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FARADAY
Syndicate 0435
Annual Report for the year ended
Contents
2
Directors and Administration ................................................................................................... 3
Strategic report of the Managing Agent .................................................................................. 4
Managing Agent’s report ....................................................................................................... 11
Statement of Managing Agent’s responsibilities ................................................................... 13
Independent Auditor’s report to the members of Syndicate 435 ........................................... 14
Statement of profit or loss and other comprehensive income: .............................................. 18
Balance sheet – Assets ........................................................................................................ 20
Balance sheet – Liabilities .................................................................................................... 21
Statement of changes in members’ balances ....................................................................... 22
Statement of cash flows ........................................................................................................ 23
Notes to the financial statements .......................................................................................... 24
Directors and Administration
3
Managing Agent
Managing Agent
Directors
Nick Frankland, Chair and non-executive director
Paul Blight
Andrew D’Arcy, non-executive director
Vicky Cortese
Kevin Harker
Michael Hosking
Terry Masters, Senior non- executive director
Stephen Michael, non-executive director
Andrea Reynolds, non-executive director
Tom Shelley
Company Secretary
Elisabeth Richardson
Managing Agent’s registered office
Corn Exchange
55 Mark Lane
London
EC3R 7NE
Managing Agent’s registered number
01682486
Website
www.faraday.com
Syndicate
Active Underwriter
Paul Blight
Investment Managers
New England Asset Management Limited
Registered Auditor
Deloitte LLP
Statutory Auditor
2 New Street Square
London
EC4A 3BZ
United Kingdom
Strategic report of the Managing Agent
4
The Strategic report contains a review of the business including an analysis of its performance during
the year ended 31 December 2024, as well as the principal risks and uncertainties facing the business
and future developments.
Principal activity and review of the business
The principal activity of the business remains the transaction of general insurance and reinsurance
business as part of the Lloyd’s market in London.
2024 has been another turbulent year. The global economy continues to be impacted by geopolitical
turmoil, of note Russia’s incursions in Ukraine and on-going unrest in the Middle East in several
territories. Around the world other regions are also experiencing tensions and unrest. Despite on-going
inflation that prevailed throughout 2024 there are signs that the economic rate is reducing. Interest
rates around the world have risen over recent years hindering economic growth but these, in the main,
are now decreasing. Elections were held in many parts of the world and although there have been
changes in government there is little evidence that stability is returning; business failures have been
increasing and the cost of living crisis continues to impact consumer demand. The geopolitical tensions
are having an impact on the robustness of supply chains including the provision of power supplies
adding to general economic strain.
Increased focus is being applied to operational resilience bearing in mind enhanced use of electronic
means of communication and its use in most business transactions. This has become an area of focus
for various regulators. The effect of the COVID-19 pandemic whilst less of concern for day to day
activities, still appears to be having some impact from an overall economic and personal perspective.
Climatic events have resulted in several records being broken covering temperature, intensity of storms
and the frequency of flooding and other so called ‘secondary perils’.
Faraday’s business looks to address the perceived consequences from all aspects of the above in
relation to meeting ever changing client needs as well as running our own operations in an efficient and
effective manner. Giving consideration to emerging risks is an important aspect of our focus. We
remain mindful of sanctions issues as well.
Inflation both economic and social, continue to be significant factors for pricing and reserving. We
maintain robust operational standards which include prudent reserving in line with Faraday’s standard
reserving philosophy. Inflation forecasts vary widely by both region and business class and Faraday is
continuing with its enhanced and more frequent reviews of the drivers of inflation looking to prudently
allow for its impact within pricing and reserving. Governments and Central Banks, following a period of
increasing base interest rates, have started to reduce these suggesting that peak borrowing costs have
been reached, although there is considerable uncertainty over any programme of reductions at present.
However, with much and ever changing geopolitical tension around the globe plus the reaction of bond
markets to local economic policies, forecasting interest rates with any certainty is far from
straightforward; the pace of any reductions is neither predictable nor steady.
Foreign exchange movements during 2024 were wide ranging too.
For the wider (re)insurance industry 2024 has been above the 10 year average for insured natural
catastrophe losses. The year commenced with severe flooding in California and after more severe
convective storm activity in the US in the Spring, the hurricane season brought two major landfall events
of note - Hurricanes Helene and Milton. The former resulted in much flooding after the storm itself had
abated. Europe also faced a series of events notably Storm Boris in September 2024 and severe
flooding in Spain in October. Australia and New Zealand had exceptional flooding as well. The global
and wide ranging nature of these events is apparent and 2024 has been declared the warmest year on
record. 2025 has begun on a difficult note with the vast area of wildfires in and around Los Angeles
and severe winterstorms in the southern US States.
Strategic report of the Managing Agent (continued)
5
Underlying gross written premium income for Syndicate 435 decreased by 0.4% in 2024. This was
principally due to the lapse of one large travel binder in Australia and other binder business in the direct
and facultative (D&F) property space.
During early 2024 the syndicate achieved rate increases although from mid-year these generally abated
and turned negative. Overall, across the portfolio rate change was around flat for the year compared
with 2023. Despite this disappointment when viewed against the plan for the year, pricing levels
remained adequate. Expected increases for certain areas, notably for Property Treaty, slowed earlier
than expected in 2024. However, there were no serious concerns for the syndicate’s portfolio. Our
Underwriters’ expertise across the many lines of business served to steer a satisfactory course through
the volatility of the market conditions.
Faraday continues to be a market leading provider of (re)insurance in windstorm and earthquake prone
areas and therefore expects to incur losses from such events when they occur. As noted above, 2024
was impacted by many noteworthy events. Whilst Syndicate 435 has exposure to the effects of weather
around the globe Hurricanes Helene and Milton were the main natural catastrophe events generating
losses in the year. Other events were of less significance. In general, the natural catastrophe losses in
2024 were below our priced expectations. Our Underwriters have worked hard to ensure the book of
business is not overly exposed to any series of attritional or modest sized events. Our reserving process
and philosophy for such events is entrenched in the business having developed significant expertise
over many years in this market. Reserves are established following a review of all available information
and after taking a conservative view of the potential for development of losses. The loss reserves
therefore reflect Faraday’s minimal appetite for any deterioration in its reported loss position. Reserves
set in recent years in respect of other natural catastrophe events have, in aggregate, proved to be
adequate. The syndicate’s whole account catastrophe excess of loss reinsurance is not expected to
be triggered by any of the 2024 events.
The Property Treaty team produced a profit driven by a favourable rating environment and prior year
improved terms and conditions. Programme attachment points and consideration of all perils in the
underwriting process contributed to the performance. The year’s income forecast and available capacity
had been increased in the expectation that improvements in terms would continue throughout 2024,
however, conditions began to soften much earlier in the cycle than had been expected. This book also
benefitted from reductions in prior years' loss estimates.
The Commercial Lines portfolio continued to perform well in 2024 despite experiencing the on-going
effects of inflationary trends. We are looking to grow the D&F areas given the current profitability levels
and further opportunities in various class sectors are being explored where favourable margin is still
perceived.
Actions to strengthen the pricing and reserving of the US Casualty business taken in recent years have
been well founded and further actions were taken this year with prior year loss experience developing
broadly in line with our best estimate expectations in most segments. Whilst rates for this business
have been increasing, claims costs, due to general and social inflationary pressures and litigation
severity in particular, are continuing to offset these improvements, particularly in the general liability
sectors. As noted above although economic inflation is abating social inflation and medical costs are
continuing to rise notably in the US and to a lesser extent in other countries. Reserving in Casualty
classes has been a focus of detailed review and where necessary revisions to the underlying original
pricing assumptions and reserving bases. The work has utilised all market data and expert judgement
in relation to the anticipated outcomes of legal, social and economic trend. The output from the specific
exercise has resulted in further reserve strengthening in some parts of the portfolio to address claims
volatility and development concerns and recent loss experience.
Strategic report of the Managing Agent (continued)
6
The Aviation market has despite notable airline losses in the year continued to see a deterioration in
rates. We have broadened our approach to the airline sector to provide a better spread of business
and increase the income levels. Litigation is now underway relating to aeroplanes which had been
leased to Russian airlines. Faraday’s Aviation book suffered adverse experience in 2024 due losses
and increasing the cost reserves for Russia / Ukraine related litigations. As court cases begin to
conclude there are indications that some of the costs may be recouped.
The Employers’ Liability & Public Liability book continues to perform satisfactorily and is now growing
to pre Covid levels with a broad base of clients and activities.
The International Casualty and Motor books were profitable benefitting from favourable prior year
developments. We have allowed for the recent increase in the UK Personal Injury Discount Rate and
the latest 2024 Annual Survey of Hours and Earnings (ASHE) which has decreased from the heightened
UK inflation in 2023 but remains elevated by historical standards. Going forward we expect the account
will develop in a diversified manner often outside of the UK.
The Financial Lines team continued to consolidate its position in the market place. Reserving on this
line is robust as it becomes established and this, together with a couple of medium sized losses during
2024, gave rise to a small loss in the year. Trading conditions continue to be challenging but the team
continues to search for profitable opportunities.
Agriculture remains a consistent performer within Syndicate 435’s portfolio due to the risk selection of
the experienced underwriting team. The account suffered one outsize loss in 2024 but underlying
performance and premium growth remained very good. 2025 should see further growth in this line as
the team continues to identify and engage in significant deals.
Energy continued upon its growth trajectory towards critical mass and has expanded linesize capability
in order to compete more equitably in the marketplace.
New lines of business continue to be given consideration and Faraday aims to further broaden its
portfolio in 2025 with the imminent addition of expertise in other underwriting sectors.
Faraday is looking to grow into new and existing lines where rates are deemed sufficient for the risk
being taken on and wishes to optimise the portfolio towards areas anticipated to produce superior
returns whilst maintaining strict underwriting discipline. Several initiatives are being worked on to
produce underwriting strategies and disciplines that are commensurate with the prevailing
environments. Faraday is willing to consider and engage in a large variety of arrangements and is
already seeing the benefit of its recent expansion of engagement with other market participants.
Performance management remains an integral part of underwriting supervision and strategies.
Coverages and exposures are continually evaluated in order to either improve the chances of likely
positive outcomes or enhance the ongoing profitability of a sector. Where necessary we will act to limit
areas of the business not delivering to target.
Principal risks and uncertainties
A formal risk strategy and set of risk policies have been put in place, these are consistent with our
business strategy. The risk policies are supported by a series of risk appetites which set out our overall
appetite for risk. The business strategy and risk appetites are subject to frequent review to ensure
Faraday is able to respond to any changes in market conditions. The board retains responsibility for
the design of the risk management framework and approval of the risk appetites. It has delegated other
aspects of risk management to the Risk & Capital Committee and the Audit & Risk Committee; the latter
reports to the board.
Strategic report of the Managing Agent (continued)
7
The Executive Management Committee is responsible for the execution of the business strategy and
manages the business from an operational perspective. It is supported by formal groups responsible
for day-to-day underwriting, investment review, overseeing the larger transactions, management of the
syndicate’s counterparty exposures, climate change, data analytics, operational resilience and
information technology; these groups report directly to the Executive Management Committee.
The Risk & Capital Committee, reporting to the Audit & Risk Committee, oversees the risk profile of the
syndicate.
The Audit & Risk Committee is composed entirely of non-executive directors; this body provides
independent oversight and challenge to the way in which risk is managed, monitored and reported
within the syndicate. It considers any changes to risk appetite ensuring consistency with the syndicate’s
risk strategy. In addition, this Committee reviews, amongst other matters, the risk management
framework, the operation of the internal model and the internal control system. The Risk and
Compliance functions provide input to the Audit & Risk Committee.
From an operational perspective, the Chief Executive Officer is responsible for strategic risk, risk related
to personnel and group risk. The Chief Underwriting Officer monitors underwriting risk, including the
oversight of catastrophe exposures and, in conjunction with the Chief Executive Officer reinsurance
protections. The Head of Claims is responsible for claims management and the Chief Actuary, in
conjunction with the Chief Financial Officer, is responsible for reserve risk. The Chief Financial Officer
manages all aspects of market risk and credit risk. The Chief Operating Officer is responsible for the
oversight of operational risks, as they relate to processes and systems.
The Chief Risk Officer is responsible for risk management and regulatory compliance. Risk and control
owners are responsible for assessing and managing the risks for which they are held accountable using
a series of key performance and key risk indicators. The former are reported on at the Executive
Management Committee and the latter are the responsibility of the Risk & Capital Committee. Where
an indicator triggers pre-set criteria an escalation to the board is implemented to support effective
management of the syndicate’s risk profile.
The principal risks and uncertainties facing the syndicate are as follows:
Insurance risk
There are three different elements to insurance risk, being the risk of losses from catastrophe events
(catastrophe risk), the risk that business will prove to be inadequately priced given the coverage being
provided (premium risk), and the risk that claims reserves prove to be insufficient (reserve risk). The
board manages insurance risk by agreeing its underwriting appetite at least annually. This includes
catastrophe appetites, combined ratio targets and line size guidelines. Underwriting performance is
monitored against the business plan throughout the year by the Executive Management Committee.
Licensed catastrophe models are used to model maximum probable losses from natural catastrophe
exposed business for significant perils in key areas and to monitor exposures against pre-determined
appetites. Reserve adequacy is monitored through a regular review of loss development and reserving
analyses carried out by the Actuarial department.
Credit Risk
This represents the risk of default by one or more of the syndicate’s counterparties, be they brokers,
coverholders or reinsurers. The risk of default by issuers of investment holdings is captured in market
risk. The syndicate conducts business only with brokers and coverholders that have been approved by
the security group, which reviews the financial position and other information in respect of these entities
on at least an annual basis. A similar process is followed with respect to the use of reinsurers on the
syndicate’s reinsurance programmes.
Strategic report of the Managing Agent (continued)
8
Market Risk
Market risk relates primarily to the exposures faced by the syndicate in respect of movements in key
economic variables such as interest rates and foreign exchange rates and their potential impact on the
valuation of the investment portfolio and other balance sheet items, such as claims reserves. These
risks are managed through the adoption of a prudent investment strategy with respect to the duration
and credit quality of the investment portfolio, as well as through the regular re-balancing of the foreign
exchange position and exposures to match closely the liability currency profile.
In relation to investment holdings, the investment group recommends to the board the syndicate’s
investment strategy, having due regard to investment results, economic conditions and developments
in financial markets. Benchmarks are set each year with reference to this strategy in order to monitor
the performance of the syndicate’s investment managers. Credit quality and asset concentration
parameters are set which properly control the syndicate’s exposure to investment risk. The syndicate
makes no use of financial derivatives in the management of its risk exposures.
Liquidity risk
This is the risk that the syndicate will not be able to meet its liabilities as they fall due, because of a
shortfall of liquid assets. To mitigate this risk, the level of short-term investment holdings is monitored
by the Chief Financial Officer and the Executive Management and Risk & Capital Committees. The
syndicate’s conservative investment guidelines also help to ensure that its portfolio has the necessary
liquidity to respond quickly to short-term funding needs.
Operational Risk
Operational risk arises from errors caused by people, processes or systems, to include cyber issues,
that could lead to losses to the syndicate. It includes the impact from external bodies, such as
outsourced service providers and related companies. A specific workstream addresses operational
resilience in its many forms. We are mindful of the PRA’s requirements to be able to demonstrate that
we remain within our impact tolerances for our important business services (IBS). Much time has been
spent in responding to the various requests from the PRA in support of our underlying work in readiness
for the March 2025 deadline.
Operational risk is managed through a combination of robust service level agreements with external
service providers, the implementation of detailed procedures and controls in all areas of its business
and a structured programme of testing of processes and systems by the Risk, Compliance and Internal
Audit departments. This is overseen by the Executive Management and Risk & Capital Committees.
Financial key performance indicators
The syndicate's underwriting strategy is focused on the profitability of business, a key performance
indicator being the level of absolute profit achieved. In 2024, despite several catastrophe events and
the further enhancement of reserves for social and economic inflation, the syndicate generated a profit
of $185,379,000 (2023: £134,555,000, restated in USD $162,077,000) at a combined ratio of 83.5%
(2023: 84.8%).
The other key financial performance indicator is the investment return achieved compared with the
benchmark set by the board. Given the nature of the syndicate's business, 80% of its investment
portfolio is denominated in US dollars. The 2024 calendar year investment return on this portfolio was
4.8% (2023: 4.1%), compared with a benchmark of 4.0% (2023: 4.2%). Following increases in global
interest rates this is now working through into the syndicate’s investment returns.
Strategic report of the Managing Agent (continued)
9
Key stakeholders and responsibilities
The managing agent is fully aware of on-going responsibilities. Accordingly, attention is given to key
stakeholders. These include clients, regulators, staff employed by the group, third party suppliers,
local communities, the environment and Berkshire Hathaway Inc. the ultimate parent company.
The managing agent acts in good faith to promote the success of the syndicate for the benefit of the
member as a whole. Decision making is made in an informed manner, having regard to the impact on
stakeholders and matters set out in s.172 of the Companies Act 2006.
Of particular note:
• The directors, in making decisions have considered the long term prospects of Syndicate 435. A
review of the business is given above.
• The managing agent takes pride in all business relationships. The organisation looks to engage
with clients, outsourcers, professional advisers, staff and other stakeholders in a straightforward
and professional manner. Treating all stakeholders fairly is of paramount importance.
• Employees are fundamental to the success of the business. The managing agent strives to make
Faraday an enjoyable and rewarding place to work. Regular meetings are held to update staff on
the performance and operational aspects of the syndicate. The open style of management adopted
by the directors encourages employees to raise any issues and appropriate steps can be taken.
The directors regard this style as one of the core strengths; it assists with staff retention. Training
and development of staff is another important factor of the board’s focus; a skilled and content
workforce is crucial to the success of the business. As well as participating in market surveys
undertaking an in-house survey on culture a formal Culture Group has been established to enable
full and frank discussion and dialogue on the survey’s findings. Initiatives have been established
to address the matters raised.
• The directors monitor developments in the wider business and financial arenas. In particular these
include regulatory requirements and guidelines as well as legal frameworks and Risk and
Compliance aspects of the (re)insurance industry. Faraday would adapt to any revisions as they
arise having regard to our diverse stakeholders. Market conditions underpin the ever-changing
needs of key stakeholders. The directors endeavour to react to the circumstances in a timely
manner. High business standards are promoted throughout the organisation. The board revisits
the overall strategy at a formal meeting each year. Work continues on an on-going basis to increase
the quality of business being underwritten. When necessary, difficult decisions will be taken.
• The robust client focus assists with maintaining and improving relationships with clients,
outsourcers and suppliers. Every effort is made by the directors, following recommendations from
the Underwriters, to meet the changing needs of our customers. Products are regularly reviewed
to ensure they meet the requirements and are acceptable to all parties in the distribution chain;
revisions are made as necessary.
• The directors value market perception. Every effort is made to meet the wide range of financial
responsibilities. Payment terms will be met and enquiries are always made where service levels
are queried by any of the stakeholders.
• Finally, the managing agent is conscious of its environmental and social responsibilities. Care is
taken to minimise any adverse impact the business might have on the wider environment. A hybrid
working regime has been in operation during 2024; this continues to be monitored to achieve the
best outcome for the business. It is pleasing to note that colleagues continue to undertake face to
face meetings in person; the business is seeing benefits from this. Work continues to reduce the
use of general office consumables. Specific attention is now being given to the broad reach of
climate change from both a business and operational perspective.
Strategic report of the Managing Agent (continued)
10
Environment, Social & Governance : Climate change
The impact on the business from climate change continues to be assessed; relevant data is considered
and action taken as appropriate bearing in mind the long term nature of the impacts of climate change.
The managing agent is mindful of its corporate and social responsibilities in the global market place in
which the syndicate is active. Specific resource has been dedicated to evaluating climate change with
an on-going review of the risk factors from a financial and an operational perspective.
Future developments
Whilst it is too early to assess rates across the various lines of business 2025 has opened, in the main,
with a very competitive trading environment. This is due, in part, to surplus capacity in many areas with
aggressive appetite. Whilst disappointing, our Underwriters remain focussed on writing business that
meets our strict internal metrics around price adequacy and finding opportunities that supplement the
existing portfolio.
Faraday continues to work with Lloyd’s to ensure we are positioned for long term success as well as
supporting the Lloyd’s franchise with engagement in the roll-out of The Future at Lloyd’s, Blueprint 2
which has been subject to several delays.
The managing agent remains mindful that Faraday’s primary platform continues to be the syndicate.
However, in certain circumstances this may not be suitable and Faraday MGA Limited, our second
platform, would provide a means to accommodate Faraday’s clients’ needs. In 2024 our MGA has
bound business on behalf of General Reinsurance AG and it is dealing with the runoff of business bound
in earlier years on behalf of Berkshire Hathaway International Insurance Limited, both are related group
companies. And, as noted in the Managing Agent’s Report Faraday Europe SAS was formed in late
2024. This, once fully operational, will provide a further route for business for Syndicate 435.
Faraday continues to review its vision and overall strategy. We strive to ensure the optimum outcome
for policyholders as well as adding strength to the Faraday brand. We continue to investigate other
classes of business and will look to broaden the Faraday product offering where appropriate. Faraday
maintains its strong underwriting discipline across all lines of business and is prepared to take tough
decisions should the underlying risk not pass strict criteria. Underwriters remain focused on the
profitability of the business being written. We are actively looking to enhance our market presence
during the coming year through growth in our younger teams, participation in further new lines of
business and large individual bespoke arrangements.
By order of the board
Elisabeth Richardson
Company Secretary
London
26 February 2025
Managing Agent’s report
11
The directors of Faraday Underwriting Limited (‘the managing agent’) present their report for the year
ended 31 December 2024.
This Annual Report is prepared using the annual basis of accounting as required by Statutory
Instrument No 1950 of 2008, the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate
Accounts) Regulations 2008 and applicable United Kingdom Accounting Standards, including Financial
Reporting Standard 102: The Financial Reporting Standard applicable in the United Kingdom and
Republic of Ireland (‘FRS102’) and Financial Reporting Standard 103: Insurance Contracts (‘FRS103’).
Results
As can be seen from Note 5 – ‘Segmental analysis’ the majority of Syndicate 435’s business is US
based. After much thought it has been concluded that the presentation currency should change to US
dollars from GB pounds; accordingly, the 2023 comparative figures have been restated at the relevant
2023 exchange rate. Any regulatory figures that are established in GB pounds are and will continue to
be stated in that currency.
The result for the 2024 calendar year is a profit of $185,379,000 (2023: £134,555,000 restated in USD
$162,077,000).
Going concern
After making enquiries, the directors have a reasonable expectation that Syndicate 435 (‘the syndicate)
has adequate resources to continue in operational existence for the foreseeable future. Moreover, the
directors expect that continued capital support will be in place in order to do so. Accordingly, the going
concern basis continues to be adopted in preparing the Annual Report.
Directors
The directors of the managing agent who served during the year ended 31 December 2024 and to the
date of signing this report were as follows:
Paul Blight, Chief Underwriting Officer and Active Underwriter
Andrew D’Arcy, non-executive director
Vicky Cortese, HR director appointed to the board on 6 September 2024
Nick Frankland, non-executive director appointed on 1 February 2024, non-executive Chairman with
effect from 13 June 2024
Kevin Harker, Chief Financial Officer
Michael Hosking, Chief Risk Officer, appointed to the board on 29 August 2024
Terry Masters, Senior non-executive director
Stephen Michael, non-executive director
Martin Pike, Chairman and non-executive director to date of retirement 31 May 2024
Andrea Reynolds, non-executive director
Tom Shelley, Chief Executive Officer
Faraday’s wider role
Although Syndicate 435 is Faraday’s main platform, Faraday MGA Limited (‘the MGA’) provides a
means to accommodate our clients’ needs when the Lloyd’s platform does not. The MGA has a binding
authority to write business on behalf of General Reinsurance AG (GRAG) and recently with Berkshire
Hathaway International Insurance Limited (BHIIL), both of which are related companies.
In 2024 Faraday Europe SAS was incorporated in France. At present its infrastructure and operational
capabilities are being finalised; in due course it will provide another route for business to pass to
Syndicate 435.
Managing Agent’s report (continued)
12
Statement of disclosure of information to auditors
Each of the directors at the date of this report confirms that:
(a) so far as each of them is aware, there is no information relevant to the audit of the syndicate’s
financial statements for the year ended 31 December 2024 of which the auditors are unaware;
and
(b) the director has taken all the steps that she/he ought to have taken in her/his duty as a director to
make her/ him aware of any relevant audit information and to establish that the syndicate’s
auditors are aware of that information.
Management and capacity
Faraday Underwriting Limited is the managing agent for Syndicate 435. Faraday Holdings Limited,
the immediate parent company of the managing agent, is itself owned by General Re Corporation
which is a subsidiary of Berkshire Hathaway Inc. The ultimate holding company of the Faraday group
of companies is therefore Berkshire Hathaway Inc.
Syndicate capacity for the 2022 to 2023 years of account has been provided in full by Faraday Capital
Limited, a wholly owned subsidiary of Faraday Holdings Limited. With effect from the 2024 year of
account syndicate capacity is provided in full by Faraday Corporate Capital Limited, also a wholly owned
subsidiary of Faraday Holdings Limited The capacity in recent years is as follows 2022: £480m, 2023
and 2024: £680m.
Capacity for 2025 has been set at £640m.This is being provided by our corporate member Faraday
Corporate Capital Limited which has received Lloyd’s regulatory approval for the role with effect from
the 2024 year of account. Faraday Capital Limited will continue to be the sole corporate name on the
2023 and prior years of account whilst they remain open.
Faraday Capital Limited has exercised its right to waive the requirement to prepare separate accounts
for the 2022 closed year of account.
Faraday is composed of Faraday Holdings Limited and its subsidiaries Faraday Underwriting Limited,
Faraday Corporate Capital Limited, Faraday Capital Limited, Faraday Europe SAS, Faraday MGA
Limited and GRF Services Limited.
Future developments
Future developments at the syndicate are described in the Strategic Report on page 4.
Auditors and syndicate meeting
The managing agent hereby gives formal notification of a proposal to re-appoint Deloitte LLP as auditor
of Syndicate 435 for a further year. In addition, the managing agent confirms that it does not propose
to hold an annual general meeting of the syndicate.
By order of the board
Elisabeth Richardson
Company Secretary
London
26 February 2025
Statement of Managing Agent’s responsibilities
13
31 December 2024
The managing agent is responsible for preparing the annual report and the syndicate financial
statements in accordance with applicable law and regulations.
The Insurance Accounts Directive (Lloyd’s syndicate and Aggregate Accounts) Regulations 2008 (‘the
2008 Regulations’) require the managing agent to prepare syndicate financial statements for each
financial year. Under that law the managing agent has elected to prepare the financial statements in
accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under company law the managing agent must not approve the financial
statements 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 syndicate financial statements, the managing agent is required to:
(a) select suitable accounting policies and then apply them consistently
(b) make judgments and accounting estimates that are reasonable and prudent;
(c) state whether applicable UK Accounting Standards have been followed, subject to any
material departures disclosed and explained in the financial statements; and
(d) prepare the syndicate financial statements on the going concern basis unless it is
inappropriate to presume that the syndicate will continue to write business.
The managing agent is responsible for keeping adequate accounting records that are sufficient to show
and explain the syndicate’s transactions and disclose with reasonable accuracy at any time the financial
position of the syndicate and enable it to ensure that the financial statements comply with 2008
Regulations. 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.
The preparation and review of the iXBRL tagging that has been applied to the Syndicate Financial
Statements in accordance with the instructions issued by Lloyd’s, including designing, implementing
and maintaining systems, processes and internal controls to result in tagging that is free from material
non-compliance with the instructions issued by Lloyd’s, whether due to fraud or error.
The managing agent is responsible for the maintenance and integrity of the corporate and financial
information included on the business’ website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Independent Auditor’s report to the members of
Syndicate 435
14
Report on the audit of the syndicate annual financial statements
Opinion
In our opinion the syndicate annual financial statements of Syndicate 435 (the ‘syndicate’):
• give a true and fair view of the state of the syndicate’s affairs as at 31 December 2024 and of
its profit for the year then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, including Financial Reporting Standard 102 “The Financial Reporting
Standard applicable in the UK and Republic of Ireland”; and
• have been prepared in accordance with the requirements of The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and sections 1 and 5 of the
Syndicate Accounts Instructions Version 2.0 as modified by the Frequently Asked Questions
Version 1.1 issued by Lloyd’s (the “Lloyd’s Syndicate Accounts Instructions”).
We have audited the syndicate annual financial statements which comprise:
• the statement of profit or loss account and other comprehensive income;
• the balance sheet;
• the statement of changes in members’ balances;
• the statement of cash flows; and
• the related notes 1 to 24.
The financial reporting framework that has been applied in their preparation is applicable law and United
Kingdom Accounting Standards, including Financial Reporting Standard 102 “The Financial Reporting
Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted
Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law and the Syndicate Accounts Instructions. Our responsibilities under those standards are
further described in the auditor's responsibilities for the audit of the syndicate annual financial
statements section of our report.
We are independent of the syndicate in accordance with the ethical requirements that are relevant to
our audit of the syndicate annual financial statements in the UK, including the Financial Reporting
Council’s (the ‘FRC’s’) Ethical Standard, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the managing agent’s use of the going
concern basis of accounting in the preparation of the financial statements is appropriate.
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 in operations for a period of at least twelve months from when the syndicate financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the managing agent with respect to going concern are
described in the relevant sections of this report.
Independent Auditor’s report to the members of
Syndicate 435 (continued)
15
Other information
The other information comprises the information included in the annual report, other than the syndicate
annual financial statements and our auditor’s report thereon. The managing agent is responsible for the
other information contained within the annual report. Our opinion on the syndicate annual financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in
our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the syndicate annual financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this
gives rise to a material misstatement themselves. 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 in this regard.
Responsibilities of managing agent
As explained more fully in the managing agent’s responsibilities statement, the managing agent is
responsible for the preparation of the syndicate annual financial statements and for being satisfied that
they give a true and fair view, and for such internal control as the managing agent determines is
necessary to enable the preparation of syndicate annual financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the syndicate annual financial statements, the managing agent is responsible for assessing
the syndicate’s ability to continue in operation, disclosing, as applicable, matters related to the
syndicate’s ability to continue in operation and to use the going concern basis of accounting unless the
managing agent intends to cease the syndicate’s operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the syndicate annual financial statements
Our objectives are to obtain reasonable assurance about whether the syndicate annual financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditor's 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 financial statements.
A further description of our responsibilities for the audit of the syndicate annual financial statements is
located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities
. This description forms part of
our auditor’s report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
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.
We considered the nature of the syndicate and its control environment, and reviewed the syndicate’s
documentation of their policies and procedures relating to fraud and compliance with laws and
regulations. We also enquired of management and internal audit about their own identification and
assessment of the risks of irregularities.
Independent Auditor’s report to the members of
Syndicate 435 (continued)
16
We obtained an understanding of the legal and regulatory frameworks that the syndicate operates in,
and identified the key laws and regulations that:
• had a direct effect on the determination of material amounts and disclosures in the financial
statements. These included the Insurance Accounts Directive (Lloyd’s Syndicate and
Aggregate Accounts) Regulations 2008 and the Lloyd’s Syndicate Accounting Byelaw (no. 8 of
2005), the Lloyd’s Syndicate Accounts Instructions; and
• do not have a direct effect on the financial statements but compliance with which may be
fundamental to the syndicate’s ability to operate or to avoid a material penalty. These included
the requirements of Solvency II.
We discussed among the audit engagement team including relevant internal specialists such as
actuarial and IT specialists regarding the opportunities and incentives that may exist within the
organisation for fraud and how and where fraud might occur in the financial statements.
As a result of performing the above, we identified the greatest potential for fraud in the following areas,
and our procedures performed to address them are described below:
• Estimation of pipeline premiums requires significant management judgement and therefore
there is potential for management bias through manipulation of core assumptions. In response
our testing included, on a sample basis, comparing management’s estimates on prior year
policies against actual premiums received as well as to historical experience on similar policies.
• Valuation of technical provisions includes assumptions and methodology requiring significant
management judgement and involves complex calculations, and therefore there is potential for
management bias. There is also a risk of overriding controls by making late adjustments to the
technical provisions. In response to these risks we involved our actuarial specialists to develop
independent estimates of the technical provisions and we tested the late journal entries to
technical provisions.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to
respond to the risk of management override. In addressing the risk of fraud through management
override of controls, we tested the appropriateness of journal entries and other adjustments; assessed
whether the judgements made in making accounting estimates are indicative of a potential bias; and
evaluated the business rationale of any significant transactions that are unusual or outside the normal
course of business.
In addition to the above, our procedures to respond to the risks identified included the following:
• reviewing financial statement disclosures by testing to supporting documentation to assess
compliance with provisions of relevant laws and regulations described as having a direct effect
on the financial statements;
• performing analytical procedures to identify any unusual or unexpected relationships that may
indicate risks of material misstatement due to fraud;
• enquiring of management and internal audit concerning actual and potential litigation and
claims, and instances of non-compliance with laws and regulations; and
• reading minutes of meetings of those charged with governance, reviewing internal audit reports,
and reviewing correspondence with Lloyd’s, Prudential Regulation Authority and Financial
Conduct Authority.
Independent Auditor’s report to the members of
Syndicate 435 (continued)
17
Report on other legal and regulatory requirements
Opinions on other matters prescribed by The Insurance Accounts Directive (Lloyd’s Syndicate
and Aggregate Accounts) Regulations 2008
and the Lloyd’s Syndicate Accounts Instructions
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the managing agent’s report for the financial
year for which the financial statements are prepared is consistent with the financial statements;
and
• the strategic report and the managing agent’s report have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the syndicate and its environment obtained in the
course of the audit, we have not identified any material misstatements in the strategic report or the
managing agent’s report.
Matters on which we are required to report by exception
Under The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations
2008 we are required to report in respect of the following matters if, in our opinion:
• the managing agent in respect of the syndicate has not kept adequate accounting records; or
• the syndicate annual financial statements are not in agreement with the accounting records; or
• we have not received all the information and explanations we require for our audit.
We have nothing to report in respect of these matters.
Use of our report
This report is made solely to the syndicate’s members, as a body, in accordance with regulation 10 of
The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008. Our
audit work has been undertaken so that we might state to the syndicate’s members those matters we
are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the syndicate’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
As required by the Syndicate Accounts Instructions Version 2.0, these financial statements will form
part of the Electronic Format Annual Syndicate Accounts filed with the Council of Lloyd’s and published
on the Lloyd’s website. This auditors’ report provides no assurance over whether the Electronic Format
Annual Syndicate Accounts have been prepared in compliance with Section 2 of the Syndicate
Accounts Instructions Version 2. We have been engaged to provide assurance on whether the
Electronic Format Annual Syndicate Accounts has been prepared in compliance with Section 2 of the
Syndicate Accounts Instructions Version 2 and will privately report to the directors of the managing
agent and the Council of Lloyd’s on this.
Adam Ely FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
26 February 2025
Statement of profit or loss and other comprehensive
income
18
Technical account – General business
For the year ended 31 December 2024
Note
2024
$000
Restated
2023
$000
Gross premiums written
5
Outwards reinsurance premiums
(94,542 )
(90,163 )
Premiums written, net of reinsurance
Changes in unearned premium
17
Change in the gross provision for unearned premiums
(38,427 )
(9,143 )
Change in the provision for unearned premiums reinsurers’ share
Net change in provisions for unearned premiums
(31,818 )
Earned premiums, net of reinsurance
Allocated investment return transferred from the non-technical
account
10
Claims paid
17
Gross amount
(353,056 )
(388,726 )
Reinsurers’ share
Net claims paid
(320,144 )
(354,682 )
Change in the provision for claims
17
Gross amount
(9,080 )
(40,283 )
Reinsurers’ share
(46,531 )
(21,816 )
Net change in provisions for claims
(55,611 )
(62,099 )
Claims incurred, net of reinsurance
(375,755 )
(416,781 )
Net operating expenses
7
(204,457 )
(207,127 )
Balance on the technical account – general business
Statement of profit or loss and other comprehensive
income (continued)
19
Non-technical account – General business
For the year ended 31 December 2024
The accompanying notes from page 24 to 46 form an integral part of these financial statements.
Note
2024
$000
Restated
2023
$000
Balance on the technical account – general business
Investment income
10
Realised gains/(losses) on investments
10
Unrealised gains/(losses) on investments
10
Investment expenses and charges
10
(1,037 )
(924 )
Total investment return
Allocated investment return transferred to the general business
technical account
(75,049 )
(55,830 )
Foreign exchange
(5,040 )
(6,249 )
Profit for the financial year
Other comprehensive income:
Other
Total profit for the year
Balance sheet - Assets
20
As at 31 December 2024
Note
2024
$000
Restated
2023
$000
Financial investments
11
Deposits with ceding undertakings
Investments
Provision for unearned premiums
Claims outstanding
Reinsurers’ share of technical provisions
17
Debtors arising out of direct insurance operations
12
Debtors arising out of reinsurance operations
13
Other debtors
14
Debtors
Cash at bank and in hand
Other assets
Accrued interest and rent
Deferred acquisition costs
15
Other prepayments and accrued income
Prepayments and accrued income
Total assets
Balance sheet - Liabilities
21
As at 31 December 2024
Note
2024
$000
Restated
2023
$000
Members’ balances
Total capital and reserves
Provision for unearned premiums
Claims outstanding
Technical provisions
17
Creditors arising out of direct insurance operations
18
Creditors arising out of reinsurance operations
19
Other creditors including taxation and social security
20
Creditors
Accruals and deferred income
Total liabilities
Total liabilities, capital and reserves
The Syndicate financial statements on pages 18 to 46 were approved by the board of Faraday
Underwriting Limited on 25 February 2025 and were signed on its behalf by;
Kevin Harker
Director
London
26 February 2025
Statement of changes in members’ balances
22
For the year ended 31 December 2024
2024
$000
Restated
2023
$000
Members’ balances brought forward at 1 January
(37,963 )
Total profit/(loss) for the year
Payments of profit to members’ personal reserve funds
(60,847 )
(44,451 )
Other
(2 )
Members’ balances carried forward at 31 December
Statement of cash flows
23
For the year ended 31 December 2024
Note
2024
$000
Restated
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
(48,918 )
(4,870 )
Increase/(decrease) in creditors
Movement in other assets/liabilities
Investment return
(75,049 )
(55,830 )
Foreign exchange
(9,856 )
Other
(17,557 )
(4,127 )
Net cash flows from operating activities
Cash flows from investing activities
Purchase of equity and debt instruments
(1,377,932 )
(664,550 )
Sale of equity and debt instruments
Investment income received
Other
(5,304 )
Net cash flows from investing activities
(89,221 )
(110,493 )
Cash flows from financing activities
Distribution of profit
(60,847 )
(44,451 )
Other
(2 )
Net cash flows from financing activities
(60,840 )
(44,453 )
Net increase/(decrease) in cash and cash equivalents
(13,238 )
Cash and cash equivalents at the beginning of the year
Foreign exchange on cash and cash equivalents
(3,737 )
(7,501 )
Cash and cash equivalents at the end of the year
21
Notes to the financial statements
24
1. Basis of preparation
Faraday Syndicate 435 (‘The syndicate’) comprises a group of members of the Society of Lloyd's that
underwrites insurance business in the London Market. The address of the Syndicate’s managing agent
is Corn Exchange, 55 Mark Lane, London, EC3R 7NE.
The financial statements have been prepared in accordance with the Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and applicable Accounting Standards
in the United Kingdom and the Republic of Ireland, including Financial Reporting Standard 102 (FRS
102). FRS 102 requires the application of Financial Reporting Standard 103 (FRS 103) in relation to
insurance contracts. Since all open years of account are aligned data under Schedule 3 Section 6(1)b
of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 has
not been prepared.
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 years presented are 31 December 2024 and comparatives at 31 December 2023 . All
amounts have been rounded to the nearest thousand, unless otherwise indicated.
The financial statements are presented in US Dollars, the functional currency of the syndicate is US
Dollars because that is the currency of the primary economic environment in which the syndicate
operates. The 2023 accounts were presented in GB pounds, the 2023 financials in these accounts have
been restated at the relevant 2023 exchange rates in US Dollars in alignment with FRS 102 section
30.18.
During 2024, Lloyd's introduced changes to the syndicate accounts process to rationalise and
standardise financial reporting across the market. As a result, certain comparative information has been
restated to ensure consistency with current year presentation and compliance with the Lloyd's
Syndicate Accounts Instructions. The appropriate changes have been made.
The syndicate continues to engage in non-life business.
Going concern
The syndicate has financial resources to meet its financial needs and manages 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 for the next 12 months. The syndicate 2024 year of account has opened
and the directors have concluded that the syndicate has sufficient resources to, and a reasonable
expectation that it will, open a 2025 year of account. 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 following critical judgements have been made in applying the syndicate’s accounting policies:
There are no critical accounting judgements, apart from those involving estimations (which are dealt
with separately below), in the process of applying the syndicate’s accounting policies.
The syndicate makes estimates and assumptions concerning the future based on historical experience
and other factors that are considered to be relevant. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and underlying assumptions are
reviewed on an ongoing basis.
Notes to the financial statements (continued)
25
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision and future periods if the revision
affects both current and future periods. The 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.
Gross premiums written
Gross premiums written includes estimates for pipeline premiums together with adjustments to
premiums written in prior accounting periods; these are key estimates. Gross premiums written include
pipeline premiums calculated using actuarial projection techniques on the key assumption that historical
development is representative of future development. In the syndicate, premiums written is initially
based on the estimated premium income (‘EPI’) of each contract, adjusted by actuarial projection
techniques where appropriate. EPI is adjusted as the year of account matures. Sensitivities have been
run on the pipeline premium balance. A decrease in the pipeline premium of 20% would impact gross
written premium by $59.7m (2023: $48.3m) and conversely an increase would add $59.7m (2023:
$48.3m) to gross written premium. Neither movement would give rise to a material change in the overall
result. Gross premiums written are disclosed in note 5.
Valuation of assets and liabilities of non-life insurance contracts
Estimates are made for both the expected ultimate cost of claims reported and claims IBNR at the
balance sheet date. The estimate of IBNR is generally subject to a greater degree of uncertainty than
that for reported claims. In calculating the estimated liability, the syndicate uses a variety of estimation
techniques based upon statistical analyses of historical experience which assumes past trends can be
used to project future developments. The estimation of the reinsurer’s share of technical provisions,
particularly IBNR, is subject to the same estimation uncertainty since its valuation is dependent on the
gross estimate. Technical provisions are disclosed in note 17.
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.
Premiums written
Premiums written comprise premiums on policies incepted during the financial year as well as
adjustments made in the year to premiums written in prior financial years. Premiums written are shown
gross of acquisition costs payable and exclude taxes and duties levied on them. Premiums include
estimates for pipeline premiums, representing amounts due to the syndicate not yet notified.
Unearned premiums
Unearned premiums represent the proportion of premiums written in the financial year that relate to
unexpired terms of policies in force at the balance sheet date, calculated on the basis of established
earnings patterns or time apportionment as appropriate.
Reinsurance premium ceded
Outwards reinsurance premiums are accounted for in the same year as the premiums for the related
inwards business being reinsured.
Claims provisions and related recoveries
Gross claims incurred comprise the estimated cost of all claims occurring during the financial year,
whether reported or not, including related direct and indirect claims handling costs and adjustments to
claims outstanding established in previous years.
Notes to the financial statements (continued)
26
The provision for claims outstanding is assessed on an individual case basis and is based on the
estimated ultimate cost of all claims notified but not settled by the balance sheet date, together with the
provision for related claims handling costs. The provision also includes the estimated cost of claims
incurred but not reported (‘IBNR’) at the balance sheet date based on statistical methods.
These methods generally involve the projection from past experience of the development of claims over
time to form a view of the likely ultimate claims to be incurred, having regard to variations in the business
accepted and the underlying terms and conditions. For the most recent years, where a high degree of
volatility can arise from projections, estimates may be based in part on output from rating and other
models of the business accepted and assessments of underwriting conditions.
The reinsurers’ share of claims outstanding is based on the amounts of gross case reserves and IBNR,
net of estimated irrecoverable amounts, having regard to the reinsurance programme in place for the
class of business, the claims experience for the financial year and the current security rating of the
reinsurance companies involved. A number of statistical methods are used to assist in making these
estimates.
The two most critical assumptions with regard to claims provisions are firstly that the past is, in general
terms, a reasonable predictor of the likely level of claims development but subject always to
unpredictable changes and secondly that the rating and other models used for current business are fair
reflections of the likely level of ultimate claims to be incurred.
The directors consider that the provisions for gross claims and related reinsurance recoveries are fairly
stated on the basis of the information currently available to them. However, the ultimate liability will
vary as a result of subsequent information and events and this may result in significant adjustments to
the amounts provided. Adjustments to the amounts of claims provisions established in prior financial
years are reflected in the financial statements for the period in which the adjustments are made. The
methods used, and the estimates made, are reviewed regularly.
Unexpired risks provision
A provision for unexpired risks is made where anticipated claims and related expenses arising after the
end of the financial year in respect of contracts concluded before that date, are expected to exceed the
unearned premiums under these contracts, after the deduction of any deferred acquisition costs.
The provision for unexpired risks is calculated by reference to classes of business which are managed
together, after taking into account the relevant investment return.
Deferred acquisition costs
Acquisition costs, comprising commission and other costs related to the acquisition of insurance and
reinsurance policies as well as reinsurance polices ceded, are deferred to the extent that they are
attributable to premiums unearned at the balance sheet date.
Foreign currencies
The syndicate’s functional currency is considered to be US dollars (USD) because that is the currency
of the primary economic environment in which the syndicate operates. The syndicate’s chosen
presentational currency is USD.
Underwriting transactions denominated in currencies other than USD, GBP or Canadian dollars (CAD)
are predominantly converted to GBP at the rate of exchange ruling at the date the transaction is
processed. Thereafter, GBP and CAD transactions are converted to the functional currency using the
USD exchange rates prevailing at the respective month end.
Under FRS 102 and FRS 103, monetary assets and liabilities (which include unearned premiums and
deferred acquisition costs) denominated in foreign currencies are retranslated into the functional
currency at the exchange rate ruling on the reporting date. Non-monetary items denominated in foreign
currencies, measured at fair value, are translated into the functional currency using the exchange rate
ruling at the date when the fair value was determined.
Notes to the financial statements (continued)
27
Exchange differences arising from translation to functional currency are recorded in the Profit and Loss
Account, non-technical account.
Investments
Investments are stated at current value at the balance sheet date. For this purpose, listed investments
are stated at market value and deposits with credit institutions which includes overseas deposits are
stated at cost. Unlisted investments for which a market exists are stated at the average price at which
they are traded on the balance sheet date or the last trading day before that date.
Unlisted investments for which a market does not exist, where the investment is held to maturity, are
stated at cost.
The directors use their judgement in selecting an appropriate valuation technique. Where possible,
financial instruments are marked at prices quoted in active markets. In certain instances, such price
information is not available for all instruments and the syndicate uses valuation techniques to measure
such instruments. These techniques use ‘market observable inputs’ where available, derived from
similar assets in similar and active markets, from recent transaction prices for comparable items or from
other observable market data. For positions where observable reference data are not available for
some or all parameters the syndicate estimates the non-market observable inputs used in its valuation
models.
Investment fair value hierarchy
We have adopted FRS 102 section 11.27 which establishes a fair value hierarchy that prioritises the
inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest
priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are as follows:
Level 1 – Quoted prices for an identical asset in an active market. Quoted in an active market in this
context means quoted prices are readily and regularly available and those prices represent actual and
regularly occurring market transactions on an arm’s length basis.
Level 2 – When quoted prices are unavailable, the price of a recent transaction for an identical asset
provides evidence of fair value as long as there has not been a significant change in economic
circumstances or a significant lapse of time since the transaction took place. If it can be demonstrated
that the last transaction price is not a good estimate of fair value (e.g. because it reflects the amount
that an entity would receive or pay in a forced transaction, involuntary liquidation or distress sale), that
price is adjusted.
Level 3 – If the market for the asset is not active and recent transactions of an identical asset on their
own are not a good estimate of fair value, the fair value is estimated by using a valuation technique.
The objective of using a valuation technique is to estimate what the transaction price would have been
on the measurement date in an arm’s length exchange motivated by normal business considerations.
Investment return
Investment return comprises all investment income, realised investment gains and losses and
movements in unrealised gains and losses, net of investment expenses, charges and interest.
Realised gains and losses on investments are calculated as the difference between sale proceeds and
purchase price. Unrealised gains and losses on investments represent the difference between the
valuation at the balance sheet date and their valuation at the previous balance sheet date, or purchase
price, if acquired during the financial year, together with the reversal of unrealised gains and losses
recognised in earlier financial years in respect of investment disposals in the current financial year.
Investment return is initially recorded in the non-technical account. A transfer is made from the non-
technical account to the technical account – general business. Investment return has been wholly
allocated to the technical account since all investments relate to the technical account.
Notes to the financial statements (continued)
28
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 the
member 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 during the year are included
in the balance sheet under the heading ‘Other debtors’.
No provision has been made for any overseas tax payable by members on underwriting results.
Pension costs
Staff who provide services to the syndicate are employed by GRF Services Limited, a wholly owned
subsidiary of Faraday Holdings Limited. GRF Services Limited operates a defined contribution pension
scheme. Pension contributions relating to syndicate staff are charged to the syndicate and included
within net operating expenses.
Profit commission
Profit commission is not being charged by the managing agent.
Deposits with ceding undertakings
Deposits with ceding undertakings are funds held by Lloyd’s Europe on behalf of the syndicate to settle
Part VII claims. These funds are held at amortised cost in the balance sheet.
4. Risk and capital management
Introduction and overview
This note presents information about the nature and extent of insurance and financial risks to which the
syndicate is exposed, the managing agent’s objectives, policies and processes for measuring and
managing insurance and financial risks, and for managing the syndicate’s capital.
Risk management framework
The Board of Directors of the Managing Agent has overall responsibility for the establishment and
oversight of the syndicate’s risk management framework. The Board has established a Risk 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.
The Risk Committee reports regularly to the Audit and Risk Committee on its activities.
The risk management policies are established to identify and analyse the risks faced by the syndicate,
to set appropriate risk limits and controls, and to monitor risks and adherence to limits.
A. Insurance risk
The syndicate accepts insurance risk through its insurance contracts where it assumes the risk of loss
from persons or organisations that are directly subject to the underlying loss. The syndicate is exposed
to the uncertainty surrounding the timing, frequency and severity of claims under these contracts.
The syndicate manages its risk via its underwriting and reinsurance strategy within an overall risk
management framework.
Notes to the financial statements (continued)
29
The claims development table in note number 16 shows the actual claims incurred to previous estimates
for the last 10 years.
Concentration
The syndicate writes Property, Liability and Aviation risks primarily over a twelve month duration. The
most significant risks arise from natural disasters and other catastrophes (i.e. high severity, low
frequency events). A concentration of risk may also arise from a single insurance contract issued to a
particular demographic type of policyholder, within a geographical location or to types of commercial
business. The relative variability of the outcome is mitigated if there is a large portfolio of similar risks.
The concentration of non-life insurance by type of contract is summarised below by reference to
liabilities.
Sensitivity to insurance risk
The liabilities established could be significantly lower or higher than the ultimate cost of settling the
claims arising. This level of uncertainty varies between the classes of business and the nature of the
risk 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 presents the sensitivity of the value of insurance liabilities disclosed in the accounts
to potential movements in the assumptions applied within the technical provisions. Given the nature of
the business underwritten by the syndicate, the approach to calculating the technical provisions 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.
General insurance business sensitivities as at 31 December 2024
Sensitivity
+5.0%
$000
-5.0%
$000
Claims outstanding – gross of reinsurance
83,377
(83,377)
Claims outstanding – net of reinsurance
73,378
(73,378)
General insurance business sensitivities as at 31 December 2023
Sensitivity
+5.0%
Restated
$000
-5.0%
Restated
$000
Claims outstanding – gross of reinsurance
83,484
(83,484)
Claims outstanding – net of reinsurance
71,151
(71,151)
B. Financial risk
The syndicate monitors and manages the financial risks relating to the operations of the syndicate
through internal risk reports which analyse exposures by degree and magnitude of risks. These risks
include market risk (currency risk, interest rate risk and price risk), credit risk and liquidity risk.
a. Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the syndicate. The key areas of exposure to credit risk for the syndicate are in relation
to its investment portfolio, reinsurance programme and to a lesser extent amounts due from
policyholders and intermediaries.
Notes to the Financial Statements (continued)
30
The objective of the syndicate in managing its credit risk is to ensure risk is managed in line with the
syndicate’s risk appetite. The syndicate has established policies and procedures in order to manage
credit risk and methods to measure it.
Year 2024
AAA
$000
AA
$000
A
$000
BBB
$000
Other
$000
Not rated
$000
Total
$000
Shares and other variable yield
securities and units in unit trusts
-
6,848
-
-
-
-
6,848
Debt securities and other fixed income
securities
77,229
522,948
996,652
-
-
-
1,596,829
Loans and deposits with credit
institutions
-
47,515
1,049
-
-
-
48,564
Deposits with ceding undertakings
-
-
2,423
-
-
-
2,423
Reinsurers’ share of claims outstanding
815
151,125
40,193
96
-
7,750
199,979
Debtors arising out of direct insurance
operations
-
-
-
-
-
141,581
141,581
Debtors arising out of reinsurance
operations
4
1,478
1,754
19
-
139,727
142,982
Cash at bank and in hand
-
-
69,146
-
-
-
69,146
Other debtors and accrued interest
797
6,455
-
-
-
-
7,252
Total
78,845
736,369
1,111,217
115
-
289,058
2,215,604
Figures below have been restated in USD.
Year 2023
AAA
$000
AA
$000
A
$000
BBB
$000
Other
$000
Not
rated
$000
Total
$000
Shares and other variable yield securities
and units in unit trusts
-
8,799
-
-
-
-
8,799
Debt securities and other fixed income
securities
178,884
1,114,927
119,197
-
-
-
1,413,008
Loans and deposits with credit institutions
-
58,217
779
-
-
-
58,996
Deposits with ceding undertakings
-
-
3,952
-
-
-
3,952
Reinsurers’ share of claims outstanding
-
185,323
50,423
35
-
10,873
246,654
Debtors arising out of direct insurance
operations
-
-
-
-
-
110,391
110,391
Debtors arising out of reinsurance
operations
296
815
3,409
32
-
120,702
125,254
Cash at bank and in hand
-
-
86,388
-
-
-
86,388
Other debtors and accrued interest
1,461
12,962
-
-
-
22
14,445
Total
180,641
1,381,043
264,148
67
-
241,988
2,067,887
The 2023 disclosure has been revised to reflect more accurately the credit ratings.
The syndicate has debtors arising from direct insurance and reinsurance operations that are past due
but not impaired at the reporting date.
Notes to the financial statements (continued)
31
The table below sets out the age analysis of financial assets that are past due but not impaired at the
balance sheet date:
Figures below have been restated in USD.
b. Liquidity risk
Liquidity risk is the risk that the syndicate cannot meet its obligations associated with financial liabilities
as they fall due. The syndicate has adopted an appropriate liquidity risk management framework for the
management of the syndicate’s liquidity requirements. The syndicate is exposed to liquidity risk arising
from clients on its insurance and investment contracts.
Undiscounted net cash flows
Year 2024
No maturity
stated
$000
0-1 yrs
$000
1-3 yrs
$000
3-5 yrs
$000
>5 yrs
$000
Total
$000
Claims outstanding
-
436,443
676,379
234,181
320,529
1,667,532
Creditors
-
68,632
27,740
-
-
96,372
Other credit balances
-
8,898
-
-
-
8,898
Total
-
513,973
704,119
234,181
320,529
1,772,802
Figures below have been restated in USD.
Undiscounted net cash flows
Year 2023
No maturity
stated
$000
0-1 yrs
$000
1-3 yrs
$000
3-5 yrs
$000
>5 yrs
$000
Total
$000
Claims outstanding
-
504,279
632,243
147,315
385,846
1,669,683
Creditors
-
67,340
26,947
-
-
94,287
Other credit balances
-
9,785
-
-
-
9,785
Total
-
581,404
659,190
147,315
385,846
1,773,755
Past due but not impaired
0-3 months
past due
3-6 months
past due
6-12 months
past due
Greater
than 1 year
past due
Total
2024
$000
$000
$000
$000
$000
Debtors arising out of direct insurance
operations
30,037
7,105
1,524
-
38,666
Debtors arising out of reinsurance
operations
2,447
1,171
516
260
4,394
Total
32,484
8,276
2,040
260
43,060
Past due but not impaired
0-
3 months
past due
3-
6 months
past due
6-
12 months
past due
Greater
than 1 year
past due
Total
2023
$000
$000
$000
$000
$000
Debtors arising out of direct insurance
operations
31,049
6,798
707
-
38,554
Debtors arising out of reinsurance
operations
757
3,041
1,045
263
5,106
Total
31,806
9,839
1,752
263
43,660
Notes to the financial statements (continued)
32
c. Market risk
Market risk is the risk of adverse financial impact as a consequence of market movements such as
currency exchange rates, interest rates and other price changes. Market risk arises due to fluctuations
in both the value of assets held and the value of liabilities. The objective of the syndicate in managing
its market risk is to ensure risk is managed in line with the syndicate’s risk appetite.
The syndicate undertakes certain transactions denominated in foreign currencies and has minimal
exposure to currency risk as the syndicate’s financial assets are primarily matched to the same
currencies as its insurance contract liabilities. As a result, foreign exchange risk arises only to the extent
that assets and liabilities denominated in other currencies are not precisely matched.
The table below summarises the carrying value of the syndicate’s assets and liabilities, at the reporting
date:
Sterling
US dollar
Euro
Canadian
dollar
Australian
dollar
Japanese
Yen
Total
2024
$000
$000
$000
$000
$000
$000
$000
Investments
217,257
1,268,745
44,600
102,163
21,899
-
1,654,664
Reinsurers' share of
technical provisions
85,040
135,052
810
5,240
3,506
-
229,648
Debtors
33,492
195,959
33,005
11,803
6,383
3,921
284,563
Other assets
7,255
11,512
7,940
1,703
26,139
14,597
69,146
Prepayments and
accrued income
7,376
50,545
6,773
3,770
2,225
302
70,991
Total assets
350,420
1,661,813
93,128
124,679
60,152
18,820
2,309,012
Technical provisions
(328,385)
(1,432,551)
(88,202)
(91,885)
(48,169)
(10,350)
(1,999,542)
Creditors
(13,092)
(72,200)
(2,914)
(4,928)
(3,211)
(27)
(96,372)
Accruals and deferred
income
(4,542)
(3,336)
(77)
(514)
(429)
-
(8,898)
Total liabilities
(346,019)
(1,508,087)
(91,193)
(97,327)
(51,809)
(10,377)
(2,104,812)
Total capital and
reserves
4,401
153,726
1,935
27,352
8,343
8,443
204,200
Figures below have been restated in USD.
Sterling
US dollar
Euro
Canadian
dollar
Australian
dollar
Japanese
Yen
Total
2023
$000
$000
$000
$000
$000
$000
$000
Investments
86,427
1,184,818
44,884
137,136
31,490
-
1,484,755
Reinsurers' share of
technical provisions
96,684
162,101
1,113
7,034
3,037
-
269,969
Debtors
22,378
173,815
14,338
12,633
9,542
2,939
235,645
Other assets
11,868
12,266
12,744
5,399
20,693
23,418
86,388
Prepayments and
accrued income
7,100
54,036
2,034
5,167
3,907
97
72,341
Total assets
224,457
1,587,036
75,113
167,369
68,669
26,454
2,149,098
Technical provisions
(381,471)
(1,339,417)
(76,831)
(92,086)
(66,190)
(9,370)
(1,965,365)
Creditors
(18,343)
(64,260)
(3,101)
(6,169)
(1,540)
(874)
(94,287)
Accruals and deferred
income
(6,783)
(1,647)
(38)
(873)
(444)
-
(9,785)
Total liabilities
(406,597)
(1,405,324)
(79,970)
(99,128)
(68,174)
(10,244)
(2,069,437)
Total capital and
reserves
(182,140)
181,712
(4,857)
68,241
495
16,210
79,661
Notes to the financial statements (continued)
33
The following table details Interest rate risk. This is the risk that the value of future cash flows of a
financial instrument will fluctuate because of changes in market interest rates.
The syndicate is exposed to interest rate risk as it invests in long term debt at both fixed and floating
interest rates. The risk is managed by the syndicate by maintaining an appropriate mix of asset duration
such that the duration of liabilities is closely matched by our asset portfolio.
The sensitivity analyses below have been determined based on the exposure to interest rates. A 0.5%
increase or decrease is used when reporting interest rate risk internally to key management personnel
and represents management’s assessment of the reasonably possible change in interest rates.
2024
Impact on
result
s
before tax
$000
2024
Impact on
members’
balances
$000
Restated
2023
Impact on
results
before tax
$000
Restated
2023
Impact on
members’
balances
$000
Interest rate risk
+ 50 basis points shift in yield curves
(3,194)
(3,194)
(5,564)
(5,564)
- 50 basis points shift in yield curves
3,208
3,208
5,601
5,601
Equity price risk
5 percent increase in equity prices
342
342
440
440
5 percent decrease in equity prices
(342)
(342)
(440)
(440)
C. Capital management
i. Capital framework at Lloyd’s
The Society of Lloyd’s (Lloyd’s) is a regulated undertaking and subject to supervision by the Prudential
Regulatory Authority (PRA) under the Financial Services and Markets Act 2000, and in accordance with
the Solvency II Framework.
Within this supervisory framework, Lloyd’s applies capital requirements at member level and centrally
to ensure that Lloyd’s would comply with the Solvency II requirements, and beyond that to meet its own
financial strength, licence and ratings objectives.
Although, as described below, Lloyd’s capital setting processes use a capital requirement set at
syndicate level as a starting point, the requirement to meet Solvency II and Lloyd’s capital requirements
apply at overall and member level only respectively, not at syndicate level. Accordingly, the capital
requirement in respect of Syndicate 435 is not disclosed in these financial statements.
ii. Lloyd’s capital setting process
In order to meet Lloyd’s requirements, each syndicate is required to calculate its Solvency Capital
Requirement (SCR) for the prospective underwriting year. This amount must be sufficient to cover a 1
in 200 year loss, reflecting uncertainty in the ultimate run-off of underwriting liabilities (SCR ‘to ultimate’).
The syndicate must also calculate its SCR at the same confidence level but reflecting uncertainty over
a one year time horizon (one year SCR) for Lloyd’s to use in meeting Solvency II requirements. The
SCRs of each syndicate are subject to review by Lloyd’s and approval by the Lloyd’s Capital and
Planning Group.
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.
Notes to the financial statements (continued)
34
Each member’s SCR shall thus be determined by the sum of the member’s share of the syndicate SCR
‘to ultimate’. Where a member participates on more than one syndicate, a credit for diversification is
provided to reflect the spread of risk, but consistent with determining an SCR which reflects the capital
requirement to cover a 1 in 200 loss ‘to ultimate’ for that member. Over and above this, Lloyd’s applies
a capital uplift to the member’s capital requirement, known as the Economic Capital Assessment (ECA).
The purpose of this uplift, which is a Lloyd’s not a Solvency II requirement, is to meet Lloyd’s financial
strength, licence and ratings objectives. The capital uplift applied for 2024 was 35% (2023: 35%) of the
member’s SCR ‘to ultimate’.
iii. Provision of capital by members
Each member may provide capital to meet its ECA either by assets held in trust by Lloyd’s specifically
for that member (FAL), assets held and managed within a syndicate (FIS), or as the member’s share
of the members’ balances on each syndicate on which it participates.
Accordingly, all of the assets less liabilities of the syndicate, as represented in the members’ balances
reported on the balance sheet represent resources available to meet members’ and Lloyd’s capital
requirements.
Notes to the financial statements (continued)
35
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
Direct insurance
Accident and health
1,986
5,417
10,536
(9,303)
56
6,706
Motor (third party liability)
1,170
2,765
(4,500)
(737)
(7)
(2,479)
Motor (other classes)
46,672
43,346
(23,572)
(16,955)
(103)
2,716
Marine, aviation, and transport
26,263
19,836
(13,596)
(6,793)
(4,065)
(4,618)
Fire and other damage to
property
247,489
241,982
(67,999)
(60,707)
(41,753)
71,523
Third party liability
120,580
117,073
(89,841)
(35,873)
(5,700)
(14,341)
Credit and suretyship
2,816
2,913
(2,462)
(984)
6
(527)
Legal expenses
1,191
1,077
(911)
(417)
1
(250)
Assistance
-
-
-
-
-
-
Miscellaneous
-
-
-
-
-
-
Total direct insurance
448,167
434,409
(192,345)
(131,769)
(51,565)
58,730
Reinsurance acceptances
373,775
349,106
(169,791)
(81,323)
(41,352)
56,640
Total
821,942
783,515
(362,136)
(213,092)
(92,917)
115,370
The below is an additional disclosure for Lloyd’s reporting purposes and is included to facilitate the
classification of the above segments into the Lloyd’s aggregate classes of business:
2024
Gross
premiums
written
$000
Gross
premiums
earned
$000
Gross
claims
incurred
$000
Gross
operating
expenses
$000
Reinsurance
balance
$000
Underwriting
result
$000
Additional analysis
Fire and damage to property of
which is:
Specialities
6,287
6,288
(2,493)
(2,372)
(381)
1,042
Energy
8,293
8,420
(3,512)
(2,163)
(1,142)
1,603
Third party liability of which is:
Energy
192
91
(34)
(36)
(9)
12
Notes to the financial statements (continued)
36
Figures below have been restated in USD.
2023
Gross
premiums
written
$000
Gross
premiums
earned
$000
Gross
claims
incurred
$000
Gross
operating
expenses
$000
Reinsurance
balance
$000
Underwriting
result
$000
Direct insurance
Accident and health
47,794
60,108
(34,997)
(26,024)
(1,366)
(2,279)
Motor (third party liability)
4,060
3,694
(4,948)
(1,185)
18
(2,421)
Motor (other classes)
41,616
37,223
(19,867)
(13,911)
(424)
3,021
Marine, aviation, and transport
15,828
16,583
(12,956)
(4,814)
(1,497)
(2,684)
Fire and other damage to
property
243,706
230,619
(131,826)
(58,679)
(12,709)
27,405
Third party liability
112,247
106,208
(67,845)
(30,961)
(7,943)
(541)
Credit and suretyship
2,138
1,048
(203)
(567)
34
312
Legal expenses
258
327
(10)
(124)
(1)
192
Assistance
-
-
-
-
-
-
Miscellaneous
-
-
-
-
-
-
Total direct insurance
467,647
455,810
(272,652)
(136,265)
(23,888)
23,005
Reinsurance acceptances
357,408
360,102
(156,357)
(78,259)
(35,995)
89,491
Total
825,055
815,912
(429,009)
(214,524)
(59,883)
112,496
The below is an additional disclosure for Lloyd’s reporting purposes and is included to facilitate the
classification of the above segments into the Lloyd’s aggregate classes of business. The figures have
been restated in USD.
2023
Gross
premiums
written
$000
Gross
premiums
earned
$000
Gross
claims
incurred
$000
Gross
operating
expenses
$000
Reinsurance
balance
$000
Underwriting
result
$000
Additional analysis
Fire and damage to property of
which is:
Specialities
6,023
5,848
(1,654)
(2,170)
(813)
1,211
Energy
9,466
7,667
(2,741)
(2,336)
(299)
2,291
Third party liability of which is:
Energy
13
23
(10)
(8)
(2)
3
The gross premiums written for direct insurance by underwriting location of risk is presented in the table
below:
2024
$000
Restated
2023
$000
United Kingdom
89,236
74,728
European Union Member States
803
2,080
US
260,056
263,666
Rest of the world
98,072
127,173
Total gross premiums written
448,167
467,647
Notes to the financial statements (continued)
37
6. Claims
There has been no material change to the method of reserving during the year under review.
Overall loss development was lower than anticipated across the majority of years and business classes.
In particular there were reserve releases of $106,055,000 arising from Property business, as well as
deficit of $8,980,000 from Casualty business. In total there was a net release of $97,075,000 during
2024 in respect of claims outstanding at 31 December 2023 (restated 2023: a net release of
$59,122,000).
7. Net operating expenses
2024
$000
Restated
2023
$000
Acquisition costs
157,925
157,667
Change in deferred acquisition costs
(6,240)
1,774
Administrative expenses
51,170
48,660
Members’ standard personal expenses
10,237
9,298
Reinsurance commissions and profit participation
(8,635)
(10,272)
Net operating expenses
204,457
207,127
Total commissions for direct insurance business for the year amounted to:
2024
$000
Restated
2023
$000
Total commission for direct insurance business
100,579
104,841
Administrative expenses include:
2024
$000
Restated
2023
$000
Auditors’ remuneration:
Fees payable to the syndicate’s auditor for the audit of these financial statements
444
414
Fees payable to the syndicate’s auditor and its associates in respect of other
services pursuant to legislation
121
91
Fees payable to Deloitte LLP for the audit of the annual financial statements of the managing agent,
Faraday Underwriting Limited, are $101,000 (restated 2023: $95,000). Fees payable for audit related
assurance services provided to the managing agent are $8,000 (restated 2023: $7,000). There were
no other fees payable for the provision of other non audit services.
8. Staff numbers and costs
All staff who provide services to the syndicate are employed by GRF Services Limited, a related
company of the managing agent.
Notes to the financial statements (continued)
38
8. Staff numbers and costs (continued)
The average number of employees employed by GRF Services Limited and working for the syndicate
during the year was as follows:
Number of employees
2024
2023
Administration and finance
72
67
Underwriting
43
41
Claims
11
11
Investments
1
1
Total
127
120
The following amounts were recharged by GRF Services Limited to the syndicate in respect of payroll
costs:
2024
$000
Restated
2023
$000
Wages and salaries
19,910
19,480
Social security costs
4,768
4,589
Other pension costs
1,550
1,492
Other short/long term incentive costs
8,414
7,748
Total
34,642
33,309
9. Key management personnel compensation
The directors of the managing agent received the following aggregate remuneration charged to the
syndicate:
2024
$000
Restated
2023
$000
Directors’ emoluments
3,403
2,860
The Active Underwriter received the following aggregate remuneration charged to the syndicate:
2024
$000
Restated
2023
$000
Active Underwriter emoluments
846
998
Notes to the financial statements (continued)
39
10. Investment return
2024
$000
Restated
2023
$000
Interest and similar income
From financial instruments designated at fair value through profit or loss
Interest and similar income
36,591
39,630
Dividend income
331
329
From financial instruments at amortised cost
Interest and similar income
3,290
1,377
Interest on cash at bank
62
54
Other income from investments
From financial instruments designated at fair value through profit or loss
Gains on the realisation of investments
17,558
5,506
Losses on the realisation of investments
(1)
(376)
Unrealised gains on investments
18,323
11,929
Unrealised losses on the investments
(68)
(1,695)
Investment management expenses
(1,037)
(924)
Total investment return
75,049
55,830
Transferred to the technical account from the non-technical account
75,049
55,830
No interest has been paid to or derived from any group undertakings in 2024 (2023: nil).
The investment return was wholly allocated to the technical account.
Notes to the financial statements (continued)
40
11. Financial investments
Carrying value
Cost
2024
$000
Restated
2023
$000
2024
$000
Restated
2023
$000
Shares and other variable yield securities and units in unit trusts
6,848
8,799
6,848
8,799
Debt securities and other fixed income securities
1,596,829
1,413,008
1,578,728
1,402,771
Loans and deposits with credit institutions
48,564
58,996
48,564
58,996
Total financial investments
1,652,241
1,480,803
1,634,140
1,470,566
The amount ascribable to listed investments is $1,046,025,000 (restated 2023: $1,355,881,000).
The table below presents an analysis of financial investments by their measurement classification:
2024
$000
Restated
2023
$000
Financial assets measured at fair value through profit or loss
1,603,677
1,421,807
Financial assets measured at amortised cost
48,564
58,996
Total financial investments
1,652,241
1,480,803
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 - Quoted prices for an identical asset in an active market. Quoted in an active market in this
context means quoted prices are readily and regularly available and those prices represent actual and
regularly occurring market transactions on an arm’s length basis.
Level 2 - When quoted prices are unavailable, the price of a recent transaction for an identical asset
provides evidence of fair value as long as there has not been a significant change in economic
circumstances or a significant lapse of time since the transaction took place. If it can be demonstrated
that the last transaction price is not a good estimate of fair value (e.g. because it reflects the amount
that an entity would receive or pay in a forced transaction, involuntary liquidation or distress sale), that
price is adjusted.
Level 3 - If the market for the asset is not active and recent transactions of an identical asset on their
own are not a good estimate of fair value, the fair value is estimated by using a valuation technique.
The objective of using a valuation technique is to estimate what the transaction price would have been
on the measurement date in an arm’s length exchange motivated by normal business considerations.
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.
Notes to the financial statements (continued)
41
11. Financial investments (continued)
2024
Level 1
$000
Level 2
$000
Level 3
$000
Assets
held at
amortis
ed
cost
Total
$000
Shares and other variable yield securities and units
in unit trusts
-
-
6,848
-
6,848
Debt securities and other fixed income securities
1,564,373
32,456
-
-
1,596,829
Loans and deposits with credit institutions
-
-
-
48,564
48,564
Total financial investments
1,564,373
32,456
6,848
48,564
1,652,241
Total
1,564,373
32,456
6,848
48,564
1,652,241
Figures below have been restated in USD
2023
Level 1
$000
Level 2
$000
Level 3
$000
Assets
held at
amortised
cost
Total
$000
Shares and other variable yield securities and units
in unit trusts
-
-
8,799
-
8,799
Debt securities and other fixed income securities
1,373,837
39,171
-
-
1,413,008
Loans and deposits with credit institutions
-
-
-
58,996
58,996
Total financial investments
1,373,837
39,171
8,799
58,996
1,480,803
Total
1,373,837
39,171
8,799
58,996
1,480,803
The 2023 disclosure has been revised to reflect more accurately the assets held at amortised cost.
Movement in level 3 investments
The following table provides an analysis of investments valued with reference to level 3 inputs.
2024
$000
Restated
2023
$000
At 1 January
8,799
8,403
Disposals
(1,969)
-
Foreign Exchange
18
396
At 31 December
6,848
8,799
Shares and other variable yield securities classified as Level 3 are loans to the Lloyd’s Central Fund in
respect of the 2019 and 2020 underwriting years; they are not tradeable. Their valuation, in accordance
with our policy as fair value, recognises the credit and illiquidity risk of the loans and an element of
subjectivity.
12. Debtors arising out of direct insurance operations
2024
$000
Restated
2023
$000
Due within one year
141,581
110,391
Due after one year
-
-
Total
141,581
110,391
Notes to the financial statements (continued)
42
13. Debtors arising out of reinsurance operations
2024
$000
Restated
2023
$000
Due within one year
142,982
125,254
Due after one year
-
-
Total
142,982
125,254
14. Other debtors
2024
$000
Restated
2023
$000
Other
-
-
Total
-
-
15. 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
Restated
2023
Gross
$000
Reinsurance
$000
Net
$000
Gross
$000
Reinsurance
$000
Net
$000
Balance at 1 January
57,896
(4,615)
53,281
56,316
(1,671)
54,645
Incurred deferred acquisition costs
157,925
(8,635)
149,290
157,667
(10,272)
147,395
Amortised deferred acquisition costs
(151,627)
8,577
(143,050)
(156,566)
7,397
(149,169)
Foreign exchange movements
(455)
57
(398)
479
(69)
410
Balance at 31 December
63,739
(4,616)
59,123
57,896
(4,615)
53,281
Notes to the financial statements (continued)
43
16. Claims development
The following tables illustrate the development of the estimates of earned ultimate cumulative claims
incurred, including claims notified and IBNR, for each successive underwriting year, illustrating how
amounts estimated have changed from the first estimates made.
As these tables are on an underwriting year basis, there is an apparent large increase from amounts
reported for the end of the underwriting year to one year later as a large proportion of premiums are
earned in the year of account’s second year of development.
Balances have been translated at exchange rates prevailing at 31 December 2024 in all cases.
Gross:
Pure underwriting year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Total
$000
$000
$000
$000
$000
$000
$000
$000
$000
$000
$000
Estimate of gross claims
At end of underwriting year
106,291
158,906
542,024
323,722
263,292
221,060
251,739
259,498
274,316
286,657
One year later
196,113
309,333
680,522
500,431
428,856
393,287
404,394
461,999
402,225
Two years later
185,332
310,805
652,772
480,330
396,274
384,942
383,079
446,869
Three years later
174,302
289,405
612,047
426,094
373,932
371,419
374,248
Four years later
169,047
279,364
592,065
417,371
363,100
372,342
Five years later
165,691
271,286
586,030
408,320
339,489
Six years later
161,395
274,085
591,825
387,596
Seven years later
156,766
277,252
585,004
Eight years later
161,154
278,409
Nine years later
160,328
Estimate of gross claims
reserve
160,328
278,409
585,004
387,596
339,489
372,342
374,248
446,869
402,225
286,657
3,633,167
Provision in respect of prior
years
365,549
Less gross claims paid
(140,859)
(227,191)
(500,682)
(327,341)
(262,965)
(254,935)
(242,422)
(239,088)
(112,285)
(23,416)
(2,331,184)
Gross claims reserve
19,469
51,218
84,322
60,255
76,524
117,407
131,826
207,781
289,940
263,241
1,667,532
Net:
Pure underwriting year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Total
$000
$000
$000
$000
$000
$000
$000
$000
$000
$000
$000
Estimate of net claims
At end of underwriting year
103,318
148,918
321,835
230,493
240,667
213,533
246,388
250,060
262,944
276,326
One year later
189,369
295,099
455,603
371,594
381,224
347,822
386,604
433,452
383,145
Two years later
174,866
296,010
443,356
369,203
358,998
347,275
365,779
419,637
Three years later
161,592
275,848
430,999
343,227
343,941
339,065
358,143
Four years later
158,488
265,980
421,176
336,000
334,310
344,530
Five years later
154,793
258,093
415,947
332,106
324,501
Six years later
153,247
261,961
421,898
322,698
Seven years later
149,338
264,813
414,671
Eight years later
153,695
266,591
Nine years later
152,694
Estimate of net claims
reserves
152,694
266,591
414,671
322,698
324,501
344,530
358,143
419,637
383,145
276,326
3,262,936
Provision in respect of prior
years
219,574
Less net claims paid
(133,228)
(216,416)
(331,045)
(266,622)
(249,386)
(234,761)
(228,362)
(223,629)
(108,093)
(23,415)
(2,014,957)
Net claims reserve
19,466
50,175
83,626
56,076
75,115
109,769
129,781
196,008
275,052
252,911
1,467,553
Notes to the financial statements (continued)
44
17. 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
Restated
2023
Gross
provisions
$000
Reinsurance
Assets
$000
Net
$000
Gross
provisions
$000
Reinsurance
Assets
$000
Net
$000
Claims outstanding
Balance at 1 January
1,669,683
(246,654)
1,423,029
1,609,736
(263,884)
1,345,852
Claims paid during the year
(353,056)
32,912
(320,144)
(388,726)
34,044
(354,682)
Expected cost of current year
claims
490,352
(17,522)
472,830
494,892
(18,989)
475,903
Change in estimates of prior year
provisions
(128,216)
31,141
(97,075)
(65,883)
6,761
(59,122)
Foreign exchange movements
(11,231)
144
(11,087)
19,664
(4,586)
15,078
Balance at 31 December
1,667,532
(199,979)
1,467,553
1,669,683
(246,654)
1,423,029
2024
Restated
2023
Gross
provisions
$000
Reinsurance
Assets
$000
Net
$000
Gross
provisions
$000
Reinsurance
Assets
$000
Net
$000
Unearned premiums
Balance at 1 January
295,682
(23,315)
272,367
285,415
(12,350)
273,065
Premiums written during the year
821,942
(94,542)
727,400
825,055
(90,163)
734,892
Premiums earned during the year
(783,515)
87,933
(695,582)
(815,912)
79,508
(736,404)
Foreign exchange movements
(2,099)
255
(1,844)
1,124
(310)
814
Balance at 31 December
332,010
(29,669)
302,341
295,682
(23,315)
272,367
Refer to Note 4 for the sensitivity analysis performed over the value of insurance liabilities, disclosed in
the accounts, to potential movements in the assumptions applied within the technical provisions.
18. Creditors arising out of direct insurance operations
2024
$000
Restated
2023
$000
Due within one year
11,118
13,299
Due after one year
-
-
Total
11,118
13,299
Notes to the financial statements (continued)
45
19. Creditors arising out of reinsurance operations
2024
$000
Restated
2023
$000
Due within one year
57,458
53,984
Due after one year
27,740
26,948
Total
85,198
80,932
20. Other creditors
2024
$000
Restated
2023
$000
Other liabilities
56
56
Total
56
56
21. Cash and cash equivalents
2024
$000
Restated
2023
$000
Cash at bank and in hand
69,146
86,388
Deposits with credit institutions
1,049
782
Total cash and cash equivalents
70,195
87,170
Of the total cash and cash equivalents, the following amount was held in regulated bank accounts in
overseas jurisdictions:
2024
$000
Restated
2023
$000
Cash at bank and in hand
-
-
Deposits with credit institutions
1,049
782
Total cash and cash equivalents not available for use by the syndicate
1,049
782
22. Related parties
In 2024 managing agency fees of $2,785,000 (restated 2023: $2,723,000) were paid by the syndicate
to Faraday Underwriting Limited. In addition to this, expenses of $50,234,000 (restated 2023:
$46,875,000) were paid to GRF Services Limited for expenses paid on behalf of the syndicate. At the
year end, the amount owing to GRF Services Limited was $nil (2023: $nil). In respect of other
transactions, Faraday Underwriting Limited was charged $2,056,000 for expenses (restated 2023:
$2,065,000). The amount due to Faraday Underwriting Limited at the year end was $nil (2023: $nil).
Notes to the financial statements (continued)
46
23. 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
Euro
US dollar
Canadian dollar
Australian dollar
Japanese Yen
24. Funds at Lloyd’s
Every member is required to hold capital at Lloyd’s which is held in trust and known as Funds at Lloyd’s
(‘FAL’). These funds are intended primarily to cover circumstances where syndicate assets prove
insufficient to meet participating members’ underwriting liabilities. The level of FAL that Lloyd’s requires
a member to maintain is determined by Lloyd’s based on Prudential Regulatory Authority requirements
and resource criteria. The determination of FAL has regard to a number of factors including the nature
and amount of risk to be underwritten by the member and the assessment of the reserving risk in respect
of business that has been underwritten. Since FAL is not under the management of the managing agent,
no amount has been shown in these financial statements by way of such capital resources. However,
the managing agent is able to make a call on the member’s FAL to meet liquidity requirements or to
settle losses.
