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Tokio Marine Kiln Syndicate 1880
Report and Accounts
For the year ended 31 December 2024
Tokio Marine Kiln Syndicate 1880
Report and accounts for the year ended 31 December 2024
3
Contents
Directors and advisers
4
Report of the Directors of the managing agent
5
Syndicate 1880 annual accounts for the year ended 31 December 2024
Statement of managing agent’s responsibilities
12
Independent auditors’ report to the member of Syndicate 1880
13
Profit and loss and other comprehensive income
Technical account – general business for the year ended 31 December 2024
16
Profit and loss and other comprehensive income
Non-technical account – general business for the year ended 31 December 2024
17
Balance
sheet: assets
as at 31 December 2024
18
Balance sheet:
liabilities
as at 31 December 2024
19
Statement of changes in member’s balances
for the year ended 31 December 2024
20
Statement
of cash flows
for the year ended 31 December 2024
21
Notes to the annual accounts and significant accounting policies
22
Tokio Marine Kiln Syndicate 1880
Report and accounts for the year ended 31 December 2024
4
Directors and advisers
Managing agent
1880), Tokio Marine Combined Syndicate 510 (Syndicate 510), Tokio Marine Kiln Catastrophe Syndicate 557
(Syndicate 557) and Tokio Marine Kiln Life Syndicate 308 (Syndicate 308). TMKS is a wholly-owned subsidiary of
Tokio Marine Kiln Group Limited (TMKGL). TMKGL and its subsidiaries are referred to as Tokio Marine Kiln (TMK).
TMKGL’s ultimate parent is Tokio Marine Holdings, Inc., Japan (Tokio Marine).
TMKS is authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority
(FCA), the PRA and the Society of Lloyd’s.
Directors
S Batori
C Fuhrmann
V M Gordon-Walker
N I Hutton-Penman
B T Irick
A McNamara
C J G Moulder
R Patel
A M W Shaw
V Syal
D A Torrance (Chair)
M H Trussell
C J B Williams (resigned 31 March 2024)
Company secretary
Investment managers
A Gordon
BlackRock Investment Management (UK) Limited
12 Throgmorton Avenue
Active underwriter
London EC2N 2DL
M A Mortlock
New England Asset Management Limited
Registered office
The Oval-Block 3, Shelbourne Road, Ballsbridge,
20 Fenchurch Street
D04 T8F2, Dublin 4, Ireland
London EC3M 3BY
Registered numbers
Independent auditors
TMKS company number
00729671
PricewaterhouseCoopers LLP
FCA reference number
204909
Chartered Accountants and Statutory Auditors
Lloyd’s agent number
1041K
7 More London Riverside
London SE1 2RT
Bankers
Barclays Bank plc
Citibank, N.A.
Royal Bank of Canada
Tokio Marine Kiln Syndicate 1880
Report and accounts for the year ended 31 December 2024
5
Report of the Directors of the managing agent
The Directors of the managing agent (the Board) present their report and audited accounts for the year ended 31
December 2024 under UK Generally Accepted Accounting Practice (GAAP). This report covers Syndicate 1880 (the
Syndicate), managed by TMKS. The managing agent’s ultimate parent is Tokio Marine Holdings, Inc., the head office of
which is in Japan.
The annual report for the Syndicate is prepared using the annual basis of accounting as required by Statutory Instrument
No. 1950 of 2008, the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008.
Syndicate underwriting year accounts have not been prepared for the closed 2022 year of account in accordance with the
exemption available under Regulation 6(1) of the 2008 Regulations.
Principal activity
The principal activity of the Syndicate remains the transaction of general insurance and reinsurance business on a
worldwide basis in the Lloyd’s market.
The Syndicate’s business attaching to the 2021 and post years of account was written on a split stamp basis with Syndicate
510, split 20% to the Syndicate and 80% to Syndicate 510. Business attaching to the 2020 & prior years of account did
not form part of the split stamp arrangement.
The Syndicate is managed by TMKS, with capital provided on an aligned basis by Tokio Marine Underwriting Limited, a
wholly owned subsidiary of Tokio Marine & Nichido Fire Insurance Co., Ltd.
Results
The result for the 2024 calendar year was a profit of £36.8 million (2023: £58.6 million). The Syndicate’s key financial
performance indicators during the year were as follows:
2024
£m
2023
£m
Gross written premium
450.0
444.1
Net earned premium
319.6
280.7
Profit for the financial year
36.8
58.6
Investment return
13.8
14.9
Claims ratio
(1)
52.9%
44.8%
Combined ratio
(2)
93.7%
85.5%
(1)
Claims ratio - Total of net incurred claims as a percentage of net earned premium
(2)
Combined ratio - Total of net incurred claims, net acquisition costs and operating expenses as a percentage of net earned premium
Review of the business
On 6 September 2024, the Lloyd’s Capacity Transfer Panel (CTP) approved an application to merge the Syndicate into the
2025 year of account of Syndicate 510. It is anticipated that the last trading year of account of the Syndicate (the 2024
year of account) will reinsure-to-close into the 2025 year of account of Syndicate 510 at 36 months. Until the point of
closure, the Syndicate will be managed as a run-off syndicate.
Performance
Gross written premium for the year of £450.0 million (2023: £444.1 million) generated a profit of £36.8 million (2023:
£58.6 million) and a combined ratio of 93.7% (2023: 85.5%). At constant rates of exchange, gross written premium
increased by 4.3% compared to prior year, primarily driven by growth in the Aviation, Liability & Special Risks divisions.
The net claims ratio of 52.9% is adverse to prior year (44.8%). Reserve deteriorations on prior year losses (defined as
movements on closed years of account and on previous accident years’ catastrophe losses) contributed 5.9% (2023:
0.7%) to the net claims ratio and included an increase in provisions held for potential exposures arising from the Russian
invasion of Ukraine within the Aviation and Marine & Energy divisions.
Catastrophe losses contributed 6.3% (2023: 4.7%) to the net claims ratio and included Hurricanes Helene and Milton.
Together, these events resulted in higher losses to the Syndicate compared to the catastrophes reported in 2023.
The Syndicate reported an attritional claims ratio of 40.7% (2023: 39.4%). Although higher than prior year, attritional
claims experience remains benign, particularly across the Property & Motor division.
Tokio Marine Kiln Syndicate 1880
Report and accounts for the year ended 31 December 2024
6
2025 Outlook
Following the decision to merge the Syndicate with Syndicate 510 for the 2025 year of account, the 2024 year of account
will be the last underwriting year for the Syndicate. The Syndicate will focus on an orderly run-off of the risks which
remain in force.
Capital management
TMK’s business model remains consistent: the Syndicate consists of specialist underwriters, providing a wide variety of
products tailored to their clients’ changing risk profiles. This is supported by a comprehensive, enterprise-wide framework
for the management of risk across the whole of TMK. The Syndicate focusses on specialist lines of insurance and
reinsurance business where the occurrence of a loss is known relatively quickly, and so it is able to make more immediate
reliable estimates regarding the extent of the losses expected. The Syndicate is substantially exposed to catastrophe
related business and the underwriters have detailed knowledge of the risks underwritten.
It is the Syndicate’s policy to confine risk exposure primarily to core areas of expertise: the underwriting of specialist
insurance and reinsurance risks. This approach results in prudent financial risk management, such as investment
management and reserving. This allows the Syndicate to protect capital and focus its risk appetite on underwriting.
Capital framework at Lloyd’s
The Society of Lloyd’s (Lloyd’s) is a regulated undertaking and subject to supervision by the PRA under the Financial
Services and Markets Act 2000, and in accordance with Solvency II and the Insurance and Reinsurance Undertakings
(Prudential Requirements) (Risk Margin) Regulations 2023.
Within this supervisory framework, Lloyd’s applies capital requirements at member level and centrally to ensure that
Lloyd’s complies with 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, Lloyd’s capital requirements apply at member level only, not at a syndicate level. Accordingly, the capital
requirement at syndicate level is not disclosed in these report and accounts.
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 underwriting liabilities (SCR ‘to ultimate’). The Syndicate must also calculate its SCR at the same
confidence level but reflecting uncertainty over a one-year time horizon (one-year SCR) for Lloyd’s to use in meeting
Solvency II requirements. The SCRs of each syndicate are subject to review by Lloyd’s and approval by the Lloyd’s Capital
Planning Group.
A syndicate may be supported by one or more underwriting members of Lloyd’s. Each member is liable for its own share
of underwriting liabilities on the syndicate(s) on which it is participating but not other members’ shares. Accordingly,
the capital requirements that Lloyd’s set for each member operate on a similar basis. Each member’s total capital
requirement is therefore determined by the share of each syndicate’s SCR ‘to ultimate’ on which they participate.
Where a member participates on more than one syndicate, a credit for diversification is provided to reflect the spread
of risk, but consistent with determining an SCR which reflects the capital requirement to cover a 1 in 200-year loss ‘to
ultimate’ for that member. Over and above this, Lloyd’s applies a capital uplift to the members’ capital requirement,
known as the Economic Capital Assessment (ECA). The purpose of this uplift, which is a requirement set by Lloyd’s
rather than Solvency II, is to meet Lloyd’s financial strength, licence and ratings objectives.
Provision of capital by members
Each member may provide capital to meet its ECA either through assets held in trust by Lloyd’s specifically for that
member (Funds at Lloyd’s) or as the member’s share of the member’s balances on each syndicate on which it
participates. Accordingly, all of the assets less liabilities of the Syndicate, as represented in the member’s balances
reported on the respective balance sheets, represent resources available to meet the member’s and Lloyd’s capital
requirements. The Lloyd’s market-wide capital uplift applied for 2024 to derive the ECA is 35.0% (2023: 35.0%) of the
member’s SCR ‘to ultimate’.
Capital allocation
The Syndicate has an approved internal model which is used to calculate capital requirements, allocate capital to business
lines and risk categories and assess the value of different business and reinsurance strategies. The calculations are based
upon sophisticated mathematical models that reflect the key risks in the business, allowing for the probability of
occurrence, the potential impact should losses occur and the interactions between the different risk types. The results of
the modelling confirm that the majority of capital is required to support insurance risk.
Tokio Marine Kiln Syndicate 1880
Report and accounts for the year ended 31 December 2024
7
Risk management and risk appetite
There is a comprehensive, enterprise-wide Risk Management Framework (RMF) in place for the management of risk across
the whole of TMK. A key element of this is the Risk Appetite Framework (RAF) which is approved by the Board each year
and lays out the agreed appetite for each area of risk the Syndicate is exposed to.
TMK is exposed to a variety of risks and the Board has developed a strategy for categorising, managing and reporting
these different risks. This high-level categorisation is called the TMK Risk Universe. The Risk Universe is defined as ‘the
complete view of all possible types of risk that the firm may face, reflecting the risk profile of the business’. The universe
includes risks that could positively or negatively impact the business and underpins the RAF, which sets out the parameters
for risk taking.
The RAF ensures that risk taking is aligned to the business strategy by including a set of risk preferences. These are
strategic choices taken by the business to deliver the best result to its stakeholders. These preferences change over time
as the strategy develops, ensuring the Syndicate remains relevant to its clients, whilst adapting to market conditions.
Risk appetites are regularly monitored with risk metrics supported by qualitative and quantitative data collated by the
Risk Management team (RMT) from first-line teams and are reported quarterly as part of the Own Risk and Solvency
Assessment (ORSA) process to the Risk, Capital & Compliance Committee (RCCC).
Key risks facing TMK are included in the risk register and form part of the regular risk assessment process, facilitated by
the RMT. Risks are reported on a quarterly basis as part of the ORSA to the RCCC.
The principal risks, known as Tier 1 risks, are Solvency, Liquidity, Earnings Volatility and Reputational. The Syndicate also
has exposure to the following Tier 2 risks: Insurance, Market, Credit, Operational, Regulatory and Conduct. Additionally,
the Syndicate faces Climate and Emerging risks.
Tier 1 risks:
Solvency risk
This is the risk of non-compliance with solvency capital requirements as set out in the previous section, ‘Capital
Management’. These requirements are set out to ensure that the Syndicate has enough capital to meet demands as they
fall due.
Solvency risk is driven by exposure to several other risks such as Insurance, Market, Credit and Operational. These risks
and their mitigants are described later in this section.
Liquidity risk
This is the risk of the Syndicate being unable to meet liabilities in a timely manner due to the lack of liquid resources.
To mitigate liquidity risk, the Treasury team reviews syndicate cash flow projections quarterly, and also stress tests them
against Realistic Disaster Scenarios. In the event of a catastrophe loss of a significant size, the Syndicate has the ability to
take advantage of outstanding claims advances from its major reinsurers. The Syndicate also has the ability to make cash
calls on its member in order to manage liquidity.
Earnings volatility risk
This is the risk that there is excessive fluctuation in profits.
Exposure to this risk is calculated annually as part of the Syndicate’s business plan submission and reviewed by the RMT
through the business plan review.
This risk is managed on an ongoing basis through checks which ensure the Syndicate underwrites business in accordance
with the Syndicate’s business plan.
Reputational risk
This is the risk that negative publicity regarding an institution’s business practices will lead to adverse effects such as loss
of revenue, brand damage or litigation.
In the modern digital era, reputational risk and the subsequent threat to TMK’s strong brand is becoming more significant.
Loss of confidence from customers, regulators or capital providers could cause long-term harm to the business.
In light of this, all staff are made aware of their responsibilities to clients and other stakeholders.
Tokio Marine Kiln Syndicate 1880
Report and accounts for the year ended 31 December 2024
8
Tier 2 risks:
Insurance risk
This is the risk of loss arising from the inherent uncertainties as to the occurrence, amount and timing of insurance liabilities.
Due to the cyclical nature of insurance business, there is a risk that future earnings are lower or more volatile than expected
with fluctuations in capacity, competition and the frequency and severity of losses, as a result of both man-made and
natural disasters.
Insurance risk is sub-divided into several categories which include underwriting risk, reinsurance risk and reserving risk.
Underwriting risk
This is the risk arising from fluctuations in the frequency and severity of financial losses incurred as a result of the
acceptance of the insurance portfolio of business.
Underwriting risk is managed by agreeing the Syndicate’s appetite annually through the RAF and the business plan, which
sets out targets for volumes, pricing, line sizes and retention by class of business. Volume and price performance is
monitored against the Syndicate’s business plan monthly, and all of the components of the insurance result and risk
appetite quarterly. The RMT conduct an annual review of the business plan.
Catastrophe modelling software is used to model maximum probable losses from catastrophe-exposed business and as
part of the Realistic Disaster Scenario process. The Syndicate has adopted a cyber aggregate monitoring tool to manage
the growing exposures in this area.
A significant proportion of the Syndicate’s business is written through delegated authorities. A dedicated Delegated
Authority team provides operational and regulatory oversight of the Syndicate’s coverholders and third-party
administrators, carrying out annual due diligence, an ongoing schedule of audits and management of regulatory
requirements.
As an underwriter of complex and specialist insurance business, ensuring compliance with licensing and other regulatory
requirements is a priority for the Board. This is overseen by the Product and Underwriting Governance Committee (PUGC).
The PUGC also oversees adherence to internal standards for delegated authority arrangements.
Reinsurance risk
This is the risk that reinsurance purchased to protect the gross account does not respond as intended due to, inter alia,
mismatch with gross losses; poorly worded contracts; reinsurer counterparty risk; or exhaustion of reinsurance limits.
The risk is heightened if there is a lack of reinsurance or retrocession availability in the market.
Reinsurance is used to protect capital against underwriting risk volatility, either as a result of large catastrophes or from
the severity of losses on individual policies.
To mitigate this risk, there is a process in place to monitor early warning of exposures outside of tolerance thresholds,
with post-placement reviews undertaken and reported to the Underwriting Committee.
Reserving risk
This is the risk that reserves held on the balance sheet will be inadequate to meet the net amount payable when insurance
liabilities crystallise and is exacerbated due to the inherent uncertainty of knowing the ultimate timing and quantum of
liabilities incurred.
Claims provisions represent estimates, based on both the underwriters’ and claim managers’ informed knowledge and
judgement and on the Internal Reserving Actuary’s statistical projections, of the expectation of the ultimate settlement
and administration costs of claims incurred. A variety of estimation techniques are used, generally based upon statistical
analyses of historical loss development patterns, to assist in the establishment of appropriate claims reserves.
In addition, the estimates are subject to independent review by external actuaries, who sign an annual Statement of
Actuarial Opinion on the sufficiency of the reserves for the Syndicate. The Syndicate’s policy is to reserve on a consistent
basis with a reasonable margin for prudence. Claims run-off tables are used to monitor the history of reserve adequacy,
and these show a trend of predominantly positive run-off since they were first prepared in 2001.
Tokio Marine Kiln Syndicate 1880
Report and accounts for the year ended 31 December 2024
9
Market risk
This is the risk that arises from fluctuations in values of, or income from assets, interest rates or exchange rates.
Assets are held as a result of underwriting activities either in premium trust funds or as capital support. On-going
investment strategy, investment objectives and the management of risks arising from investments are agreed by the
Investment Committee in line with the Prudent Person Principle, as outlined in the Solvency II Directive.
The Syndicate monitors its cash-flow on a daily basis and reviews its cash-flow forecasts, foreign currency exposures and
asset-liability matching regularly.
Counterparty credit risk
This is the risk of loss if another party fails to meet its financial obligations, including failure to meet them in a timely
manner.
The Syndicate is exposed to three types of credit risk: reinsurer credit risk; broker/coverholder credit risk; and investment
credit risk. Credit exposure and aggregate exposure to reinsurers are managed by the Outwards Reinsurance team. The
team assesses all new reinsurers before business is placed with them, and monitors the credit ratings of all reinsurers
used. The performance of premium debtors, from brokers and coverholders, is monitored regularly. The Investment
Committee regularly tracks and reviews the Syndicate’s investment portfolio, the management of which is outsourced to
investment managers who manage the portfolios within permitted counterparty limits.
Operational risk
This is the risk that errors caused by people, processes or systems lead to losses to the Syndicate.
The Board seeks to manage this risk by the recruitment of high calibre staff and providing them with ongoing, high-quality
training. Operational risks are reviewed on a regular basis with departmental heads responsible for identifying, assessing
and controlling operational risks effectively, as well as attesting to the effectiveness of these controls on a regular basis.
This forms the Risk and Control Self-Assessment (RCSA) process which is supported by the RMT who independently assess
key risks and controls on a regular basis.
There is a strong risk reporting and risk governance system in place to ensure effective risk management of operational
risk. This is underpinned by the RMF and the RAF. The RCCC reviews the most material elements of the operational risk
profile quarterly, in line with the RMF. Attention is paid to how the risks from cyber security threats are managed by the
Information Security Group.
The Board is aware of its fiduciary responsibilities to capital providers across each of its four managed syndicates and is
careful to ensure equity between them. Potential conflicts of interest between capital providers are managed through the
Conflicts Committee, which reports to the Board.
Regulatory risk
This is the risk of loss owing to a breach of regulatory requirements or failure to respond to regulatory change.
The Board is required to comply with the requirements of the FCA, PRA and Lloyd’s, including those imposed on the Lloyd’s
market by overseas regulators, particularly in respect of US and Canadian regulated business. The Compliance function
is responsible for monitoring compliance with regulation and monitoring of regulatory change. The Compliance framework
outlines the broad regulatory and compliance structure that applies to all staff.
The nature of the Syndicate’s business exposes the managing agent to controls and sanctions which regulate international
trade. Processes and controls are in place to screen and monitor transactions against relevant requirements to ensure
compliance with them.
Strategic risk
Strategic risk refers to the risk associated with the achievement of the business’ strategic objectives. A key element of
strategic risk is the risk of making poor business decisions in the context of the internal and external market environment
in which the Syndicate operates.
Strategic risk is managed via the Board which is ultimately responsible for setting and monitoring the Syndicate’s
strategic direction. Below the Board, various sub-committees discuss and challenge business strategy.
Conduct risk
This is the risk of financial and/or service detriment which adversely affects the Syndicate’s customers due to failings in
the customer value chain.
Tokio Marine Kiln Syndicate 1880
Report and accounts for the year ended 31 December 2024
10
The Board’s conduct objective is to build, maintain and enjoy long-term relationships with customers, whether they be
held directly or indirectly via a third party. This culture of partnership is fundamental to the Syndicate’s dealings with its
customers, and comes regardless of the complexity of the risk, the sophistication of the buyer, or the length of the supply
chain to the end customer.
The conduct objective is central to delivering good outcomes for customers, aligning with the FCA Consumer Duty's cross-
cutting rules and four customer outcomes: products and services, price and value, consumer understanding, and
consumer support, which apply to all in scope UK business.
The management of conduct risk applies to all business, regardless of product lines and customer types, across both open
market and delegated underwriting and is achieved through the application of the Conduct Risk Framework. The
framework is applied in a proportionate, risk-based way which takes account of the different inherent conduct risk across
products, distribution and customer types. Conduct risk and the treatment of customers is monitored by the PUGC.
Other risks:
Climate risk
Climate risks are recognised by the Board as manifesting through a range of physical, transitional, reputational, strategic
and litigation risks as a result of climate change.
The Board considers climate risk to be a transverse risk, with each risk category affected by varied risks from climate
change. For example, physical risks of climate change such as increased severity of weather-related perils will have effects
across insurance risk, market risk and operational risk. Likewise, the global transition to low carbon will have effects
across the business.
The Board recognises the severity of the risks posed by climate change, and the need for a robust risk management
response. The risks are identified, managed and reported both internally and externally.
TMK’s climate related risk appetites are integrated within TMK’s overarching RMF and support delivery of TMK’s
Sustainability Strategy.
The RMT has performed scenario analysis to better understand the range and materiality of climate risks affecting TMK,
in collaboration with the business. This includes physical, transitional, reputational and litigation risks.
Emerging risk
The Board defines an emerging risk as relating to a new or evolving area that is perceived to be potentially significant in
terms of its impact on society and the insurance industry. These risks are characterised by significant uncertainty, with
limited relevant historical information.
The Board is committed to the continual research and identification of emerging risks and actively monitors research
undertaken independently, and via market working groups. Emerging risk analysis is included in the ORSA process with
annual and where relevant, quarterly updates. Through the effective management of emerging risks, the Board is able to
identify external trends and threats and improve risk selection and knowledge of future risk exposures. Emerging risks
may present both threats and opportunities to the business and, as the Syndicate has done in the past, it will readily
capitalise on identified opportunities in this area.
Directors
The Directors of the managing agent who served during the year ended 31 December 2024, as well as any subsequent
changes, are listed under the section ‘Directors and advisers’.
Post balance sheet events
These are discussed in note 23 of the annual accounts.
Disclosure of information to the auditors
As far as each person who was a Director of the managing agent at the date of approving this report is aware, there is
no relevant audit information, which is information needed by the auditors in connection with their report, of which the
auditors are unaware. Having made enquiries of fellow Directors of the managing agent and the Syndicate’s auditors,
each Director has taken all the steps that they are obliged to take as a Director in order to make themselves aware of
any relevant audit information and to establish that the auditors are aware of that information.
Tokio Marine Kiln Syndicate 1880
Report and accounts for the year ended 31 December 2024
11
Reappointment of auditors
The Board approved the reappointment of PricewaterhouseCoopers LLP as auditors for the current year and on an ongoing
basis for the managed syndicates, managing agent and other TMK Group entities.
Syndicate annual general meeting
In accordance with the Syndicate Meetings (Amendment No. 1) Byelaw (No. 18 of 2000) the managing agent does not
propose holding a syndicate annual meeting this year; objections to this proposal or the intention to reappoint the auditors
for a further 12 months can be made by the Syndicate member in writing to the Company Secretary within 21 days of
this notice.
Approved by the Board of Directors
A M W Shaw
Chief Executive Officer
Tokio Marine Kiln Syndicates Limited
5 March 2025
Tokio Marine Kiln Syndicate 1880
Report and accounts for the year ended 31 December 2024
12
Statement of managing agent’s responsibilities
The managing agent is responsible for preparing the Syndicate annual report and annual accounts in accordance with
applicable law and regulations.
The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 (‘2008 Regulations’)
requires the managing agent to prepare syndicate annual accounts for each syndicate at 31 December each year, in
accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable law). The annual accounts are required by law to give a true and fair view of the state of affairs of the Syndicate
as at that date and of its profit or loss for that year.
In preparing the Syndicate’s annual accounts, the managing agent is required to:
x
select suitable accounting policies and then apply them consistently;
x
make judgements and estimates that are reasonable and prudent;
x
state whether applicable United Kingdom accounting standards have been followed, subject to any material
departures disclosed and explained in the annual accounts; and
x
prepare the annual accounts on the going concern basis for each syndicate unless it is intended for the Syndicate to
cease operations, or it has no realistic alternative but to do so.
The managing agent is responsible for keeping proper accounting records which disclose with reasonable accuracy at any
time the financial position of each syndicate and enable it to ensure that the Syndicate annual accounts comply with the
2008 Regulations. It is also responsible for safeguarding the assets of each syndicate and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The managing agent is responsible for the maintenance and integrity of the corporate and financial information included
on its website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The managing agent is responsible for the preparation and review of the iXBRL tagging that has been applied to the
Syndicate Accounts in accordance with the instructions issued by Lloyd’s, including designing, implementing and
maintaining systems, processes and internal controls to result in tagging that is free from material non-compliance with
the instructions issued by Lloyd’s, whether due to fraud or error.
The Directors of the managing agent confirm that they have complied with the above requirements in preparing the
Syndicate’s annual accounts.
Tokio Marine Kiln Syndicate 1880
Report
and accounts for the year ended 31 December 2024
13
Independent auditors’ report to the member of Syndicate 1880
Report on the audit of the syndicate annual accounts
Opinion
In our opinion, 1880’s syndicate annual accounts:
●
give a true and fair view of the state of the syndicate’s affairs as at 31 December 2024 and of its profit and cash
flows for the year then ended;
●
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, including FRS 102 “The Financial Reporting Standard applicable in the UK and
Republic of Ireland”, and applicable law); and
●
have been prepared in accordance with the requirements of The Insurance Accounts Directive (Lloyd’s Syndicate
and Aggregate Accounts) Regulations 2008 and the requirements within the Lloyd’s Syndicate Accounts
Instructions version 2.0 as modified by the Frequently Asked Questions issued by Lloyd’s version 1.1 (“the Lloyd’s
Syndicate Instructions”).
We have audited the syndicate annual accounts included within the Report and Accounts the “Annual Report”), which
comprise: the Balance sheet: assets and the Balance sheet: liabilities as at 31 December 2024; Profit and loss and other
comprehensive income: technical account – general business, Profit and loss and other comprehensive income: non-
technical account – general business, the Statement of cash flows and the Statement of changes in members’ balances
for the year then ended; and the notes to the syndicate annual accounts, which include a description of the significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”), The Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, the Lloyd’s Syndicate Instructions and
other applicable law. Our responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the
audit of the syndicate annual accounts
section of our report. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the syndicate in accordance with the ethical requirements that are relevant to our audit of
the syndicate annual accounts in the UK, which includes the FRC’s Ethical Standard, as applicable to other entities of
public interest, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were
not provided.
Other than those disclosed in note 4, we have provided no non-audit services to the syndicate in the period under audit.
Conclusions relating to going concern
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the syndicate’s ability to continue as a going concern for a
period of at least twelve months from when the syndicate annual accounts are authorised for issue.
In auditing the syndicate annual accounts, we have concluded that the Managing Agent’s use of the going concern basis
of accounting in the preparation of the syndicate annual accounts is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the
syndicate's ability to continue as a going concern.
Our responsibilities and the responsibilities of the Managing Agent with respect to going concern are described in the
relevant sections of this report.
Tokio Marine Kiln Syndicate 1880
Report and accounts for the year ended 31 December 2024
14
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 Report of the Directors of the managing agent (the “Managing Agent’s Report”), we also considered
whether the disclosures required by The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts)
Regulations 2008 have been included.
Based on our work undertaken in the course of the audit, The Insurance Accounts Directive (Lloyd’s Syndicate and
Aggregate Accounts) Regulations 2008 requires us also to report certain opinions and matters as described below.
Managing Agent’s Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Managing Agent’s
Report for the year ended 31 December 2024 is consistent with the syndicate annual accounts and has been prepared in
accordance with applicable legal requirements.
In light of the knowledge and understanding of the syndicate and its environment obtained in the course of the audit, we
did not identify any material misstatements in the Managing Agent’s Report.
Responsibilities for the syndicate annual accounts and the audit
Responsibilities of the Managing Agent for the syndicate annual accounts
As explained more fully in the Statement of managing agent’s responsibilities
,
the Managing Agent is responsible for the
preparation of the syndicate annual accounts in accordance with the applicable framework and for being satisfied that
they give a true and fair view. The Managing Agent is also responsible for such internal control as they determine is
necessary to enable the preparation of syndicate annual accounts that are free from material misstatement, whether due
to fraud or error.
In preparing the syndicate annual accounts, the Managing Agent is responsible for assessing the syndicate’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis
of accounting unless the syndicate is unable to continue to realise its assets and discharge its liabilities in the ordinary
course of business
.
Auditors’ responsibilities for the audit of the syndicate annual accounts
Our objectives are to obtain reasonable assurance about whether the syndicate annual accounts as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these syndicate annual accounts.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the syndicate and industry, we identified that the principal risks of non-compliance with
laws and regulations related to breaches of regulatory principles, such as those governed by the Prudential Regulation
Authority and the Financial Conduct Authority, and those regulations set by the Council of Lloyd’s, and we considered the
extent to which non-compliance might have a material effect on the syndicate annual accounts. We also considered those
laws and regulations that have a direct impact on the syndicate annual accounts such as The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the Lloyd’s Syndicate Instructions.
Tokio Marine Kiln Syndicate 1880
Report and accounts for the year ended 31 December 2024
15
We evaluated management’s incentives and opportunities for fraudulent manipulation of the syndicate annual accounts
(including the risk of override of controls), and determined that the principal risks were related to the posting of
inappropriate journals and management bias in accounting estimates. Audit procedures performed by the engagement
team included:
•
Discussions with management, internal audit and the risk and compliance functions, including consideration of
known or suspected instances of non-compliance with laws and regulation and fraud;
•
Challenging assumptions and judgements made by management in their significant accounting estimates, in
particular in relation to valuation of the IBNR component of claims outstanding and pipeline premium income;
•
Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations
impacting revenue, journals posted by senior management and/or those posted late in the year end close process;
and
•
Reviewing relevant meeting minutes including those of the Conflicts Committee, Risk, Capital & Compliance
Committee and Audit Committee and correspondence with regulatory authorities, including Lloyd’s of London and
the Prudential Regulation Authority.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances
of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the
syndicate annual accounts. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
A further description of our responsibilities for the audit of the syndicate annual accounts is located on the FRC’s website
at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the syndicate’s 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.
Other required reporting
Under The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 we are required
to report to you if, in our opinion:
●
we have not obtained all the information and explanations we require for our audit; or
●
adequate accounting records have not been kept by the Managing Agent in respect of the syndicate; or
●
certain disclosures of Managing Agent remuneration specified by law are not made; or
●
the syndicate annual accounts are not in agreement with the accounting records.
We have no exceptions to report arising from this responsibility.
Other matter
We draw attention to the fact that this report may be included within a document to which iXBRL tagging has been applied.
This auditors’ report provides no assurance over whether the iXBRL tagging has been applied in accordance with section
2 of the Lloyd’s Syndicate Instructions version 2.0.
Matthew Nichols (Senior statutory auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
5 March 2025
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
16
Profit and loss and other comprehensive income
Technical account - general business for the year ended 31 December 2024
Note
2024
£’000
2023*
£’000
Gross premiums written
3
Outward reinsurance premiums
(123,105 )
(136,707 )
Premiums written, net of reinsurance
Change in the gross provision for unearned premiums
8
(8,913 )
(33,006 )
Change in the provision for unearned premiums, reinsurers’ share
8
Net change in provisions for unearned premiums
(7,310 )
(26,753 )
Earned premiums, net of reinsurance
Allocated investment return transferred from the
non-technical
account
7
Claims paid:
-
Gross amount
8
(180,123 )
(187,052 )
-
Reinsurers’ share
8
Net claims paid
(131,141 )
(139,638 )
Change in the provision for claims:
-
Gross amount
8
(33,215 )
(3,515 )
-
Reinsurers’ share
8
(4,761 )
Net change in provisions for claims
(37,976 )
Claims incurred, net of reinsurance
(169,117 )
(125,791 )
Net operating expenses
4,5,6
(130,324 )
(114,143 )
Balance on the technical account for general business
*Please refer to the Restatement of comparative information section in note 1.1.
All operations are continuing.
The notes to the annual accounts and significant accounting policies form part of these annual accounts.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
17
Profit and loss and other comprehensive income
Non-technical account – general business for the year ended 31 December 2024
Note
2024
£’000
2023*
£’000
Balance on the technical account for general business
Investment income
7
Realised gains on investments
7
Unrealised gains on investments
7
Investment expenses and charges
7
(180 )
(150 )
Total investment return
Allocated investment return transferred to the general business
technical account
(13,763 )
(14,986 )
Gain/(loss) on foreign exchange
(1,299 )
Other income
Profit for the financial year
Total comprehensive income for the year
*Please refer to the Restatement of comparative information section in note 1.1.
There is no other comprehensive income. Accordingly, a separate statement of other comprehensive income has not been
provided.
The notes to the annual accounts and significant accounting policies form part of these annual accounts.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
18
Balance sheet: assets
as at 31 December 2024
Note
2024
£’000
2023
£’000
Financial investments
21
Deposits with ceding undertakings
Investments
Provision for unearned premiums
8
Claims outstanding
8,9
Reinsurers’ share of technical provisions
Debtors arising out of direct insurance operations
10
Debtors arising out of reinsurance operations
11
Other debtors
12
Debtors
Cash at bank and in hand
13
Other (Overseas deposits)
Other assets
Deferred acquisition costs
15
Prepayments and accrued income
Total assets
The notes to the annual accounts and significant accounting policies form part of these annual accounts.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
19
Balance sheet: liabilities
as at 31 December 2024
Note
2024
£’000
2023*
£’000
Member’s balances
Total capital and reserves
Provision for unearned premiums
8
Claims outstanding
8,9
Technical provisions
Deposits received from reinsurers
Creditors arising out of direct insurance operations
16
Creditors arising out of reinsurance operations
17
Other creditors including taxation and social security
18
Creditors
Accruals and deferred income
Reinsurers’ share of deferred acquisition costs
15
Total liabilities
Total liabilities, capital and reserves
*Please refer to the Restatement of comparative information section in note 1.1.
The annual accounts, which comprises the Profit and loss and other comprehensive income: technical account – general
business, the Profit and loss and other comprehensive income: non-technical account – general business, Balance sheet:
assets, Balance sheet: liabilities, Statement of changes in member’s balances, Statement of cash flows and Notes to the
annual accounts and significant accounting policies, were approved by the Board of Tokio Marine Kiln Syndicates Limited
on 5 March 2025 and were signed on its behalf by:
R Patel
Deputy Chief Executive Officer & Chief Financial Officer
Tokio Marine Kiln Syndicates Limited
5 March 2025
The notes to the annual accounts and significant accounting policies form part of these annual accounts.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
20
Statement of changes in member’s balances
for the year ended 31 December 2024
2024
£’000
2023
£’000
Member’s balances brought forward at 1 January
Total comprehensive income for the year
Payments of profit to member’s personal reserve funds
(2,388 )
(30,342 )
Member’s balances carried forward at 31 December
The member participates on the Syndicate by reference to years of account and ultimate results, assets and liabilities are
assessed with reference to policies incepting in that year of account in respect of its membership of a particular year.
The notes to the annual accounts and significant accounting policies form part of these annual accounts.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
21
Statement of cash flows
for the year ended 31 December 2024
202
4
£’000
2023
Restated*
£’000
Cash flows from operating activities:
Profit for the financial year
Increase in gross technical provisions
Decrease/(increase) in reinsurers’ share of gross technical provisions
(14,334 )
Decrease/(Increase) in debtors
(1,980 )
Decrease in creditors
(67,419 )
(7,466 )
Decrease in deposits received from reinsurers
(271 )
(111 )
Movement in other assets/liabilities
(3,444 )
(8,585 )
Investment return
(13,763 )
(14,986 )
Foreign exchange
(273 )
Other
(137 )
Net cash flows from operating activities
Cash flows from investing activities:
Purchase of equity and debt instruments
(193,414 )
(158,612 )
Sale of equity and debt instruments
Investment income received
Net cash flows from investing activities
(55,274 )
(28,825 )
Cash flows from financing activities:
Distribution of profit
(2,389 )
(30,342 )
Net cash flows from financing activities
(2,389 )
(30,342 )
Net increase/(decrease) in cash and cash equivalents
(32,006 )
Cash and cash equivalents at beginning of year
Foreign exchange on cash and cash equivalents
(27 )
Cash and cash equivalents at end of year
*Please refer to the Restatement of comparative information section in note 1.1.
The notes to the annual accounts and significant accounting policies form part of these annual accounts.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
22
Notes to the annual accounts and significant accounting policies
1.
Accounting policies
1.1
Statement of compliance
These annual accounts have been prepared in accordance with Regulation 5 of The Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008 and Accounting Standards in the United Kingdom, including
Financial Reporting Standard 102, ‘The Financial Reporting Standard applicable in the United Kingdom and the Republic
of Ireland’ (FRS 102) and Financial Reporting Standard 103, ‘Insurance Contracts’ (FRS 103), 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
general business result is determined on an annual basis of accounting.
These annual accounts are prepared under the historical cost convention, as modified by the recognition of certain financial
assets and liabilities measured at fair value.
The preparation of annual accounts requires the use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Syndicate accounting policies. The areas involving a higher degree
of judgement or complexity, or areas where assumptions and estimates are significant to the annual accounts, are
disclosed in note 2.
These annual accounts are presented in pounds sterling, which is the functional currency of the Syndicate. All amounts
have been rounded to the nearest hundred thousand pounds, unless otherwise stated.
Restatement of comparative information
During 2024, Lloyd's introduced changes to the syndicate accounts process to rationalise and standardise financial
reporting across the market. As a result, certain comparative information has been restated to ensure consistency with
current year presentation and compliance with the Lloyd's Syndicate Accounts Instructions. The changes comprise:
a) Reclassification changes
Certain financial statement line items have been reclassified whilst the underlying amounts remain unchanged. The
principal change is the reclassification of profit commission balances previously presented as ‘Other accruals and deferred
income’ within the Balance sheet: liabilities account to ‘Other creditors including taxation and social security’ as shown
below. The comparative balances in note 18 have also been reclassified to align with the current period presentation.
Balance sheet: liabilities
2023
£’000
Reclass
£’000
2023
(restated)
£’000
Creditors arising out of direct insurance operations
25,530
-
25,530
Creditors arising out of reinsurance operations
229,247
-
229,247
Other creditors including taxation and social security
466
6,137
6,603
Creditors
255,243
6,137
261,380
Reinsurers’ share of deferred acquisition costs
13,962
-
13,962
Other accruals and deferred income
6,137
(6,137)
-
Accruals and deferred income
20,099
(6,137)
13,962
b) Aggregation changes
To align with Lloyd's reporting requirements whilst maintaining FRS 102 compliance, certain items have been aggregated
or disaggregated within the financial statements and related notes. This includes the presentation of realised and
unrealised gains and losses on investments, which are now shown on a disaggregated basis in the ‘Profit and loss and
other comprehensive income: non-technical account – general business’, and the presentation of Members’ standard
personal expenses, which are now shown on an aggregated basis within net operating expenses in the ‘Profit and loss
and comprehensive income: technical account – general business’.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
23
c) Correction of error
During the review of financial statement presentation, it was identified that certain short-term, highly liquid cash
equivalents as defined under paragraph 7.2 of FRS 102 had been omitted from the opening and closing cash equivalents
in the Statement of cash flows. The restated Statement of cash flows is shown below:
Statement of cash flows
20
23
£’000
Restatement
£’000
2023
(restated)
£’000
Cash flows from operating activities:
Profit for the financial year
58,635
-
58,635
Decrease in creditors*
(5,862)
(1,604)
(7,466)
Movement in other assets/liabilities*
(10,300)
1,715
(8,585)
Other operating cash flows*
(15,312)
(111)
(15,423)
Net cash inflow from operating activities
27,161
-
27,161
Purchase of equity and debt instruments
(162,306)
3,694
(158,612)
Sale of equity and debt instruments
157,016
(37,328)
119,688
Investment income received
10,099
-
10,099
Net cash flows from investing activities
4,809
(33,634)
(28,825)
Net cash flows from financing activities
(30,342)
-
(30,342)
Net (decrease)/increase in cash and cash equivalents
1,628
(33,634)
(32,006)
Cash and cash equivalents at beginning of year
2,006
56,397
58,403
Foreign exchange on cash and cash equivalents
(27)
-
(27)
Cash and cash equivalents at the end of the year
3,607
22,763
26,370
*These adjustments relate to reclassification and aggregation changes as noted in (a) and (b) above.
The reclassification and aggregation changes in (a) and (b) above have been applied retrospectively and had no impact
on previously reported profit, total comprehensive income, total assets, total liabilities, or total capital and reserves. The
restatement in (c) above increased the overall cash and cash equivalents reported in the Statement of cash flows by
£22,763,000 but did not impact the overall asset position recognised in the Balance sheet: assets account.
1.2
New standards and amendments
The Syndicate has applied FRS 102 and FRS 103 as issued in September 2024, which reflects the amendments made
since the previous editions were issued in 2022
.
FRS 102 is subject to a periodic review at least every five years. In December 2022, the Financial Reporting Council
published its periodic review of amendments to FRS 102 (FRED 82). The proposed effective date for these amendments
is accounting periods beginning on or after 1 January 2026, with early application permitted (provided all amendments
are applied at the same time).
The proposed amendments within FRED 82 are focussed on updating accounting requirements to reflect changes in
International Financial Reporting Standards (IFRS), particularly with respect to the following:
x
The proposed basis for revenue accounting will align to IFRS 15 Revenue from Contracts with Customers, and a
five-step model for revenue recognition, with appropriate simplifications.
x
The proposed basis for lease accounting will align to IFRS 16 Leases, and an on-balance-sheet model, with
appropriate simplifications.
The Syndicate has not applied any amendments from FRED 82 for the year ended 31 December 2024 and will assess the
impact of the publication in future accounting periods.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
24
1.3
Funds at Lloyd’s
Every member is required to hold capital at Lloyd’s which is held in trust and is known as Funds at Lloyd’s (FAL). These
funds are intended primarily to cover circumstances where syndicate assets prove insufficient to meet participating
member’s underwriting liabilities.
The level of FAL that Lloyd’s requires a member to maintain is determined by Lloyd’s based on PRA requirements and
resource criteria. FAL has regard to a number of factors, including the nature and amount of risk to be underwritten by
the member and the assessment of the reserving risk in respect of business that has been underwritten. Since FAL is not
under the management of the managing agent, no amount has been shown in these annual accounts by way of such
capital resources. However, the managing agent is able to make a call on the member’s FAL to meet liquidity requirements
or to settle losses.
1.4
Going concern
The Directors consider it appropriate to adopt the going concern basis of accounting in preparing the annual accounts.
The following are key factors that the Directors have considered in adopting the going concern basis of accounting:
x
Member level solvency: Lloyd’s applies capital requirements centrally at member level to ensure that Lloyd’s
complies with Solvency II requirements, and beyond to meet its own financial strength, licence and ratings
objectives.
x
A single market rating has been applied to Lloyd’s by Standards and Poor’s (AA- Very Strong), Fitch (AA- Very
Strong), AM Best (A Excellent) and Kroll Bond (AA- Stable).
x
Cash flow forecasting and monitoring: Cash flow forecasts for the next 12 months are prepared on a regular basis
and reported to Lloyd’s on a quarterly basis.
x
Reinsurance purchasing: The Syndicate has purchased reinsurance to manage insurance risk and reinsurer credit
ratings are assessed at placement, and where credit ratings are not sufficient, collateral is requested to mitigate
liquidity risk.
x
Approved run-off plan: The Syndicate has been placed into run-off but will continue to operate for the foreseeable
future in accordance with a plan approved by the Directors of the managing agent.
As referenced in the Managing Agent’s Report, it is anticipated that the last trading year of account of the Syndicate (the
2024 year of account) will reinsure-to-close into the 2025 year of account of Syndicate 510 at 36 months.
1.5
Summary of accounting policies
The significant accounting policies adopted in the preparation of the annual accounts are set out below. They have been
applied consistently to all periods presented in these annual accounts.
a. Product classification
Insurance contracts are defined as those containing significant insurance risk at the inception of the contract, or those
where at the inception of the contract there is a scenario with commercial substance where the level of insurance risk
may be significant. The significance of insurance risk is dependent on both the probability of an insured event and the
magnitude of its potential effect.
b. Premiums written
Inwards premiums written comprise premiums on contracts incepting during the financial year as well as adjustments
made in the year to premiums on contracts incepting in prior accounting periods. Premiums in respect of insurance
contracts underwritten under facilities such as binding authorities, lineslips or consortia arrangements are estimated based
on information provided by the broker, past underwriting experience and prevailing market conditions. The estimates are
updated on a regular basis. It is assumed that the majority of risks incept evenly across the period of the facility; however
bespoke writing patterns are used for a small number of facilities. Therefore, only the proportion of risks incepted at the
year-end date are reported as written. Premiums are shown gross of brokerage payable and exclude taxes and duties
levied on them. Estimates are made for pipeline premiums on a risk-by-risk basis, representing the difference between
written and signed (premium processed for future settlement) premium, which is held on the balance sheet as an asset.
Outwards reinsurance premiums are accounted for in the same accounting period as the premiums for the related direct
or inwards business being reinsured.
c. Earned premiums
Inwards and outwards earned premium represents the amount of written premium deemed to have been exposed to loss
according to defined earnings patterns. The earning patterns are based primarily on time apportionment, with an
adjustment for the risk profile of certain classes of business, particularly those exposed to seasonal weather-related
events. The provision for unearned premium comprises the proportion of gross premiums written which is estimated to
be earned after the balance sheet date.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
25
Reinstatement premiums arise on both inwards and outwards policies when a loss has been incurred on a policy and there
is a clause which requires the reinstatement of the policy with the payment of a further premium by the policyholder.
They are recognised as written and earned in full at the date of the event giving rise to the reinstatement premium.
Outwards reinstatement premiums payable in the event of a claim being made are charged to the same year of account
as that to which the recovery is credited.
d. Claims paid and incurred
Paid claims represent all claims paid during the year and include claims handling expenses.
Claims incurred comprise paid claims and changes in the provisions for outstanding claims, including provisions for claims
incurred but not reported (IBNR) and related expenses, together with any adjustments to claims from previous years.
e. Claims provisions and related recoveries
Gross claims incurred comprise the estimated cost of all claims occurring during the year, whether reported or not,
including related direct and indirect claims handling costs and adjustments to claims outstanding from previous years.
Provision is made at the year-end for the estimated cost of claims incurred but not settled at the balance sheet date,
including outstanding claims estimated on a case-by-case basis and also the cost of claims IBNR. The estimated cost of
claims includes expenses to be incurred in settling claims. All reasonable steps are taken to ensure that appropriate
information regarding claims exposures is obtained. However, given the uncertainty in establishing claims provisions, it
is likely that the final outcome will prove to be different from the original liability established. All claims provisions are
reported on an undiscounted basis.
Reinsurance recoveries are accounted for in the same period as the incurred claims for the related business. The
reinsurers’ share of provisions for claims is based on estimated amounts for gross claims incurred, net of estimated
irrecoverable amounts.
f. Provision for unexpired risks
Provision is made for any deficiencies arising when unearned premiums, net of associated acquisition costs, are insufficient
to meet expected claims and expenses after taking into account future investment return on the investments supporting
the unearned premiums provision. The expected claims are calculated having regard only to events that have occurred
prior to the balance sheet date. The need for an unexpired risks provision is assessed on a ‘managed together’ basis.
Unexpired risks surpluses and deficits are offset where business classes are managed together and a provision is made if
an aggregate deficit arises. The unexpired risks provision is included within other technical provisions.
All reasonable steps are taken to ensure that the appropriate information regarding claims exposures is obtained. The
calculation is based upon statistical analyses of historical experience, which assumes that the development pattern of
premiums and claims will be similar to past experience. Allowance is made, however, for changes or uncertainties which
may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce
when compared with the cost of previously settled claims. Therefore, given the uncertainty in establishing a provision for
unexpired risks, it is likely that the final outcome will prove to be different from the original liability established.
g. Net operating expenses and personal expenses
Net operating expenses comprise the cost of acquiring business including commission, profit commission and reinsurance
commission income as well as the staff costs and other expenses attributable to underwriting operations.
Personal expenses comprise managing agent’s fee, profit commission, Lloyd’s central fund contributions and Lloyd’s
subscriptions.
Net operating expenses and personal expenses are recognised on the accruals basis and represent the expenses incurred
on underwriting operations.
h. Finance costs
Finance costs comprise interest paid and bank charges together with facility fees on letters of credit and are recorded in
the period in which they are incurred.
i. Acquisition costs
Acquisition costs, comprising commission and other costs related to the acquisition of new insurance contracts are deferred
to the extent that they are attributable to premiums unearned at the balance sheet date. Where inwards business is ceded
to an outwards proportional reinsurance treaty, an estimate of the relevant proportion of the inwards acquisition costs is
calculated and deferred in line with the outwards unearned premium at the balance sheet date.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
26
Deferred acquisition costs, representing the proportion of commission and other acquisition costs that relate to unearned
premium on policies in force at the year-end, are charged over the period in which related premiums are earned. Deferred
acquisition costs are reviewed by category of business at the end of each reporting period and are written off where they
are no longer considered to be recoverable.
j. Foreign currencies
Functional and presentation currency
Items included in the annual accounts are measured using the currency of the primary economic environment in which
the Syndicate operates (the functional currency). The annual accounts are presented in pounds sterling which is also the
functional currency of the Syndicate.
Transactions and balances
Foreign currency transactions are recorded in the functional currency using the exchange rates prevailing at the dates of
the transactions or an appropriate average rate of exchange. At each period end, foreign currency monetary items are
translated using the closing rate. For this purpose, all assets and liabilities arising from insurance contracts (including
unearned premiums, deferred acquisition costs and unexpired risks provisions) are monetary items.
Foreign exchange gains and losses resulting from the settlement of transactions and from the measurement at year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the non-technical
account.
Exchange rates used are as follows:
2024
2023
Start of
period rate
End of
period rate
Average
rate
Start of
period rate
End of
period rate
Average
rate
Sterling
Euro
US dollar
Canadian dollar
Australian dollar
Japanese Yen
The distributable result on closing a year of account, usually at 36 months, is calculated using the exchange rates
prevailing at the date of closure.
k. Financial investments
The Syndicate has chosen to adopt Sections 11 and 12 of FRS 102 “Basic Financial Instruments” and “Other Financial
Instruments Issues”, respectively.
Financial instruments are initially recorded at cost, which equates to fair value, and subsequently carried at fair value
through profit or loss.
Financial instruments that are designated as fair value through profit or loss are classified using a fair value hierarchy
that reflects the significance of the inputs used in these measurements.
x
Level 1: the fair value of financial instruments is derived using unadjusted quoted prices in an active market for
identical assets or liabilities at the measurement date. These instruments include government bonds and
securities using quoted prices in an active market.
x
Level 2: the fair value of financial instruments is derived using inputs other than quoted prices included within
level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.
These instruments include regularly traded government agency bonds, supranational bonds, corporate bonds,
money market and open-ended funds.
x
Level 3: financial instruments are derived from inputs that are not observable. Unobservable inputs are used to
measure fair value to the extent that relevant observable inputs are not available and may include internal data
or models. Assumptions from market participants may be used to formulate the valuation of certain assets and
liabilities.
All regular purchases of financial investments are recognised on the trade date, being the date the Syndicate commits to
purchase the asset. All regular sales of financial investments are recognised at the earlier of the trade date and maturity
date.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
27
A financial asset is derecognised when the contractual right to receive cash flows expires or where they have been
transferred and the Syndicate has also substantially transferred all risks and rewards of ownership. A financial liability is
derecognised once the obligation under the liability is discharged, cancelled or expires.
l. Derivative financial instruments
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are
subsequently re-measured at their fair value. Changes in the fair value are recognised immediately in the profit and loss
account. Fair values are obtained from quoted market prices in active markets, including recent market transactions. All
derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
The best evidence of the fair value of a derivative at initial recognition is the transaction price (i.e. the fair value of the
consideration given or received) unless the fair value of that instrument is evidenced by comparison with other observable
current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation
technique whose variables include only data from observable markets.
m. Debtors and creditors arising out of direct and reinsurance operations
Debtors and creditors arising out of direct and reinsurance operations are initially recognised at transaction price and are
subsequently carried at the recoverable amount. The carrying value is reviewed for impairment whenever events or
circumstances indicate that the carrying amount is greater than the recoverable amount, with the impairment adjustment
recorded in the profit and loss account. Debtors arising out of direct insurance and reinsurance operations are stated net
of specific provisions against doubtful debts which are made on the basis of reviews conducted by management.
n. Other debtors and creditors
Any other debtors and creditors are recognised initially at transaction price and subsequently carried at the recoverable
amount. The carrying value of other debtors is reviewed for impairment whenever events or circumstances indicate that
the carrying amount is greater than the recoverable amount, with the impairment adjustment recorded in the profit and
loss account. All other debtors and creditors are due within one year, unless otherwise stated.
o. Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand, deposits held at call with banks and other short-term highly
liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of
changes in value.
Bank overdrafts, when applicable, are shown within borrowings in current liabilities. These are measured at cost less any
allowance for impairment.
p. Overseas deposits
Overseas deposits are lodged as a condition of conducting underwriting business in certain countries. These are initially
recorded at cost, which equates to fair value, and subsequently carried at fair value through profit or loss.
q. Investment return
Investment return comprises all investment income, realised investment gains and losses and movements in unrealised
gains and losses, net of investment management expenses, including interest. Realised gains and losses on investments
carried at fair value through profit or loss are calculated as the difference between sale proceeds and the fair value at the
previous balance sheet date, or purchase price if acquired during the year. Unrealised gains and losses on investments
represent the difference between the fair value at the balance sheet date and the fair value at the previous balance sheet
date, or purchase price if acquired during the year.
Investment return on general business is initially recorded in the profit and loss non-technical account. A transfer is made
from the non-technical account to the technical account. Investment return has been wholly allocated to the profit and
loss technical account as all investments relate to the technical account.
r. Investment yield
The calendar year investment yield is calculated as the ratio of ‘aggregate investment return’ to ‘average funds available’,
expressed as a percentage. Aggregate investment return is the total amount of net appreciation/losses, investment
income and accrued interest received during the year, after deducting investment management costs but before deducting
tax. Average funds available is the average value of all investments (including accrued interest), deposits and surplus
cash at the beginning of the year and at each quarter-end revalued at market prices.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
28
s. Taxation
Under Schedule 19 of the Finance Act 1993 the Syndicate does not pay UK taxation, its profits being allocated and
assessed to tax on its member in direct proportion to their capacity.
The Syndicate pays various overseas direct and premium based taxes, the majority of which are allocable to its member
in direct proportion to their capacity and which can be claimed by the member either as double tax relief or as an expense
against tax liabilities.
t. Pension costs
TMK operates a defined contribution scheme. A defined contribution plan is a pension plan under which a fixed contribution
is paid into a separate entity. Once the contributions have been paid TMK has no further payment obligations. Pension
contributions relating to syndicate staff are charged to the Syndicate and included within net operating expenses.
u. Profit commission
Profit commission is charged by the managing agent at a rate of 12.5% of profit subject to the operation of a two-year
deficit clause. The Syndicate’s profit commission is calculated after the deduction of a 5% divisional profit share, again
subject to the operation of a divisional two-year deficit clause. Final settlement to the managing agent is made when the
year of account closes; normally at 36 months. Divisional profit share does not become payable until after the appropriate
year of account closes; normally at 36 months. Profit commission and divisional profit share are both estimated on an
ultimate basis for each year of account and accrued by the Syndicate on a straight-line basis to the extent it is probable
(more likely than not) that the Syndicate will be required to transfer economic benefits in settlement.
v. Provisions
A provision is recognised when the Syndicate has a present legal or constructive obligation, as a result of a past event,
that is expected to result in an outflow of resources. A provision is recognised when a reliable estimate of the amount of
the obligation can be made.
w. Current and non-current disclosure
For each asset and liability line item that combines amounts expected to be recovered or settled (a) no more than 12
months after the year-end date and (b) more than 12 months after the year-end date, the relevant note discloses the
amount expected to be recovered or settled after more than 12 months.
x. Contingencies
Contingent liabilities arise as a result of past events when either it is not probable that there will be an outflow of resources
or that the amount cannot be reliably measured at the reporting date or when the existence will be confirmed by the
occurrence or non-occurrence of uncertain future events not wholly within the Syndicate’s control. Contingent liabilities
are disclosed in the annual accounts unless the probability of an outflow of resources is remote.
y. Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet only when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the
assets and settle the liability simultaneously.
z. Other income and charges
Other income and other charges include investment return on withheld premium.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
29
2.
Use of critical accounting estimates and judgements in applying accounting policies
The preparation of the annual accounts requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Syndicate’s accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the annual
accounts are those listed below.
Incurred
but
not
reported
claims (IBNR)
The estimation of claims IBNR is generally subject to a greater degree of uncertainty than the
estimation of the cost of settling claims already notified to the Syndicate, where more information
about the claim event is generally available. In calculating the estimated cost of unpaid claims the
Syndicate uses a variety of estimation techniques, generally based upon statistical analyses of
historical experience, which assumes that the development pattern of the current claims will be
consistent with past experience. Allowance is made, however, for changes or uncertainties which may
create distortions in the underlying statistics or which might cause the cost of unsettled claims to
increase or reduce when compared with the cost of previously settled claims including:
x
changes in processes which might accelerate or slow down the development and/or recording of
paid or incurred claims compared with the statistics from previous periods;
x
changes in the legal environment;
x
the effects of inflation;
x
changes in the mix of business;
x
the impact of large losses; and
x
movements in industry benchmarks.
A component of these estimation techniques is usually the estimation of the cost of notified but not
paid claims. In estimating the cost of these, regard is given to the claim circumstance as reported,
any information available from loss adjusters and information on the cost of settling claims with similar
characteristics in previous periods.
Large claims affecting each relevant business class are generally assessed separately, either measured
on a case-by-case basis or projected separately, in order to allow for the possible distorting effect of
the development and incidence of these large claims.
Where possible, multiple techniques are adopted in order to estimate the required level of provisions.
This assists in giving greater understanding of the trends inherent in the data being projected. The
projections given by the various methodologies also assist in setting the range of possible outcomes.
The most appropriate estimation technique is selected taking into account the characteristics of the
business class and the extent of the development of each accident year. The amount of salvage and
subrogation recoveries is separately identified and, where material, reported as an asset.
The Directors consider that the provisions for gross claims and related reinsurance recoveries are fairly
stated on the basis of the information currently available to them. However, the ultimate liability will
vary as a result of subsequent information and events and this may result in significant adjustments
to the amounts provided. Adjustments to the amounts of claims provisions established in prior years
are reflected in the report and accounts for the period in which the adjustments are made. The
methods used, and the estimates made, are reviewed regularly.
Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the
amounts that will be recoverable from reinsurers based upon the gross provisions and having due
regard to collectability. An estimate of the future cost of indirect claims handling is calculated as a
percentage of the claims reserves held at the balance sheet date.
Property & Motor, Special Risks, Cyber & Enterprise Risk, Portfolio Solutions and
Reinsurance business
These business areas are predominantly ‘short tail’, as there is not a significant delay between the
occurrence of the claim and the claim being reported, with the exception of the liability risks written
in the
Cyber & Enterprise Risk and Property & Motor divisions
. For short tail risks, the costs of claims
notified to t
he Syndicate at the year-end date are estimated on a case-by-case
basis to reflect the
individual circumstances of each claim. The ultimate expected cost of claims is projected from this
data by reference to statistics which show how estimates of claims incurred in previous periods have
developed over time to reflect changes in the underlying estimates of the cost of notified claims and
late notifications. For liability risks, claims may not
become apparent for many years after the event
giving rise to the claim has happened, and there will typically be greater variation between initial
estimates and final outcomes compared with other classes.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
30
Marine & Energy, Liability and Aviation business
These business areas have a mix of hull and cargo risks that are short tail in nature, and liability risks
which are longer tail. The methodology uses a predetermined formula whereby greater weight is given
to actual claims experience as time passes. The initial estimate of the loss ratio based on the
experience of previous years adjusted for factors such as premium rate changes and claims inflation,
and on the anticipated market experience, is an important assumption in this estimation technique.
The assessment of claims inflation and anticipated market experience is particularly sensitive to the
level of court awards and to the development of legal precedent on matters of contract and tort. This
class of business is also potentially subject to the emergence of new types of latent claims but no
specific allowance is included for this as at the year-end date.
COVID-19
The Directors are aware of the heightened estimation uncertainty in reserving for estimated losses
arising from COVID-19 due to the unique nature of the loss. Management has a robust reserving
approach which supports the held reserves at the year-end date.
Russian invasion of Ukraine
The Syndicate has loss exposure to the Russian invasion of Ukraine, stemming from its Aviation,
Special Risks and Marine & Energy divisions. There remains significant uncertainty as to how these
losses will develop, particularly surrounding Aviation exposures, but management’s robust reserving
approach supports the held reserves at the year-end date.
Written
premium &
Pipeline
premium
Written premium is reported according to management estimation of when premium will be written.
An estimate of premiums written during the year that have not yet been notified by the financial year-
end (pipeline premium) is made on a risk-by-risk basis. The pipeline premium is booked as written
and an assessment is made of the related unearned premium provision and an estimate of claims
incurred but not reported in respect of the earned element. Pipeline premium of £152,562,000 (2023:
£159,402,000) was recognised as an asset on the balance sheet at 31 December 2024.
For delegated authority business, the underwriters estimate how much business will attach to a facility
based on information provided by the broker, using the underwriters’ experience with reference to the
trading conditions of the market. This estimate is updated on a regular basis. It is assumed that risks
attaching to the master facility incept evenly across the period of the facility and therefore only the
proportion of risks which have incepted to the master facility by the year-end date are reported within
written premium in these report and accounts.
Earned
premium
Earned premium is estimated based on assumptions of how each risk is earned according to its method
of placement and class of business. Each risk falling within a class of business is earned according to
the estimated pattern applying to that class of business, which takes into account the class
characteristics including exposure to seasonal weather
-
related events. This approach is applied
consistently year
-on-year.
The earning of premiums is based primarily on time apportionment, with an adjustment for the risk
profile of certain classes of business particularly those exposed to seasonal
weather-related events.
Provision
for
unexpired
risks
All reasonable steps are taken to ensure that the appropriate information regarding claims exposures
is obtained. The calculation is based upon statistical analyses of historical experience, which assumes
that the development pattern of premium and claims will be similar to past experience. However,
given the uncertainty in establishing a provision for unexpired risks, it is likely that the final outcome
will prove to be different from the original liability established.
Reinsurance
recoverable
Reinsurance is deemed to be fully recoverable unless there is reason to doubt its recoverability. In
these circumstances specific provisions are made based on the expected proportional recovery and
the credit risk profile of the counterparties.
Financial
investments
Financial investments are carried in the balance sheet at fair value. Market valuations of funds are
obtained from fund administrators.
The fair value of Level 3 financial instruments, which
are those
where no active market exists or where quoted prices are not otherwise available
,
is determined by
using valuation technique
s. To the extent that valuations are
based on models or inputs that are
unobservable in the market, the determination of fair value requires more judgement and accordingly,
those instruments will require a greater degree of judgement to be exercised during
valuation.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
31
3.
Analysis of underwriting result
An analysis of the underwriting result before investment return is presented in the table below:
Gross
premiums
written
Gross
premiums
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
result
2024
£’000
£’000
£’000
£’000
£’000
£’000
Direct insurance
Accident and health
7,994
8,763
(3,363)
(4,570)
(328)
502
Motor (other classes)
10,910
10,712
(5,936)
(4,819)
-
(43)
Marine, aviation, and transport
49,675
54,168
(53,779)
(26,233)
7,745
(18,099)
Fire and other damage to property
231,097
224,484
(77,968)
(77,929)
(37,466)
31,121
Third party liability
87,138
84,523
(41,650)
(38,073)
(6,597)
(1,797)
Credit and suretyship
25,631
21,577
(16,363)
(12,891)
(1,038)
(8,715)
Miscellaneous
82
39
45
(465)
(3)
(384)
Total direct insurance
412,527
404,266
(199,014)
(164,980)
(37,687)
2,585
Reinsurance acceptances
37,515
36,863
(14,324)
(3,090)
(1,848)
17,601
Total
450,042
441,129
(213,338)
(168,070)
(39,535)
20,186
2023*
Direct insurance
Accident and health
9,479
9,497
(4,812)
(4,848)
(470)
(633)
Motor (other classes)
9,854
10,320
(5,788)
(4,372)
-
160
Marine, aviation, and transport
47,239
41,715
(39,190)
(18,721)
4,149
(12,047)
Fire and other damage to property
234,341
217,271
(95,469)
(71,650)
(25,643)
24,509
Third party liability
83,091
74,256
(33,918)
(30,828)
(7,878)
1,632
Credit and suretyship
21,335
21,896
(7,202)
(12,116)
(727)
1,851
Miscellaneous
117
82
(42)
(435)
-
(395)
Total direct insurance
405,456
375,037
(186,421)
(142,970)
(30,569)
15,077
Reinsurance acceptances
38,683
36,096
(4,146)
(4,029)
(2,253)
25,668
Total
444,139
411,133
(190,567)
(146,999)
(32,822)
40,745
*Please refer to the Restatement of comparative information section in note 1.1.
All business was concluded in the UK. The geographical analysis of gross premium written is below:
2024
£’000
2023*
£’000
United Kingdom
68,867
50,852
US
200,547
199,873
Rest of the world
180,628
193,414
Total gross premiums written
450,042
444,139
*Please refer to the Restatement of comparative information section in note 1.1.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
32
An additional analysis of two of the segments above has been set out below:
Gross
premiums
written
Gross
premiums
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
result
2024
£’000
£’000
£’000
£’000
£’000
£’000
Fire and damage to property of
which is:
-
Specialities
358
348
(121)
(121)
(58)
48
-
Energy
1,417
1,376
(478)
(478)
(230)
191
Third party liability of which is:
-
Energy
7,091
6,878
(3,389)
(3,098)
(537)
(146)
2023
Fire and damage to property of
which is:
-
Specialities
363
336
(148)
(111)
(40)
38
-
Energy
1,437
1,332
(585)
(439)
(157)
150
Third party liability of which is:
-
Energy
6,761
6,042
(2,760)
(2,509)
(641)
133
4.
Net operating expenses
2024
£’000
2023*
£’000
Acquisition costs
129,080
117,586
Change in deferred acquisition costs
(4,675)
(7,622)
Administrative expenses
30,898
26,973
Member’s standard personal expenses
12,767
10,062
Reinsurance commissions and profit participations
(37,746)
(32,856)
Net operating expenses
130,324
114,143
*Please refer to the Restatement of comparative information section in note 1.1.
Total commission for direct insurance business for the year amounted to:
2024
£’000
2023
£’000
Total commission for direct insurance business
122,037
110,109
Auditors’ remuneration
2024
£’000
2023
£’000
Fees payable to the Syndicate’s auditors for the audit of these financial
statements
239
227
Fees payable to the Syndicate’s auditors and its associates in respect of other
services pursuant to legislation
116
97
All other services
60
69
Total
415
393
The charge incurred for other services pursuant to legislation relates to the audit and review of the Syndicate’s regulatory
returns and these financial statements. The charge in 2024 also includes fees relating to the iXBRL tagging of these
financial statements. The charge for all other services relates to the provision of a statement of actuarial opinion on the
reserves.
Audit fees are billed combined for the TMK Group and the Syndicate and are paid by a fellow subsidiary of TMKGL. A
recharge of audit fees is made to the Syndicate.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
33
5.
Staff numbers and costs
The Syndicate and its managing agent have no employees. Staff are employed by Tokio Marine Kiln Insurance Services
Limited (TMKIS). The following amounts were recharged to the Syndicate in respect of salary costs and are included within
administrative expenses:
2024
£’000
2023*
£’000
Wages and salaries
14,066
11,783
Social security costs
1,089
992
Other pension costs
896
810
Total
16,051
13,585
*Please refer to the Restatement of comparative information section in note 1.1.
6.
Key management personnel compensation
The Directors of TMKS received the following aggregate remuneration in relation to their work on the Syndicate:
2024
£’000
2023
£’000
Directors’ emoluments
850
639
Of the above amount, £173,000 (2023: £173,000) was charged to the Syndicate as an expense, with the remainder borne
by other group entities.
The active underwriter received the following remuneration charged as a syndicate expense:
2024
£’000
2023
£’000
Emoluments
81
91
7.
Investment return
2024
£’000
2023*
£’000
Interest and similar income
From financial instruments designated at fair value through profit or loss
Interest and similar income
12,435
9,410
Interest on cash at bank
58
38
Other income from investments
From financial instruments designated at fair value through profit or loss
Gains on the realisation of investments
614
1,060
Losses on the realisation of investments
(411)
(260)
Unrealised gains on investments
3,260
4,967
Unrealised losses on the investments
(2,013)
(79)
Investment management expenses
(180)
(150)
Total investment return
13,763
14,986
Transferred to the technical account from the non-technical account
13,763
14,986
*Please refer to the Restatement of comparative information section in note 1.1.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
34
8.
Technical provisions
The reconciliation of the opening and closing provision for claims outstanding is as follows:
Gross
£’000
Reinsurance
£’000
Net
£’000
2024
Claims outstanding
Balance at 1 January
480,668
(146,195)
334,473
Claims paid during the year
(180,123)
48,982
(131,141)
Expected cost of current year claims
199,712
(49,600)
150,112
Change in estimates of prior year provisions
13,626
5,379
19,005
Foreign exchange adjustments
583
(455)
128
At 31 December
514,466
(141,889)
372,577
2023*
Balance at 1 January
500,017
(135,876)
364,141
Claims paid during the year
(187,052)
47,414
(139,638)
Expected cost of current year claims
172,091
(48,312)
123,779
Change in estimates of prior year provisions
18,476
(16,464)
2,012
Foreign exchange adjustments
(22,864)
7,043
(15,821)
At 31 December
480,668
(146,195)
334,473
*Please refer to the Restatement of comparative information section in note 1.1.
The reconciliation of the opening and closing provision for unearned premiums is as follows:
Gross
£’000
Reinsurance
£’000
Net
£’000
2024
Unearned premiums
Balance at 1 January
219,741
(53,132)
166,609
Premiums written in the year
450,042
(123,105)
326,937
Premiums earned during the year
(441,129)
121,502
(319,627)
Foreign exchange adjustments
(266)
(40)
(306)
At 31 December
228,388
(54,775)
173,613
2023
Balance at 1 January
195,571
(49,117)
146,454
Premiums written in the year
444,139
(136,707)
307,432
Premiums earned during the year
(411,133)
130,454
(280,679)
Foreign exchange adjustments
(8,836)
2,238
(6,598)
At 31 December
219,741
(53,132)
166,609
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
35
9.
Claims development
Within the calendar year technical result, a deficit of £19,004,000 (2023: deficit of £2,013,000) relates to the
reassessment of net claims incurred for previous accident years.
The following table shows the development of gross and net claims incurred including IBNR and the claims handling
provision over the last ten years. The claims development tables are prepared on an underwriting year of account basis,
and therefore reflect the pattern of earned premium and risk exposure over a number of years. All figures are shown
converted at current year-end rates.
Gross:
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Pure underwriting year
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
at end of underwriting
year
50,568
81,021
114,358
96,958
96,806
94,341
96,890
121,050
81,768
99,159
one year later
89,438
144,927
179,438
183,484
208,603
147,538
206,088
209,996
172,677
-
two years later
93,448
153,169
196,535
197,985
198,542
147,729
225,689
215,053
-
-
three years later
96,715
153,310
197,952
185,320
189,559
145,132
251,428
-
-
-
four years later
99,636
146,903
196,979
182,783
182,418
131,701
-
-
-
-
five years later
93,542
144,158
195,269
187,823
176,984
-
-
-
-
-
six years later
93,451
143,757
192,271
191,745
-
-
-
-
-
-
seven years later
93,650
140,919
197,808
-
-
-
-
-
-
-
eight years later
102,826
144,671
-
-
-
-
-
-
-
-
nine years later
102,414
-
-
-
-
-
-
-
-
-
Estimate of gross
claims reserve
102,414
144,671
197,808
191,745
176,984
131,701
251,428
215,053
172,677
99,159
Less: gross claims paid
90,446
134,779
181,531
173,611
156,572
114,399
136,773
129,452
50,765
8,154
Gross claims reserve
11,968
9,892
16,277
18,134
20,412
17,302
114,655
85,601
121,912
91,005
Net:
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Pure underwriting year
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
at end of underwriting
year
49,075
74,507
94,781
80,884
93,147
88,944
59,474
74,541
60,611
71,824
one year later
86,187
125,955
157,815
154,335
201,374
132,376
133,631
136,476
132,109
-
two years later
87,050
124,686
173,031
167,443
191,872
125,372
141,258
143,448
-
-
three years later
89,163
124,905
174,424
154,362
181,494
122,452
160,274
-
-
-
four years later
90,168
119,851
171,599
149,099
173,334
114,733
-
-
-
-
five years later
85,239
117,020
168,605
152,094
168,543
-
-
-
-
-
six years later
85,376
115,765
166,326
157,606
-
-
-
-
-
-
seven years later
85,937
114,107
168,880
-
-
-
-
-
-
-
eight years later
92,040
118,792
-
-
-
-
-
-
-
-
nine years later
91,551
-
-
-
-
-
-
-
-
-
Estimate of net claims
reserve
91,551
118,792
168,880
157,606
168,543
114,733
160,274
143,448
132,109
71,824
Less: net claims paid
84,285
110,439
157,126
139,247
149,010
100,609
93,899
83,877
37,058
5,454
Net claims reserve
7,266
8,353
11,754
18,359
19,533
14,124
66,375
59,571
95,051
66,370
Gross
£’000
Reinsurance
£’000
Net
£’000
Estimated balance to pay
507,158
(366,756)
140,402
2014 and prior years of account
7,308
(5,821)
1,487
Outstanding claims reserve
514,466
(372,577)
141,889
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
36
10.
Debtors arising out of direct insurance operations
2024
£’000
2023
£’000
Due within one year
173,204
173,908
Due after one year
5,748
4,850
Total
178,952
178,758
11.
Debtors arising out of reinsurance operations
2024
£’000
2023*
£’000
Due within one year
169,304
250,076
Due after one year
24,815
26,170
Total
194,119
276,246
*Please refer to the Restatement of comparative information section in note 1.1.
12.
Other
debtors
The following balances are included within other debtors:
2024
£’000
2023*
£’000
Inter-syndicate balance
163
615
Other
5,263
3,720
Consisting of:
-
Taxation
2,935
86
-
Amounts due from service company
2,328
3,634
Total
5,426
4,335
*Please refer to the Restatement of comparative information section in note 1.1.
13. Cash and cash equivalents
2024
£000
2023
£000
Cash at bank and in hand
7,613
3,607
Short term deposits with credit institutions
38,726
22,763
Total cash and cash equivalents
46,339
26,370
Included within cash and cash equivalents are the following amounts which are not available for use by the Syndicate:
2024
£’000
2023
£’000
Short term deposits with credit institutions
15,363
14,510
14. Analysis of net debt
At 1 January
2024
Cash flows
Fair value and
exchange
movement
At 31
December
2024
Cash and cash equivalents
26,370
19,978
(9)
46,339
Derivative financial liabilities
(20)
-
20
-
Total
26,350
19,978
11
46,339
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
37
15.
Deferred acquisition costs
The reconciliation of the opening and closing deferred acquisition costs is as follows:
Gross
£’000
Reinsurance
£’000
Net
£’000
2024
Balance at 1 January
57,680
(13,962)
43,718
Incurred deferred acquisition costs
129,080
(38,585)
90,495
Amortised deferred acquisition costs
(124,405)
37,746
(86,659)
Foreign exchange movements
(134)
(33)
(167)
Balance at 31 December
62,221
(14,834)
47,387
2023
Balance at 1 January
52,275
(13,234)
39,041
Incurred deferred acquisition costs
117,586
(34,177)
83,409
Amortised deferred acquisition costs
(109,964)
32,856
(77,108)
Foreign exchange movements
(2,217)
593
(1,624)
Balance at 31 December
57,680
(13,962)
43,718
16.
Creditors arising out of direct insurance operations
2024
£’000
2023
£’000
Due within one year
26,237
24,226
Due after one year
796
1,304
27,033
25,530
17.
Creditors arising out of reinsurance operations
2024
£’000
2023
£’000
Due within one year
150,663
228,224
Due after one year
1,613
1,023
152,276
229,247
18.
Other creditors including taxation and social security
The following balances are included within other creditors:
2024
£’000
2023*
£’000
Inter Syndicate Balances
-
32
Profit commissions payable
12,569
6,137
Amounts owed to group undertakings
2,083
335
Derivative liabilities
-
20
Other liabilities
-
79
Total
14,652
6,603
Amounts due after one year
8,543
4,157
*Please refer to the Restatement of comparative information section in note 1.1.
19.
Off-balance sheet items
The Syndicate has not been party to an arrangement, which is not reflected in its balance sheet, where material risks and
benefits arise for the Syndicate.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
38
20.
Related parties
From/to
related parties
Service
companies
TMKS/
TMKIS
£’000
£’000
£’000
2024
Profit and loss
Gross premiums written
12,210
28,049
-
Outward reinsurance premiums
(34,955)
-
-
Claims paid: gross amount
(5,388)
(31,766)
-
Claims paid: reinsurer’s share
22,665
-
-
Member’s standard personal expenses (managing agent’s fee)
-
-
(3,338)
Net operating expenses (profit commission)
1
-
-
(8,412)
Net operating expenses (expenses)
-
-
(22,139)
Balance sheet
Reinsurers’ share of technical provisions: claims outstanding
2
20,878
-
-
Technical provisions: claims outstanding
2
(3,714)
(29,665)
-
2023
Profit and loss
Gross premiums written
15,473
28,114
-
Outward reinsurance premiums
(69,442)
-
-
Claims paid: gross amount
(6,168)
(55,081)
-
Claims paid: reinsurer’s share
17,916
-
-
Member’s standard personal expenses (managing agent’s fee)
-
-
(3,100)
Net operating expenses (profit commission)
1
-
-
(5,100)
Net operating expenses (expenses)
-
-
(20,400)
Balance sheet
Reinsurers’ share of technical provisions: claims outstanding
2
31,297
-
-
Technical provisions: claims outstanding
2
(3,527)
(49,667)
-
1
Including divisional profit share
2
Notified claims
From/to related parties
The Syndicate accepted inwards reinsurance business from, and placed outwards reinsurance with, other TMK Group
entities, including Syndicate 510, that are deemed to be related parties of TMKS by virtue of the shareholding in TMKGL,
the parent of TMKS, by Tokio Marine Holdings, Inc. All transactions between these entities were conducted at arm’s length
and on normal commercial terms.
Service companies
The Syndicate received business through Tokio Marine Kiln Singapore Pte Limited (100% owned) whose investment is
held ultimately by the managing agent.
The Syndicate also received business through Tokio Marine Highland Insurance Services, Inc. (formerly WNC Insurance
Services, Inc), whose parent WNC Holding Company, LP is 100% owned within the TMK Group.
TMKS
Profit commission is estimated on an ultimate basis for each year of account and accrued by the Syndicate on a straight-
line basis to the extent it is probable (more likely than not) that the Syndicate will be required to transfer economic
benefits, final settlement to the managing agent is paid when the year of account is closed after three years.
Managing agent’s fees were paid by the Syndicate to Tokio Marine Kiln Syndicates Limited.
TMKIS
Expenses were paid to TMKIS (a fellow subsidiary of TMKGL) for expenses paid on behalf of the Syndicate.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
39
21.
Financial Investments
Carrying Value
Cost
2024
£000
2023
£000
2024
£000
2023
£000
Shares and other variable yield securities and units in unit
trusts
37,980
18,806
42,122
23,953
Debt securities and other fixed income securities
292,855
225,761
288,898
218,986
Loans and deposits with credit institutions
362
-
362
-
Syndicate loan to central fund
4,142
5,147
4,142
5,147
Total financial investments
335,339
249,714
335,524
248,086
The table below presents an analysis of financial investments by their measurement classification:
2024
£000
2023
£000
Financial assets measured at fair value through profit or loss
335,339
249,714
Total financial investments
335,339
249,714
The table below analysis the derivative assets and liabilities by type:
2024
2023
Notional
amount
Fair value
Notional
amount
Fair value
£000
£000
£000
£000
Foreign exchange forward contracts
-
-
3,746
(20)
Total
-
-
3,746
(20)
22.
Risk management
Details of the Syndicate’s Risk Management Framework are given in the Report of the Directors of the managing agent.
(a)
Insurance risk
Claims sensitivity analysis
The following table shows the impact of a ±5.0% sensitivity on claims outstanding – net of reinsurance and represents
the impact on both the profit and loss for the year and member’s balances.
2024
+5.0%
£’000
-5.0%
£’000
Claims outstanding – gross of reinsurance
25,723
(25,723)
Claims outstanding – net of reinsurance
18,629
(18,629)
2023
Claims outstanding – gross of reinsurance
24,033
(24,033)
Claims outstanding – net of reinsurance
16,724
(16,724)
(b)
Financial risk
The Syndicate is exposed to a range of financial risks through its financial assets and financial liabilities. In particular, the
key financial risk is that the proceeds from financial assets are not sufficient to fund the obligations arising from insurance
policies and investment contracts as they fall due. The most important components of this financial risk are credit risk,
liquidity risk and market risk (including interest rate risk and currency risk).
These risks arise from open positions in interest rate and currency products, all of which are exposed to general and
specific market movements. The risks that the Syndicate primarily faces due to the nature of its investment and liabilities
are interest rate risk and currency risk.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
40
Credit risk
For details of the management of the Syndicate’s credit risk please refer to Report of the Directors of the managing agent.
The following table provides information regarding credit risk exposures of the Syndicate by classifying assets according
to the Standard & Poor’s credit rating of the counterparties. Where a security has no credit rating, the rating of the issuer
is used. During the year there were no material breaches in exposure limits.
AAA
£000
AA
£000
A
£000
BBB
£000
Other
£000
Not rated
£000
Total
£000
2024
Shares and other variable yield securities and units in
unit trusts
20,093
-
4,142
-
-
13,744
37,979
Debt securities and other fixed income securities
48,209
119,880
83,056
38,531
-
3,180
292,856
Loans and deposits with credit institutions
-
-
362
-
-
-
362
Syndicate loans to central fund
-
-
-
-
-
4,142
4,142
Deposits with ceded undertakings
-
-
387
-
-
-
387
Reinsurers’ share of claims outstanding
3,429
48,671
73,071
-
2,545
14,173
141,889
Debtors arising out of direct insurance operations
-
20,821
-
-
-
158,131
178,952
Debtors arising out of reinsurance operations
66
143,527
8,758
-
586
41,182
194,119
Other (Overseas deposits)
16,308
4,599
4,381
8,972
1,288
217
35,765
Cash at bank and in hand
-
-
7,613
-
-
-
7,613
Other debtors and accrued interest
-
-
-
-
-
122,422
122,422
Total
88,105
337,498
181,770
47,503
4,419
357,191
1,016,486
AAA
£000
AA
£000
A
£000
BBB
£000
Other
£000
Not rated
£000
Total
£000
2023*
Shares and other variable yield securities and units in
unit trusts
5,694
-
5,147
-
-
7,965
18,806
Debt securities and other fixed income securities
53,744
82,941
68,279
20,378
-
419
225,761
Loans and deposits with credit institutions
-
-
-
-
-
-
-
Syndicate loans to central fund
-
-
-
-
-
5,147
5,147
Deposits with ceded undertakings
-
-
401
-
-
-
401
Reinsurers’ share of claims outstanding
6,420
36,790
90,273
-
118
12,594
146,195
Debtors arising out of direct insurance operations
-
18,746
-
-
-
160,012
178,758
Debtors arising out of reinsurance operations
2,814
184,518
6,922
-
-
81,992
276,246
Other (Overseas deposits)
17,437
4,206
2,984
10,486
1,155
84
36,352
Cash at bank and in hand
-
-
3,607
-
-
-
3,607
Other debtors and accrued interest
-
-
-
-
-
115,147
115,147
Total
86,109
327,201
177,613
30,864
1,273
383,360
1,006,420
*Please refer to the Restatement of comparative information section in note 1.1.
In respect of the reinsurers’ share of claims, there are collateralised agreements with reinsurers including insurance-
linked securities (ILS) arrangements, which comprise letter of credits and trust accounts totalling US $41,718,800 (2023:
US $55,833,000).
The largest potential reinsurer credit exposure to the Syndicate at 31 December 2024 was £35,897,000 with Tokio Marine
& Nichido Fire Insurance Co., Ltd., an ‘A+ Stable’ Standard and Poor’s (S&P) rated security (2023: £40,500,000 with
Tokio Marine & Nichido Fire Insurance Co., Ltd.). The Outwards Reinsurance team review the level of this exposure and
take appropriate action where necessary, including obtaining a letter of credit from reinsurers, related parties included.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
41
An aged analysis of financial assets past-due is shown below.
Neither past
due no
r
impaired assets
Past due but
not impaired
assets
Total
2024
£’000
£’000
£’000
Shares and other variable yield securities and units in unit trusts
37,980
-
37,980
Debt securities and other fixed income securities
292,855
-
292,855
Loans and deposits with credit institutions
362
-
362
Overseas deposits
35,765
-
35,765
Syndicate loans to central fund
4,142
-
4,142
Deposits with ceded undertakings
387
-
387
Reinsurers’ share of claims outstanding
141,889
-
141,889
Debtors arising out of direct insurance operations
144,176
34,776
178,952
Debtors arising out of reinsurance operations
188,231
5,888
194,119
Cash at bank and in hand
7,613
-
7,613
Other debtors and accrued interest
122,422
-
122,422
Total
975,822
40,664
1,016,486
Neither past
due nor
impaired
assets
Past due but
not impaired
assets
Total
2023*
£’000
£’000
£’000
Shares and other variable yield securities and units in unit trusts
18,806
-
18,806
Debt securities and other fixed income securities
225,761
-
225,761
Loans and deposits with credit institutions
-
-
-
Overseas deposits
36,352
-
36,352
Syndicate loans to central fund
5,147
-
5,147
Deposits with ceded undertakings
401
-
401
Reinsurers’ share of claims outstanding
146,195
-
146,195
Debtors arising out of direct insurance operations
140,363
38,395
178,758
Debtors arising out of reinsurance operations
270,331
5,915
276,246
Cash at bank and in hand
3,607
-
3,607
Other debtors and accrued interest
115,147
-
115,147
Total
962,110
44,310
1,006,420
*Please refer to the Restatement of comparative information section in note 1.1.
For assets to be classified as past-due the contractual payments are in arrears by more than 30 days. An impairment
adjustment is recorded in the Profit and loss and other comprehensive income: non-technical account for assets impaired.
The Syndicate operates mainly on a ‘neither past-due nor impaired basis’ and when evidence is available, sufficient
collateral will be obtained for ‘past-due and impaired’ assets. An impairment assessment will also be performed if
applicable.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
42
Analysis of the amounts past due but not impaired is shown below.
0-3 mon
ths
past due
3-6 months
past due
6
-
12 months
past due
Greater than
1 year past
due
Total
2024
£’000
£’000
£’000
£’000
£’000
Debtors arising out of direct insurance
operations
3,369
3,888
10,005
17,514
34,776
Debtors arising out of reinsurance
operations
2,773
311
1,024
1,780
5,888
Total
6,142
4,199
11,029
19,294
40,664
2023
Debtors arising out of direct insurance
operations
3,782
3,212
13,579
17,822
38,395
Debtors arising out of reinsurance
operations
1,417
1,000
1,181
2,317
5,915
Total
5,199
4,212
14,760
20,139
44,310
Liquidity risk
For details of the management of the Syndicate’s liquidity risks please refer to the Report of the Directors of the managing
agent.
The Syndicate writes a significant proportion of US Situs and Canadian business which requires the deposit of appropriate
monies in specific trust funds. Some of these trust funds are regulated, requiring quarterly assessment of the adequacy
of funding. Surplus funds or additional funding requirements are settled each quarter between the regulated and non-
regulated trust funds. In exceptional circumstances, and with approval from Lloyd’s, inter-fund settlement can take place
outside the quarterly process. As at 31 December 2024, the balances held in the regulated US Situs and Canadian trust
funds were US $136,136,000 (2023: US $143,058,000) and Canadian $132,161,500 (2023: Canadian $130,879,000)
respectively.
The following table analyses the financial liabilities and claims outstanding into their relevant maturity groups based on
the remaining period at the year-end date to their contractual maturities or expected settlement dates. The projected
settlement of claims outstanding is modelled using actuarial techniques. These estimates assume that future claims
settlement patterns will be broadly similar to those experienced in the past.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
43
No maturity
stated
0-1 yrs
1-3 yrs
3-5 yrs
>5 yrs
Total
2024
£000
£000
£000
£000
£000
£000
Claims outstanding
-
183,903
173,284
74,574
82,705
514,466
Derivative liabilities
-
-
-
-
-
-
Deposits received from reinsurers
-
-
-
-
-
-
Creditors
-
183,009
10,952
-
-
193,961
Other liabilities
-
243,222
-
-
-
243,222
Total
-
610,134
184,236
74,574
82,705
951,649
2023*
Claims outstanding
-
178,799
163,574
69,227
69,068
480,668
Derivative liabilities
-
20
-
-
-
20
Deposits received from reinsurers
-
271
-
-
-
271
Creditors
-
254,876
6,484
-
-
261,360
Other liabilities
-
233,703
-
-
-
233,703
Total
-
667,669
170,058
69,227
69,068
976,022
*Please refer to the Restatement of comparative information section in note 1.1.
Foreign currency market risk
For further details of the management of the Syndicate’s market risk please refer to the report of the Directors of the
managing agent.
The Syndicate maintains bank accounts, investment portfolios and claims reserves in pounds sterling, US dollars and
Canadian dollars (the Lloyd’s closing currencies). Additionally, bank accounts are maintained in Euros. Transactions arising
in other currencies are translated to the Lloyd’s closing currencies as they occur. Certain other currencies are held for
regulatory purposes. The majority of the Syndicate’s financial assets are denominated in the same currencies as its
insurance liabilities and thus the developing profit or loss that remains embedded within the Syndicate gives rise to the
main currency exposure. The profit or loss is distributed, or settled, in accordance with Lloyd’s rules using a combination
of pounds sterling and US dollars after deduction of the member level charges.
Investment strategy is recommended and agreed by the Investment Committee. The Syndicate currency exposure and
future cash flows are monitored and shortfalls addressed by foreign currency transactions, hedges or cash calls on the
member.
A substantial proportion of the Syndicate’s business is written in currencies other than pounds sterling, in particular US
dollars. The Syndicate’s business is therefore exposed to changes in exchange rates and there is no assurance that foreign
currency risk mitigation initiatives undertaken by the Syndicate will be successful in preventing any losses due to such
changes.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
44
The table below summarises the carrying value of the Syndicate’s assets and liabilities, at the reporting date:
Sterling
US dollar
Euro
Canadian
dollar
Australian
dollar
Other
Total
2024
£000
£000
£000
£000
£000
£000
£000
Investments
4,527
254,504
-
76,695
-
-
335,726
Reinsurers' share of technical
provisions
39,082
136,223
-
21,359
-
-
196,664
Debtors
34,495
325,318
2
18,633
-
49
378,497
Other assets
6,966
2,170
-
15,082
9,767
9,393
43,378
Prepayments and accrued income
12,436
38,869
-
10,916
-
-
62,221
Total assets
97,506
757,084
2
142,685
9,767
9,442
1,016,486
Technical provisions
(137,295)
(495,838)
-
(109,721)
-
-
(742,854)
Deposits received from reinsurers
-
-
-
-
-
-
-
Creditors
(23,636)
(158,861)
-
(11,464)
-
-
(193,961)
Accruals and deferred income
(2,259)
(10,605)
-
(1,970)
-
-
(14,834)
Total liabilities
(163,190)
(665,304)
-
(123,155)
-
-
(951,649)
Total Capital and reserves
65,684
(91,780)
(2)
(19,530)
(9,767)
(9,442)
(64,837)
2023
Investments
5,410
166,592
-
78,113
-
-
250,115
Reinsurers' share of technical
provisions
18,988
159,294
-
21,045
-
-
199,327
Debtors
29,214
410,737
2
19,369
-
17
459,339
Other assets
3,079
2,402
-
15,038
7,641
11,799
39,959
Prepayments and accrued income
11,510
34,602
-
11,568
-
-
57,680
Total assets
68,201
773,627
2
145,133
7,641
11,816
1,006,420
Technical provisions
(92,261)
(501,921)
-
(106,227)
-
-
(700,409)
Deposits received from reinsurers
(37)
(194)
-
(40)
-
-
(271)
Creditors
(14,529)
(234,796)
(2)
(12,025)
-
(28)
(261,380)
Accruals and deferred income
(2,277)
(9,555)
-
(2,130)
-
-
(13,962)
Total liabilities
(109,104)
(746,466)
(2)
(120,422)
-
(28)
(976,022)
Total Capital and reserves
40,903
(27,161)
-
(24,711)
(7,641)
(11,788)
(30,398)
The use of financial derivatives is governed by the Syndicate’s policies approved by the Investment Committee, which
provides written principles on the use of financial derivatives.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
45
Exchange rate sensitivity analysis
The analysis below is performed for possible movements in key variables, with all other variables held constant, showing
the impact on the result and net assets. The correlation of variables will have a significant effect in determining the
ultimate impact. However, to isolate and demonstrate the effect due to changes in variables, each variable has been
changed on an individual basis.
The following table gives an indication of the impact on the result and net assets or liabilities of a ten percent change in
the relative strength of the pound sterling against the value of the US dollar and Canadian dollar, excluding the effects of
hedges.
2024
Impact on
results
before tax
£000
2024
Impact on
member’s
balances
£000
2023
Impact on
results before
tax
£000
2023
Impact on
member’
s
balances
£000
Currency risk
10 percent increase in GBP/USD exchange rate
(10,198)
(10,198)
(3,108)
(3,108)
10 percent increase in GBP/CAD exchange rate
(2,170)
(2,170)
(2,746)
(2,746)
10 percent decrease in GBP/USD exchange rate
10,198
10,198
3,018
3,018
10 percent decrease in GBP/CAD exchange rate
2,170
2,170
2,746
2,746
Interest rate market risk
For further details of the management of the Syndicate’s market risk please refer to the Report of the Directors of the
managing agent.
The Syndicate holds investments in its balance sheet and the performance of its investment portfolio may have an effect
on the result. The income derived by the Syndicate from its investments, and the capital value of its investments, may
fall as well as rise. Therefore, changes in interest rates, credit ratings and other economic variables could substantially
affect the Syndicate’s profitability.
The use of financial derivatives is governed by the Syndicate’s policies approved by the Investment Committee, which
provides written principles on the use of financial derivatives. More information is available in part (c) of this note.
Interest rate sensitivity analysis
The analysis below is performed for possible movements in key variables with all other variables held constant, showing
the impact on the result. The correlation of variables will have a significant effect in determining the ultimate impact. It
should be noted that movements in these variables are linear.
The table below shows the estimated impact on the result and member’s balances of a 50-basis point movement in
interest rates on the market value of the Syndicate’s investments.
2024
Impact on
results
before tax
£000
2024
Impact on
member
’s
balances
£000
2023
Impact on
results before
tax
£000
2023
Impact on
member’
s
balances
£000
Interest rate risk
+ 50 basis points shift in yield curves
(4,204)
(4,204)
(3,013)
(3,013)
- 50 basis points shift in yield curves
4,204
4,204
2,984
2,984
Capital management
Disclosures on capital management can be found in the Report of the Directors of the managing agent.
Tokio Marine Kiln Syndicate 1880
Annual report and accounts 2024
46
(c)
Fair value estimation
Financial instruments that are fair valued through profit or loss are classified using a fair value hierarchy that reflects the
significance of the inputs used in these measurements.
x
Level 1 financial instruments comprise government bonds and securities which have been valued at fair value using
quoted prices in an active market.
x
Level 2 financial instruments are less regularly traded government agency bonds, supranational bonds, corporate
bonds, money market and open-ended funds. These fair values have been derived from market observable inputs.
x
The fair value for level 3 financial instruments is derived from inputs that are not observable. Level 3 securities
include securitised instruments, the fair value of which are based on broker quotes and a pricing vendor model.
Loans to the Lloyd’s Central Fund are held at par value of £4,142,000 (2023: £5,147,000) as a proxy for fair value.
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:
Level 1
Level 2
Level 3
Total
2024
£000
£000
£000
£000
Shares and other variable yield securities and units in
unit trusts
-
37,980
-
37,980
Debt securities and other fixed income securities
57,927
234,928
-
292,855
Loans and deposits with other credit institutions
362
-
362
Syndicate loans to central fund
-
-
4,142
4,142
Total assets
58,289
272,908
4,142
335,339
Derivative liabilities
-
-
-
-
Total
58,289
272,908
4,142
335,339
2023*
Shares and other variable yield securities and units in
unit trusts
-
18,806
-
18,806
Debt securities and other fixed income securities
41,360
184,401
-
225,761
Loans and deposits with other credit institutions
-
-
-
-
Syndicate loans to central fund
-
-
5,147
5,147
Total assets
41,360
203,207
5,147
249,714
Derivative liabilities
(20)
-
-
(20)
Total
41,340
203,207
5,147
249,694
*Please refer to the Restatement of comparative information section in note 1.1.
23.
Post balance sheet events
There are no post balance sheet events to report.