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Beazley Furlonge Limited | Syndicate 4321 at Lloyd’s

Annual report and accounts 2024

Welcome to our Annual report 2024

Syndicate 4321 launched

in 2022 to focus on

offering additional

capacity to clients that

perform well against pre-

defined ESG metrics, the

Syndicate 5623.

Contents

1

Highlights

2

Strategic report of the managing

agent

4

Managing agent’s report

9

Statement of comprehensive income

14

Balance sheet

15

Statement of changes in members’

balances

16

Cash flow statement

17

Notes to the syndicate annual

39

Statement of managing agents

responsibilities

40

Independent auditor's report to the

members of Syndicate 4321 - 2022

closed year of account

43

Profit or loss account

44

47

Notes to the syndicate 2022

underwriting year of account

52

One-year summary of closed year

results at 31 December 2024

53

Managing agent's corporate

information

Highlights

01

Strategic report of the managing agent

Overview

Syndicate-in-a-box 4321 (the ‘syndicate’) was established in 2022 to provide a choice of additional capacity for large corporate

clients who meet the eligibility standards of the environmental, social and governance ('ESG') scoring criteria that have been

developed with support from specialist, independent rating agencies. The syndicate follows the lead underwriting of syndicates

2623 and 623, also managed by Beazley Furlonge Limited ('BFL') to write business on a multi-line basis. From 1 January 2024,

The result for the syndicate for the year ended 31 December 2024 is a profit of $3,680k (2023: loss of $296k) driven by

favourable claims development on the 2022 and 2023 years of account.

Combined ratio

The combined ratio is a measure of operating performance and represents the ratio of the syndicate's total costs (excluding

foreign exchange movements) to total net earned premium. The syndicate’s combined ratio for 2024 was 73% (2023: 104%),

demonstrating an improvement in profitability year on year. The expense and claims ratio both improved substantially as the

syndicate ceased writing new business but it continued to earn premium already written. Positive claims experience and

decreased administration costs from writing new business both contributed to the improved combined ratio.

Claims

The claims ratio is a measure of the syndicate's claims experience and represents the ratio of net insurance claims to net

earned premium. The 2024 claims ratio for syndicate 4321 was 51% (2023: 66%). This improvement can be attributed to

positive claims development on the syndicates existing book of risks.

Brokerage costs

Managing agent’s report

Managing agent’s report continued

risk from underwriting such as catastrophe and reserves.

(e.g. hurricane, windstorm, earthquake and/or wildfire) or

mankind (e.g. coordinated cyber-attack, global pandemic,

losses; and

Our prudent and comprehensive approach to reserving ensures

adequate provisions are made for the payment of all valid claims. High

calibre claims and underwriting professionals deliver expert service and

claims handling to insureds, ensuring good customer outcomes.

Beazley makes extensive use of modelling, including catastrophe

modelling, the use of our Solvency II model and stress and scenario

testing to ensure insurance risk is within our risk appetite.

Insurance risk outlook continues to be stable as BFL manages the

changes in the credit standing of either counterparties or

any debtors which the company is exposed to.

Exposure to credit risk largely emanates from the use of

reinsurers and brokers, of which broker debtors is the

largest exposure for the Syndicate.

The credit risk outlook remains stable, as Beazley manages down the

syndicate is run-off.

Assets are not available or adequate in order to settle

handling its financial assets. This proactive approach ensures that

The contagion risk that an action or inaction of one part of

the Beazley Group adversely affect an area of the

Syndicate. This also includes a deterioration in culture

which leads to inappropriate behaviour, actions and/or

decisions including dilution of culture or negative impact on

the brand.

Risk culture is grounded in principles of transparency, accountability,

and awareness. An effective risk culture reflects a mature risk

management function, encourages prudent risk-taking, and fosters

Statement of changes in members’ balances

Cash flow statement

16

Estimates and assumptions are continually evaluated and are based on historical experience and other factors. For example,

estimates which are sensitive to economic, regulatory and geopolitical conditions could be impacted by significant changes in

the external environment such as the volatile macroeconomic environment, climate change, international conflicts, and

significant changes in legislation. Any revisions to accounting estimates are recognised in the period in which the estimate is

revised and in any future periods affected.

Specific to climate change, since responses to it are still developing, it is not possible to consider all possible future outcomes

when determining asset and liability valuations, and timing of future cash flows, as these are not yet known. Nevertheless, the

current management view is that reasonably possible changes arising from climate risks would not have a material impact on

asset and liability valuations at the year-end date.

facts available at the time, in conjunction with the claims manager’s view of likely future developments. The total estimate of

gross IBNR as at 31 December 2024 included within claims outstanding is $11,342k (2023: $10,094k).

Notes to the syndicate annual accounts

Premium written is initially based on the estimated premium income (‘EPI’) of each contract. Judgement is involved in

determining the ultimate estimates in order to establish the appropriate premium value and, ultimately, the cash to be received.

EPI estimates are updated to reflect changes in an underwriters expectation through consultation with brokers and third-party

coverholders, changes in market conditions, historic experience and to reflect actual cash received for a contract.

Significant accounting policies

The financial statements have been prepared on an annual basis of accounting, whereby the incurred cost of claims,

commissions and related expenses are charged against the earned proportion of premiums, net of reinsurance as follows:

A provision for unearned premiums represents that part of the gross premiums written that is estimated will be earned in the

following or subsequent financial periods. It is calculated using the daily pro-rata method, under which the premium is

apportioned over the period of risk.

Claims represent the cost of claims and claims handling expenses paid during the financial year, together with the movement in

provisions for outstanding claims, claims IBNR and future claims handling provisions. The provision for claims outstanding

comprises amounts set aside for claims advised and IBNR.

The IBNR amount is based on estimates calculated using widely accepted actuarial techniques which are reviewed quarterly by

the group actuary and annually by the independent syndicate reporting actuary. The techniques generally use projections, based

on past experience of the development of claims over time, to form a view on the likely ultimate claims to be experienced. For

steps to ensure that it has appropriate information regarding its claims exposures. 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.

At each reporting date, liability adequacy tests are performed to ensure the adequacy of the claims liabilities net of deferred

acquisition costs and unearned premium reserves. In performing these tests, current best estimates of future contractual cash

flows, claims handling and administration expenses as well as investment income from the assets backing such liabilities are

used.

Any deficiency is subsequently charged to the statement of comprehensive income and a liability for unexpired risk provision is

established.

transaction rate. Foreign exchange gains and losses resulting from the settlement of such transactions and from translation at

18

the period end of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of

comprehensive income.

Investment return comprises all investment income, realised investment gains and losses and movements in unrealised gains

and losses, net of investment expenses, charges and interest.

Realised gains and losses on investments carried at market value are calculated as the difference between sale proceeds and

purchase price. Movements in unrealised gains and losses on investments represent the difference between the valuation at

the balance sheet date, together with the reversal of unrealised gains and losses recognised in earlier accounting periods in

provisions of the financial instrument. A financial asset is derecognised when:

another party and the other party has the practical ability to sell the asset in its entirety to an unrelated third party.

Financial liabilities are derecognised if the syndicate’s obligations specified in the contract expire, are discharged or cancelled.

On acquisition of a financial asset or liability, the syndicate will measure the asset or liability at transaction price, except for

those financial assets and liabilities at FVTPL, which are initially measured at fair value. The exception to this is when the

arrangement constitutes a financing transaction however, the syndicate does not make use of any such arrangements.

an active market, it is measured using the assumptions that market participants would use when pricing the asset or liability.

The best evidence of the fair value of a financial instrument 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.

When transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially

measured at the transaction price and any difference between this price and the value initially obtained from a valuation model

is subsequently recognised in profit or loss depending on the individual facts and circumstances of the transaction but not later

than when the valuation is supported wholly by observable market data or the transaction is closed out.

Upon initial recognition, attributable transaction costs relating to financial instruments at FVTPL are recognised in the income

19

quoted on an active market. Insurance debtors are measured at amortised cost less any provision for impairment. Insurance

creditors are stated at amortised cost. The syndicate does not have any debtors directly with policyholders, all transactions

occur via an intermediary.

Other debtors principally consist of intercompany debtor balances and sundry debtors and are carried at amortised cost less

any impairment losses.

Other creditors principally consist of amounts due to other related entities and profit commissions payable. These are stated at

amortised cost determined using the effective interest rate method.

carrying amount and the value of the estimated future cash flows discounted at the financial asset’s original effective interest

rate. Where a loss is incurred this is recognised in the statement of comprehensive income.

Cash and cash equivalents are comprised of cash at bank and in hand, in addition to deposits held at call with banks and

bank and in hand is presented separately on the face of the balance sheet, while cash equivalents are included within the

'financial investments' line. Cash and cash equivalents are shown in aggregate on the cash flow statement and at note 13.

These are carried at amortised cost less impairment losses.

Under Schedule 19 of the Finance Act 1993 managing agents are not required to deduct basic rate income tax from trading

No provision has been made for any other overseas tax payable by members on underwriting results.

2. Risk management

The managing agent has identified the risks arising from its activities and has established policies and procedures to manage

these items in accordance with its risk appetite. The sections below outline the syndicate’s risk appetite and explain how it

defines and manages each category of risk. The risk management framework is discussed in the managing agent's report.

2.1 Insurance risk

The syndicate’s insurance business assumes the risk of loss from persons or organisations that are directly exposed to an

underlying loss. Insurance risk arises from this risk transfer due to inherent uncertainties about the occurrence, amount and

timing of insurance liabilities. The four key components of insurance risk are underwriting, claims management and reserving.

Each element is considered below:

20

21

To manage reserving and ultimate reserves risk, the managing agent's actuarial team uses a range of recognised techniques to

project gross premiums written, monitor claims development patterns and stress test ultimate insurance liability balances. An

22