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Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
3
Contents
Syndicate 2019 annual accounts for the year ended 31 December 2024
Directors and Administration – Syndicate 2019 4
Report of the Directors of the Managing Agent 6
Statement of Managing Agent’s Responsibilities 12
Independent Auditor’s Report to the Members of Syndicate 2019 13
Statement of profit or loss and other comprehensive income 17
Balance sheet – Assets 19
Balance sheet – Liabilities 20
Statement of changes in members’ balances 21
Statement of cash flows 22
Notes to the financial statements 23
Syndicate 2019 underwriting year accounts for the 2022 year of account
Underwriting Year – Report of the directors of the Managing Agent 55
Underwriting Year – Statement of Managing Agent’s responsibilities 57
Independent auditors’ report to the members of Syndicate 2019 – 2022 closed year of account 58
Profit and loss account: technical account – general business 62
Profit and loss account: non-technical account 63
Balance Sheet 64
Notes to the underwriting year accounts 65
Two-year summary of closed year results (unaudited) 70
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
4
Directors and Administration – Syndicate 2019
Managing Agent
Managing Agent’s registered number
58 Fenchurch Street
London
EC3M 4AB
2202362
Directors
CJR Rash
JG Ross
RE Bean
RD Cowling
ME Hind
DJ Batchelor
KA Coates
JL Hancock
Chief Executive
Chief Risk Officer
Chief Underwriting Officer
Chief Financial Officer
Independent Non-executive
Independent Non-executive
Independent Non-executive
Non-executive
Company secretary
Active underwriter
JP Middleton
AR Fox
Bankers
Investment managers
Citibank NA
Barclays plc
BlackRock Investment Management (UK) Limited
12 Throgmorton Avenue
London
EC2N 2DL
Lloyd’s Treasury Services
One Lime Street
London
EC3M 7HA
Independent auditors
PricewaterhouseCoopers LLP
7 More London
Riverside
London
SE1 2RT
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
6
Report of the Directors of the Managing Agent
The Directors of the Managing Agent, Talbot Underwriting Ltd (TUL), present the annual report and
audited accounts of Syndicate 2019 (the Syndicate) for the year ended 31 December 2024 . The annual
report is prepared using the annual basis of accounting as required by Regulation 5 of the Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008.
The comments below refer to both information prepared on an annual accounting basis and information
derived from a Lloyd’s underwriting year of account basis. The latter is included where it is used to
manage the business.
Principal activities
The principal activity of the Syndicate is the underwriting of proportional quota share reinsurance
covering High Net Worth (HNW) personal lines insurance business in the US, underwritten by American
International Group, Inc (AIG). The quota share reinsurance provides coverage for AIG HNW policies,
incepting from 1 January each year.
In December 2024, AIG non-renewed the PCS Whole Account Quota Share for the 2025 underwriting
year of account. For the 2025 underwriting year of account, the Syndicate has underwritten a quota
share for the PCS Collections portfolio on a standalone basis with a 30% participation. The remainder
being reinsured by other Lloyd’s Syndicates.
The Collections quota share for PCS incepts 1 January 2025 and is ceded on a gross basis. Any
outwards reinsurance cover will be purchased directly by the Syndicate. This contrasts to the 2024 and
prior years of account, where the whole account quota share agreements were ceded net of the deemed
inuring reinsurance cover purchased by AIG. The deemed inuring reinsurance purchased by AIG in
2025 will continue to apply to the run off of the 2024 and prior underwriting years.
As a result of these changes the Syndicate capacity for the 2025 underwriting year of account has
decreased to £21.0m (2024: £498.2m; 2023: £498.2m). PCG 2019 Corporate Member will continue to
be the Corporate Member for Syndicate 2019.
Results for the financial year
The result for the year was a profit of $131.8m (2023: profit of $59.3m). The Syndicate’s key financial
performance indicators during the year were as follows:
2024
$m
2023
$m
2022
$m
2021
$m
2020
$m
Gross premiums written
572.9
748.5
602.4
773.4
724.7
Net premiums written
572.9
748.5
602.4
773.4
724.7
Net earned premiums
643.3
719.0
677.1
728.0
370.1
Underwriting result
99.5
24.8
(50.2)
(99.1)
(67.3)
Investment return
32.4
34.2
(13.8)
(2.0)
0.6
Profit/(loss) for the financial year
131.8
59.3
(64.0)
(101.3)
(66.7)
Net claims ratio (%)
1
54.6
65.3
73.7
77.7
81.8
Net expense ratio (%)
2
29.9
31.3
33.7
35.9
36.4
Combined ratio (%)
3
84.5
96.6
107.4
113.6
118.2
1
The ratio of net claims incurred to net earned premiums.
2
The ratio of net operating expenses (both net acquisition costs and administrative expenses) to net earned premiums.
3
The total of net claims incurred and net operating expenses as a percentage of net earned premiums.
Report of the Directors of the Managing Agent (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
7
Review of the business
Underwriting
The Syndicate underwrote a 50.0% quota share of AIG’s HNW portfolio for the 2024 underwriting year
of account (2023 underwriting year of account: 70.0%). The portfolio is protected by a reinsurance
programme purchased by AIG, comprising excess of loss, quota share and facultative covers, which is
applied before premium is ceded to the Syndicate. The Syndicate did not purchase any reinsurance in
2024 (2023: nil).
In 2024, the Syndicate delivered a combined ratio of 84.5% (2023: 96.6%). The 2024 result has
benefited from favourable current year attritional claims experience and prior year claims development.
Gross Premiums Written
Gross premiums written by class of business for the calendar year were as follows:
2024
$m
2023
$m
Homeowners
372.8
487.0
Auto
103.0
137.0
Collections Fine Art
8.8
12.8
Collection General Specie
36.9
35.5
Yacht
4.7
14.2
Excess Liability
45.2
59.3
Workers Comp
1.5
2.7
Total Gross premiums written
572.9
748.5
Gross premiums written decreased by $175.6m in 2024 to $572.9m (2023: $748.5m) due to the
decrease in cession of the AIG HNW Quota Share from 70.0% to 50.0%.
Net claims
The net claims ratio for the year was 54.6% (2023: 65.3%). Net claims incurred as a percentage of net
earned premiums were as follows:
2024
2023
Current year claims – attritional (%)
52.1
56.7
Current year claims – catastrophe (%)
10.2
9.4
Change in prior years’ net claims (%)
(7.7)
(0.8)
Net claims ratio (%)
54.6
65.3
Report of the Directors of the Managing Agent (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
8
The current year attritional loss ratio of 52.1% (2023: 56.7%) reflects favourable experience on the 2023
and 2024 underwriting years of account.
Catastrophe losses in the year contributed 10.2% to the net claims ratio (2023: 9.4%). Whilst there have
been notable losses, including Hurricane Helene, Hurricane Milton and the Oklahoma Tornadoes,
overall catastrophe losses have been within the range of expectation.
The net claims ratio benefited from prior year development of $49.3m, or 7.7% of net earned premium
(2023: $5.8m, or 0.8% of net earned premium). This is a combination of favourable attritional experience
and improvements on catastrophe claims across all prior years. Refer to note 6 for further details.
Net operating expenses
Net operating expenses for the year are set out below:
2024
$m
2023
$m
Movement
$m
Net acquisition costs
180.1
202.0
(21.9)
Administrative expenses
12.3
22.4
(10.1)
Net operating expenses
192.4
224.4
(32.0)
As % of net earned premiums
%
%
%
Net acquisition expense ratio (%)
28.0
28.1
(0.1)
Administrative expense ratio (%)
1.9
3.2
(1.3)
Net expense ratio (%)
29.9
31.3
(1.4)
Net acquisition costs comprise the ceding commission as specified in the respective underwriting year
of account quota share contracts. The net acquisition ratio of 28.0% (2023: 28.1%) is a blend of costs
associated with premium earned across each underwriting year of account in the period. The quota
share acquisition ratio for the 2024 underwriting year of account is unchanged from the 2023
underwriting year of account (28.0%). Administrative expenses comprise mainly of Lloyd’s costs and
managing agency fees.
Review of the business (continued) | Net claims (continued)
Report of the Directors of the Managing Agent (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
9
Investment return
The return on Syndicate funds is shown below:
2024
$m
2023
$m
2024
Average Syndicate funds available for investment
778.3
763.3
Investment return for the year
32.4
34.2
Calendar year investment return (%)
4.2%
4.5%
Net investment return for 2024 was a profit of $32.4m (2023: profit of $34.2m) equating to a return of
4.2% (2023: return of 4.5%). Investment return includes net realised and unrealised gains of $1.7m
(2023: $16.1m) and income from investments net of expenses of $30.6m (2023: $18.1m). The
investment portfolio largely comprises investment grade fixed income securities with an average rating
of AA-. The Syndicate has increased its asset duration, resulting in an increase in the reinvestment yield.
Refer to note 9 for further details of investment income, expenses and charges.
Financial position
The Syndicate’s members’ balance was $61.2m at 31 December 2024 (2023: deficit of $46.8m). The
main components of the balance sheet are financial investments and technical provisions.
Financial investments consist primarily of debt securities, issued by governments, government
agencies, or high-grade corporate entities and comprise 94.1% of the investment portfolio (2023:
80.6%). All investments are traded within liquid markets. The fair value of investments is determined
predominantly by TUL’s investment managers, using data from a number of sources including index
providers, commercial valuation providers and broker-dealers. At 31 December 2024, the fair value of
investments was $762.3m (2023: $732.3m) and the portfolio composition, as well as further details on
valuation methodology, is shown in note 11
Technical provisions include a provision for claims outstanding of $608.9m (2023: $608.0m) and a
provision for unearned premiums of $284.5m (2023: $354.9m). Refer to note 2 for further details on the
reserving methodologies used for claims provisions and the judgements and uncertainties involved.
Capital
An internal capital model is used to set the Syndicate’s capital. The Syndicates managed by TUL comply
with Lloyd’s capital setting processes, which are described in more detail in note 4H.
Lloyd’s unique capital structure is designed to provide financial security to policyholders and capital
efficiency for members. Lloyd’s is A+ rated by A.M. Best, AA- by Fitch Ratings, AA- by Kroll Bond Rating
Agency and AA- by Standard & Poor’s. This chain of security provides the financial strength that
ultimately backs the insurance written through Lloyd’s.
Review of the business (continued)
Report of the Directors of the Managing Agent (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
10
Key components of the Lloyd’s capital structure are as follows:
All premiums received by Syndicates are held in trust
Every member is required to hold capital at Lloyd’s known as Funds at Lloyd’s (FAL); and
Central assets are available at the discretion of the Council of Lloyd’s to meet any valid claim
that cannot be met from the resources of any member.
The Syndicate, for the 2022 and prior years of account, has a number of corporate members, including
the majority participant PCG 2019 Corporate Member Limited, which is part of the AIG Group. For the
2023, 2024 and 2025 underwriting years of account, the Syndicate is wholly aligned to one member,
PCG 2019 Corporate Member Limited. The capital and solvency position of the Syndicate remains
robust with continued support from AIG, as evidenced by its commitment of capital support for the 2025
Syndicate Business Plan. The Syndicate’s 2025 underwriting plan is fully capitalised with FAL that is
entirely provided by AIG, which is A rated by A.M. Best and A+ by Fitch Ratings and Standard & Poor’s.
The Syndicate has available resources to mitigate all modelled stress scenarios.
Future developments and outlook
The Syndicate capacity for the 2025 underwriting year of account has decreased to £21.0m (2024
underwriting year of account: £498.2m). The reduction reflects the non-renewal of the PCS whole
account quota share and that, for the 2025 underwriting year of account, the Syndicate has underwritten
a quota share for the PCS Collections portfolio.
For the 2024 and prior underwriting years of account TUL will manage the orderly run-off of the liabilities
for these years. In parallel, TUL will continue to work with AIG to explore options, which may facilitate
the release of capital and reduction in costs.
For the 2025 year of account, the Syndicate will reinsure AIG’s PCS Collections portfolio on a standalone
basis with 30% participation. The Syndicate has purchased direct outwards reinsurance protection for
this business. This book will complement the Fine Art and Specie book that TUL underwrites through
Syndicate 1183, and TUL will work with AIG on additional opportunities, which would be accretive.
Principal risks and uncertainties
The principal risks and uncertainties to the Syndicate are insurance, financial, operational and climate
risks. A description of these principal risks and uncertainties, as well as details around TUL’s wider risk
management framework is set out in note 4 to the financial statements (risk management).
Review of the business (continued) | Capital (continued)
Report of the Directors of the Managing Agent (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
11
Directors
The Directors of the Managing Agent during the period from 1 January 2024 to the date of this report
were as follows:
CJR Rash
(Chief Executive)
JG Ross
(Chief Risk Officer)
RE Bean
(Chief Underwriting Officer)
RD Cowling
(Chief Financial Officer)
ME Hind
(Independent Non-executive)
DJ Batchelor
(Independent Non-executive)
KA Coates
(Independent Non-executive)
JL Hancock
(Non-executive, shareholder representative)
Former Directors who served during the period from 1 January 2024 to the date of this report were as
follows:
MEA Carpenter
(Non-executive, resigned 31 March 2024)
TA Bolt
(Non-executive, shareholder representative, resigned 31 December 2024)
Active Underwriter
AR Fox (Appointed 24 March 2024)
A Howse (Resigned 24 March 2024)
Company Secretary
JP Middleton (Appointed 5 June 2024)
M-C Gallagher (Resigned 5 June 2024)
Statutory Information
Disclosure of information to auditors
The Directors of the Managing Agent who held office at the date of approval of this report confirm that,
so far as they are each aware, there is no relevant audit information of which the Syndicate’s auditors
are unaware; and each Director has taken all the steps that they ought to have taken as a Director to
make themselves aware of any relevant audit information and to establish that the Syndicate’s auditors
are aware of that information.
Independent auditors
The Syndicate auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in
office and will be reappointed.
Annual General Meeting
Subject to the consent of the Council of Lloyd’s, it is not intended to hold a Syndicate Annual General
Meeting in 2025.
Review of the business (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
12
Statement of Managing Agent’s Responsibilities
The Directors of the Managing Agent are required by the Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008 to prepare Syndicate annual accounts at 31
December each year, which give a true and fair view of the state of affairs of the Syndicate and of the
profit or loss of the Syndicate for that year. The Directors have elected to prepare the Syndicate annual
accounts in accordance with applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Account Practice), including Financial Reporting Standard 102 “The
Financial Reporting Standard Applicable in the UK and Republic of Ireland” (FRS 102).
The Directors must not approve the accounts unless they are satisfied that they give a true and fair view
of the state of affairs of the Syndicate and of the profit or loss of the Syndicate for that period. In preparing
these accounts, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards, including FRS 102, have been followed,
subject to any material departures disclosed and explained in the Syndicate annual accounts; and
prepare the Syndicate annual accounts on the basis that the Syndicate will continue to write
business unless it is inappropriate to presume that the Syndicate will do so.
The Directors of the Managing Agent confirm that they have complied with the above requirements in
preparing the Syndicate annual accounts.
The Directors of the Managing Agent are responsible for;
keeping proper accounting records that disclose with reasonable accuracy at any time the financial
position of the Syndicate and enable them to ensure that its accounts comply with the Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008;
safeguarding the assets of the Syndicate and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities; and
the preparation and review of the iXBRL tagging that has been applied to the Syndicate annual
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.
Approved by the Board of Directors and signed on behalf of the Board.
RD Cowling, Chief Financial Officer
04 March 2025
13
Independent auditors’ report to the members of
Syndicate 2019
Report on the audit of the syndicate annual accounts
Opinion
In our opinion, Syndicate 2019’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 Annual Report and Accounts (the
“Annual Report”), which comprise: the balance sheet as at 31 December 2024; the statement of
profit or loss and other comprehensive income, 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 7, we have provided no non-audit services to the syndicate in the
period under audit.
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
14
Independent auditor’s report to the member of Syndicate 2019 (continued)
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.
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
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
15
Independent auditor’s report to the member of Syndicate 2019 (continued)
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 it is intended for the syndicate to cease
operations, or it has no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the syndicate annual accounts
Our objectives are to obtain reasonable assurance about whether the syndicate annual accounts as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these syndicate annual accounts.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect
of irregularities, including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below.
Based on our understanding of the syndicate and industry, we identified that the principal risks of non-
compliance with laws and regulations related to breaches of regulatory principles, such as those
governed by the Prudential Regulation Authority and the Financial Conduct Authority, and those
regulations set by the Council of Lloyd’s, and we considered the extent to which non-compliance might
have a material effect on the syndicate annual accounts. We also considered those laws and regulations
that have a direct impact on the syndicate annual accounts such as The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the Lloyd’s Syndicate Instructions.
We evaluated management’s incentives and opportunities for fraudulent manipulation of the syndicate
annual accounts (including the risk of override of controls), and determined that the principal risks were
related to fraud in revenue recognition and management override of controls.
Audit procedures performed by the engagement team included:
● Discussions with management, the Board, the compliance function and the Internal Audit Group
of the Managing Agent, including consideration of known or suspected instances of non-
compliance with laws and regulations, and fraud;
● Assessment of matters reported on the Managing Agent’s whistleblowing helpline relevant to
the syndicate and the results of investigations of such matters;
● Reviewing relevant meeting minutes and correspondence with regulatory authorities;
● Testing and challenging where appropriate the assumptions and judgements made in
establishing significant accounting estimates;
● Identifying and testing journal entries based on risk criteria; and
● Designing audit procedures to incorporate unpredictability around the nature, timing and extent
of testing.
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.
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
16
Independent auditor’s report to the member of Syndicate 2019 (continued)
A further description of our responsibilities for the audit of the syndicate annual accounts is located on
the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’
report.
Use of this report
This report, including the opinions, has been prepared for and only for the syndicate’s members 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.
Paul Pannell (Senior statutory auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
4 March 2025
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
17
Statement of profit or loss and other
comprehensive income:
Technical account – General business
For the year ended 31 December 2024
Note | 2024 $000 | 2023 $000 | |
Gross premiums written | 5 | ||
Outwards reinsurance premiums | |||
Premiums written, net of reinsurance | |||
Changes in unearned premium | 16 | ||
Change in the gross provision for unearned premiums | ( | ||
| Change in the provision for unearned premiums reinsurers’ share | |||
Net change in provisions for unearned premiums | ( | ||
| Earned premiums, net of reinsurance | |||
Allocated investment return transferred from the non-technical account | 9 | ||
Claims paid | |||
Gross amount | ( | ( | |
| Reinsurers’ share | |||
Net claims paid | ( | ( | |
Change in the provision for claims | 16 | ||
Gross amount | ( | ( | |
| Reinsurers’ share | |||
Net change in provisions for claims | ( | ( | |
Claims incurred, net of reinsurance | ( | ( | |
Net operating expenses | 7 | ( | ( |
| Balance on the technical account – general business |
Statement of profit or loss and other comprehensive income: (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
18
Non-technical account – General business
For the year ended 31 December 2024
*Comparative balances for the year ended 31 December 2023 have been represented – refer to note
23 to the financial statements for further details.
There was no other comprehensive income or expense in the current or prior year.
The accompanying notes from page 23 to 53 form an integral part of these financial statements.
Note | 2024 $000 | *2023$000 | |
| Balance on the technical account – general business | |||
Investment income | 9 | ||
Realised gains/(losses) on investments | 9 | ( | ( |
Unrealised gains/(losses) on investments | 9 | ||
Investment expenses and charges | 9 | ( | ( |
Total investment return | |||
Allocated investment return transferred to the general business technical account | ( | ( | |
Gain/(loss) on foreign exchange | ( | ||
Profit/(loss) for the financial year |
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
19
Balance sheet – Assets
As at 31 December 2024
Note | 2024 $000 | *2023 $000 | |
Investments | |||
Financial investments | 11 | ||
Deposits with ceding undertakings | |||
Total investments | |||
| Reinsurers’ share of technical provisions | 16 | ||
Provision for unearned premiums | |||
Claims outstanding | |||
| Total reinsurers’ share of technical provisions | |||
Debtors | |||
Debtors arising out of reinsurance operations | 12 | ||
Other debtors | 13 | ||
Total debtors | |||
Other assets | |||
Cash at bank and in hand | 19 | ||
Total other assets | |||
Prepayments and accrued income | |||
Accrued interest | |||
Deferred acquisition costs | 14 | ||
Total prepayments and accrued income | |||
Total assets |
*Comparative balances for the year ended 31 December 2023 have been represented – refer to note
23 to the financial statements for further details.
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
20
Balance sheet – Liabilities
As at 31 December 2024
Note | 2024 $000 | 2023 $000 | |
Capital and reserves | |||
| Members’ balances | ( | ||
Total capital and reserves | ( | ||
Technical provisions | 16 | ||
Provision for unearned premiums | |||
Claims outstanding | |||
Total technical provisions | |||
Creditors | |||
Creditors arising out of reinsurance operations | 17 | ||
| Reinsurers’ share of deferred acquisition costs | 14 | ||
Other creditors | 18 | ||
Total creditors | |||
Accruals and deferred income | |||
Accruals | |||
Total liabilities | |||
Total liabilities, capital and reserves |
The accompanying notes from page 23 to 53 form an integral part of these financial statements.
The financial statements on pages 17 to 53 were approved by the Board of Directors on 18 February
2025 and were signed on its behalf by;
RD Cowling, Chief Financial Officer
04 March 2025
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
21
Statement of changes in members’ balances
For the year ended 31 December 2024
| 2024 $000 | 2023 $000 | |
| Members’ balances brought forward at 1 January | ( | ( |
Total profit/(loss) for the year | ||
| Payments of profit to members’ reserve funds | ( | |
Losses collected in relation to distribution on closure of underwriting year | ||
| Members’ balances carried forward at 31 December | ( |
The members participate on the Syndicate by reference to underwriting year of account.
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
22
Statement of cash flows
For the year ended 31 December 2024
Note | 2024 $000 | 2023 $000 | |
Cash flows from operating activities | |||
Profit/(loss) for the financial year | |||
Adjustments: | |||
Increase/(decrease) in gross technical provisions | ( | ||
| Increase/(decrease) in reinsurers’ share of gross technical provisions | |||
Increase/(decrease) in debtors | ( | ||
Increase/(decrease) in creditors | ( | ||
Movement in other assets/liabilities | ( | ||
Investment return | ( | ( | |
Foreign exchange | ( | ||
Other | |||
Net cash flows from operating activities | |||
Cash flows from investing activities | |||
Purchase of equity and debt instruments | ( | ( | |
Sale of equity and debt instruments | |||
Investment income received | |||
Other | ( | ||
Net cash flows from investing activities | ( | ||
Cash flows from financing activities | |||
Cash calls from member | |||
Distribution of profit | ( | ||
Other | ( | ||
Net cash flows from financing activities | ( | ( | |
Net increase/(decrease) in cash and cash equivalents | ( | ||
Cash and cash equivalents at the beginning of the year | |||
Foreign exchange on cash and cash equivalents | |||
Cash and cash equivalents at end of year | 19 |
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
23
Notes to the financial statements
1. Basis of preparation
The financial statements of Syndicate 2019 have been prepared in accordance with the Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and applicable
Accounting Standards in the United Kingdom and the Republic of Ireland, including Financial Reporting
Standard 102 (FRS 102). FRS 102 requires the application of Financial Reporting Standard 103 (FRS
103) in relation to insurance contracts and the Lloyd’s Syndicate Accounts Instructions Version 2.0 as
modified by the Frequently Asked Questions Version 1.1 issued by Lloyd’s.
The financial statements have been prepared on the historical cost basis, except for financial assets at
fair value through profit or loss and available for sale that are measured at fair value.
The financial statements are presented in US dollars, which is also the Syndicate’s functional currency.
All amounts have been rounded to the nearest thousand, unless otherwise indicated.
Going concern
The Syndicate has financial resources to meet its financial needs and manage its portfolio of insurance
risk. The directors have continued to review the business plans, liquidity and operational resilience of
the Syndicate and are satisfied that the Syndicate is well positioned to manage its business risks in the
current economic environment. The Syndicate 2025 year of account opened and the directors have
concluded that the Syndicate has sufficient resources to, and a reasonable expectation that it will, open
a 2026 year of account. The Syndicate has sufficient capital for each year of account in its Funds at
Lloyd’s (FAL). There is no intention to cease underwriting or cease the operations of the Syndicate.
Accordingly, the directors of the Managing Agent continue to adopt the going concern basis in preparing
the annual report and financial statements.
2. Use of judgements and estimates
In preparing these financial statements, the directors of the Managing Agent have made judgements,
estimates and assumptions that affect the application of the Syndicate’s accounting policies and the
reported amounts of assets, liabilities, income and expenses.
The Syndicate makes critical judgements, estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the related actual results. The
judgements, estimates and assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year are addressed below.
Premium estimates
Significant estimates include premium written and the earning pattern of recognising premium over the
life of the policy.
Syndicate 2019 writes a single annual quota share reinsurance contract. Premium written is initially
based on estimated premium income (EPI) recognised in full at inception based on what will be
ultimately written under the contract.
The premium ceded to, and recognised by, the Syndicate under the quota share contract is net of
deemed reinsurance outlined within the quota share reinsurance contract and applied by the cedent
prior to cession to the Syndicate. The cedent’s reinsurance programme is not exclusive to the portfolio
of business ceded under the quota share contract and thus the reinsurance applied prior to cession to
the Syndicate represents an allocation of the total deemed reinsurance coverage the cedent has
purchased.
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
24
Premium written is provided quarterly by AIG, which will include actuals and estimates for future months
of the underwriting year, and is adjusted to actual as the underwriting year develops. Premium estimates
will also include estimates for the reinsurance applied before the cession of premium. These reinsurance
cost estimates will include allocation to the business ceded under the quota share as well as allocation
to underwriting year.
Premium estimates are reviewed at least quarterly. Quarterly EPI reflects actual underlying written
premium and forecast for future months, which are compared to plan and previous quarters’ actuals for
reasonableness. The allocation of reinsurance applied by AIG prior to cession is validated against
modelling outputs as well as placing broker analysis. Premium estimates are subject to review and
approval by the Active Underwriter and Reserve Committee. A source of uncertainty arises from the fact
that, at any given point in time, the EPI could be different to final signed premium thereby leading to an
adjustment that could be material.
Premium is earned on a straight-line basis for underlying AIG policies, which have been ceded under
the quota share contract.
Claims provisions
Significant estimates include the estimate for insurance losses incurred but not reported (IBNR), which
is included in claims outstanding in the balance sheet. If this estimation were to prove inadequate then
a loss would arise in future years. The total gross IBNR at 31 December 2024 is $386.9m (2023:
$384.3m).
The process for estimating claims provisions considers key sources of uncertainty around the following:
The allocation of claims liabilities by underwriting year prior to cession to the Syndicate;
Future development of inward claims, both reported but unsettled, and ultimate IBNR;
Estimates of claims liabilities for catastrophe events;
The splits of future claim liabilities between earned and unearned exposures.
These significant estimates are made using data, assumptions, models and expert judgement by in-
house actuarial, claims and underwriting personnel and adopted only after suitable discussion and
challenge from management, through the Reserve Committee, and the Audit Committee. The data and
analysis used includes:
Quarterly cedent updates on expected premium volumes and rating levels in light of business
written and prevalent market conditions;
Quarterly claims and premium data, both gross and net of reinsurance, with the claims data being
both paid and reported and being segmented by the Syndicate’s classes of business and between
attritional and catastrophe losses;
Ongoing monitoring of actual emerging claims experience relative to that expected from the
reserving model, with quarterly monitoring of the ongoing suitability of the actuarial reserving
assumptions in light of the emerging experience; and
Annual detailed reviews of actuarial assumptions used in the reserving model, including discussion
of the impact of any material changes in the business mix, rate movements, underwriting strategies,
reinsurance protection, etc., on these assumptions.
The Syndicate incurred to ultimate development of catastrophe claims can take longer to develop
due to the nature of the portfolio and coverage being provided for AIG HNW clients. The estimates
of claims provisions allow for alternative living costs and building code changes.
Deemed inuring reinsurance protection on the AIG HNW portfolio applies before cession to the
Syndicate. Catastrophe and other claims may therefore develop up to a specific retention. The
2. Use of judgements and estimates | Claims provisions (continued) 2. Use of judgements and estimates | Claims provisions (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
25
retention and limit of the deemed inuring reinsurance coverage varies depending on the type of
coverage and US state.
TUL receives the reserve data from the cedent and reviews these assumptions and judgements. TUL’s
Reserve Committee sets the claims liability provisions on a best estimate, undiscounted basis.
3. Significant accounting policies
The following significant accounting policies have been applied consistently in dealing with items which
are considered material in relation to the Syndicate’s financial statements.
A. Gross premiums written
Gross premiums written comprise premiums on contracts incepted during the financial year as well as
adjustments made in the year to premiums written in prior accounting periods. 2020, 2021, 2022, 2023
and 2024 each comprise a single quota share contract incepting on 1 January, which renews annually.
Premiums are shown gross of acquisition costs. Premiums include estimated amounts of premium due
but not yet received or notified.
B. Unearned premiums
Written premiums are recognised as earned according to the risk profile of the policy. Unearned
premiums represent the proportion of premiums written that relate to unexpired terms of policies in force
at the balance sheet date. The provision for unearned premiums is calculated on a pro rata basis. The
Syndicate underwrites risks attaching during (RAD) contracts for which premiums are earned in line with
the gross premiums to which the risk attaching contract relates.
C. Acquisition costs
Acquisition costs comprise the ceding commission as specified in the respective underwriting year of
account quota share contracts. The acquisition ratio is a blend of costs associated with premium earned
across each year of account in the period. The quota share acquisition ratio of 28.0% for the 2024
underwriting year of account is unchanged from the 2023 underwriting year of account. The deferred
acquisition cost asset represents the proportion of acquisition costs, which corresponds to the proportion
of gross premiums written that is unearned at the balance sheet date.
D. Reinsurance
Outwards reinsurance premiums written comprise premiums for contracts incepted during the financial
year as well as adjustments made in the year to outwards reinsurance premiums written in prior
accounting periods. There has been no outwards reinsurance since the inception of the Syndicate.
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
26
E. Claims provisions and related reinsurance recoveries
Provision is made at the year-end for the estimated cost of unpaid claims incurred.
In calculating the claims provisions, the Syndicate uses generally accepted estimation techniques
applied to underwriting year of account data, usually based upon analyses of historical experience,
which assume that the development pattern of future 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 alter when compared with the cost of those
previously settled. Catastrophe and Large claims that impact specific classes of business are assessed
and measured on a case by case basis or projected separately.
The Syndicate writes a mix of predominantly short tail business, wherein most of the claims are settled
within relatively few years following the writing of the policy. A proportion of the Syndicate’s short tail
business is, however, low frequency and high severity in nature, which increases the volatility of the
data.
For longer tail business, where there are liability exposures, the time from the occurrence of a claim to
it being reported and the subsequent time before settlement of the claim can be many years. In this
time, additional facts regarding individual claims and trends often will become known and legislation and
case law may change, affecting the ultimate value of the claim.
Provisions are calculated net of any reinsurance recoveries. There has been no outwards reinsurance
since inception of the Syndicate.
Net ultimate claims provision are split between earned and unearned components, based upon earned
exposure at the balance sheet date.
The factors above bring considerable uncertainty to the process of estimating earned ultimate losses
and earned claims provisions.
The Directors consider that the claims provisions are fairly stated on the basis of the information
currently available to them. However, the ultimate liability may vary as a result of subsequent information
and this may result in significant adjustments in future years to the amounts provided.
F. Unexpired risks provision
Provision is made for unexpired risks arising from general insurance contracts where the expected value
of claims and expenses attributable to the unexpired periods of policies in force at the balance sheet
date exceeds the unearned premiums provision in relation to such policies (after the deduction of any
deferred acquisition costs). The provision for unexpired risks is calculated at the whole account level
and by underwriting year of account, after taking into account relevant investment return. The Syndicate
reinsures a single annual reinsurance contract and all business is reinsured together under one contract.
There are no unexpired risk provisions to be reported in the current or prior year.
G. Foreign currencies
Transactions in foreign currencies are translated to the functional currency using the exchange rates at
the date of the transactions. The Syndicate’s monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the rates of exchange at the balance sheet date.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value
are retranslated to the functional currency at the exchange rate at the date that the fair value was
determined. Non-monetary items denominated in foreign currencies that are measured at historical cost
are translated to the functional currency using the exchange rate at the date of the transaction. For the
purposes of foreign currency translation, unearned premiums and deferred acquisition costs are treated
as if they are monetary items.
Differences arising on translation of foreign currency amounts relating to the insurance operations of the
Syndicate are included in the non-technical account. Differences arising on translation from the
functional currency to the presentational currency are recognised in other comprehensive income.
3. Significant accounting policies (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
27
H. Financial assets and liabilities
In applying FRS 102, the Syndicate has chosen to apply the recognition and measurement provisions
of Chapters 11 and 12 of FRS 102.
i. Classification
The accounting classification of financial assets and liabilities determines the way in which they are
measured and changes in those values are presented in the statement of profit or loss and other
comprehensive income. Financial assets and liabilities are classified on their initial recognition.
The initial classification of a financial instrument shall take into account contractual terms including those
relating to future variations. Once the classification of a financial instrument is determined at initial
recognition, re-assessment is only required subsequently when there has been a modification of
contractual terms that is relevant to an assessment of the classification.
Financial assets and financial liabilities at fair value through profit and loss comprise financial assets
and financial liabilities held for trading and those designated as such on initial recognition. Investments
in shares and other variable yield securities and debt and other fixed income securities are designated
as at fair value through profit or loss on initial recognition, as they are managed on a fair value basis in
accordance with the Syndicate’s investment strategy.
Deposits with credit institutions, debtors, and accrued interest are classified as loans and receivables.
ii. Recognition
Financial instruments are recognised when the Syndicate becomes a party to the contractual provisions
of the instrument. Financial assets are derecognised if the Syndicate’s contractual rights to the cash
flows from the financial assets expire or if the Syndicate transfers the financial asset to another party
without retaining control of substantially all risks and rewards of the asset. A financial liability is
derecognised when its contractual obligations are discharged, cancelled or expired.
Purchases and sales of financial assets are recognised and derecognised, as applicable, on the trade
date, i.e., the date that the Syndicate commits itself to purchase or sell the asset.
iii. Measurement
A financial asset or financial liability is measured initially at fair value plus, for a financial asset or financial
liability not at fair value through profit or loss, transaction costs that are directly attributable to its
acquisition or issue.
Financial assets at fair value through profit or loss are measured at fair value with fair value changes
recognised immediately in profit or loss. Net gains or net losses on financial assets measured at fair
value through profit or loss includes foreign exchange gains/losses arising on their translation to the
functional currency but excludes interest and dividend income.
Loans and receivables and financial liabilities are measured at amortised cost, except Syndicate Loans
to the Central Fund which are measured at fair value through profit or loss.
iv. Identification and measurement of impairment
At each reporting date the Syndicate assesses whether there is objective evidence that financial assets
not at fair value through profit or loss are impaired. Financial assets are impaired when objective
evidence demonstrates that a loss event has occurred after the initial recognition of an asset, and that
the loss event has an impact on the future cash flows of the asset that can be estimated reliably.
Objective evidence that financial assets are impaired includes observable data that comes to the
attention of the Syndicate about any significant financial difficulty of the issuer, or significant changes in
the technological, market, economic or legal environment in which the issuer operates.
3. Significant accounting policies (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
28
Impairment losses on available for sale financial assets are recognised by reclassifying the losses
accumulated in other comprehensive income to profit or loss. The net cumulative loss that is reclassified
from other comprehensive income to profit or loss is the difference between the acquisition cost, net of
any principal repayment, and the current fair value, less any impairment loss recognised previously in
profit or loss. If, in a subsequent period, the fair value of an impaired available for sale debt security
increases and the increase can be related objectively to an event occurring after the impairment loss
was recognised, the impairment loss is reversed through profit or loss. Otherwise it is reversed through
the statement of comprehensive income.
v. Off-setting
Financial assets and financial liabilities are offset, and the net amount presented in the balance sheet
when, and only when, the Syndicate has a legal right to set off the amounts and intends either to settle
on a net basis or to realise the asset and settle the liability simultaneously.
I. Investment return
Investment return comprises investment income and movements in unrealised gains and losses on
financial instruments at fair value through profit or loss, less investment management expenses, interest
expense, realised losses and impairment losses. Investment income comprises interest income,
dividends receivable and realised investment gains.
For the purpose of separately presenting investment income and unrealised gains and losses for
financial assets at fair value through profit or loss, interest income is calculated using the effective
interest method excluding transaction costs that are expensed when incurred. For investments at fair
value through profit or loss, realised gains and losses represent the difference between the net proceeds
on disposal and the purchase price.
Unrealised investment gains and losses 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. Movements in unrealised investment gains and losses comprise the increase/decrease in the
reporting period in the value of the investments held at the reporting date and the reversal of unrealised
investment gains and losses recognised in earlier reporting periods in respect of investment disposals
of the current period.
Investment return is initially recorded in the non-technical account. The return is typically transferred in
full to the general business technical account to reflect the investment return on funds supporting
underwriting business.
J. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of three months
or less from the acquisition date that are subject to an insignificant risk of changes in fair value and are
used by the Syndicate in the management of its short-term commitments.
Cash and cash equivalents are carried at amortised cost in the balance sheet.
Bank overdrafts that are repayable on demand and form an integral part of the Syndicate’s cash
management are included as a component of cash and cash equivalents for the purpose of the
statement of cash flows.
K. Taxation
Under Schedule 19 of the Finance Act 1993 Managing Agents are not required to deduct basic rate
income tax from trading income. In addition, all UK basic rate income tax deducted from Syndicate
investment income is recoverable by managing agents and consequently the distribution made to
members or their members’ agents is gross of tax. Capital appreciation falls within trading income and
is also distributed gross of tax.
3. Significant accounting policies | H. Financial assets and liabilities, iv. Identification & measurement (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
29
No provision has been made for any United States Federal Income Tax payable on underwriting results
or investment earnings. Any payments on account made by the Syndicate during the year have been
included in the balance sheet under the heading ‘other debtors’.
No provision has been made for any other overseas tax payable by members on underwriting results.
L. Profit commission
Profit commissions payable to the managing agent, which are expected to arise on closure of a Lloyd’s
year of account, are recognised on an accruals basis, taking into consideration any deficit clauses. The
managing agent’s charges for the 2024, 2023, 2022 and 2021 years of account do not include profit
commission.
M. Operating expenses
Syndicate operating expenses are allocated to the year of account for which they are incurred. Where
expenses incurred in a financial year do not relate to any specific year of account they are apportioned
between years of account based the volume of business transacted.
N. Debtors and creditors
Insurance debtors and creditors include amounts due to and from brokers and contract holders. These
are classified as insurance debtors and creditors as they are non-derivative financial assets with fixed
or determinable payments that are not quoted on an active market.
Other debtors principally consist of sundry debtors and are carried at amortised cost.
Other creditors principally consist of amounts due to related entities and other sundry payables. These
are stated at amortised cost.
O. Classification of insurance and reinsurance contracts
Insurance and reinsurance contracts are classified as insurance contracts where they transfer significant
insurance risk. If a contract does not transfer significant insurance risk it is classified as a financial
instrument. All of the Syndicates written contracts and purchased reinsurance contracts transfer
significant insurance risk and therefore are recognised as insurance contracts.
P. Comparative disclosure
Certain comparative balances for the year ended 31 December 2023 have been represented following
changes to the presentation of the financial statements as required by the Society of Lloyd’s reporting
requirements. The changes are detailed in note 23.
3. Significant accounting policies | K. Taxation (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
30
4. Risk and capital management
A. Introduction and overview
This note presents information about the nature and extent of insurance, financial, operational and
climate change risks to which the Syndicate is exposed, the Managing Agent’s objectives, policies and
processes for measuring and managing insurance and financial risks, and for managing the Syndicate’s
capital.
B. Risk governance
The Managing Agent for the Syndicate, TUL, is responsible for the management of risk at the Syndicate
level. The Board has overall responsibility for the establishment and oversight of the Syndicate’s risk
management framework. Risk management policies and procedures are established to identify and
analyse the risks faced by the Syndicate, to set appropriate risk appetite, limits and controls, and to
monitor risks and adherence to limits. The Board has established a Risk and Compliance Committee to
oversee the operation of the Syndicate’s risk management framework and to review and monitor the
management of the risks to which the Syndicate is exposed.
Risk oversight by the Board Risk and Compliance Committee is supplemented by specific risk oversight
from three other Board sub-committees: the Audit Committee for reserving, financial reporting, market,
credit and liquidity risks; the Underwriting Committee for underwriting, reinsurance and systemic risks;
and the People and Remuneration Committee for people risks.
All material risks are recorded on a comprehensive risk register for the Syndicate and TUL and are
managed by the business in line with the established set of risk appetite limits, risk policies and
procedures, monitoring and mitigations, enabling new risks to be identified and new controls to be put
in place as necessary either to reduce the likelihood of a risk event or to mitigate its impact once it has
happened.
Executive oversight of the risk management framework is delegated to the Chief Executive Officer, who
is responsible for ensuring that risk management is embedded as part of TUL’s culture and that risks
are properly managed and mitigated through appropriate controls, operating effectively.
The Chief Executive Officer has formed an Executive Committee to support the discharge of the duties
delegated from the Board. The Executive Committee oversees the management of the key risks with
regard to strategy and relationships with key stakeholders and has established a number of
management committees that support oversight of how risk is managed by the business including the
following:
Syndicate 2019 Steering Committee (responsible for general oversight of the Syndicate)
Reserve Committee (responsible for overseeing reserve risk);
Aggregation Risk Committee (responsible for overseeing systemic risk);
Finance Committee (responsible for overseeing credit risk (excluding investments), liquidity risk,
currency matching risk and financial reporting and process risk);
Sustainability Committee (responsible for developing and embedding the framework for overseeing
climate change risk);
Investment Committee (responsible for overseeing market risk and credit risk with regard to
investments);
Operational Risk Committee (responsible for overseeing operational risks); and
Internal Model Governance Committee (responsible for overseeing the Internal Model).
4. Risk and capital management (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
31
C. Insurance risk
Insurance risk is defined as the risk of actual claims experience and/or policyholder behaviour being
materially different than initially expected at the inception of an insurance contract or at the latest
valuation. Uncertainties related to insurance risk can lead to deviations in magnitude and/or time of
prospective cash flows associated with the Syndicate’s liabilities compared to what is expected.
Insurance risk can be categorised into underwriting risk and reserve risk.
a. Underwriting risk
Underwriting risk is the risk that in aggregate insurance premiums will not be sufficient to cover future
insurance claims and associated expenses. This might arise because premiums are set too low for the
cover provided, or because the actual timing, frequency, severity or aggregation of claims events is
higher than was expected during the underwriting process.
i. Management of underwriting risk
Underwriting risk arises from differences in timing, frequency and severity of insured events, relative to
expectations at the time of underwriting, as well as inappropriate pricing, selection and approval of
insurance risks. The AIG business plan, including the deemed reinsurance, for the prospective year of
account is reviewed in depth prior to underwriting the quota share contract. The business ceded to the
Syndicate is after the application of the deemed reinsurance to arrive at an acceptable level of risk. The
Board reviews the deemed reinsurance structure at least annually to determine whether any additional
reinsurance is required at a Syndicate level. Underwriting strategy is agreed by the Board and is set out
in the Syndicate business plan that is submitted to the Society of Lloyd’s for approval each year.
Underwriting is aligned with the Syndicate’s strategy, agreed business plan and underwriting policy.
The nature of the business exposes the Syndicate to various kinds of natural disaster, such as
hurricanes, windstorms, hailstorms, flooding, earthquakes, wildfires, and other catastrophes, in which
multiple losses can occur and affect multiple lines of business in any given year. TUL’s Risk Appetite
Framework establishes and maintains appropriate limits on the material risks identified. A significant
proportion of the natural catastrophe-related risks that are underwritten by AIG are renewed on an
annual basis. This provides the opportunity to regularly re-underwrite and re-price the risk. TUL, in
combination with AIG, uses a blend of proprietary and third-party risk models to help better understand
the frequency and severity of natural catastrophe risk. TUL and AIG have assembled a collection of
hazard and engineering data, client and industry exposure, and loss information all of which have been
used to analyse the external catastrophe models, inform catastrophe model selections, and support
catastrophe model calibrations which form the in-house view of catastrophe risk. For weather perils TUL
models the following: 1) hurricanes including storm surge, 2) floods, 3) wildfires, 4) severe convective
storms, and 5) winter storms. TUL has a clear approach for how catastrophe risk is represented in the
Internal Model and this includes validation and governance around model selection, model peril
evaluation, model use, and model change. Wider climate risk impacts to the Syndicate and their
mitigation are detailed in note 4(f) below.
b. Reserve risk
Reserve risk is the risk that the reserves established in respect of insurance claims and claim expenses
incurred at the balance sheet date, whether reported or incurred but not reported (IBNR), are insufficient
to settle those claims and associated expenses in full. The level of uncertainty in the reserves set can
vary significantly across lines of business. It can arise from inadequate reserving data and processes
or from the naturally uncertain progress of insurance events.
i. Management of reserve risk
The Syndicate has exposure to volatile lines of business that carry inherent risk that the ultimate claims
settlement will vary from previous assessments of reserves. The Syndicate reserves are annually
subject to a formal independent actuarial opinion. The actuarial opinions are covered by a combination
of formal Actuarial Professional Standards and specific Lloyd’s guidance and rules.
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
32
Note 2 contains additional details around the key judgements and uncertainties involved in the estimate
for claims provisions as well as how these are managed and overseen. The Syndicate also has in place
detailed procedures and controls to manage and monitor the handling and assessment of claims and
the setting of appropriate reserves. Note 15 includes further detail on claims provisions and claims
development triangles.
The Syndicate’s quarterly reserves are reviewed and approved by the Reserve Committee, reporting to
the Executive Committee, and overseen by the Audit Committee. The Syndicate reserves are also
subject to an annual, independent statement of actuarial opinion (SAO). The work of the in-house
actuarial team and of the third-party actuaries providing the SAO is carried out in compliance with the
relevant principles, guidance and rules published by Lloyd’s, with the formal Actuarial Professional
Standards published by the Institute and Faculty of Actuaries, and with the Technical Actuarial
Standards published by the Financial Reporting Council (FRC).
ii. Sensitivity to reserve risk
The reserves established could ultimately prove to be significantly lower or higher than the actual cost
of settling the claims arising. This level of uncertainty varies between classes of business and the nature
of the risk being underwritten and can arise from developments in case reserving for large losses and
catastrophes, or from changes in estimates of claims IBNR.
The following table illustrates the sensitivity of the insurance reserves disclosed in the accounts to
movements in the assumptions applied within the reserving process. Given the nature of the business
underwritten by the Syndicate, the approach to calculating the reserves for each class can vary and as
a result the sensitivity performed is to apply a beneficial and adverse risk margin to the total insurance
liability.
The amount disclosed in the table represents the profit or loss impact of an increase or decrease in the
insurance liability, gross and net of reinsurance, as a result of applying the sensitivity, being a 5%
increase or decrease in the loss ratio.
General insurance business sensitivities as at
31 December 2024
+5.0%
$000
-5.0%
$000
Claims outstanding – gross of reinsurance
32,164
(32,164)
Claims outstanding – net of reinsurance
32,164
(32,164)
General insurance business sensitivities as at
+5.0%
$000
-5.0%
$000
Claims outstanding – gross of reinsurance
35,948
(35,948)
Claims outstanding – net of reinsurance
35,948
(35,948)
D. Financial risk
The focus of financial risk management for the Syndicate is ensuring that the proceeds from its financial
assets are sufficient to fund the obligations arising from its insurance contracts. The goal of the
investment management process is to optimise the risk-adjusted investment income and risk-adjusted
total return by investing in a diversified portfolio of securities, whilst ensuring that the syndicate can meet
its liabilities as they fall due.
a. Credit risk
Credit risk is defined as the risk that our customers or counterparties are unable or unwilling to repay
their contractual obligations when they become due. Credit risk may also result from a downgrade of a
counterparty’s credit ratings or a widening of its credit spreads.
The Syndicate is exposed to credit risk across its asset portfolio.
4. Risk and capital management | A. Insurance risk (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
33
The nature of the Syndicate’s exposures to credit risk and its objectives, policies and processes for
managing credit risk have not changed significantly from the prior year.
i. Management of credit risk
Investment counterparties
Investment guidelines require that the Syndicate’s investments are held in high quality instruments. The
portfolio is monitored for concentration with respect to issuers and credit ratings. Credit risk exposures
are calculated regularly and compared with authorised credit limits before further transactions are
undertaken with counterparties. Of the investments and cash balances as at 31 December 2024, 77%
are with counterparties having a credit agency rating of A or better (2023: all balances A or better).
Broker and coverholder counterparties
The quota share contract is entirely written through Aon plc, which has a credit rating of A- (2023: A-).
The Syndicate has no premiums receivable that are past due at the reporting date (2023: nil).
ii. Exposure to credit risk
The carrying amount of financial assets represents the maximum credit risk exposure.
The following table analyses the credit rating by investment grade of the Syndicate’s following assets:
31 December 2024
AAA
$000
AA
$000
A
$000
BBB
$000
Other
$000
Not rated
$000
Total
$000
Debt securities and other fixed
income securities
-
409,963
241,063
61,247
-
-
712,273
Shares and other variable yield
securities
40,134
-
-
-
-
-
40,134
Lloyd’s overseas deposits
2,795
941
575
320
-
-
4,631
Syndicate loans to Central Fund
-
-
-
-
-
5,219
5,219
Debtors arising out of reinsurance
operations
-
-
-
-
-
61,914
61,914
Other debtors and accrued interest
-
-
-
-
-
10,187
10,187
Cash at bank and in hand
-
-
44,808
-
-
-
44,808
Total
42,929
410,904
286,446
61,567
-
77,320
879,166
4. Risk and capital management | B. Financial risk, a. Credit risk (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
34
31 December 2023
AAA
$000
AA
$000
A
$000
BBB
$000
Other
$000
Not
rated
$000
Total
$000
Debt securities and
other fixed income
securities
13,376
411,485
161,586
-
-
-
586,447
Shares and other variable
yield securities
134,466
-
-
-
-
-
134,466
Lloyd’s overseas deposits
3,839
1,339
760
454
-
-
6,392
Syndicate loans to the
Central Fund
-
-
-
-
-
5,034
5,034
Debtors arising out of
reinsurance operations
-
-
-
-
-
74,049
74,049
Other debtors and accrued
interest
-
-
-
-
-
14,730
14,730
Cash at bank and in hand
-
-
919
-
-
-
919
Total
151,681
412,824
163,265
454
-
93,813
822,037
Comparative balances for the year ended 31 December 2023 have been represented – refer to note 23 to the
financial statements for further details.
iii. Financial assets that are past due or impaired
There are no other assets that are past due at the reporting date.
Neither past due nor
impaired assets
Past due but not
impaired assets
Total
31 December 2024
$000
$000
$000
Debt securities and other fixed income securities
712,273
-
712,273
Shares and other variable yield securities
40,134
-
40,134
Debt funds
-
-
-
Lloyd’s overseas deposits
4,631
-
4,631
Syndicate loans to the Central Fund
5,219
-
5,219
Debtors arising out of reinsurance operations
61,914
-
61,914
Other debtors and accrued interest
10,187
-
10,187
Cash at bank and in hand
44,808
-
44,808
Total
879,166
-
879,166
4. Risk and capital management | B. Financial risk, a. Credit risk (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
35
Neither past due nor
impaired assets
Past due but not
impaired assets
Total
31 December 2023
$000
$000
$000
Debt securities and other fixed income securities
586,447
-
586,447
Shares and other variable yield securities
134,466
-
134,466
Debt funds
-
-
-
Lloyd’s overseas deposits
6,392
-
6,392
Syndicate loans to the Central Fund
5,034
-
5,034
Deposits with ceding undertakings
-
-
-
Debtors arising out of reinsurance operations
74,049
-
74,049
Other debtors and accrued interest
14,730
-
14,730
Cash at bank and in hand
919
-
919
Total
822,037
-
822,037
Comparative balances for the year ended 31 December 2023 have been represented – refer to note 23 to the
financial statements for further details.
b. Liquidity risk
Liquidity risk is defined as the risk that the Syndicate's financial condition will be adversely affected by
the inability or perceived inability to meet its short-term cash, collateral or other financial obligations as
they come due.
The Syndicate is exposed to quarterly calls on its available cash resources from claims arising from its
reinsurance contract. The nature of the Syndicate’s exposures to liquidity risk and its objectives, policies
and processes for managing liquidity risk have not changed significantly from the prior year.
i. Management of liquidity risk
The Syndicate’s goal for approach to managing liquidity risk is to ensure, as far as possible, that it will
always have sufficient liquidity to meet its liabilities when they fall due, under both normal and stressed
conditions.
The Syndicate’s approach to managing its liquidity risk is as follows:
Forecasts are prepared and reviewed on a regular basis to predict cash outflows from insurance
contracts over the short, medium and long term, in both normal and stressed circumstances;
The Syndicate regularly reviews stress tests to ensure that adequate liquid financial resources
are in place to meet obligations as they fall due in the event of reasonably foreseeable abnormal
circumstances.
Syndicate cash flow forecasts are reviewed periodically by the Finance Committee. Liquidity is
also considered periodically by the Finance Committee, the Audit Committee and the Board,
when reviewing asset allocation constraints within the investment guidelines.
After 1 October 2022, no collateral is required to be posted to the Credit for Reinsurance Trust Fund
(CRTF). All of the Syndicate’s business is in scope of CRTF requirements. With no ongoing requirement
from this date, funds have been released from the trust, which have resulted in improvement in the
Syndicate’s liquidity during the 2023 and 2024 financial years.
4. Risk and capital management | B. Financial risk (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
36
ii. Maturity analysis of syndicate liabilities
The maturity analysis presented in the table below shows the remaining contractual maturities for the
Syndicate’s insurance contracts and financial instruments. For insurance and reinsurance contracts, the
contractual maturity is taken to be the estimated date when the final gross undiscounted contractually
required cash flows will occur. For financial liabilities, it is taken to be the earliest date on which the
gross undiscounted cash flows (including contractual interest payments) could be paid assuming
conditions are consistent with those at the reporting date.
At 31 December 2024, the average duration of Syndicate funds to maturity was 2.3 years (2023: 1.8
years) compared to 1.9 years (2023: 2.5 years) for Syndicate claims outstanding.
Undiscounted net cash flows
31 December 2024
No maturity stated
$000
0-1 yrs
$000
1-3 yrs
$000
3-5 yrs
$000
>5 yrs
$000
Total
$000
Claims outstanding
-
299,300
198,941
78,207
32,445
608,893
Creditors
-
1,709
-
-
-
1,709
Total
-
301,009
198,941
78,207
32,445
610,602
Undiscounted net cash flows
31 December 2023
No maturity stated
$000
0-1 yrs
$000
1-3 yrs
$000
3-5 yrs
$000
>5 yrs
$000
Total
$000
Claims outstanding
-
333,478
187,496
63,077
23,998
608,049
Creditors
-
3,186
-
-
-
3,186
Total
-
336,664
187,496
63,077
23,998
611,235
c. Market risk
Market risk is defined as the risk of adverse impact due to systemic movements in one or more of the
following market risk drivers: equity and commodity prices, residential and commercial real estate
values, interest rates, credit spreads, foreign exchange, inflation, and their respective levels of
uncertainty. Market risk can also be brought on by political turmoil, natural disasters, and terrorist
attacks.
The objective of market risk management is to manage and control market risk exposure within the
Board’s risk appetite, while optimising the return on risk subject to preserving capital. The nature of the
Syndicate exposure to market risk and its objectives, policies and processes for managing market risk
have not changed significantly from the prior year.
i. Management of market risks
For each of the major components of market risk the Syndicate has policies and procedures in place
which detail how each risk should be managed and monitored. The management of each of these major
components of major risk and the exposure of the Syndicate at the reporting date to each major risk are
outlined below.
Interest rate risk
This is the risk that an increase in interest rates or volatility in the fixed income markets could result in
significant unrealised or realised losses in the market value of the investment portfolio. The Syndicate
is exposed to interest rate risk arising on interest bearing assets. Assets with floating interest rates
expose the Syndicate to cash flow interest rate risk. Fixed interest rate assets expose the Syndicate to
fair value risk. The Syndicate’s strategy is to invest in high quality, liquid, fixed and floating rate interest
4. Risk and capital management | B. Financial risk (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
37
securities and cash and actively to manage duration. The investment portfolios are actively managed
to achieve a balance between cash flow interest rate risk and fair value interest rate risk bearing in mind
the need to meet the liquidity requirements of the business.
Currency risk
This is the risk that foreign exchange rate movements could impact the valuation of assets and liabilities
in the Syndicate’s reporting currency. The Syndicate’s results are reported in US dollars and assets and
liabilities are held primarily in US dollars . Therefore, there is minimal risk that fluctuations in exchange
rates would have a significant effect on the Syndicates results and net assets.
The profile of the assets and liabilities, categorised by currency at their translated carrying amounts is
as follows:
Sterling
US dollar
Euro
Canadian
dollar
Australian
dollar
Other
Total
31 December 2024
$000
$000
$000
$000
$000
$000
$000
Financial Investments
5,219
757,038
-
-
-
-
762,257
Debtors
1,398
63,162
-
-
-
-
64,560
Other assets
100
44,708
-
-
-
-
44,808
Prepayments and accrued
income
-
87,213
-
-
-
-
87,213
Total assets
6,717
952,121
-
-
-
-
958,838
Technical provisions
-
(893,434)
-
-
-
-
(893,434)
Creditors
(167)
(1,542)
-
-
-
-
(1,709)
Accruals and deferred income
(812)
(1,673)
-
-
-
-
(2,485)
Total liabilities
(979)
(896,649)
-
-
-
-
(897,628)
Total capital and reserves
5,738
55,472
-
-
-
-
61,210
Sterling
US dollar
Euro
Canadian
dollar
Australian
dollar
Other
Total
31 December 2023
$000
$000
$000
$000
$000
$000
$000
Financial Investments
5,034
727,305
-
-
-
-
732,339
Debtors
706
84,400
-
-
-
-
85,106
Other assets
341
578
-
-
-
-
919
Prepayments and accrued
income
-
103,055
-
-
-
-
103,055
Total assets
6,081
915,338
-
-
-
-
921,419
Technical provisions
-
(962,986)
-
-
-
-
(962,986)
Creditors
(1,084)
(2,102)
-
-
-
-
(3,186)
Accruals and deferred income
(601)
(1,412)
-
-
-
-
(2,013)
Total liabilities
(1,685)
(966,500)
-
-
-
-
(968,185)
Total capital and reserves
4,396
(51,162)
-
-
-
-
(46,766)
Comparative balances for the year ended 31 December 2023 have been represented – refer to note 23 to the
financial statements for further details.
4. Risk and capital management | B. Financial risk, c. Market risk (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
38
ii. Sensitivity analysis to market risks
The analysis below considers reasonably possible movements in market indices on financial
instruments with all other variables held constant, showing the impact on the profit or loss and on the
members’ balance due to the ensuing changes in fair value of financial assets and liabilities (whose fair
values are recorded in the profit and loss account).
2024
Impact on
results
$000
2024
Impact on
members’
balances
$000
*2023
Impact on
results
$000
*2023
Impact on
members’
balances
$000
Interest rate risk
+ 50 basis points shift in yield curves
(9,464)
(9,464)
(6,692)
(6,692)
- 50 basis points shift in yield curves
9,464
9,464
6,692
6,692
*Comparative balances for the year ended 31 December 2023 have been represented – refer to note 23 to the
financial statements for further details.
A 50 basis point increase (or decrease) in yield curves have been selected on the basis that these are
considered to be reasonably possible changes in these risk variables over the following year.
The sensitivity analysis demonstrates the effect of a change in a key variable while other assumptions
remain unchanged. However, the occurrence of a change in a single market factor may lead to changes
in other market factors as a result of correlations.
Additionally, the sensitivity analysis is based on the Syndicate’s financial position at the reporting date
and that may vary at the time that any actual market movement occurs. For example, the sensitivity
analysis does not take into consideration that the Syndicate’s financial investments are actively
managed and if investment markets move past pre-determined trigger points, actions may be taken
which would alter the Syndicate’s position.
4. Risk and capital management | B. Financial risk, c. Market risk (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
39
E. Operational risk
Operational risk is defined as the risk of loss, or other adverse consequences, resulting from inadequate
or failed internal processes, people, systems, or from external events. Operational risk includes legal,
regulatory, technology, compliance, third-party and business continuity risks, but excludes business and
strategy risks.
Operational risks are managed by the business, reported and reviewed quarterly at the Operational Risk
Committee, reporting to the Executive Committee, and overseen by the Board’s Risk and Compliance
Committee.
During the year, particular attention was focused on transformation risk following the sale of Validus to
RenaissanceRe in November 2023 and on operational resilience in preparation for the regulatory
deadline in March 2025.
Transformation risk
Prior to the sale of Validus to RenaissanceRe, TUL shared IT infrastructure and support functions with
Validus Re. The sale of Validus necessitated an acceleration in the separation of TUL from Validus’ IT
infrastructure and support functions and migration to AIG’s. This process involves material
transformation risk, which is being carefully managed. Once complete it will facilitate closer strategic
and operational alignment of TUL with AIG, including full IT connectivity between TUL and AIG with
greater efficiency and reduced duplication of systems, applications and tools. TUL will have reliance on
the same third parties as AIG and will benefit from a managed IT infrastructure service, while retaining
high-level oversight of the IT environment and overall accountability for the IT infrastructure services
provided to TUL by AIG.
To effect the transformation, TUL established detailed implementation plans for this work in late 2023
and early 2024, and subsequently began to execute the plans during 2024. The business has put in
place dedicated governance, oversight and mitigations for the work and the associated risks, including
contingency plans to roll changes back to a prior state if necessary. The work is subject to regular senior
management and Board scrutiny and oversight. The transition is anticipated to be ongoing throughout
2025.
Operational resilience
A key element of TUL’s operational risk management is to ensure compliance with operational resilience
regulations. TUL has well-established business continuity and disaster recovery plans in place and a
Continuity Steering Group, reporting to the Operational Risk Committee, to oversee execution of these
plans and compliance with the PRA’s operational resilience regulations. TUL continues actively to
engage with Lloyd’s on operational resilience, participating in market tests, and ensuring that TUL
complies with Lloyd’s Principles in this area, including ongoing scenario testing and third party resilience.
As the Syndicate underwrites a single Quota Share treaty reinsurance, operations are also based within
AIG in North America, with premiums and claims being processed into the Syndicate under a single
quarterly bordereau. In accordance with the Syndicate’s established operating model, it continues to
utilise information from AIG for its key processes through a service level agreement and a quarterly
attestation process.
F. Climate change risk
TUL recognises the material risk that climate change poses to its business and is committed to
embedding climate change considerations within its risk management and decision making.
TUL has committed to reaching net zero greenhouse gas (GHG) emissions across its underwriting and
investment portfolios by 2050, or sooner. TUL’s initial underwriting actions to these ends include no
longer providing new insurance cover for thermal coal-fired power plants, thermal coal mines, oil sands
or Arctic energy exploration, as well as phasing out existing insurance risks with clients that derive 30
percent or more of their revenues from these activities by 1 January 2030 or sooner. Similarly, TUL’s
4. Risk and capital management (continued) 4. Risk and capital management (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
40
initial investment actions include no longer investing in new thermal coal-fired power plants, thermal coal
mines, oil sands or new Arctic energy exploration activities, as well as phasing out existing investments
with companies that derive 30 percent or more of their revenues from these activities by the end of 2025.
This is in line with Lloyd’s expectations of the market.
TUL has also committed to reducing its own GHG emissions by reviewing energy efficiencies in its
facilities, business travel, printing and procurement areas. This is aligned to AIG’s ‘Operational Pathway
to Net Zero Emissions by 2050’.
The transition to a low carbon economy is likely to provide opportunities for TUL’s business strategy,
with the potential for new products and services to help clients and customers manage their climate-
related risks and improve resource efficiency.
Risks associated with climate change are commonly grouped under physical risks, transitional risks and
liability risks.
a. Physical risks
Physical risks from climate change arise from changing frequency, magnitude and location of severe
weather events (e.g. windstorms, floods and wildfires) and longer-term shifts in the climate (e.g. sea
level rise, increases in average temperatures and greater variability in weather events).
Physical climate change risks may have financial impacts on the Syndicate, for example through
challenging AIG’s ability to underwrite, model and price catastrophe risk effectively, particularly allowing
for change over time in the frequency and severity of catastrophe events.
AIG manages these physical risks through its risk appetite limits and underwriting by using risk models
that have been adjusted to allow for the impact of climate change over time, providing forward-looking
scenario analysis for natural catastrophe risk pricing. The claims and actuarial functions track specific
types of losses, including natural catastrophes, for which climate change may be an exacerbating factor
with the potential to worsen loss scenarios. They also work closely with the underwriting team to assess
the impact of those events on both the level of risk to which AIG might be exposed, and the pricing of
that risk. The business regularly reassesses the increasing frequency and severity of claims that may
stem from climate change impacts, as well as claims from emerging risks such as previously un-
modelled catastrophes.
Physical climate change risks impacting the Syndicate’s underwriting are also mitigated because the
majority of physical damage, catastrophe-exposed risks the Syndicate underwrites are renewed on an
annual basis. This provides TUL the opportunity to re-underwrite and re-price most risks annually.
Physical climate change risks may also have an operational impact, for example on individual facilities
and office locations. TUL also assesses and manages these as part of its regular management of
operational resilience.
b. Transitional risks
Transitional risks from climate change arise from the adjustment of countries around the world to a low-
carbon economy (e.g. climate-related developments in policy and regulation, and the emergence of
new, possibly disruptive, technology and business models). Transitional risks around investment,
reputation and technology are discussed briefly below.
As the world starts to move away from a carbon-intensive economy, investment transitional risks may
arise if financial markets begin fundamentally to reassess the value of carbon-intensive assets and the
businesses that rely on them, leading to material change in their valuation and ongoing viability. The
changes to the Syndicate’s investment policy described above are designed to mitigate this risk in the
short term.
Investors, customers, regulators and other stakeholders are placing increasing importance on how the
companies with which they deal are addressing climate change and their expectations of those with
whom they do business are evolving. Companies that are unable to meet stakeholders’ expectations
4. Risk and capital management | F. Climate change risk (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
41
could suffer from negative publicity and reputational harm, leading to the loss of business from customer
and loss of confidence from investor, which could adversely affect their operations. As a wholly-owned
subsidiary of AIG, TUL seeks to manage this risk by aligning with AIG’s approach and public
commitments to managing the financial risks and impacts of climate change.
Technological advancements that support the transition to a lower-carbon, energy-efficient economic
system may have a significant impact on a wide range of companies. The economic transition may also
materially affect the demand for insurance in specific sectors, most obviously in energy and transport.
Although this may not necessarily reduce the overall demand for insurance products and services, it
may alter the patterns of demand and the nature of insurance cover required. Working in alignment with
AIG, the Syndicate will need to respond to these changing demands albeit in relation to the specific lines
it reinsures in the future.
c. Liability risks
Liability risks may arise from parties who have suffered loss or damage attributable to physical or
transitional climate change risks and who seek to recover them from those they hold responsible. For
example, a material and sustained increase in the physical risk of flooding may affect the value of
multiple property assets, which could lead to increased credit risk for banks and other mortgage lenders
from loan defaults, which if it is material enough could lead to a reduction in their share price and
shareholder claims against their directors and officers. Alternatively, company share prices may fall if
they fail to address the impact of climate change on their business or are accused of making misleading
public statements about how they are addressing the impact of climate change, which could again lead
to shareholder claims against their directors and officers.
In recent years, the insurance industry has observed an increase in climate-related litigation and
therefore during 2024 TUL developed its climate litigation scenarios, which it incorporated into its capital
setting process. Modelling the medium and long-term impacts of climate litigation is however an evolving
area in light of the limited amount of liability claims data currently available. TUL will therefore continue
to monitor climate change litigation trends to assess the potential impact of any developments on our
business and our overall risk mitigation strategies.
G. Corporate and social responsibilities
TUL is committed both to making lasting, positive change to the communities in which we operate and
to our employees.
TUL values Diversity, Equity and Inclusion (DEI) and seeks to embed a culture of inclusion with a
motivated and committed workforce, equipped with the skills required to deliver the strategy and perform
at their best. TUL is committed to equitable pay and also identifies skill requirements and delivers these
through training and recruitment designed to attract, develop and retain diverse talent.
TUL works with a number of charities to raise funds and promote their cause, as well as supporting our
communities, either by financial charitable contributions or by donating time to a range of volunteering
initiatives. There are also a number of partnerships with non-profit initiatives, such as mentoring, to
extend our charitable reach.
H. Capital management
i. Lloyd’s capital framework
The Society of Lloyd’s (Lloyd’s) is a regulated insurance and reinsurance marketplace that is subject to
supervision by the Prudential Regulatory Authority (PRA) under the Financial Services and Markets Act
2000, in accordance with the requirements of Solvency II.
Within this supervisory framework, Lloyd’s applies capital requirements at member level, supported by
mutualised, centrally-held assets, to ensure that Lloyd’s can comply with the Solvency II requirements,
and beyond that to meet its own financial strength, licencing and ratings objectives.
4. Risk and capital management (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
42
ii. Lloyd’s capital setting process
Lloyd’s capital setting process, as outlined below, uses capital requirements assessed at syndicate level
as a starting point, from which it agrees capital requirements for each member at Lloyd’s, this being the
level at which underwriting at Lloyd’s is capitalised. For this reason, the capital requirement in respect
of the Syndicate is not disclosed in these financial statements.
In order to meet Lloyd’s requirements, each Syndicate must calculate its Lloyd’s 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 (referred to as the
ultimate SCR or uSCR). The Syndicate must also calculate its regulatory SCR at the same confidence
level but reflecting uncertainty over a one-year time horizon (referred to as the one-year SCR or SCR1)
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 and Planning Group (CPG).
A syndicate may be comprised of one or more underwriting members of Lloyd’s. Each member is liable
for its own share of underwriting liabilities on the Syndicates on which it is participating but not other
members’ shares. Accordingly, the capital requirements that Lloyd’s sets for each member operates on
a similar basis.
Each members’ SCR shall thus be determined by the sum of the members’ share of the Syndicate SCR
‘to ultimate’. Where a member participates on more than one syndicate, a credit for diversification is
provided to reflect the spread of risk, but consistent with determining an SCR which reflects the capital
requirement to cover a 1 in 200 loss ‘to ultimate’ for that member. Over and above this, Lloyd’s applies
a capital uplift to the members’ capital requirement, known as the Economic Capital Assessment (ECA).
The purpose of this uplift, which is a Lloyd’s not a Solvency II requirement, is to meet Lloyd’s financial
strength, licence and ratings objectives. The capital uplift applied for 2024 was 35% (2023: 35%) of the
members’ SCR ‘to ultimate’.
iii. Provision of capital by members
Each member may provide capital to meet its ECA either by assets held in trust by Lloyd’s specifically
for that member, known as Funds at Lloyd’s (FAL), assets held and managed within a syndicate, known
as Funds in Syndicate (FIS), or as the members’ share of the members’ balances on each syndicate on
which it participates. See below for further details on FAL.
All of the assets less liabilities of the Syndicate, as represented in the members’ balances reported on
the balance sheet on page 21, represent resources available to meet the members’ Lloyd’s capital
requirements.
An additional level of security is the Central Fund to which all Syndicates contribute, based on their
premium income, for every underwriting year of account. In the event that a members’ resources are
exhausted, outstanding claims may be paid out of the Central Fund if approved by the Council of Lloyd’s.
iv. Funds at Lloyd’s
Every member is required to hold capital at Lloyd’s, which is held in trust as FAL. These funds are
intended primarily to cover circumstances where syndicate assets prove insufficient to meet participating
members’ underwriting liabilities from the syndicate. The level of FAL that Lloyd’s requires a member to
maintain is determined by Lloyd’s based on Prudential Regulatory Authority requirements. The
determination of FAL has regard to a number of factors including the nature and amount of risk to be
underwritten by the member and an assessment of the reserving risk in respect of business that has
been underwritten, both of which are reflected in the SCR. Since FAL is not under the management of
the Managing Agent, no FAL amount has been included in these financial statements. However, the
Managing Agent is able to make a call on the members’ FAL to meet liquidity requirements or to settle
losses.
4. Risk and capital management | H. Capital management (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
43
5. Analysis of underwriting result
An analysis of the underwriting result before investment return is presented in the table below:
2024
Gross
premiums
written
$000
Gross
premiums
earned
$000
Gross
claims
incurred
$000
Gross
operating
expenses
$000
Reinsurance
balance
$000
Underwriting
result
$000
Reinsurance acceptances
572,880
643,276
(351,283)
(192,444)
-
131,900
Total
572,880
643,276
(351,283)
(192,444)
-
131,900
2023
Gross
premiums
written
$000
Gross
premiums
earned
$000
Gross
claims
incurred
$000
Gross
operating
expenses
$000
Reinsurance
balance
$000
Underwriting
result
$000
Reinsurance acceptances
748,536
718,955
(469,732)
(224,445)
-
58,979
Total
748,536
718,955
(469,732)
(224,445)
-
58,979
All business written by the Syndicate is reinsurance. All premium written under a single contract in the
UK and the domicile of the insured is the US.
2024
$000
2023
$000
United Kingdom
-
-
European Union Member States
-
-
US
572,880
748,536
Rest of the world
-
-
Total gross premiums written
572,880
748,536
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
44
6. Movement in prior year’s provision for claims outstanding
There has been no material change to the method of reserving during the year under review. Favourable
movements amounting to $49,297k (2023: adverse movements of $5,752k) in the past year’s provision
for claims outstanding, net of expected reinsurance recoveries, are included in claims incurred, net of
reinsurance.
2024
$000
2023
$000
Homeowner
(50,152)
12,277
Auto
6,473
(563)
Collections Fine Art
(4,157)
(5,828)
Collection General Species
(1,894)
(2,400)
Yacht
137
962
Excess Liability
1,322
801
Workers Comp
(1,026)
503
Total
(49,297)
5,752
7. Net operating expenses
2024
$000
2023
$000
Acquisition costs (brokerage and commission)
160,430
210,337
Change in deferred acquisition costs
19,711
(8,283)
Administrative expenses
12,303
22,391
Net operating expenses
192,444
224,445
An analysis of the amounts paid to the Syndicate’s auditors and associates is given below. The audit
and non-audit fees are borne by Talbot Underwriting Services Ltd (TUSL) and are incorporated in the
management fee charged (included within the administrative expenses total above). Refer to note 20
for further details of the management fee.
2024
$000
2023
$000
Auditors’ remuneration:
fees payable to the Syndicate’s auditor for the audit of these financial statements
354
290
fees payable to the Syndicate’s auditor and its associates in respect of other
services pursuant to legislation
317
312
Other services pursuant to legislation relate to the audit and review of Lloyd’s regulatory returns, the
provision of iXBRL tagging assurance services, as well as the provision of the statement of actuarial
opinion as required by Lloyd’s Byelaws.
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
45
8. Key management personnel compensation
The Syndicate has no direct employees. The staff and key management personnel who provide services
to the Syndicate are employed by various group companies, which are responsible for paying their
remuneration. This includes amounts related to the services provided by the executive and non-
executive directors of the managing agent. Key management personnel includes TUL Directors and the
active underwriter. As disclosed in note 20, the Managing Agent charges the Syndicate a Managing
Agent’s fee based on gross written premium for services provided to the Syndicate. Therefore, other
than the Syndicate’s active underwriter, staff costs and numbers are not separately identified. Although
not separately charged to the Syndicate, the estimated aggregate emoluments of the active underwriter
are $338k (2023: $365k).
9. Investment return
2024
$000
2023
$000
Interest and similar income
From financial assets designated at fair value through profit or loss
Interest and similar income
31,299
19,026
Other income from investments
From financial assets designated at fair value through profit or loss
Gains on the realisation of investments
2,948
3,301
Losses on the realisation of investments
(3,803)
(7,895)
Unrealised gains on investments
14,001
21,774
Unrealised losses on the investments
(11,410)
(1,126)
Investment management expenses
(684)
(879)
Total investment return
32,351
34,201
Transferred to the technical account from the non-technical account
(32,351)
(34,201)
10. Distribution and open years of account
A collection from members of $61,670k will be proposed in relation to the 2022 closing year of account
(2023: $23,845k distribution in relation to the 2021 closing year of account).
11. Financial investments
Carrying value
Cost
2024
$000
*2023
$000
2024
$000
*2023
$000
Debt securities and other fixed income securities
712,273
586,447
714,928
591,898
Shares and other variable yield securities
40,134
134,466
45,587
134,466
Lloyd’s overseas deposits
4,631
6,392
4,575
6,305
Syndicate loans to the Central Fund
5,219
5,034
5,454
5,551
Total financial investments
762,257
732,339
770,544
738,220
*Comparative balances for the year ended 31 December 2023 have been represented – refer to note 23 to the
financial statements for further details.
All financial investments are measured at fair value through profit or loss.
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
46
The Syndicate classifies its financial instruments held at fair value in its balance sheet using a fair value
hierarchy based on the inputs used in the valuation techniques as follows:
Level 1 – financial assets that are measured by reference to published quotes in an active market.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and
regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory
agency and those prices represent actual and regularly occurring market transactions on an arm’s
length basis.
Level 2 – financial assets measured using a valuation technique based on assumptions that are
supported by prices from observable current market transactions. For example, assets for which
pricing is obtained via pricing services but where prices have not been determined in an active
market, financial assets with fair values based on broker quotes, investments in private equity funds
with fair values obtained via fund managers and assets that are valued using the Syndicate’s own
models whereby the significant inputs into the assumptions are market observable.
Level 3 – financial assets measured using a valuation technique (model) based on assumptions
that are neither supported by prices from observable current market transactions in the same
instrument nor are they based on available market data. Therefore, unobservable inputs reflect the
Syndicate's own assumptions about the assumptions that market participants would use in pricing
the asset or liability (including assumptions about risk). These inputs are developed based on the
best information available, which might include the Syndicate’s own data.
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.
2024
Level 1
$000
Level 2
$000
Level 3
$000
Total
$000
Debt securities and other fixed income securities
315,860
396,413
-
712,273
Shares and other variable yield securities and units in
unit trusts
40,134
-
-
40,134
Lloyd’s overseas deposits
-
4,631
-
4,631
Syndicate loans to the Central Fund
-
-
5,219
5,219
Total
355,994
401,044
5,219
762,257
2023
Level 1
$000
Level 2
$000
Level 3
$000
Total
$000
Debt securities and other fixed income securities
330,375
256,072
-
586,447
Shares and other variable yield securities and units in
unit trusts
134,466
-
-
134,466
Lloyd’s overseas deposits
-
6,392
-
6,392
Syndicate loans to the Central Fund
-
-
5,034
5,034
Total
464,841
262,464
5,034
732,339
Comparative balances for the year ended 31 December 2023 have been represented – refer to note 23 to the
financial statements for further details.
Information on the methods and assumptions used to determine fair values for each major category of
financial instrument measured at fair value is provided below.
Debt securities are generally valued using prices provided by external pricing vendors. Pricing vendors
will often determine prices by consolidating prices of recent trades for identical or similar securities
obtained from a panel of market makers into a composite price. The pricing service may make
11. Financial investments (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
47
adjustments for the elapsed time from a trade date to the valuation date to `take into account available
market information. Lacking recently reported trades, pricing vendors will use modelling techniques to
determine a security price.
Shares and other variable securities and units in unit trusts are generally categorised as level 1 in the
fair value hierarchy except where they are not actively traded, in which case they are generally
measured at prices of recent transactions in the same instrument. The Syndicate has no exposure to
hedge funds.
Some government and supranational securities are listed on recognised exchanges and are generally
classified as level 1 in the fair value hierarchy. Those that are not listed on a recognised exchange are
generally based on composite prices of recent trades in the same instrument and are generally classified
as level 2 in the fair value hierarchy.
Corporate bonds, including asset backed securities that are not listed on a recognised exchange, or are
traded in an established over-the-counter market are also mainly valued using composite prices. Where
prices are based on multiple quotes and those quotes are based on actual recent transactions in the
same instrument the securities are classified as level 2, otherwise they are classified as level 3 in the
fair value hierarchy.
Management performs an analysis of the prices obtained from pricing vendors to ensure that they are
reasonable and produce a reasonable estimate of fair value. Management considers both qualitative
and quantitative factors as part of this analysis. Examples of analytical procedures performed include
reference to recent transactional activity for similar securities, review of pricing statistics and trends and
consideration of recent relevant market events.
Lloyd’s overseas deposits are lodged as a condition of conducting underwriting business in certain
countries or states within countries. These funds are managed by Lloyd’s Treasury Services.
Syndicate loans to the Lloyd’s Central Fund are classified as level 3 assets. A fair value adjustment has
been recognised in relation to the value of the Syndicate loan to the Lloyd’s Central Fund where fair
value is considered to be below the original cost.
At the reporting date Level 1 and Level 2 financial assets and liabilities were valued using valuation
techniques based on observable market data. All of the investments categorised as Level 3 are fair
valued based on the inputs to the valuation technique used.
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
48
12. Debtors arising out of reinsurance operations
2024
$000
2023
$000
Reinsurance premiums due from ceding insurers and intermediaries within one year
61,914
74,049
Reinsurance premiums due from ceding insurers and intermediaries after one year
-
-
Reinsurance recoveries on paid claims due from reinsurers and intermediaries within
one year
-
-
Total
61,914
74,049
13. Other debtors
2024
$000
2023
$000
Investment receivables
2,646
11,057
Total
2,646
11,057
Amounts owed by group companies are unsecured, interest free, have no fixed date of repayment and
are repayable on demand.
14. Deferred acquisition costs
The table below shows changes in deferred acquisition costs assets from the beginning of the period
to the end of the period.
2024
2023
Gross
$000
Net
$000
Gross
$000
Net
$000
Balance at 1 January
99,383
99,383
91,100
91,100
Movement during the year
(19,711)
(19,711)
8,282
8,282
Foreign exchange movements
-
-
-
-
Balance at 31 December
79,672
79,672
99,382
99,382
15. Claims development
The following tables illustrate the development of the estimates of earned ultimate cumulative claims
incurred, including claims notified and IBNR, for each successive underwriting year, illustrating how
amounts estimated have changed from the first estimates made.
As these tables are on an underwriting year basis, there is an apparent large increase from amounts
reported for the end of the underwriting year to one year later as a large proportion of premiums are
earned in the year of account’s second year of development.
Balances have been translated at exchange rates prevailing at 31 December 2024 in all cases.
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
49
Gross:
Pure underwriting year
2020
2021
2022
2023
2024
Total
$000
$000
$000
$000
$000
$000
Estimate of gross claims
at end of underwriting year
302,582
294,587
256,480
228,021
171,966
1,253,636
one year later
573,837
541,299
536,868
439,928
-
2,091,933
two years later
569,613
520,408
529,322
-
-
1,619,343
three years later
551,826
501,401
-
-
-
1,053,227
four years later
545,789
-
-
-
-
545,789
five years later
-
-
-
-
-
-
six years later
-
-
-
-
-
-
seven years later
-
-
-
-
-
-
eight years later
-
-
-
-
-
-
nine years later
-
-
-
-
-
-
Estimate of gross claims liabilities
545,789
501,401
529,332
439,928
171,966
2,188,416
Provision in respect of prior years
-
-
-
-
-
-
Less gross claims paid
(497,163)
(440,752)
(405,161)
(218,251)
(18,186)
(1,579,513)
Gross claims liabilities
48,626
60,649
124,171
221,677
153,780
608,903
The Syndicate purchases no reinsurance and, as such, gross claims equals net claims. Some business
is not off-risk after the first 12 months, therefore it would be anticipated that cumulative claims will
increase in the second year as this business is earned.
16. Technical provisions
The table below shows changes in the insurance contract liabilities and assets from the beginning of
the period to the end of the period.
2024
2023
Gross
provisions
$000
Net
$000
Gross
provisions
$000
Net
$000
Claims outstanding
Balance at 1 January
608,049
608,049
598,566
598,566
Movement during the year
844
844
9,483
9,483
Foreign exchange movements
-
-
-
-
Balance at 31 December
608,893
608,893
608,049
608,049
15. Claims development (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
50
2024
2023
Gross
provisions
$000
Net
$000
Gross
provisions
$000
Net
$000
Unearned premiums
Balance at 1 January
354,937
354,937
325,356
325,356
Movement during the year
(70,396)
(70,396)
29,581
29,581
Foreign exchange movements
-
-
-
-
Balance at 31 December
284,541
284,541
354,937
354,937
Refer to Note 4C(ii) for the sensitivity analysis performed over the value of insurance liabilities, disclosed
in the accounts, to potential movements in the assumptions applied within the technical provisions.
17. Creditors arising out of reinsurance operations
2024
$000
2023
$000
Due within one year
-
-
Due after one year
-
-
Total
-
-
18. Other creditors
2024
$000
2023
$000
Amounts due to group companies
1,709
3,186
Investment payables
-
-
Amounts owed to credit institutions
-
-
Other liabilities
-
-
Total
1,709
3,186
Amounts owed to group companies are unsecured, interest free, have no fixed date of payment and
are payable on demand.
19. Cash and cash equivalents
2024
$000
2023
$000
Cash at bank and in hand
44,808
919
Short term debt instruments presented within other financial investments
40,134
134,466
Bank overdrafts
-
-
Total cash and cash equivalents
84,942
135,385
16. Technical provisions (continued)
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
51
20. Related parties
Parent Companies
The immediate parent company of Talbot Underwriting Ltd is Talbot Underwriting Holdings Ltd, a
company registered in England and Wales.
The ultimate parent and controlling party of TUL is American International Group, Inc. (AIG). The
registered office of which is 1271 Avenue of the Americas, New York, NY 10020, United States of
America. AIG is listed on the New York Stock Exchange.
Directors’ interests
JL Hancock and T Bolt held senior management positions and executive directorships within the AIG
group of companies during the year.
Reinsurance
The Syndicate reinsured a single quota share contract for the 2020, 2021, 2022, 2023 and 2024
underwriting years of account. This quota share contract is with AIG group entities and was brokered
and priced on an arm’s length basis.
The portfolio was protected by a reinsurance programme comprising excess of loss, quota share and
facultative covers, which is applied before premium is ceded to the Syndicate. The Syndicate purchases
no reinsurance and, as such, gross premiums and claims equal net premiums and claims, respectively.
Corporate member
PCG 2019 Corporate Member Limited (PCGCM), an AIG Company, has the following participation by
underwriting year 2020: 97.2%, 2021: 82.5%, 2022: 82.5%, 2023: 100% and 2024: 100%.
Managing agent
Talbot Underwriting Ltd is the Managing Agent of the Syndicate and the registered address is the AIG
Building, 58 Fenchurch Street, London, EC3M 4AB.
TUL charges the Syndicate an annual management fee. The annual fee for 2024 was $5,745k (2023:
$7,486k).
Intra group loan
The Syndicate has a loan facility in place with a group entity. At 31 December 2024, the balance of the
loan is nil (2023: nil). The loan facility has a limit of $300m and a maturity date of 24 April 2025.
21. Foreign exchange rates
The following currency exchange rates have been used for principal foreign currency transactions:
| 2024 | 2023 | |||||
Start of period rate | End of period rate | Average rate | Start of period rate | End of period rate | Average rate | |
| Sterling | ||||||
US dollar |
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
52
22. Post balance sheet events
A series of wildfires affected the Los Angeles metropolitan area during January 2025. The Syndicate
has exposure to this in the Property and Marine classes of business. At this stage, analysis of the losses
is ongoing, but the insured losses are expected to be in the range of $65m and not more than $100m,
after taking account of insurance limits.
There have been changes to the underlying business being reinsured from AIG by the Syndicate for the
2025 Underwriting Year of Account compared to prior years. Refer to the Report of the Directors of the
Managing Agent, Future Developments and Outlook.
23. Representation of prior year comparative disclosures
Certain comparative balances for the year ended 31 December 2023 have been represented following
changes to the presentation of the financial statements as required by the Society of Lloyd’s reporting
requirements. The changes are as follows:
Details of change
Impact on the financial statements
Net realised gains/losses and net unrealised gains/losses are
both disclosed in the profit or loss: non-technical account, with
the separate respective realised and unrealised gains and loss
disclosures included within the investment income note to the
financial statements. Previously, only unrealised gains and
losses on investments were disclosed separately in the profit or
loss: non-technical account, with realised gains and losses
shown in the investment income note to the financial
statements.
Profit or loss: Non-technical
account; and
Note 9: Investment return.
Accrued interest is now included within its own line item in the
balance sheet rather than being included within the other
debtors disclosure.
Balance sheet: Assets;
Note 4D(c)(i): Currency risk; and
Note 13: Other debtors.
Investment asset categories have been amended to separately
disclose the Syndicate loan to the Central Fund. The Syndicate
loan to the Central Fund was previously disclosed within the
shares and other variable yield securities disclosures.
Additionally, investment disclosures have been aggregated
together in the currency risk disclosure rather than being split
out into sub-categories.
Note 4D(a)(ii): Exposure to credit
risk;
Note 4D(a)(iii): Financial assets
that are past due or impaired;
Note 4D(c)(i): Currency risk; and
Note 11: Financial investments.
In the risk management notes, debtors are now categorised as
to whether they arise from direct insurance operations or
reinsurance operations, rather than disclosing the total premium
receivable (from both insurance and reinsurance operations)
and the total reinsurance recoveries on paid claims. In the
currency risk note, these items are aggregated within the
debtors total rather than being split between total premium
receivable (from both insurance and reinsurance operations)
and other assets.
Note 4D(a)(ii): Exposure to credit
risk;
Note 4D(a)(iii): Financial assets
that are past due or impaired; and
Note 4D(c)(i): Currency risk.
Risk management sensitivity disclosures have been updated to
use the sensitivities required by the Society of Lloyd’s. The
interest rate risk sensitivity is set at 50 basis points increase or
reduction in yield curves rather than 200 basis points used in
2023. The currency risk sensitivity is set at 10 percent increase
or decrease in exchange rate rather than 5 percent used in
2023.
Note 4D(c)(ii): Sensitivity analysis
to market risks.
Notes to the financial statements (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
53
Details of change
Impact on the financial statements
All amounts have been rounded to the nearest thousand, rather
than nearest million.
All primary financial statements
and supporting notes.
Talbot Underwriting Ltd | Syndicate 2019
Underwriting Year Accounts for the 2022 Year of Account | 31 December 2024
55
Underwriting Year – Report of the directors of the
Managing Agent
The Directors of the Managing Agent present their report at 31 December
2024
The report comprises the cumulative result to 31 December 2024 for the closed 2022 underwriting year
of account (year of account).
This report is prepared in accordance with the Lloyd’s Syndicate Accounting Byelaw (No. 8 of 2005). It
accompanies the underwriting year accounts prepared on an underwriting year basis of accounting as
required by the Insurance Accounts Directives (Lloyd’s Syndicate and Aggregate Accounts) Regulations
2008.
The reinsurance to close for the 2022 underwriting year was approved by the Board of Directors on 18
February 2025.
Refer to the Report of the Directors of the Managing Agent within the Annual Report and Accounts for
the year ended 31 December 2024 for a review of the business and future developments.
Principal activities
The Syndicate underwrote a single 57.8% proportional quota share reinsurance contract covering High
Net Worth (HNW) personal lines insurance business underwritten by American International Group, Inc
(AIG) companies. The quota share contract provides coverage for AIG HNW policies incepting from 1
January each year.
2022 closed year of account
The Syndicate made a 2022 and prior year of account closing loss of $(61.7m) on allocated capacity of
$687.5m (loss on capacity of 9.0%) after the balance on the non-technical account. The loss attributable
to the pure 2022 year of account was $(92.6m) (13.5% loss on capacity). The profit attributable to the
pure 2021 year of account business reinsured into the 2022 year of account was $22.1m (3.2% return
on capacity) and the profit attributable to the 2020 year of account business reinsured into the 2022 year
of account was $8.8m (1.3% return on capacity).
The 2022 pure year gross written premium net of acquisition costs of $436.5m represents an 63.5%
stamp utilisation when measured using the Lloyd’s planning rate of £1 = $1.38. The Syndicate’s 2022
pure year underwriting loss was $(123.2m) (combined ratio 120.3%). The pure 2022 net claims ratio of
87.3% includes a catastrophe claims ratio of 32.3%. The pure 2022 year of account was impacted by
high severity US catastrophe events, most notably Hurricane Ian and Winter Storm Elliot.
The 2021 year of account, during the 2024 calendar year has produced a net profit of $22.1m. This is
inclusive of favourable claims development of $19.0m.
The 2020 year of account, during the 2024 calendar year has produced a net profit of $8.8m. This is
inclusive of favourable claims development of $6.0m.
The 2022 and prior year of account closing loss includes an investment profit of $36.2m.
The portfolio was protected by a reinsurance programme comprising excess of loss, quota share and
facultative covers, which is applied before premium is ceded to the Syndicate. The Syndicate purchases
no reinsurance and, as such, gross premiums and claims equal net premiums and claims, respectively.
For current trading and future developments, please refer to the Page 6 in the Annual Report and
Accounts.
Underwriting Year – Report of the directors of the Managing Agent (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
56
Directors
The Directors of the Managing Agent are disclosed in the Syndicate 2019 Annual Report and Accounts.
Disclosure of information to auditors
The Directors of the Managing Agent who held office at the date of approval of this report confirm that,
so far as they are each aware, there is no relevant audit information of which the Syndicate’s auditors
are unaware; and each director has taken all the steps that they ought to have taken as a director to
make themselves aware of any relevant audit information and to establish that the Syndicate’s auditors
are aware of that information.
Independent auditors
The Syndicate auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in
office and will be reappointed.
Annual General Meeting
Subject to the consent of the Council of Lloyd’s, it is not intended to hold a Syndicate Annual General
Meeting in 2025.
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
57
Underwriting Year – Statement of Managing
Agent’s responsibilities
The Directors of the Managing Agent are responsible for preparing the Managing Agent’s report and the
Syndicate underwriting year accounts in accordance with applicable law and regulations.
The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008
require the Managing Agent to prepare Syndicate underwriting year accounts at 31 December in respect
of any underwriting year which is being closed by reinsurance to close which give a true and fair view
of the result of the underwriting year at closure.
In preparing the Syndicate underwriting year accounts, the Managing Agent is required to:
Select suitable accounting policies and then apply them consistently; and where there are items
which affect more than one year of account, ensure a treatment which is equitable as between the
members of the Syndicate affected. In particular the amount charged by way of premium in respect
of the reinsurance to close shall, where the reinsuring members’ and reinsured members’ are
members of the same Syndicate for different years of account, be equitable as between them,
having regard to the nature and amount of the liabilities reinsured;
Take into account all income and charges relating to a closed year of account without regard to the
date of receipt or payment;
Make judgements and estimates that are reasonable and prudent; and
State whether applicable accounting standards, have been followed, subject to any material
departures disclosed and explained in underwriting years accounts.
The Managing Agent is responsible for keeping proper accounting records that disclose with reasonable
accuracy at any time the financial position of the Syndicate and enable it to ensure that the Syndicate
underwriting year accounts comply with the Insurance Accounts Directive (Lloyd’s Syndicate and
Aggregate Accounts) Regulations 2008. It is also responsible for safeguarding the assets of the
Syndicate and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
Approved by the Board of Directors and signed on behalf of the Board
RD Cowling, Chief Financial Officer
04 March 2025
Talbot Underwriting Ltd | Syndicate 2019
Underwriting Year Accounts for the 2022 Year of Account | 31 December 2024
58
Independent auditors’ report to the members of
Syndicate 2019 - 2022 closed year of account
Report on the audit of the syndicate underwriting year financial
statements
Opinion
In our opinion, Syndicate 2019’s syndicate underwriting year financial statements for the 2022 year of
account for the 36 months ended 31 December 2024 (the “underwriting year financial statements”):
● give a true and fair view of the state of the syndicate’s affairs as at 31 December 2024 and of
its loss for the 2022 closed year of account;
● have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards, including FRS 102 “The Financial
Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law); and
● have been prepared in accordance with the requirements of The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the Lloyd’s Syndicate
Accounting Byelaw (No. 8 of 2005).
We have audited the underwriting year financial statements included within the Underwriting Year
Accounts for the 2022 year of account (the “Underwriting Year Accounts”), which comprise: the balance
sheet as at 31 December 2024; the profit and loss account: technical account – general business
and
the profit and loss account: non-technical account for the 36 months then ended; and the notes to the
underwriting year financial statements which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”),
including ISA (UK) 800, and The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate
Accounts) Regulations 2008 and other applicable law. Our responsibilities under ISAs (UK) are further
described in the Auditors’ responsibilities for the audit of the underwriting year financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Independence
We remained independent of the syndicate in accordance with the ethical requirements that are relevant
to our audit of the underwriting year financial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to other entities of public interest, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Emphasis of matter – Basis of preparation
Without modifying our opinion, we draw attention to note 1 of the underwriting year financial statements,
which describes the basis of preparation. In particular, as these underwriting year financial statements
relate to a closed underwriting year of account, matters relating to going concern are not relevant to
these underwriting year financial statements. The underwriting year financial statements are prepared
in accordance with a special purpose framework for the specific purpose as described in the Use of this
report paragraph below. As a result, the underwriting year financial statements may not be suitable for
another purpose.
Independent auditors’ report to the members of Syndicate 2019 – 2022 closed year of account (continued)
59
Reporting on other information
The other information comprises all of the information in the Underwriting Year Accounts other than the
underwriting year financial statements and our auditors’ report thereon. The Managing Agent is
responsible for the other information. Our opinion on the underwriting year financial statements does
not cover the other information and, accordingly, we do not express an audit opinion or, except to the
extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the underwriting year financial statements, our responsibility is to read
the other information and, in doing so, consider whether the other information is materially inconsistent
with the underwriting year financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material
misstatement of the underwriting year financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based on these
responsibilities.
Responsibilities for the underwriting year financial statements and the audit
Responsibilities of the Managing Agent for the underwriting year financial statements
As explained more fully in the Underwriting Year - Statement of Managing Agent’s Responsibilities, the
Managing Agent is responsible for the preparation of the underwriting year financial statements in
accordance with the applicable framework and for being satisfied that they give a true and fair view of
the result for the 2022 closed year of account. The Managing Agent is also responsible for such
internal control as they determine is necessary to enable the preparation of underwriting year
financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ responsibilities for the audit of the underwriting year financial statements
Our objectives are to obtain reasonable assurance about whether the underwriting year financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these underwriting year financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect
of irregularities, including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below.
Based on our understanding of the syndicate and industry, we identified that the principal risks of non-
compliance with laws and regulations related to breaches of regulatory principles, such as those
governed by the Prudential Regulation Authority and the Financial Conduct Authority, and those
regulations set by the Council of Lloyd’s, and we considered the extent to which non-compliance might
have a material effect on the underwriting year financial statements. We also considered those laws
and regulations that have a direct impact on the underwriting year financial statements such as
The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008.
We evaluated management’s incentives and opportunities for fraudulent manipulation of the
underwriting year financial statements (including the risk of override of controls), and determined that
the principal
Talbot Underwriting Ltd | Syndicate 2019
Underwriting Year Accounts for the 2022 Year of Account | 31 December 2024
Independent auditors’ report to the members of Syndicate 2019 – 2022 closed year of account (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
60
risks were related to fraud in revenue recognition and management override of controls. Audit
procedures performed by the engagement team included:
● Discussions with management, the Board, the compliance function and the Internal Audit Group
of the Managing Agent, including consideration of known or suspected instances of non-
compliance with laws and regulations, and fraud;
● Assessment of matters reported on the Managing Agent’s whistleblowing helpline relevant to
the syndicate and the results of investigations of such matters;
● Reviewing relevant meeting minutes and correspondence with regulatory authorities;
● Testing and challenging where appropriate the assumptions and judgements made in
establishing accounting estimates;
● Identifying and testing journal entries based on risk criteria; and
● Designing audit procedures to incorporate unpredictability around the nature, timing and extent
of testing.
There are inherent limitations in the audit procedures described above. We are less likely to become
aware of instances of non-compliance with laws and regulations that are not closely related to events
and transactions reflected in the underwriting year financial statements. Also, the risk of not detecting
a material misstatement due to fraud is higher than the risk of not detecting one resulting from error,
as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
A further description of our responsibilities for the audit of the underwriting year financial statements is
located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the syndicate’s members in
accordance with part 2 of The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate
Accounts) Regulations 2008 and Part C of the Lloyd’s Syndicate Accounting Byelaw (No. 8 of 2005)
and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
Independent auditors’ report to the members of Syndicate 2019 – 2022 closed year of account (continued)
Talbot Underwriting Ltd | Syndicate 2019
Underwriting Year Accounts for the 2022 Year of Account | 31 December 2024
61
Other required reporting
Under The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008
and the Lloyd’s Syndicate Accounting Byelaw (No. 8 of 2005), we are required to report to you if, in our
opinion:
● we have not obtained all the information and explanations we require for our audit; or
● adequate accounting records have not been kept by the Managing Agent in respect of the
syndicate; or
● the underwriting year financial statements are not in agreement with the accounting records.
We have no exceptions to report arising from this responsibility.
Paul Pannell (Senior statutory auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
4 March 2025
Talbot Underwriting Ltd | Syndicate 2019
Underwriting Year Accounts for the 2022 Year of Account | 31 December 2024
62
Profit and loss account: technical account –
general business
2022 year for the 36 months ended 31 December 2024
Note
2022 year of
account
$000
Syndicate Allocated Capacity
687,516
Gross premiums written
3
606,617
Outwards reinsurance premiums
-
Net premiums written
606,617
Earned premiums, net of reinsurance
606,617
Reinsurance to close premium received
9
177,532
Allocated investment return, transferred from the
non-technical account
36,215
Claims incurred, net of reinsurance
Gross claims paid
(448,374)
Reinsurers' share of claims paid
-
Claims paid, net of reinsurance
(448,374)
Reinsurance to close premium payable
10
(233,435)
Claims incurred, net of reinsurance
(681,809)
Net operating expenses
5
(199,880)
Balance on the technical account for general business
12
(61,325)
Talbot Underwriting Ltd | Syndicate 2019
Underwriting Year Accounts for the 2022 Year of Account | 31 December 2024
63
Profit and loss account: non-technical account
2022 year for the 36 months ended 31 December 2024
Note
2022 year of
account
$000
Balance on the technical account for general business
12
(61,325)
Investment income
4(a)
34,150
Unrealised gains on investments
20,938
Investment expenses and charges
4(b)
(7,849)
Unrealised losses on investments
(11,024)
36,215
Allocated investment return transferred to the general business technical
account
(36,215)
Loss on exchange
(344)
Loss for the 2022 closed year of account
(61,670)
There was no other comprehensive income or expense during the accounting period.
The notes on pages 65 to 69 form an integral part of these underwriting year accounts
Talbot Underwriting Ltd | Syndicate 2019
Underwriting Year Accounts for the 2022 Year of Account | 31 December 2024
64
Balance Sheet
2022 account at 31 December 2024
2022 year of
account
Note
$000
Assets
Financial Investments
6
408,644
408,644
Debtors
Other debtors
7
1,636
1,636
Other assets
Prepayments and accrued income
4,623
4,623
Total assets
414,903
Liabilities
Capital and reserves
Members’ balance
(61,670)
Reinsurance to close premium payable
10
233,435
Creditors
Other creditors
8
241,989
241,989
Other Liabilities
Accrued expenses
1,149
Total Liabilities
414,903
The notes on pages 65 to 69 form an integral part of these underwriting year accounts.
The financial statements on pages 62 to 69 were approved by the Board of Directors on 18 February
2025 and signed on its behalf by:
RD Cowling, Chief Financial Officer
04 March 2025
Talbot Underwriting Ltd | Syndicate 2019
Underwriting Year Accounts for the 2022 Year of Account | 31 December 2024
65
Notes to the underwriting year accounts
1 Basis of preparation
The accounts of Syndicate 2019 have been prepared in compliance with United Kingdom Accounting
Standards, including Financial Reporting Standard 102, “The Financial Reporting Standard applicable
in the United Kingdom and the Republic of Ireland” (FRS 102), Insurance Contracts standard (FRS 103),
Regulation 6 of the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts)
Regulations 2008 and the Lloyd’s Syndicate Accounting Byelaw (No. 8 of 2005).
Members participate on a Syndicate by reference to a year of account and each Syndicate year of
account is a separate annual venture.
These accounts relate to the 2022 year of account which has been closed by reinsurance to close as at
31 December 2024. Consequently, the balance sheet represents the assets and liabilities of the 2022
year of account at the date of closure. These accounts cover the three years from the date of inception
of the 2022 year of account to the date of closure. Accordingly, this is the only reporting period and so
corresponding amounts are not shown.
Effective at each year-end 31 December, the reinsurance to close process means that all assets and
liabilities have been transferred to a reinsuring year of account. To this extent, the risks that the syndicate
is exposed to in respect of the reported financial position and financial performance are significantly less
than those relating to the open years of account, full disclosures relating to these risks are provided in
the Syndicate 2019 Annual Report and Accounts.
2 Accounting policies
The accounting policies applied in the preparation of these underwriting accounts are set out below. All
amounts presented are stated in US dollars, being the syndicate’s functional currency, and in thousands.
A. Insurance
The underwriting accounts for each year of account are normally kept open for three years before the
result on that year is determined. At the end of the three year period, outstanding liabilities can normally
be determined with sufficient accuracy to permit the year of account to be closed by payment of a
reinsurance to close premium to the successor year of account.
i Premiums written
Gross premium is allocated to year of account based on the inception date of a single quota share
contract incepting on 1 January. Premiums are shown gross of acquisition costs and include estimated
amounts of premium due but not yet received or notified.
ii Claims paid
Gross claims paid are allocated to the same year of account as the original premium for the underlying
policy.
Notes to the underwriting year accounts (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
66
iii Reinsurance to close premium payable
The reinsurance to close premium is determined by reference to outstanding liabilities, including claims
incurred but not reported (IBNR), relating to the closed year and to all previous closed years reinsured
therein. Although the estimate of outstanding liabilities is considered to be fair and reasonable, it is
implicit in the estimation procedure that the ultimate liabilities will be at variance from the premium so
determined.
B. Investment return
Investment returns arising in a calendar year are apportioned to years of account in proportion to the
average funds available on each year of account. Investment returns arising on overseas deposits are
allocated to the year of account that funded the deposit.
C. Operating expenses
Syndicate operating expenses are allocated to the year of account for which they are incurred. Where
expenses incurred in a financial year do not relate to any specific year of account they are apportioned
between years of account based the volume of business transacted. Ceding commission is charged to
the year of account to which the relevant policy is allocated.
D. Taxation
Under Schedule 19 of the Finance Act 1993, Managing Agents are not required to deduct basic rate
income tax from trading income. In addition, all UK basic rate income tax deducted from Syndicate
investment income is recoverable by Managing Agents and consequently the distribution made to
members is gross of tax. Capital appreciation falls within trading income and is also distributed gross of
tax.
No provision has been made for any United States Federal Income Tax payable on underwriting results
or investment earnings. Any payments on account made by the Syndicate on behalf of members during
the year are included in the balance sheet under the heading ‘other debtors’.
No provision has been made for any other overseas tax payable by members on underwriting results.
E. Foreign currencies
Transactions in foreign currencies are translated to the functional currency using the exchange rates at
the date of the transactions. The Syndicate’s monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the rates of exchange at the balance sheet date.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value
are retranslated to the functional currency at the exchange rate at the date that the fair value was
determined. Non-monetary items denominated in foreign currencies that are measured at historical cost
are translated to the functional currency using the exchange rate at the date of the transaction. For the
purposes of foreign currency translation, unearned premiums and deferred acquisition costs are treated
as if they are monetary items.
Differences arising on translation of foreign currency amounts relating to the insurance operations of the
Syndicate are included in the non-technical account. Differences arising on translation from the
functional currency to the presentational currency are recognised in other comprehensive income.
2. Accounting policies | A. Insurance (continued)
Notes to the underwriting year accounts (continued)
Talbot Underwriting Ltd | Syndicate 2019
Underwriting Year Accounts for the 2022 Year of Account | 31 December 2024
67
3 Segmental information
All business written by the Syndicate is reinsurance. All premium written is for a single contract in the
UK and the domicile of the insured is the US.
4 Investment Income, expenses and charges
(a) Investment income
$000
Income from investments
30,456
Gains on the realisation of investments
3,694
Total
34,150
(b) Investment expenses and charges
$000
Losses on the realisation of investments
(6,635)
Investment management expenses
(1,214)
Total
(7,849)
5 Net operating expenses
$000
Acquisition costs (brokerage and commission)
169,876
Administrative expenses
30,004
Total
199,880
An analysis of the amounts paid to the Syndicate’s auditors and associates is given below.
$000
Fees payable to the Syndicate’s auditors and their associates in respect of:
Audit of the Syndicate underwriting year accounts
105
Other fees pursuant to legislation
-
Total
105
6 Financial Investments
Cost
$000
Market Value
$000
Debt securities and other fixed income securities
398,423
396,944
Shares and other variable yield securities
7,106
7,069
Lloyd’s overseas deposits
4,631
4,631
Total
410,160
408,644
4. Investment Income, expenses and charges (continued)
Notes to the underwriting year accounts (continued)
Talbot Underwriting Ltd | Lloyd’s Syndicate 2019
Annual Report and Accounts for the year ended 31 December 2024
68
7 Other debtors
$000
Investment receivables
1,636
Total
1,636
Other debtors are receivable within one year.
8 Other creditors
$000
Inter year loan
241,765
Amounts owed to credit institutions
224
Total
241,989
The inter year loans are between different underwriting years of account and are settled as part of the
reinsurance to close process.
9 Reinsurance to close premium received
2021 year of account closure at 31 December 2023
$000
Provision for reported claims
85,483
Provision for IBNR
92,049
Reinsurance to close premium received
177,532
10 Reinsurance to close premium payable
2022 year of account closure at 31 December 2024
$000
Provision for reported claims
114,033
Provision for IBNR
119,402
Reinsurance to close premium payable
233,435
11 Financial assets and liabilities
The assets and liabilities of the closing year of the Syndicate are financial assets and liabilities. The
Directors consider the carrying value of the financial assets and liabilities to be equal to their fair value.
12 Balance on the technical account
2022 year of account
$000
Technical account balance excluding investment return and operating expenses:
Attributable to the 2022 pure year of account
(92,861)
Attributable to the 2021 pure year of account
19,207
Attributable to the 2020 pure year of account
6,118
(67,536)
Allocated investment return transferred to/from the technical account
36,215
Net operating expense other than acquisition costs
(30,004)
Balance on the technical account for general business
(61,325)
Notes to the underwriting year accounts (continued)
Talbot Underwriting Ltd | Syndicate 2019
Underwriting Year Accounts for the 2022 Year of Account | 31 December 2024
69
13 Related parties
Parent Companies
The immediate parent Company of Talbot Underwriting Ltd (TUL) is Talbot Underwriting Holdings Ltd,
a Company registered in England and Wales.
The ultimate parent and controlling party of Talbot is American International Group, Inc (AIG). The
registered office of which is 1271 Avenue of the Americas, New York, NY 10020, United States of
America. AIG is listed on the New York Stock Exchange.
Directors’ interests
JL Hancock and T Bolt held senior management positions and executive directorships within the AIG
group of companies during the year.
Intra group loan
The Syndicate has a loan facility with an AIG Group entity. The loan facility at the balance sheet date
and it remains undrawn available to the Syndicate, if required until the maturity date of 24 April 2025.
Reinsurance
The Syndicate reinsured a single quota share contract for the 2022 year of account. This quota share
contract is with AIG group entities and was brokered and priced on an arm’s length basis.
Corporate member
PCG 2019 Corporate Member Limited (PCGCM), an AIG company, has a 82.5% participation on the
2022 underwriting year.
Managing agent
For the past 3 years, the Syndicate has been charged an annual fee by TUL, the Managing Agent of
the Syndicate, amounting to $6,062k.
Talbot Underwriting Ltd | Syndicate 2019
Underwriting Year Accounts for the 2022 Year of Account | 31 December 2024
70
Two-year summary of closed year results
(unaudited)
At 31 December 2024
Year of account
2022
2021
Syndicate allocated capacity - £m
498.2
500.4
Syndicate allocated capacity - $m
687.5
620.4
Capacity utilised
63.5%
87.9%
Number of underwriting members
4
5
Net premiums net of brokerage - $m
436.7
545.2
Return on stamp
(9.0%)
3.8%
Results for an illustrative share of £10,000 ($1.28)
2022
$
2021
$
Gross premiums
8,766
10,896
Net premiums
8,766
10,896
Net claims paid
(9,000)
(9,004)
Reinsurance to close
(1,122)
(1,041)
Syndicate operating expenses
(394)
(204)
Personal expenses
(208)
(297)
Balance on technical account before investment return
(1,958)
350
Gain / (loss) on exchange
727
20
Investment return
(7)
106
Profit / (loss)
(1,238)
476
Notes:
1. The two year summary has been prepared from the audited accounts of the Syndicate
2. Personal expenses have been stated at the amount which would be incurred pro-rata by members writing the illustrative
premium income in the Syndicate, irrespective of any minimum charge applicable. Personal expenses include managing agent
fees, central fund contributions and Lloyd’s subscriptions.
3. Capacity utilised represents gross premiums as a percentage of allocated capacity. For this calculation, gross premiums are
net of brokerage.
4. Gross and net premium amounts shown above are net of brokerage.
