’s report (continued)
Regulatory risk
Regulatory risk is the risk of loss owing to a breach of regulatory requirements or failure to respond to regulatory
change. The Managing Agent is required to comply with the requirements of the Financial Conduct Authority
("FCA"), Prudential Regulation Authority ("PRA") and Lloyd’s. Lloyd’s requirements include those imposed on
the Lloyd’s market by overseas regulators, particularly in respect of US situs business. A Compliance Officer
manages the function that monitors business activity and regulatory developments to assess any effects on the
Managing Agent.
Capital
Lloyd's unique capital structure provides excellent financial security for policyholders:
x
All premiums received are initially held in trust.
x
Funds at Lloyd's (“FAL”) provide a layer of capital that can be called upon to pay liabilities. The FAL
requirement is set by Lloyd's standard model for new syndicates, until their Internal Model is approved.
Syndicate 1975 does not have its own security rating; however, it does benefit from Lloyd’s global A (Excellent)
rating from A.M. Best, AA- (Very Strong) rating from Standard and Poor’s, and AA- (Very Strong) from Fitch.
Future Developments
The Syndicate’s remaining open year 2022, Reinsured to Close into Syndicate 1254, effective 1 January 2025
.
Post Balance sheet events
PMA successfully agreed & completed the RITC agreement of Syndicate 1975 into Syndicate 1254, on the 13
February 2025.
Other performance indicators
Staff matters
The managing agent considers its staff to be a key resource and seeks to provide a good working
environment
for its staff that is rewarding and safe and complies with appropriate employee legislation. During the year there
have been no significant injuries to staff in the workplace nor any significant actions taken by any regulatory
bodies with regards to staff matters.
Environmental matters
The managing agent does not consider its business to have a large adverse impact upon the
environment. As
a result, the agent does not manage its underwriting business by reference to any environmental key
performance indicators.
The managing agent takes a responsible approach in the management of assets by striving to invest in
institutions that do no harm to the environment. The asset manager incorporates Environmental, Social and
Corporate Governance (“ESG”) factors in its assessment of investment alternatives and monitors the portfolio’s
ESG impact on a regular basis.
7
Managing agent’s report (continued)
Directors’ Interests
None of the Directors of the Managing Agent have any participation in the Syndicate’s premium income capacity.
Directors who served at PMA during the year or up until the period the Report & Accounts were signed are
detailed in the 'Directors and Administration' section on page 3.
Directors and Officers
Details of the Directors and Officers of the Managing Agent that were serving at the year end and up to the date
of signing of the financial statements are provided on page 3. Changes to directors and officers from the last
report were as follows:
P M Laws - Compliance Director
(Resigned 26/4/2024)
P M Laws
–
Company Secretary (Appointed 26/4/2024)
C E Layton - Director of Underwriting (Appointed 03/01/2025)
J A Hummerston - Director of Underwriting (Resigned 19/02/2025)
The Board has agreed to appoint G H J Nokes as Finance Director subject to regulatory approvals, which have
been applied for.
Syndicate Annual General Meeting
The Managing Agent does not propose to hold an annual general meeting for the member of the Syndicate.
The member is asked to note that any objections to this proposal should be submitted, in writing, to the Risk &
Compliance Director within 21 days of this notice.
Other matters
During the year PwC undertook the independent validation of the Syndicate 1975 Internal Model, to assist the
syndicate in complying with its regulatory obligations to Lloyd's.
Auditors
PricewaterhouseCoopers LLP will not be reappointed as the Syndicate's auditors as the Syndicate has closed
into Syndicate 1254, effective 1 January 2025.
Disclosure of Information to Auditors
So 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, being information needed by the auditors in connection with preparing its
report, of which the auditor is unaware. Each director has taken all the steps that he/she is obliged to take as a
director in order to make himself/herself aware of any relevant audit information and to establish that the auditor
is aware of that information.
Approved by order of the Board of Directors and signed on its behalf:
M J Bishop
Finance Director
4 March 2025
8
Statement of Managing Agent’s Responsibilities
The Managing Agent is responsible for preparing the Syndicate Report and Annual Accounts in accordance
with applicable law and United Kingdom Generally Accepted Accounting Practice.
The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 (‘the 2008
Regulations’) require the Managing Agent to prepare syndicate annual accounts for each financial year. Under
that law the Managing Agent has elected to prepare the financial statements in accordance with United Kingdom
Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic
of Ireland” , FRS 103 “Insurance Contracts” (United Kingdom Generally Accepted Ac
counting Practice) and the
Lloyd’s Syndicate Accounts Instructions Version 2.0 as modified by the Frequently Asked Questions Version
1.1 issued by Lloyd’s.
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 those Syndicate Report and Annual Accounts, the Managing Agent is required to:
x
select suitable accounting policies, and apply them consistently except where relevant accounting
requirements change;
x
make judgments and estimates that are reasonable and prudent;
x
state whether applicable accounting standards have been followed, subject to any material
departures disclosed and explained in the Syndicate Annual Accounts;
x
prepare the Syndicate Report and Annual Accounts on a going concern basis, unless it is
inappropriate to do so; and
x
prepare and review of the iXBRL tagging that has been applied to the Syndicate Accounts in accordance
with the instructions issued by Lloyd’s, including designing, implementing and maintaining systems,
processes and internal controls to result in tagging that is free from material non-compliance with the
instructions issued by Lloyd’s, whether due to error.
The Managing Agent is responsible for keeping proper accounting records which disclose with reasonable
accuracy at any time the financial position of the 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 the Syndicate
and hence for taking reasonable steps for prevention and detection of fraud and other irregularities.
9
Independent Auditors
'
Report
to the Member
of
Syndicate
1975
Report on the audit of the syndicate annual accounts
Opinion
In our opinion, 1975’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 loss
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 Annual Report and Accounts
(the “Annual
Report”), which comprise: the Balance sheet –
(Assets) and the Balance sheet –
(Liabilities) as at 31 December
2024; the Statement of profit or loss and other comprehensive income: Technical account –
General business,
Statement of profit or loss and other comprehensive income: Non-technical account –
General business,
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 6, 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 3 which explains that the 2022 year of account of the
syndicate has closed and all assets and liabilities transferred to the 2025 year of account of Syndicate 1254 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
10
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.
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
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
11
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 posting inappropriate journals to increase
revenue or reduce expenditure or to manipulate members’ balances. We also considered management bias in
accounting estimates and judgemental areas of the syndicate annual accounts such as the valuation of the
technical provisions for claims outstanding.
Audit procedures performed by the engagement team included:
●
discussions with senior management involved in the Risk and Compliance functions, including
consideration of known or suspected instance of non-compliance with laws and regulation and fraud;
●
assessment of any matters reported on the whistleblowing helpline and fraud register and the results of
management’s investigation of such matters;
●
reading key correspondence with Lloyd’s in relation to compliance with laws and regulations;
●
reviewing relevant meeting minutes including those of the Audit Committee;
●
testing journal entries identified in accordance with our risk assessment;
●
designing audit procedures to incorporate unpredictability around the nature, timing or extent of our
testing; and
●
testing material transactions entered into outside or the normal course of business, where relevant.
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 member 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.
12
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.
Andrew Box (Senior statutory auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
4 March 2025
13
Statement of profit or loss and other comprehensive income
Technical account – General business
For the year ended 31 December 2024
Note
2024
£000
2023
£000
£000
£000
Gross premiums written
5
(1,766 )
Outwards reinsurance premiums
(8,702 )
Premiums written, net of reinsurance
Changes in unearned premium
18
Change in the gross provision for unearned
premiums
Change in the provision for unearned premiums
reinsurers’ share
(1,531 )
(22,197 )
Net change in provisions for unearned premiums
Earned premiums, net of reinsurance
Allocated investment return transferred from the
non-technical account
9
Claims paid
18
Gross amount
(23,610 )
(13,177 )
Reinsurers’ share
Net claims paid
(394 )
(388 )
Change in the provision for claims
18
Gross amount
(10,681 )
Reinsurers’ share
(19,991 )
Net change in provisions for claims
(9 )
(211 )
Claims incurred, net of reinsurance
(403 )
(599 )
Net operating expenses
6
(7,586 )
(4,024 )
Balance on the technical account
–
general
business
(4,723 )
(1,511 )
14
Statement of profit or loss and other comprehensive income (cont.)
Non-technical account – General business
For the year ended 31 December 2024
Note
2024
2023
£000
£000
Balance on the technical account – general business
(4,723 )
(1,511 )
Investment income
9
Realised gains/(losses) on investments
9
(46 )
Unrealised gains on investments
9
Investment expenses and charges
9
(62 )
(36 )
Total investment return
Allocated investment return transferred to the general business technical
account
(3,266 )
(3,112 )
(Loss)/gain on foreign exchange
(560 )
Loss for the financial year
(5,283 )
(1,126 )
Total comprehensive loss for the year
(5,283 )
(1,126 )
The accompanying notes from page 18 to 42 form an integral part of these financial statements.
15
Balance sheet – (Assets)
As at 31 December 2024
Note
2024
2023
£000
£000
Assets
Financial investments
Investments
11
Provision for unearned premiums
Claims outstanding
Reinsurers’ share of technical provisions
18
Debtors arising out of direct insurance operations
12
Debtors arising out of reinsurance operations
13
Other debtors
14
Debtors
Cash at bank and in hand
21
Other*
15
Other Assets
Deferred acquisition costs
16
Other prepayments and accrued income
Prepayments and accrued income
Total assets
* previously presented as overseas deposits, re-presented as other assets.
16
Balance sheet (cont’d) – (Liabilities)
As at 31 December 2024
Note
2024
2023
£000
£000
Members’ balances
(8,752 )
(7,490 )
Total Capital and reserves
(8,752 )
(7,490 )
Provision for unearned premiums
Claims outstanding
Technical provisions
18
Deposits received from reinsurers
Creditors arising out of reinsurance operations
19
Other creditors including taxation and social security
20
Creditors
Accruals and deferred income
Total liabilities
Total liabilities, Capital and reserves
The Syndicate financial statements on pages 13 to 42 were approved by the board of Directors of Polo
Managing Agency Limited on 4 March 2025 and were signed on its behalf by:
M J Bishop
Finance Director
4 March 2025
17
Statement of changes in members’ balances
For the year ended 31 December 2024
2024
2023
£000
£000
Members’ balances brought forward at 1 January
(7,490 )
(10,586 )
Total recognised losses for the year
(5,283 )
(1,126 )
Losses collected in relation to distribution on closure of underwriting year
Members’ balances carried forward at 31 December
(8,752 )
(7,490 )
Statement of cash flows
For the year ended 31 December 2024
Note
2024
2023
£000
£000
Cash flows from operating activities
*(restated)
Loss for financial year
(5,283 )
(1,126 )
Adjustments:
Decrease in gross technical provisions
(21,171 )
(17,160 )
Decrease
in reinsurers’ share of gross technical provisions
Decrease in debtors
Increase/(decrease) in creditors
(1,240 )
Decrease in deposits received from reinsurers
(25,952 )
(16,340 )
Movement in other assets/(liabilities)
(864 )
Investment return
(3,266 )
(3,112 )
Other
(198 )
Net cash flows from operating activities
(65 )
(5,609 )
Cash flows from investing activities
Purchase of equity and debt instruments
(110,964 )
(4,860 )
Sale of equity and debt instruments
Investment income received
Other
Net cash flows from investing activities
(3,796 )
Cash flows from financing activities
Distribution collection of losses
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
(5,183 )
Cash and cash equivalents at the beginning of the year
Foreign exchange on cash and cash equivalents
(702 )
(634 )
Cash and cash equivalents at the end of the year
21
*see note 21
18
Notes to the financial statements
1.
Basis of preparation
Syndicate 1975 comprises of a member of the Society of Lloyd's that underwrites insurance business in the
London Market. The address of the Syndicate’s managing agent is ‘
Grange
Park’
, Cheltenham, Gloucestershire,
United Kingdom, GL52 8YQ.
The financial statements have
been prepared in accordance with the Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008 and applicable Accounting Standards in the United
Kingdom and the Republic of Ireland, including Financial Reporting Standard 102 (FRS 102). FRS 102 requires
the application of Financial Reporting Standard 103 (FRS 103) in relation to insurance contracts
and the Lloyd’s
Syndicate Accounts Instructions Version 2.0 as modified by the Frequently Asked Questions Version 1.1 issued
by Llo
yd’s
.
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 changes
Certain financial statement line items have been reclassified whilst the underlying amounts remain unchanged.
The principal change is the reclassification of overseas deposits, previously shown as a separate balance sheet
item, to form part of other assets. The comparative balances have also been represented to align with the
current period presentation.
b)
Aggregation changes
To align with Lloyd's reporting requirements whilst maintaining FRS 102 compliance, certain items have been
aggregated or disaggregated within the related notes. This includes the presentation of realised and unrealised
gains and losses on investments, which are now shown on an aggregated basis in the note 9.
c)
Correction of error
An error was identified in relation to the classification of the short-term deposit accounts to cash and cash
equivalents. These are deposits with credit institutions with maturities of three months or less that are used by
the Syndicate in the management of its short-term commitments. Explained further in note 21.
The financial statements have been prepared on the historical cost basis, except for financial assets at fair value
through profit or loss that are measured at fair value.
The financial statements are presented in GBP, which
is also the Syndicate’s functional currency
.
All amounts have been rounded to the nearest thousand, unless otherwise indicated.
Going concern
The Syndicate’s remaining open year 2022,
Reinsured to Close into Syndicate 1254, effective 1 January 2025.
As such, the Syndicate is no longer considered to be a Going Concern, and the financial statements have been
prepared on a basis other than Going Concern.
No further adjustments are necessary to the amounts at which the net assets are included in these financial
statements. FRS 102 and 103 have been consistently applied. There have been no material changes in
accounting policies or values necessary to address the non-going concern status of the Syndicate.
2.
Use of judgements and estimates
In preparing these financial statements, the directors of the Managing Agent have made judgements, estimates
and assumptions that affect the application of the Syndicate’s accounting policies and the reported amounts of
assets, liabilities, income and expenses.
19
2.
Use of judgements and estimates (continued)
The
following critical judgements have been made in applying the Syndicate’s accounting policies:
The Syndicate makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the financial year
are addressed below.
Technical Provisions
The accounting policy for technical provisions is described on page 20 and the related risks are described in
the risk management section. The gross technical provisions excluding deposits from reinsurers is £93,608k
(2023: £114,779k) comprising of provisions for outstanding claims. The most uncertain element within these
technical provisions is the amount for claims outstanding which covers amounts where either the claim has
been notified to the Syndicate or where there has not yet been a notification or although notified there has been
insufficient information to date to be certain regarding its ultimate costs. The gross amount of claims outstanding
is £91,258k (2023: £110,660k). As described in the risk management section, there is a thorough review process
of claims notifications and reserving estimates. There is a limited spread of risks written as the Syndicate is
highly specialised.
Within the medical professional liability sector, the Syndicate achieves spread by writing
within the various sub sections (physicians, facilities, international and long-term care).
Where investment has
also been made in risk management across many of the risks; these combined should reduce the risk of a
common trend of adverse development occurring.
Due to the current global inflationary pressures, an explicit allowance for future inflation has been added to the
gross technical provisions. The loading was 2.7% (2023: 5.1%) on gross claims reserves (with no net impact).
The uncertainty within gross technical provisions is eliminated (excluding bad debt consideration and ULAE) by
the LPT and QS contracts, reinsuring the balances to MPMIC.
Premium Income
The accounting policy for written and earned premium income is described on page 19 and the related risks are
described in the risk management section. The estimation of written premium includes amounts for additional
or return premiums and business that may have been underwritten but not yet notified. The earning of this
premium has been calculated on a basis of time apportionment. The directors consider that this represents a
reasonable approximation of the overall earning risk profile of the policies written. As described in the risk
management section there is detailed evaluation of premium written estimates at the time of writing risks, and
these are monitored and checked as remaining valid until they are received.
Investment valuations
All investments are shown at their fair value as described in the accounting policy on pages 21 to 23 and details
of the risks relating to investments are disclosed in note 4. Investments mainly consist of highly rated securities
regularly traded on major stock exchanges so that the risks in their valuations are reduced.
3.
Significant accounting policies
The following significant accounting policies have been applied consistently in dealing with items which are
considered material in relation to the Syndicate’s financial statements.
A.
Premiums written
Premiums written comprise of adjustments made in the year to premiums on contracts incepted in prior
accounting periods. Premiums are shown gross of commission payable and exclude taxes and duties levied on
them. Premiums written include estimates of premiums written in previous periods. Outwards reinsurance
20
3.
Significant accounting policies (continued)
A.
Premium written (continued)
premiums are accounted for in the same accounting period as the premiums for the related direct or inwards
business being reinsured.
B.
Unearned premiums
Written premium is earned according to the risk profile of the policy. Unearned premiums represent the
proportion of premiums written that relate to unexpired terms of policies in force at the balance sheet date,
calculated on the basis of established earnings patterns or time apportionment as appropriate.
C.
Acquisition costs
Acquisition costs, comprising commission and other costs related to the acquisition of insurance contracts are
deferred to the extent that they are attributable to premiums unearned at the balance sheet date. Acquisition
costs include direct costs such as brokerage and commission. The deferred acquisition cost asset represents
the proportion of acquisition costs which corresponds to the proportion of gross premiums written that is
unearned at the balance sheet date.
D.
Reinsurance
Outwards reinsurance premiums comprise premium adjustments on contracts adjusted during the financial
year, allocated to a year of account in accordance with the underlying risks being protected or in relation to the
coverage period of the contract as appropriate. Any reinsurance premium adjustments are charged to a year of
account according to the basis on which the adjustments concerned are calculated.
Reinsurance premium
ceded is also disclosed gross of commissions and profit participations recoverable from reinsurers.
E.
Claims provisions and related reinsurance recoveries
Gross claims incurred comprise claims and settlement expenses (both internal and external) occurring during
the year and the movement in provision for outstanding claims and settlement expenses brought forward.
Allowance is made for the cost of claims incurred by the balance sheet date but not reported until after the year-
end.
The provision for claims outstanding comprises amounts set aside for claims notified and claims incurred but
not reported (“IBNR”).
IBNR is calculated using standard actuarial techniques.
Given the relatively long
-tailed
nature of the business written, reliance continues to be placed on loss ratios originally from the business plan,
updated by detailed pricing work undertaken on individual risks by the pricing actuaries, and this is
supplemented with insights from claims experience as the business dev
elops. Some regard is given to Lloyd’s
risk code data from th
e Lloyd’s Market Association
(
“
LMA
”)
where PMA weights the individual risk code triangles
in line with the premiums written by class. The provision for claims also includes amounts in respect of internal
and external claims handling costs.
The reinsurers’ share of provisions for claims is based on calculated amounts of outstanding claims and
projections for IBNR, net of estimated irrecoverable amounts, having regard to the reinsurance programme in
place for the class of business, the claims experience for the year and the current security rating of the
reinsurance companies involved.
The Syndicate uses a number of statistical techniques to assist in making
these estimates.
Accordingly, the two most critical assumptions with regards to claims provisions are that the past is a reasonable
predictor of the likely level of claims development and that the rating and other models used, including pricing
models, for recent business are reasonable indicators of the likely level of ultimate claims to be incurred.
The level of uncertainty with regard to the estimations within these provisions generally decreases in absolute
(monetary) terms with time as experience develops.
In addition to these factors, if there are disputes regarding
coverage under policies or changes in the relevant law regarding a claim, this may increase the uncertainty in
the estimation of the outcomes.
21
3.
Significant accounting policies (continued)
E.
Claims provisions and related reinsurance recoveries (continued)
The assessment of these provisions is usually the most subjective aspect of an insurer’s annual accounts and
may result in greater uncertainty within an insurer’s annual accounts than within those of many other
businesses. The directors consider that the provisions for gross claims outstanding and related reinsurance
recoveries are fairly stated on the basis of the information currently available to them. However, 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 annual accounts
for the period in which the adjustments are made. The provisions are not discounted for the investment earnings
that may be expected to arise in the future on the funds retained to meet the future liabilities. The methods
used, and the estimates made, are reviewed regularly.
F.
Unexpired risks provision
A provision for unexpired risks is made where claims, related expenses and deferred acquisition costs, likely to
arise after the end of the financial period in respect of contracts concluded before that date, are expected to
exceed the unearned premiums and premiums receivable under these contracts, after the deduction of any
acquisition costs deferred. There is no provision recognised in the 2024 annual accounts or comparatives.
G.
Foreign currencies
The presentational and functional currency of the Syndicate is Sterling. Transactions in US dollars, Euros and
Canadian dollars are translated at the average rates of exchange for the period. Transactions denominated in
other foreign currencies are included at the rate of exchange ruling at the date the transaction is processed.
All monetary balance sheet assets and liabilities, including unearned premiums and deferred acquisition costs
are translated into the Sterling functional currency at the rates of exchange at the balance sheet date. The profit
or loss arising on the retranslation of balances to the closing rate of exchange is dealt with through the
“
(loss)/gain on foreign exchange
” within the statement of profit or loss –
non-technical account.
H.
Financial assets and liabilities
The full provisions of FRS 102 have been applied to the treatment of financial instruments. The accounting
classification of financial assets and liabilities determines their basis of measurement and how changes in those
values are presented in the profit or loss or other comprehensive income. These classifications are made at
initial recognition, and subsequent reclassification is only permitted in restricted circumstances.
i.
Classification
The accounting classification of financial assets and liabilities determines the way in which they are measured
and changes in those values are presented in the statement of profit or loss and other comprehensive income.
Financial assets and liabilities are classified on their initial recognition.
The initial classification of a financial instrument shall take into account contractual terms including those relating
to future variations. Once the classification of a financial instrument is determined at initial recognition, re
assessment is only required subsequently when there has been a modification of contractual terms that is
relevant to an assessment of the classification.
Financial assets and financial liabilities at fair value through profit and loss comprise financial assets and
financial liabilities and those designated as such on initial recognition. Investments in shares and other variable
yield securities, units in unit trusts, and debt and other fixed income securities are designated as at fair value
through profit or loss on initial recognition, as they are managed on a fair value basis in accordance with the
Syndicate’s investment strategy.
22
3.
Significant accounting policies (continued)
H.
Financial assets and liabilities (continued)
ii.
Recognition
Financial instruments are recognised when the Syndicate becomes a party to the contractual provisions of the
instrument. Financial assets are derecognised if the Syndicate’s contractual rights to the cash flows from the
financial assets expire or if the Syndicate transfers the financial asset to another party without retaining control
of substantially all risks and rewards of the asset. A financial liability is derecognised when its contractual
obligations are discharged, cancelled or expired.
Regular purchases and sales of financial assets are recognised and derecognised, as applicable, on the trade
date, i.e. the date that the Syndicate commits itself to purchase or sell the asset.
iii. Measurement
A financial asset or financial liability is measured initially at fair value plus, for a financial asset or financial liability
not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.
Financial assets at fair value through profit or loss are measured at fair value with fair value changes recognised
immediately in profit or loss. Net gains or net losses on financial assets measured at fair value through profit or
loss includes foreign exchange gains/losses arising on their translation to the functional currency but excludes
interest.
Impairment losses and foreign exchange gains or losses are reported in profit or loss. Other fair value changes
are recognised in other comprehensive income
(“OCI”)
. Any gain or loss recognised in OCI will be recycled to
profit and loss on derecognition of the asset.
Loans and receivables and non-derivative financial liabilities are measured at amortised cost using the effective
interest method, except Syndicate Loans to the Central Fund which are measured at fair value through profit or
loss.
iv.
Identification and measurement of impairment
At each reporting date the Syndicate assesses whether there is objective evidence that financial assets not at
fair value through profit or loss are impaired. Financial assets are impaired when objective evidence
demonstrates that a loss event has occurred after the initial recognition of an asset, and that the loss event has
an impact on the future cash flows on the asset that can be estimated reliably.
Objective evidence that financial assets are impaired includes observable data that comes to the attention of
the Syndicate about any significant financial difficulty of the issuer, or significant changes in the technological,
market, economic or legal environment in which the issuer operates.
Where indicators exist for a decrease in impairment loss, and the decrease can be related objectively to an
event occurring after the impairment was recognised, the prior impairment loss is tested to determine reversal.
An impairment loss is reversed on an individual impaired financial asset to the extent that the revised
recoverable value does not lead to a revised carrying amount higher than the carrying value had no impairment
been recognised. The amount of the reversal is recognised in profit and loss immediately.
v. Off-setting
Debtors/creditors arising from insurance/reinsurance operations shown in the balance sheet include the totals
of all outstanding debit and credit transactions as processed by the Syndicate and through the Lloyd’s central
facility. Account has been taken for offsets relating to MPMIC QS/LPT balances which may be applicable in
calculating the net amounts due between the Syndicate and MPMIC where balances due are greater than three
months.
23
3.
Significant accounting policies (continued)
H.
Financial assets and liabilities (continued)
Investment return comprises all investment income, realised investment gains and losses and movements in
unrealised gains and losses, net of investment expenses, charges and interest.
Realised gains and losses on investments are calculated as the difference between sale proceeds and purchase
price. Unrealised gains and losses on investments represent the difference between the valuation at the balance
sheet date and their valuation at the previous balance sheet date, or purchase price, if acquired during the year,
together with the reversal of unrealised gains and losses recognised in earlier accounting periods in respect of
investment disposals in the current period.
Investment return 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.
I.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and deposits with maturities of three months or less from
the acquisition date that are subject to an insignificant risk of changes in fair value and are used by the Syndicate
in the management of its short-term commitments.
Cash and cash equivalents are carried at amortised cost in the statement of financial position.
J.
Taxation
Under Schedule 19 of the Finance Act 1993 managing agents are not required to deduct basic rate income tax
from trading income. In addition, all UK basic rate income tax (currently at 25%) deducted from Syndicate
investment income is recoverable by managing agents and consequently the distribution made to members or
their members’ agents is gross of tax. Capital appreciation falls within trading income and is also dist
ributed
gross of tax.
No provision has been made for any United States Federal Income Tax payable on underwriting results or
investment earnings. Any payments on account made by the Syndicate during the year have been included in
the balance sheet under the heading ‘other debtors’.
No provision has been made for any other overseas tax payable by members on underwriting results.
K.
Deposits received from reinsurers
Deposits received from reinsurers includes other amounts received in advance from reinsurers against future
claims under the Syndicate's reinsurance arrangements. These funds are held at amortised cost in the balance
sheet.
L.
Operating expenses
Where expenses are incurred by the Managing Agent for the administration of the Syndicate, these expenses
are apportioned appropriately based on type of expense, and allocated to the year of account for which they
are incurred.
M.
Debtors and creditors
Insurance debtors and creditors include amounts due to and from agents, brokers and insurance contract
holders. These are classified as debt instruments as they are non-derivative financial assets with fixed or
determinable payments that are not quoted on an active market. Insurance debtors are measured at amortised
cost less any provision for impairments. Insurance creditors are stated at amortised cost. The Syndicate does
not have any debtors directly with policyholders.
24
3.
Significant accounting policies (continued)
M.
Debtors and creditors (continued)
Reinsurance debtors and creditors include amounts due to and from reinsurers. These are classified as debt
instruments as they are non-derivative financial assets with fixed or determinable payments that are not quoted
on an active market. Reinsurance debtors are measured at amortised cost less any provision for impairments.
Reinsurance creditors are stated at amortised cost. Reinsurance debtor principally relates to claims recoveries
where the underlying claim has been settled, and the recovery is due. Reinsurance creditors are primarily
premiums payable for reinsurance contracts and are recognised as an expense when due.
Other debtors principally consist of amounts due from members and sundry debtors and are carried at amortised
cost less any impairment losses.
Other creditors principally consist of amounts due to other related entities, and other sundry payables. These
are stated at amortised cost.
N.
Classification of insurance and reinsurance contracts
Insurance and reinsurance contracts are classified as insurance contracts where they transfer significant
insurance risk. If a contract does not transfer significant insurance risk, it is classified as a financial instrument.
All of the Syndicates written contracts and purchased reinsurance contracts transfer significant insurance risk
and therefore are recognised as insurance contracts.
O.
Reinsurance To Close
A reinsurance to close is a contract of insurance which, in return for a premium paid by the closing year of
account, transfers, normally to the following year of account, all known and unknown liabilities arising out of
transactions connected with insurance business underwritten by the closing year of account. However, it should
be noted that a reinsurance contract does not extinguish the primary liability of the original underwriter. Each
year of account is expected to RITC after 36 months in the normal course of Lloyd's business.
The 2022 year of account of the Syndicate has closed and all assets and liabilities transferred to the 2025 year
of account of Syndicate 1254 by reinsurance to close.
P.
Overseas deposits
Overseas deposits are required as a condition of conducting underwriting business in certain countries in
compliance with Lloyd’s licences. These are stated at market value at the statement of financial position date.
These are disclosed within other assets on the statement of financial position.
4.
Risk and capital management
Introduction and overview
This note presents information about the nature and extent of insurance and financial risks to which the
Syndicate is exposed, the Managing Agent’s objectives, policies and processes for measuring and managing
insurance and financial risks, and for managin
g the Syndicate’s capital.
Risk management framework
The Syndicate’s activities expose it to a variety of financial and non
-
financial risks. The Syndicate’s core
business was to accept significant insurance risk, whilst maintaining a low appetite for other risks arising in the
course of conducting business. The Managing Agent is responsible for understanding and managing the
Syndicate’s exposure to such risks and does this through the deployment of its enterprise risk management
(“ERM”) framework.
The PMA ERM framework includes an annual review, setting and Board approval of, risk appetites for the
Syndicate as a part of the syndicate business planning (when applicable) and capital setting process. The Risk
Management Function (“RMF”) regularly assess the risks to which the Syndicate is exposed, and where deemed
necessary, ensures that controls and procedures are in place to mitigate the effects of such risks to an
25
4.
Risk and capital management (continued)
Risk management framework (continued)
acceptable level. A Board Risk Committee meets regularly to monitor performance against the approved risk
appetites using a set of key risk indicators and provide oversight and challenge to ensure the Syndicate operates
within a robust control environment.
Critical to the risk management of the Syndicate is ensuring sufficient capital is in place to meet the solvency
needs of the Syndicate. An internally developed capital model (“internal model”) for
Syndicate 1975 is used to
quantify the Syndicate’s capital requirements based on the assessment of the risks impacting the Syndicate’s
business and the measures in place to manage and mitigate those risks from a quantitative and qualitative
perspective.
As described on page 32 and 33, the Managing Agent is required to prepare a Solvency Capital Requirement
(
“
SCR
”) return to Lloyd’s annually, using the results of the internal model, to agree capital requirements for the
Syndicate with Lloyd’s.
The following provides a summary of the types of risks to which the Syndicate is exposed, the materiality of the
risk to the Syndicate and their key drivers, and the risk management tools and procedures in place to mitigate
these risks.
Insurance risk
Insurance risk arises from the possibility of an adverse financial result due to actual claims experience being
different from that expected when an insurance product was designed and priced. The actual performance of
insurance contracts is subject to the inherent uncertainty in the occurrence, timing and amount of the final
insurance liabilities.
The insurance risk the Syndicate is exposed can be separated into underwriting risk and reserve risk.
i. Underwriting risk
Underwriting risk is the risk that the insurance premium will not be sufficient to cover future insurance losses
and associated expenses. This includes the risks that the premium is set too low, provides inappropriate levels
of cover, or that the actual frequency or severity of claims events will be significantly higher than was expected
during the underwriting process.
The key drivers of insurance risk are:
x
Rating levels (pricing) - the risk that the expected attritional losses and anticipated events, together with
the cost of reinsurance, will result in net claims which exceed the premium income of the Syndicate.
However, the Syndicate is no longer exposed to Underwriting and Pricing risk due to it being in run-off from
January 2023.
ii. Reserve Risk
Reserving risk is the risk that the reserves established by the Syndicate prove to be inadequate. There are a
number of reserve components which can be drivers of reserving risk:
x
Reserves are established for earned premium income (the claims reserves) and unearned premium (the
unearned premium reserves). There may also be an additional unexpired risk provision.
x
Additionally, a reserve for Unallocated Loss Adjustment Expenses (“ULAE”) will also be established and
an allowance made for bad debt.
Management of insurance risk
In the calendar year 2022, insurance risk for Syndicate 1975 was reduced to nil through a number of risk transfer
mechanisms put in place. At Q4 2021, a Loss Portfolio Transfer (“LPT”) with MPMIC of the 2018 and 2019
underwriting years (“UWYs”) was placed to reinsure out the remai
ning net liabilities. At Q2 2022, the LPT was
extended to 2020 and 2021 UWYs, and a 100% Quota Share (“QS”) with MPMIC with a retrospective 1 January
26
4.
Risk and capital management (continued)
Insurance risk (continued)
Management of insurance risk (continued)
2022 inception was incorporated. The QS fully reinsures unearned and unwritten exposures across all
underwriting years and there are no net reserves remaining (other than ULAE). In the current year, as a result
of the LPT and QS arrangements, there is a no net premium and net reserves decrease; hence insurance risk
is of limited importance for Syndicate 1975.
Additionally, as Syndicate 1975 is in run-off, reserving risk remains the driver of gross insurance risk; however,
due to the insurance risk transfer mechanisms in place noted above, this has reduced the net insurance risk to
nil for the Syndicate.
The Actuarial Function uses a number of actuarial techniques to project gross and net premiums and gross and
net insurance liabilities on a best estimate basis. The results of these techniques are then subject to formal peer
review. This is an iterative process where the internal actuaries discuss data, models, methods and assumptions
in relation to the syndicate reserves, prior to presentation at the Reserving Committee, where reserves are
reviewed ahead of the Audit Committee. This process involves a considerable amount of challenge. Once the
actuaries have completed their peer review of reserves, the results of the external actuary’s projections are then
compared to those proposed by the PMA actuarial function.
The Actuarial Function will then make a reserve recommendation to the Audit Committee and Syndicate
Management Committee (“SMC”) including any loadings required. The level of booked reserves requires formal
approval by the Board and is subject to an external audit and further actuarial opinion. The independent reserve
assessment is presented in a Statement of Actuarial Opinion (“SAO”) to confirm the adequacy of the reserves
and is provided annually to Lloyd’s.
Sensitivity to insurance risk
The liabilities established could be significantly lower or higher than the ultimate cost of settling the claims
arising. This level of uncertainty varies between the classes of business and the nature of the risk underwritten
and can arise from developments in case reserving for large losses, or from changes in estimates of claims
IBNR.
The following table presents the sensitivity of the value of insurance liabilities disclosed in the accounts to
potential movements in the assumptions applied within the technical provisions applying a 5%
increase/decrease to loss reserves.
General insurance business sensitivities as at 31 December 2024
+5.0%
-5.0%
£000
£000
Claims outstanding
–
gross of reinsurance
4,576
(4,576)
Claims outstanding
–
net of reinsurance
134
(134)
General insurance business sensitivities as at 31 December 2023
+5.0%
-5.0%
£000
£000
Claims outstanding
–
gross of reinsurance
5,533
(5,533)
Claims outstanding
–
net of reinsurance
-
-
27
4.
Risk and capital management (continued)
Financial risk
The focus of financial risk management for the Syndicate is ensuring that the proceeds from its financial assets
are sufficient to fund the obligations arising from its insurance contracts. The goal of the investment
management process is to optimise the risk adjusted investment income and risk adjusted total return by
investing in a diversified portfolio of securities, whilst ensuring that the assets and liabilities are managed on a
cash flow and duration matching basis.
Credit risk
Credit risk is defined as the risk that the Syndicate’s counterparties fail to meet their financial obligations in full
as they fall due, leading to financial losses. The primary sources of credit risk for the Syndicate are:
•
Reinsurers: Whereby reinsurers may fail to pay valid claims against a reinsurance contract held by the
Syndicate.
•
Brokers and intermediaries: Whereby counterparties fail to pass on premiums collected or claims paid on
behalf of the Syndicate.
•
Financial instruments: Whereby issuer default results in the Syndicate losing all or part of the value of a
financial instrument.
i.
Management of credit risk
The Syndicate’s credit risk in respect of debt securities is managed by placing limits on its exposure to a single
counterparty, by reference to the credit rating of the counterparty. Financial assets are graded according to
current credit ratings issued by rating agencies such
as Standard and Poor’s.
The Syndicate has a policy of
investing mainly in government issued and government backed debts.
The Syndicate assesses the creditworthiness of all reinsurers by reviewing public rating information and by
internal investigations. The impact of reinsurer default is regularly assessed and managed accordingly.
ii.
Exposure to credit risk
The carrying amount of financial assets and reinsurance assets represents the maximum credit risk exposure.
The following table analyses the credit rating by investment grade of financial investments, debt securities and
derivative financial instruments, reinsurers’ share of claims outstanding, amount due from intermediaries,
amounts due from reinsurers in respect of settled claims, cash and cash equivalents, and other debtors and
accrued interest.
28
4.
Risk and capital management (continued)
Credit risk (continued)
As at 31 December 202
4
AAA
AA
A
BBB
Other
Not
rated
Total
£000
£000
£000
£000
£000
£000
£000
Shares and other variable yield
securities and units in unit trusts
13,031
-
2,584
-
-
7,504
23,119
Debt securities and other fixed income
securities
-
3,907
-
-
-
-
3,907
Participation in investment pools
24,322
-
-
-
-
-
24,322
Syndicate loans to central fund
-
-
640
-
-
-
640
Other investments
744
178
163
121
94
250
1,550
Deposits with ceding undertakings
-
-
-
-
-
-
0
Reinsurers’ share of claims outstanding
-
1,643
89,298
-
-
-
90,941
Debtors arising out of direct insurance
operations
-
-
-
-
-
761
761
Debtors arising out of reinsurance
operations
-
-
110
-
-
-
110
Cash at bank and in hand
-
280
27,713
-
-
-
27,993
Other debtors and accrued interest
-
-
572
-
-
-
572
Total
38,097
6,008
121,080
121
94
8,515
173,915
As at 31 December 2023
AAA
AA
A
BBB
Other
Not
rated
Total
£000
£000
£000
£000
£000
£000
£000
Shares and other variable yield securities
and units in unit trusts
143
-
4,754
-
-
131
5,
028
Debt securities and other fixed income
securities
-
21,326
1,615
306
-
-
23,247
Participation in investment pools
-
25,622
10,435
-
-
-
36,057
Other investments
1,656
360
300
244
352
-
2,912
Deposits with ceding undertakings
-
-
-
-
-
-
-
Reinsurers’ share of claims outstanding
-
5,009
105,568
-
-
-
110,577
Debtors arising out of direct insurance
operations
-
-
5,730
-
-
-
5,730
Debtors arising out of reinsurance
operations
-
-
5,762
-
-
-
5,762
Cash at bank and in hand
-
5,520
2,656
-
-
-
8,176
Other debtors and accrued interest
-
-
4,435
-
-
-
4,435
Total
1,799
57,837
141,256
550
352.2
131
201,925
Financial assets that are past due or impaired
The Syndicate has debtors arising from direct insurance that are past due but not impaired at the reporting date.
Liquidity risk
Liquidity risk is the risk that the Syndicate will encounter difficulty in meeting obligations arising from its
insurance contracts and financial liabilities. The Syndicate is exposed to daily calls on its available cash
resources mainly from claims arising from insurance contracts.
29
4.
Risk and capital management (continued)
Liquidity risk (continued)
The nature of the Syndicate’s exposures to liquidity risk and its objectives, policies and
processes for managing
liquidity risk have not changed significantly from the prior year.
i.
Management of liquidity risk
The Syndicate’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when they fall due, under both normal and stressed conditions.
The Syndicate’s approach to managing its liquidity risk is as follows:
x
Forecasts are prepared and revised on a regular basis to predict cash outflows from insurance contracts
over the short, medium and long term;
x
The Syndicate purchases assets with durations not greater than its estimated insurance contract outflows;
x
Assets purchased by the Syndicate are required to satisfy specified investment management guidelines;
x
The Syndicate maintains cash and liquid assets to meet daily calls on its insurance contracts; and
x
The Syndicate regularly updates its contingency funding plans to ensure that adequate liquid financial
resources are in place to meet obligations as they fall due in the event of reasonably foreseeable abnormal
circumstances.
To mitigate liquidity risk, the agency monitors cash flow projections and maintains cash levels consistent with
the needs of the Syndicate, providing commentary into the SMC. As there are funds withheld for syndicate
liabilities, liquidity risk for the Syndicate is very limited.
ii.
Maturity analysis of syndicate liabilities
The maturity analysis presented in the table below shows the remaining contractual maturities for the
Syndicate’s insurance contracts and financial instruments. For insurance contracts, the contractual maturity is
the estimated date when the gross undiscounted contractually required cash flows will occur. For financial
liabilities, it is the earliest date on which the gross undiscounted cash flows (including contractual interest
payments) could be paid assuming conditions are consistent with those at the reporting date.
Undiscounted net cash flows
As at 31 December 2024
No
maturity
stated
0-1 yrs
1-3 yrs
3-5 yrs
>5 yrs
Total
£000
£000
£000
£000
£000
£000
Claims outstanding
-
25,414
36,540
17,666
13,989
93,609
Deposits received from reinsurers
-
64,894
-
-
-
64,894
Creditors
-
22,927
-
-
-
22,927
Other liabilities
-
-
-
-
-
-
Total
-
113,234
36,540
17,666
13,989
181,430
30
4.
Risk and capital management (continued)
Liquidity risk (continued)
Maturity analysis of syndicate liabilities (continued)
Undiscounted net cash flows
As at 31 December 2023
No
maturity
stated
0-1 yrs
1-3 yrs
3-5 yrs
>5 yrs
Total
£000
£000
£000
£000
£000
£000
Claims outstanding
-
27,416
43,071
23,855
18,891
113,230
Deposits received from reinsurers
-
-
90,846
-
-
90,846
Creditors
-
2,838
1,063
-
-
3,901
Other liabilities
-
-
-
-
-
-
Total
-
30,254
134,980
23,855
18,891
207,977
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument or insurance contract will
fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk,
currency risk and other price risk.
The objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return on risk. The nature of the Syndicate exposures to market risk and its
objectives, policies and processes for managing market risk have not changed significantly from the prior year.
Management of market risks
For each of the major components of market risk the Syndicate has policies and procedures in place which
detail how each risk should be managed and monitored. The management of each of these major components
of market risk and the exposure of the Syndicate at the reporting date to each major risk are addressed below.
i.
Interest rate risk
Interest rate risk is the risk that the fair value and/or future cash flows of a financial instrument will fluctuate
because of changes in interest rates. The Syndicate is exposed to interest rate risk through its investment
portfolio, borrowings and cash and cash equivalents.
The risk of changes in the fair value of these assets is managed by primarily investing in short duration financial
investments and cash and cash equivalents. The SMC monitors the duration of these assets on a regular basis,
targeting an investment portfolio duration that, in the event of changes in interest rates, always maintains the
internal capital requirements.
ii.
Currency risk
The Syndicate writes business primarily in Sterling, US dollar, Euro, Canadian dollar and Australian dollar and
is therefore exposed to currency risk arising from fluctuations in these exchange rates.
The foreign exchange policy is to maintain assets in the currency in which the cash flows from liabilities are to
be settled in order to hedge the currency risk inherent in these contracts.
T
he table below summarises the carrying value of the Syndicate’s assets and liabilities, at the reporting date:
31
4.
Risk and capital management (continued)
Market risk (continued)
Management of market risks (continued)
As at
31 December 2024
GBP
US $
Euro
CAN $
AUS $
Total
£000
£000
£000
£000
£000
£000
Investments
640
46,502
2,562
2,284
-
51,988
Reinsurers' share of technical
provisions
8,461
73,
492
3,030
5,358
600
90,941
Debtors
359
196
(545)
993
10
1,013
Other assets
1,232
27,114
125
660
412
29,543
Prepayments and accrued income
3
1
426
-
-
430
Total assets
10,695
147,305
5,598
9,295
1,022
173,915
Technical provisions
(10,840)
(73,750)
(3,040)
(5,376)
(602)
(93,608)
Deposits received from reinsurers
(4,012)
(55,698)
(3,353)
(1,519)
(312)
(64,894)
Creditors
-
(22,927)
-
-
-
(22,927)
Accruals and deferred income
(1,238)
-
-
-
-
(1,238)
Total liabilities
(16,090)
(152,375)
(6,393)
(6,895)
(914)
(182,667)
Total Capital and reserves
(5,395)
(5,070)
(795)
2,400
108
(8,752)
As at
31 December 2023
GBP
US $
Euro
CAN $
AUS $
Total
£000
£000
£000
£000
£000
£000
Investments
785
59,844
-
3,704
-
64,333
Reinsurers' share of technical
provisions
13,
637
85,096
4,542
7,901
951
112,127
Debtors
934
6,409
98
4,075
(24)
11,492
Other assets
654
5,841
547
6,125
1,699
14,866
Prepayments and accrued income
18
16
623
-
-
657
Total assets
16,028
157,206
5,810
21,805
2,626
203,475
Technical provisions
(16,209)
(85,173)
(4,543)
(7,903)
(951)
(114,779)
Deposits received from reinsurers
(4,901)
(78,793)
(3,749)
(3,004)
(399)
(90,846)
Creditors
(30)
(4,201)
(90)
(21)
-
(4,342)
Accruals and deferred income
(1,140)
72
31
39
-
(998)
Total liabilities
(22,280)
(168,095)
(8,351)
(10,889)
(1,350)
(210,965)
Total Capital and reserves
(6,252)
(10,889)
(2,541)
10,916
1,276
(7,490)
32
4.
Risk and capital management (continued)
Sensitivity analysis to market risks
The analysis below is performed for reasonably possible movements in market indices on financial instruments
with all other variables held constant, showing the impact on the result due to changes in fair value of financial
assets and liabilities (whose fair values are recorded in the profit and loss account) and members’ balances.
2024
2024
2023
2023
Impact on
result
Impact on
members'
balances
Impact on
results
Impact on
members'
balances
£000
£000
£000
£000
Interest rate risk
+ 50 basis points shift in yield curves
20
20
116
136
- 50 basis points shift in yield curves
(20)
(20)
(116)
(136)
The Syndicate’s main exposure to fluctuation in interest rates arises from its effect on the valuation of funds
invested in bonds. To mitigate this risk, the Board, advised by its external investment managers, monitors the
economic situation to seek to anticipate any future interest rate movement and to take appropriate action to
mitigate its effect on the value of investments held.
The largest element of the Syndicate’s investments
comprises of fixed income securities. The fair value of the
investment in fixed income securities is inversely correlated to the movement in market interest rates. If market
rates fall, the fair value of the Syndicate’s fixed interest investments would tend to rise
and vice versa. Fixed
income assets are predominantly invested in high quality corporate, government and supranational bonds The
investments typically have relatively short durations and terms to maturity.
Capital management
i.
Capital
framework at Lloyd’s
The Society of Lloyd’s (Lloyd’s) is a regulated undertaking and subject to the supervision of the PRA under the
Financial Services and Markets Act 2000 and in accordance with Solvency II requirements.
Within this supervisory framework, Lloyd’s applies capital requirements at member level and centrally to ensure
that Lloyd’s would comply with the Solvency II requirements, and beyond that to meet its own financial strength,
licence and ratings objectives.
Although, as described below, Lloyd’s capital setting processes use a capital requirement set at syndicate level
as a starting point, the requirement to meet Solvency II and Lloyd’s capital requirements apply at overall and
member level only respectively, not at syndicate level. Accordingly, the capital requirement in respect of
Syndicate 1975 is not disclosed in these financial statements.
ii.
Lloyd’s capital setting process
In order to meet Lloyd’s requirements, each Syndicate is required to calculate its Solvency Capital Requirement
(
“
SCR
”
) for the prospective underwriting year. This amount must be sufficient to cover a 1 in 200-year loss,
reflecting uncertainty in the ultimate run off of u
nderwriting liabilities (SCR ‘to ultimate’). The Syndicate must
also calculate its SCR at the same confidence level but reflecting uncertainty over a one-year time horizon (one
year SCR) for Lloyd’s to use in meeting Solvency II requirements. The SCRs of e
ach Syndicate are subject to
review by Lloyd’s and approval by the Lloyd’s Capital and Planning Group.
33
4.
Risk and capital management (continued)
Capital management (continued)
A syndicate may be comprised of one or more underwriting members of Lloyd’s. Each member is liable for its
own share of
underwriting liabilities on the Syndicates on which it is participating but not other members’ shares.
Accordingly, the capital requirements that Lloyd’s sets for each member operates on a similar basis.
Each member’s SCR shall thus be determined by the sum of the member’s share of the Syndicate SCR ‘to
ultimate’. Where a member participates on more than one syndicate, a credit for diversification is provided to
reflect the spread of risk, but consistent with determining an SCR which reflects the capital requirement to cover
a 1 in 200 loss ‘to ultimate’ for that member. Over and above this, Lloyd’s applies a capital uplift to the member’s
capital requirement, known as the Economic Capital Assessment (
“
ECA
”
). The purpose of this uplift, which is a
Lloyd’s not a Solvency II requirement, is to meet Lloyd’s financial strength, licence and ratings objectives. The
capital uplift applied for 2024 was 35% (2023
: 35%) of the member’s SCR ‘to ultimate’.
iii.
Provision of capital by members
Each member may provide capital to meet its ECA either by assets held in trust by Lloyd’s specifically for that
member (
“
FAL
”
), assets held and managed within a syndicate (
“
FIS
”), or as the member’s share of the members’
balances on each syndicate on which it participates.
Accordingly, all of the assets less liabilities of the Syndicate, as represented in the members’ balances reported
on the balance sheet on page 16,
represent resources available to meet members’ and Lloyd’s capital
requirement.
5.
Analysis of underwriting result
An analysis of the underwriting result before investment return is presented in the table below:
Year 2024
Gross
premiums
written
Gross
premiums
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
result
£000
£000
£000
£000
£000
£000
Direct insurance
Third party liability
(1,700)
(458)
2,486
(4,984)
(2,304)
(5,260)
Total direct insurance
(1,700)
(458)
2,486
(4,984)
(2,304)
(5,260)
Reinsurance acceptances
(66)
223
(6,114)
(2,6
02)
5,
764
(2,7
29)
Total
(1,766)
(235)
(3,628)
(7,586)
3,460
(7,989)
Year 2023
Gross
premiums
written
Gross
premiums
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
result
£000
£000
£000
£000
£000
£000
Direct insurance
Third party liability
5,273
18,904
(13,895)
(6,602)
(3,432)
(5,025)
Total direct insurance
5,273
18,904
(13,895)
(6,602)
(3,432)
(5,025)
Reinsurance acceptances
3,429
11,996
(9,963)
2,
577
(4,208)
402
Total
8,702
30,900
(23,858)
(4,025)
(7,640)
(4,623)
34
5.
Analysis of underwriting result (continued)
The gross premiums written for direct insurance by underwriting location of risk is presented in the table below:
2024
2023
£000
£000
United Kingdom
(1,700)
5,273
Total gross premiums written
(1,700)
5,273
6.
Net operating expenses
2024
2023
£000
£000
Acquisition costs
3,232
5,132
Change in deferred acquisition costs
446
3,896
Administrative expenses
3,703
3,916
Reinsurance commissions and profit participation
205
(8,920)
Net operating expenses
7,586
4,024
Total commissions for direct insurance business for the year amounted to:
2024
2023
£000
£000
Total commission for direct insurance business
2,196
3,620
Administrative expenses include:
2024
2023
£000
£000
Auditor’s remuneration
Audit of the Syndicate annual accounts
124
126
Audit-related assurance services
55
41
Other assurance services provided
86
90
Other non-assurance services provided
32
-
Total audit
or’s
remuneration
297
257
During the year the auditor provided non-assurance services to Polo Managing Agency amounting to £95k out
of which £32k was allocated to syndicate 1975.
7.
Key management personnel compensation
No emoluments of the directors of PMA were directly charged to the Syndicate and consequently no meaningful
disclosure can be made. No staff of PMA were directly charged to the Syndicate. No other compensation was
payable to key management personnel.
35
8
.
Staff numbers and costs
All staff are employed by the managing agent, the syndicate has no employees.
As agreed in the novation to PMA the following amounts were recharged by the managing agency to the
Syndicate in respect of payroll costs.
2024
2023
£000
£000
Wages and salaries
82
2,173
Social security costs
10
255
Other pension costs
5
128
Total
97
2,556
PoloWorks staff work on multiple clients therefore it is not possible to disclose average staff numbers.
9.
Investment return
2024
2023
£000
£000
Interest and similar income
From financial instruments designated at fair value through profit or loss
Interest and similar income
719
505
From financial instruments at amortised cost
Interest and similar income
367
443
Other income from investments
From financial instruments designated at fair value through profit or loss
Realised gains/(losses) on investments*
2,128
(46)
Unrealised gains on investments*
114
2,245
Investment management expenses
(62)
(35)
Total investment return
3,266
3,112
Transferred to the technical account from the non-technical account
3,266
3,112
*previously the investment return note presented gains and losses separately now investment return is
presented net of losses in line with the accounting policy.
An investment return of £3.3m was wholly allocated to the technical account
10. Distribution of results
The table below shows the current reporting year result (total comprehensive loss) of the open years of account,
with 2022 closing into s1254 effective 1
st
January 2025:
2024
2023
£000
£000
2021
Year of Account
-
(4,020)
2022
Year of Account
(8,754)
(3,443)
36
11. Financial investments
Carrying value
Cost
2024
2023
2024
2023
£000
£000
£000
£000
Shares and other variable yield securities and units
in unit trusts
23,
119
4,
244
23,119
4,244
Debt securities and other fixed income securities
3,907
23,247
3,907
23,125
Participation in investment pools
24,322
36,058
24,239
35,040
Syndicate loan to central fund
640
784
664
838
Total financial investments
51,988
64,333
51,929
63,247
All financial investments are measured at fair value through profit or loss .
The Syndicate classifies its financial instruments held at fair value in its balance sheet using a fair value
hierarchy based on the inputs used in the valuation techniques as follows:
Level 1
–
financial assets that are measured by reference to published quotes in an active market. A financial
instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from
an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent
actual and regularly occurring market transactions on an arm’s length basis.
Level 2
–
financial assets measured using a valuation technique based on assumptions that are supported by
prices from observable current market transactions. For example, assets for which pricing is obtained via pricing
services but where prices have not been determined in an active market, financial assets with fair values based
on broker quotes, investments in private equity funds with fair values obtained via fund managers and assets
that are valued using the Syndicate’s own models whereby the significant inputs into the assumptions are
market observable.
Level 3
–
financial assets measured using a valuation technique (model) based on assumptions that are neither
supported by prices from observable current market transactions in the same instrument nor are they based on
available market data. Therefore, unobservable inputs reflect the Syndicate's own assumptions about the
assumptions that market participants would use in pricing the asset or liability (including assumptions about
risk). These inputs are developed based on the best information available.
The table below analyses financial instruments held at fair value in the Syndicate’s balance sheet at the
reporting date by its level in the fair value hierarchy:
As at 31 December
2024
Level 1
Level 2
Level 3
Total
£000
£000
£000
£000
Shares and other variable yield securities and units in unit trusts
23,119
-
-
23,119
Debt securities and other fixed income securities
3,907
-
-
3,907
Participation in investment pools
20,079
4,243
-
24,322
Syndicate loan to
Lloyd’s
central fund
-
-
640
640
Total financial investments
47,105
4,243
640
51,988
37
11. Financial investments (continued)
As at
31 December 2023
Level 1
Level 2
Level 3
Total
£000
£000
£000
£000
Shares and other variable yield securities and units in unit trusts
4,244
-
-
4,244
Debt securities and other fixed income securities
23,247
-
-
23,247
Participation in investment pools
27,591
8,467
-
36,058
Syndicate loan to
Lloyd’s
central fund
-
-
784
784
Total
55,082
8,467
784
64,333
The Level 3 instrument comprises the Syndicate loans to the Lloyd’s Central Fund.
12. Debtors arising out of direct insurance operations
2024
2023
£000
£000
Amounts due within one year
761
5,730
Total
761
5,730
13. Debtors arising out of reinsurance operations
2024
2023
£000
£000
Amounts due within one year
110
5,762
Total
110
5,762
14. Other debtors
2024
2023
£000
£000
Amounts due from members
-
107
Other
142
3,220
Total
142
3,327
15. Other assets
2024
2023
£000
£000
Overseas deposits*
1,550
2,912
Total
1,550
2,912
*Previously presented as overseas deposits, re-presented as other assets.
38
16. Deferred acquisition costs
The table below shows changes in deferred acquisition costs assets from the beginning of the period to the
end of the period.
2024
2023
Gross
Reinsurance
Net
Gross
Reinsurance
Net
£000
£000
£000
£000
£000
£000
Balance at 1 January
451
(441)
10
4,479
(6,876)
(2,397)
Incurred deferred acquisition
costs
3,
232
641
3,873
5,132
2,684
7,816
Amortised deferred acquisition
costs
(3,
678)
(
205)
(3,
883)
(9,028)
3,552
(5,476)
Foreign exchange movements
(5)
5
-
(132)
199
67
Balance at 31 December
-
-
-
451
(441)
10
17. Claims development
The following tables illustrate the development of the estimates of earned ultimate cumulative claims incurred,
including claims notified and IBNR, for each successive underwriting year, illustrating how amounts estimated
have changed from the first estimates made.
As these tables are on an underwriting year basis, there is an apparent large increase from amounts reported
for the end of the underwriting year to one year later as a large proportion of premiums are earned in the year
of account’s second year of development.
Balances have been translated at exchange rates prevailing at 31 December 2024 in all cases.
Gross:
Pure underwriting year
2018
2019
2020
2021
2022
Total
£000
£000
£000
£000
£000
£000
Estimate of gross claims
at end of underwriting year
15,204
11,896
18,108
15,000
14,347
74,554
one year later
32,800
33,073
38,143
32,976
30,492
167,483
two years later
48,045
28,764
34,306
40,296
35,450
186,861
three years later
50,117
29,288
24,096
38,406
-
141,908
four years later
52,623
35,655
28,453
-
-
116,731
five years later
56,274
34,260
-
-
-
90,534
six years later
53,814
-
-
-
-
53,814
Less gross claims paid
(48,816)
(23,516)
(7,818)
(15,772)
(853)
(96,775)
Gross claims reserve
4,998
10,744
20,635
22,634
34,597
93,608
39
17. Claims development (continued)
Net:
Pure underwriting year
2018
2019
2020
2021
2022
Total
£000
£000
£000
£000
£000
£000
Estimate of net claims
at end of underwriting year
14,736
11,713
17,225
14,394
540
58,608
one year later
35,462
34,870
37,591
1,509
1,260
110,692
two years later
50,904
24,141
3,353
3,795
1,092
83,286
three years later
58,359
16,034
3,395
886
-
78,673
four years later
41,363
17,831
1,700
-
-
60,894
five years later
34,352
13,494
-
-
-
47,846
six years later
33,260
-
-
-
-
33,260
Less net claims paid
(33,240)
(13,458)
(1,038)
(27)
-
(49,764)
Net claims reserve
20
35
662
858
1,092
2,667
18. Technical provisions
The table below shows changes in the insurance contract liabilities and assets from the beginning of the period
to the end of the period.
2024
2023
Gross
provisions
Reinsurance
assets
Net
Gross
provisions
Reinsurance
assets
Net
£000
£000
£000
£000
£000
£000
Balance at 1 January
113,230
(110,577)
2,653
107,473
(105,029)
2,444
Claims paid during the year
(23,220)
23,216
(4)
(13,177)
2,419
(10,758)
Change in estimates of prior year
provisions
3,
238
(3,
225)
13
23,858
(12,889)
10,969
Effect of movements in exchange
rate
360
(
355)
5
(4,924)
4,922
(2)
Balance at 31 December
93,608
(90,941)
2,667
113,230
(110,577)
2,653
Refer to Note 4 for the sensitivity analysis performed over the value of insurance liabilities, disclosed in the
accounts, to potential movements in the assumptions applied within the technical provisions.
2024
2023
Gross
provisions
Reinsurance
assets
Net
Gross
provisions
Reinsurance
assets
Net
£000
£000
£000
£000
£000
£000
Unearned premiums
Balance at 1 January
1,550
(1,550)
-
24,466
(24,466)
-
Premiums written during the year
(1,766)
1,766
-
8,702
(8,702)
-
Premiums earned during the year
235
(235)
-
(30,899)
30,899
-
Effect of movements in exchange
rate
(19)
19
-
(719)
719
-
Balance at 31 December
-
-
-
1,550
(1,550)
-
40
19. Creditors arising out of reinsurance operations
2024
2023
£000
£000
Due within one year
87
2,838
Total
87
2,838
20. Other creditors including taxation and social security
2024
2023
£000
£000
Other liabilities
22,840
1,063
Total
22,840
1,063
Other creditors include £21.8m of cash in transit the balance related to a claims loss fund with MPMIC.
21. Cash and cash equivalents
2024
2023
£000
£000
Cash at bank and in hand
27,993
*(restated)
8,176
Short term debt instruments presented within other financial investments
2,584
3,970
Total cash and cash equivalents
30,577
12,146
The prior year cashflow has been restated due to an error in the classification of the short-term deposit accounts
(£4.0m) to cash and cash equivalents. These are deposits with credit institutions with maturities of three months
or less that are used by the Syndicate in the management of its short-term commitments. The items restated
within the cashflow statement on page 17 are shown below:
2023
2023
2023
£000
£000
£000
Cash flows from
investing activities
Restated
Correction
Original
Purchase of equity and debt instruments
(4,860)
42
(
4,902)
Sale of equity and debt instruments
31
(
240)
271
Net increase/(decrease) in cash and cash
equivalents
(
5,183)
(198)
(
4,984)
Cash and cash equivalents at the beginning of the
year
17,963
4,302
1
3,661
Foreign exchange on cash and cash equivalents
(
634)
(134)
(
500)
Cash and cash equivalents at the end of the
year
12,146
3,970
8,176
22. Analysis of net debt
At 1 January
2024
£000
C
ash
flows
£000
Fair value
and exchange
movements
£000
At 31 December
2024
£000
Cash at bank and in hand
8,176
20,284
(467)
27,993
Short term deposits
3,970
(1,151)
(235)
2,584
Total
12,146
19,133
(702)
30,577
41
23. Related parties
The Syndicate is related to MPMIC by virtue of common control.
During the calendar year 2022, the Syndicate
entered a 100% QS transaction for the 2022 year of account with MPMIC on a funds withheld basis. In the same
year the Syndicate endorsed the existing Loss Portfolio Transfer in place for the 2018 and 2019 years of
account, to include the 2020 and 2021 years of account also with MPMIC. MPMIC is the parent of ProMutual
Group Inc.(“PMGI”) which is the parent of wholly aligned
Corporate Member, Coverys Capital Limited.
24. Post balance sheet events
At the end of 2024 the Syndicate Reinsured to Close into Syndicate 1254, effective 1 January 2025.
25. Foreign exchange rates
The following currency exchange rates have been used for principal foreign currency transactions:
2024
2023
Start of
the year
rate
Yearend
rate
Average
rate
Start of
the year
rate
Yearend
rate
Average
rate
Sterling
Euro
US dollar
Canadian dollar
Australian dollar
26.
Funds at Lloyd’s
Every member is required to hold capital at Lloyd’s which is held in trust and known as Funds at Lloyd’s (“
FAL
”
).
These funds are intended primarily to cover circumstances where Syndicate assets prove insufficient to meet
participating members’ underwriting liabilities. The level of FAL that Lloyd’s requires a member to maintain is
determined by Lloyd’s based on Pr
udential Regulation Authority requirements and resource criteria. The
determination of 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 Financial Statements by way of such capital resources. However, the Managing Agent is able to make a
call on the Member’s FAL to meet liquidity re
quirements or to settle losses.
27. Controlling Party of the Managing Agent
The Managing Agent’s immediate parent undertaking is Marco Capital Holdings (UK) Limited, a company
incorporated in England and Wales. Registered address 24 Monument Street, 4th Floor, London, United
Kingdom, EC3R 8AJ.
The Managing Agent’s ultimate parent undertaking is Marco Capital Holdings Limited, a company incorporated
in Malta. Registered address is 171 Old Bakery Street, Valletta, VLT1455, Malta.
42
28. Disclosure of Interest
PMA provided services and support to the Syndicate in its capacity as Managing Agent.
In the year, Managing
Agency Fees of £2.5m (2023: £0.6m) were charged to the syndicate, in addition to service charges of £0.3m
(2023: nil). At the yearend £0.9m (2023: £0.6m) was owed to PMA by the Syndicate.
Managing Agent’s interest:
During 2024 PMA was the Managing Agent for five syndicates. Syndicates 1347, 1975, 1996 and 1254.
On 9
August 2024, PMA took on the management of Syndicate 1110.
The Financial Statements of the Managing Agency can be obtained by application to the Registered Office
(see page 3).