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Brit Syndicate 2987 Annual Report 2024 1
Contents
Report of the Directors of the Managing Agent 2
Statement of Managing Agent’s Responsibilities 8
Independent Auditors’ Report to the Member of Syndicate 2987 9
Income Statement – Technical Account 13
Income Statement – Non-Technical Account 14
Statement of Financial Position - Assets 15
Statement of Financial Position - Liabilities 16
Statement of Changes in Member’s Balance 17
Statement of Cash Flows 18
Notes to the Accounts 19
Directors of the Managing Agent 61
Report of the Directors of the Managing Agent
Brit Syndicate 2987 Annual Report 2024 2
The Directors of the Managing Agent, Brit Syndicates Limited (BSL) a company registered in England and
Wales, present the report and annual accounts of Syndicate 2987 (the Syndicate) for the year ended 31
December 2024. These annual accounts are 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 (Lloyd’s Regulations 2008).
Amounts are reported in thousands of US dollars ($’000) unless otherwise stated.
Principal activity and review of the business
The Syndicate’s principal activity is the underwriting of general insurance and reinsurance business in the
Lloyd’s market. The underwriting strategy reflects the Directors’ view of prevailing market conditions in the
classes of business written by the Syndicate during the year.
The result for the 2024 calendar year is a profit of $237,633k (2023: $315,205k), comprising an underwriting
profit of $141,301k (2023: $162,946k) with a combined ratio of 92.3% (2023: 90.8%), and a net investment
return of $138,777k (2023: $142,974k). The result reflects a positive, resilient underwriting result, a robust
attritional performance and a strong investment income. Foreign exchange losses for the year of $42,445k
(2023: gains of $9,285k) were as a result of adverse core currency rates of exchange movements against the
US dollar. Net investment return includes gains on currency derivatives of $25,058k (2023: losses of $18,100k),
which the Syndicate utilises to effectively manage its currency exposure.
The Syndicate’s key performance indicators during the year were as follows:
2024
2023
$’000
$’000
Gross premiums written
2,862,918
2,740,123
Net premiums written
1,974,636
1,789,965
Earned premiums, net of reinsurance
1,832,174
1,768,531
Underwriting result
141,301
162,946
Technical account investment income
138,777
142,974
Technical result for the financial year
280,078
305,920
(Loss)/Profit on exchange
(42,445)
9,285
Non-technical account for the financial year
(42,445)
9,285
Profit for the financial year
237,633
315,205
Combined ratio
1
92.3%
90.8%
1
The total of net claims and net operating expenses as a percentage of net earned premium.
Gross premiums written
An analysis of gross premiums written by the Brit division and class is as follows:
2024
2023
Variance
Premium by Portfolio
$’000
$’000
%
Financial and Professional Liability
510,585
456,501
11.8
Programmes and Facilities
450,782
466,938
(3.5)
Property
638,415
493,395
29.4
Specialty
472,749
459,783
2.8
Casualty Treaty
319,559
410,912
(22.2)
Property Treaty
395,105
339,285
16.5
Other
73,917
80,854
(8.6)
Discontinued
1,806
32,455
(94.4)
Total
2,862,918
2,740,123
4.5
Report of the Directors of the Managing Agent (continued)
Brit Syndicate 2987 Annual Report 2024 3
Gross premiums written increased by 4.5% to $2,862,918k (2023: $2,740,123k). Direct business increased by
10.4% to $2,072,531k (2023: $1,876,617k), and Reinsurance business decreased by 4.7% to $714,664k (2023:
$750,195k).
Favourable market conditions have continued during 2024, albeit with some rate reduction. The risk-adjusted
rate decrease on renewed business is 1.2%, (2023: increase of 6.6%). The Syndicate continued to achieve rate
increases in Programmes and Facilities, Specialty, and Property Treaty. However, this has been diluted to an
extent, primarily in Cyber where rates reduced by 14.4%. Notwithstanding the modest rate reductions seen in
2024, the compound risk adjusted rate increase since 1 January 2018 now totals a very strong 64.9%.
The retention rate for the period was 85.0% (2023: 78.8%). Across all lines, the Syndicate has retained
underwriting discipline and remained prepared to discontinue accounts that are believed inadequately priced
or outside of the Syndicate’s appetite.
The Financial and Professional Liability portfolio saw a modest increase in gross premiums relative to the prior
period. Despite the challenging market conditions, the Cyber team succeeded in winning new business,
benefiting from the expansion of distribution channels via the UK portal and increased alignment with strategic
brokers. There was also growth within the Financial Lines division, particularly within the Transactional and
Political & Credit Risk classes.
This was offset to an extent by a shortfall in Professional Lines as a result of challenging market conditions and
limited appetite in new business opportunities making it difficult to replace income following the Syndicate’s
strategic decision to execute a maximum line size strategy.
The Programmes and Facilities portfolio comprises Property Facilities, Contingency, Personal Accident and
Long Tail Facilities. A year-on-year reduction in Property Facilities due to lower retentions and non-renewals
within Personal Accident was mitigated to an extent by a good flow of new business in the Flood and
Contingency classes.
The Property Portfolio comprises US and International Open Market Property, Terrorism, Private Clients and
Specie. Despite a softening of the rating environment, income from the Open Market Property classes increased
in line with the Syndicate’s growth strategy. Proactive underwriting has resulted in the team capitalising on new
business opportunities, further aided by enhanced broker services, leading to larger lines and better lead terms.
Terrorism saw a premium increase following planned growth, enabled by new business opportunities whilst
also retaining and growing core facilities. This was despite the adverse rating environment seen across the core
UK, US and Europe segments, as well as some distressed Political Violence territories, which previously
experienced hardening rate increases.
Specialty includes the Syndicate’s Energy, Marine and Specialist Liability classes. Energy saw a year-on-year
premium increase, primarily driven by Construction, reflecting high activity, strong rating and increased line
sizes on targeted accounts. This is partially offset by Space and Nuclear following the exit of these classes.
International Professional Liability provided a further offset reflecting non-renewals and reduced lines on certain
accounts.
Reductions in Casualty Treaty premium were primarily driven by long tail pro-rata classes, as a result of adverse
premiums development following lower than expected signings, with key clients missing premium targets due
to the challenging market conditions seen in 2023. Casualty Treaty also includes business written via Brit’s
former MGA, Ambridge. Ambridge obtained additional third-party capacity, reducing the Syndicate’s share on
the lines and, therefore, year-on-year premiums.
Despite the competitive market conditions, the Property Treaty portfolio benefitted from positive June/July
renewal periods, participating on new business opportunities. This was achieved by strong broker relationships
despite the implementation of the Cat strategy and deploying smaller lines on core clients. Most classes also
experienced favourable premium development due to greater than expected signed premium across historic
years.
Other comprises of Casualty business written through Brit’s formerly owned MGA, Scion, for which premiums
decreased by 8.6% to $73,917k (2023: $80,854k). Premiums are down following remedial action, including the
cessation of lower margin business and increased pricing across large parts of the book.
Report of the Directors of the Managing Agent (continued)
Brit Syndicate 2987 Annual Report 2024 4
Discontinued lines reflect the cessation of underperforming classes in 2023, primarily Household HV and
Property Liability US SCGL.
Outwards reinsurance
Reinsurance expenditure in 2024 was $888,282k or 31.0% of Gross Premium Written (GWP) (2023: $950,158k
or 34.7%), a decrease of $61,876k or 3.7% (as a % of GWP). This reflects the continued focus on reducing
outwards spend and retaining a larger portion of profitable business while maintaining a comprehensive level
of cover. This has led to some programmes being restructured, and other smaller inuring ones being non-
renewed. The most material changes emanate from the catastrophe aggregate programme, which has seen a
reduction on the previous year following the strategy to reduce exposure, which resulted in a material reduction
in the catastrophe footprint.
Underwriting result
The Syndicate reported an underwriting profit of $141,301k (2023: profit of $162,946k) and a combined ratio of
92.3% (2023: 90.8%).
Claims
Major loss activity
The table below sets out the net impact of major losses on the Syndicate’s results, analysed by event:
2024
2023
Major losses
$’000
$’000
Hurricane Helene
35,680
-
Hurricane Milton
51,394
-
Hawaii Wildfires
-
24,141
Hurricane Idalia
-
9,228
Total natural catastrophe events
87,074
33,369
Claims arising from the Russian invasion of Ukraine
-
1,900
Total
87,074
35,269
Worldwide natural disasters in 2024 resulted in economic losses of around $320bn (2023: $250bn), above the
five-year average of $261bn, while insured losses were in the region of $140bn (2023: $95bn), above the five-
year average of $106bn (Source: Munich Re).
The year’s costliest events included Hurricane Helene (economic losses of $56bn, with insured losses of $16bn)
and Hurricane Milton (economic losses of $38bn, with insured losses of $25bn). There was also a significant
number of regional weather events, such as a Japanese earthquake/tsunami, Typhoon Yagi (Asai), Chinese
floods, US tornadoes and Spanish flash floods.
The Syndicate’s major natural catastrophe losses in 2024 amounted to $87,074k and added 4.8pps to the
Syndicate’s CoR (2023: $33,369k/1.9pps), driven by Hurricane Helene ($35,680k net) and Hurricane Milton
($51,394k net). The Syndicate does not have material exposure to other catastrophe events which occurred
during the year. While some claims are anticipated to emerge, it is expected that these will be attritional in scale.
Attritional losses
The Syndicate’s underlying claims performance in 2024 remained robust, with an attritional claims ratio (claims
ratio is claims as a percentage of net earned premium) of 48.3%, (2023: 49.2%). The improvement in the ratio
year on year reflects the favourable experience in the Syndicate’s Programme and Facilities portfolio, partially
offset by unfavourable experience within areas of Property, Speciality and Cyber. The attritional claims were
also impacted by a number of risk events in 2024, including Baltimore Bridge collision, the CrowdStrike IT
outage and the attack on the MV Sounion.
Report of the Directors of the Managing Agent (continued)
Brit Syndicate 2987 Annual Report 2024 5
Prior year development
The 2024 result includes a small prior year reserve strengthening of $885k (2023: $23,046k prior year reserve
releases), which has limited impact on the overall combined ratio.
Ex-catastrophe strengthening on older years, particularly within the Professional Lines and Discontinued
portfolios has been largely offset by favourable movements on several historic catastrophe events.
Net operating expenses
Net operating expenses include net commissions and administrative expenses. The net commission expense
ratio (the ratio of net commission expense to net earned premium) was 26.5%, an improvement over 2023
(28.7%).
The administrative expense ratio (the ratio of net administrative expenses to net earned premium) increased
modestly to 12.7% (2023: 12.2%). Administrative expenses (including member’s standard personal expenses)
increased by 8.1% to $233,718k (2023: $216,137k), largely due to an increased Managing Agents Fee,
reflecting a higher stamp (at constant rates of exchange) and underlying expense inflation.
Investment return
Net investment return for the 2024 financial year totalled $138,777k, which is broadly consistent with the prior
year (2023: $142,974k). Returns were driven by income in the fixed income portfolio, with equity and fund
returns also contributing. The Syndicate investment portfolio remains conservatively positioned, with a large
allocation to fixed income securities. Duration is broadly neutral compared to the duration of liabilities. Over the
twelve months, the two-year yield was relatively unchanged from 4.25% to 4.24%, the five-year yield rose from
3.85% to 4.38%. Investment grade spreads narrowed in the US from 0.77% to 0.60% while high yield spreads
also narrowed. Risk assets performed positively over 2024, as economic data remained resilient, inflation
reduced, and the US Federal Reserve cut rates 100bps.
Member’s Balance
The Syndicate’s Member’s Balance comprise the cumulative results of the Syndicate for the open years of
account, plus any cash calls that the Syndicate has made on its Member. The Member’s balance as at 31
December 2024 was $480,340k (2023: $593,591k). The decrease year on year is attributable to the in year
profit of $237,633k, less the distribution of profits relating to the 2021 Year of Account which closed at the end
of 2023 ($349,342k).
Financial position
Net Technical Reserves
Preserving a strong financial position is critical to the long-term success of an insurance business. The
Syndicate’s net technical reserves have increased by $408,307k, or 11.3%, to $4,018,417k (2023:
$3,610,110k). The Syndicate maintains appropriate loss reserves to cover its estimated future liabilities.
Reserves are estimates that involve actuarial and statistical projections of the expected cost of the ultimate
settlement and administration of claims. The reserving process is robust and managed by the Chief Risk Officer
and Chief Actuary and under the oversight of the Reserving Committee. Reserving estimates are prepared
quarterly and are based on facts and circumstances then known, predictions of future developments, estimates
of future trends in claims frequency and severity and other variable factors such as inflation. Movement in these
reserves forms an integral element of the operating result.
As part of the year-end reserving exercise, the impact of inflation was considered in detail by the Actuarial team
to ensure that assumptions are consistent with forward looking expectations for claims inflation. Various
techniques have been considered in line with guidance from Lloyd’s and regulators.
The Syndicate’s reserving policy is to reserve to a best estimate and carry an explicit risk margin above that
best estimate. Maintaining reserves is critical to safeguard future obligations to policyholders and the
Syndicate’s approach provides a secure foundation. It also provides a secure foundation for the pricing of new
business which is particularly critical in a soft rating environment.
Report of the Directors of the Managing Agent (continued)
Brit Syndicate 2987 Annual Report 2024 6
Financial Investments and cash
The investment portfolio retains a large proportion of high quality fixed income securities ($2,588,500k or
81.6%), equities ($344,961k or 10.9%) and an allocation to cash and cash equivalents ($94,076k or 3.0%),
(2023: fixed income securities: $2,380,410k or 81.8%, equities: $302,707k or 10.4%, cash and cash
equivalents: $88,528k or 3.1%).
Syndicate outlook
Stamp capacity for the 2025 year of account has increased 2.0% in Sterling to £2,042,297k (2024 year of
account £2,001,433k). As in previous years, Brit continues to actively manage the portfolios, to grow where the
market is strongest and the best opportunities to deliver on profitability are seen, taking action on the weaker
segments of the portfolio.
Going into 2025, the industry is faced with a number of challenges and uncertainties including macro-economic,
inflationary and geo-political pressures affecting both the rating environment and cost of claims. New and
existing capacity either entering the London Market or attracting business away increase competition and place
further pressures on rates and retention.
The market has continued to experience a level of catastrophe activity significantly in excess of historical levels.
The Syndicate is expected to continue to see the benefits from the outcomes of the 2023 catastrophe strategy
review.
Underwriting conditions were mixed during 2024, with rating pressure across a number of business areas, and
the expectation is for this to continue into 2025. Notwithstanding, there continue to be good levels of margin
across most of the portfolio and the Syndicate has the tools, resources and discipline to manage the portfolio
effectively and continue to deliver on its underwriting strategy.
The Syndicate’s non-catastrophe reinsurance renewals at 1 January have been successfully completed,
achieved within budget and with some improvements in coverage. The stability of the Syndicate’s relationship
has allowed it to benefit from the specific dynamics of Brit’s experience, rather than being impacted by broader
market issues.
The Syndicate’s main catastrophe protections renew at 1 April and discussions are currently underway as to
how best to structure the programme to manage the Syndicate’s catastrophe risk.
Brit remains cognisant of the potential impacts of inflation, with work being undertaken internally to quantify and
mitigate its impact on profitability. There is continued focus on ensuring that underwriting and pricing adequately
addresses inflationary trends and Brit continues to review the key drivers of claim settlement costs and
frequency by class of business. The Syndicate’s reserves continue to be set at a margin above the actuarial
best estimate incorporating management’s current view of social and economic inflation.
Going Concern
Following a review of the financial performance and position of the Syndicate, the Directors have a reasonable
expectation that the Syndicate has adequate resources to continue in operational existence for the foreseeable
future. For this reason, they continue to adopt the going concern basis in preparing the report and accounts.
Principal risks and uncertainties
The information on principal risks and uncertainties is disclosed in note 3 to the accounts.
Employee and environmental matters
All staff in the UK are employed by Brit Group Services Limited, the group’s service company, and the full staff
cost disclosures are included in the notes to those accounts. Amounts are recharged to the Syndicate as part
of the annual fixed fee charged by the Managing Agent.
Report of the Directors of the Managing Agent (continued)
Brit Syndicate 2987 Annual Report 2024 7
Climate change will impact Brit’s business and all its stakeholders, and Brit is committed to responsible business
practices and recognises that it is most effective when acting alongside others in the industry.
Directors
The names of the current Directors of the Managing Agent and those who have served during the year are
shown on page 60.
Independent Auditors
PricewaterhouseCoopers LLP remain in office as the Syndicate’s auditors.
Statement of disclosure of information to the Auditors
Each person who is a Director of the Managing Agent at the date of approval of this report confirms that:
• so far as the Director is aware, there is no relevant audit information, being information needed by the
Syndicate’s auditors in connection with its report, of which the Syndicate’s auditors are unaware; and
• he or she has taken all the steps that he or she is obliged to take as a Director in order to make himself
or herself aware of any relevant audit information and to establish that the Syndicate’s auditors are
aware of that information.
On behalf of the Board
Gavin Wilkinson
Director
4 March 2025
Statement of Managing Agent’s Responsibilities
Brit Syndicate 2987 Annual Report 2024 8
The Managing Agent is responsible for preparing the Syndicate annual accounts in accordance with
applicable law and regulations.
The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008
require the Managing Agent to prepare Syndicate annual accounts at 31 December each year in
accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting
standards and applicable law). The Syndicate annual accounts are required by law to give a true and
fair view of the state of affairs of the Syndicate as at that date and of its profit or loss for that year.
In preparing the Syndicate annual accounts, the Managing Agent is required to:
1. select suitable accounting policies and then apply them consistently;
2. make judgements and estimates that are reasonable and prudent;
3. state whether applicable UK accounting standards have been followed, subject to any material
departures disclosed and explained in the notes to the Syndicate annual accounts; and
4. prepare the Syndicate annual accounts on the basis that the Syndicate will continue to write future
business unless it is inappropriate to presume that the Syndicate will do so.
The Directors of the Managing Agent confirm that they have complied with the above requirement in
preparing the Syndicate annual accounts.
The Managing Agent is responsible for keeping proper accounting records which disclose with
reasonable accuracy at any time the financial position of the Syndicate and enable it to comply with the
Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008. It is also
responsible for safeguarding the assets of the Syndicate and hence for taking reasonable steps for
prevention and detection of fraud and other irregularities.
The Managing Agent is responsible for the maintenance and integrity of the corporate and financial
information included on the business’ website. Legislation in the United Kingdom governing the
preparation and dissemination of annual accounts may differ from legislation in other jurisdictions.
The Directors of the Managing Agent are also responsible for the preparation and review of the iXBRL
tagging applied to the Syndicate Accounts in accordance with the instructions issued by Lloyd’s,
including designing, implementing and maintaining systems, processes and internal controls to result in
tagging that is free from material non-compliance with the instructions issued by Lloyd’s, whether due
to fraud or error.
Brit Syndicate 2987 Annual Report 2024 9
Independent auditors’ report to the
member of Syndicate 2987
Report on the audit of the syndicate annual
accounts
Opinion
In our opinion, Syndicate 2987’s syndicate annual accounts:
● give a true and fair view of the state of the syndicate’s affairs as at 31 December 2024 and of
its profit and cash flows for the year then ended;
● have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards, including FRS 102 “The
Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable
law); and
● have been prepared in accordance with the requirements of The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the requirements within
the Lloyd’s Syndicate Accounts Instructions version 2.0 as modified by the Frequently Asked
Questions issued by Lloyd’s version 1.1 (“the Lloyd’s Syndicate Instructions”).
We have audited the syndicate annual accounts included within the Report and Accounts (the “Annual
Report”), which comprise: the Statement of Financial Position as at 31 December 2024; the Income
Statement: Technical Account – General Business, the Income Statement: Non-Technical Account,
the Statement of Cash Flows, and the Statement of Changes in Member’s Balance for the year then
ended; and the notes to the syndicate annual accounts, which include a description of the significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”),
and The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008,
the Lloyd’s Syndicate Instructions and other applicable law. Our responsibilities under ISAs (UK) are
further described in the Auditors’ responsibilities for the audit of the syndicate annual accounts section
of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the syndicate in accordance with the ethical requirements that are
relevant to our audit of the syndicate annual accounts in the UK, which includes the FRC’s Ethical
Standard, as applicable to other entities of public interest, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s
Ethical Standard were not provided.
Other than those disclosed in note 5, we have provided no non-audit services to the syndicate in the
period under audit.
Brit Syndicate 2987 Annual Report 2024 10
Conclusions relating to going concern
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the syndicate’s
ability to continue as a going concern for a period of at least twelve months from when the syndicate
annual accounts are authorised for issue.
In auditing the syndicate annual accounts, we have concluded that the Managing Agent’s use of the
going concern basis of accounting in the preparation of the syndicate annual accounts is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a
guarantee as to the syndicate's ability to continue as a going concern.
Our responsibilities and the responsibilities of the Managing Agent with respect to going concern are
described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the syndicate
annual accounts and our auditors’ report thereon. The Managing Agent is responsible for the other
information. Our opinion on the syndicate annual accounts does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in
this report, any form of assurance thereon.
In connection with our audit of the syndicate annual accounts, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
syndicate annual accounts or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency or material misstatement, we
are required to perform procedures to conclude whether there is a material misstatement of the
syndicate annual accounts or a material misstatement of the other information. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Report of the Directors of the Managing Agent (the “Managing Agent’s Report”),
we also considered whether the disclosures required by The Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008 have been included.
Based on our work undertaken in the course of the audit, The Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008 requires us also to report certain opinions and
matters as described below.
Managing Agent’s Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the
Managing Agent’s Report for the year ended 31 December 2024 is consistent with the syndicate
annual accounts and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the syndicate and its environment obtained in the
course of the audit, we did not identify any material misstatements in the Managing Agent’s Report.
Responsibilities for the syndicate annual accounts and the audit
Responsibilities of the Managing Agent for the syndicate annual accounts
As explained more fully in the Statement of Managing Agent’s Responsibilities, the Managing Agent is
responsible for the preparation of the syndicate annual accounts in accordance with the applicable
Brit Syndicate 2987 Annual Report 2024 11
framework and for being satisfied that they give a true and fair view. The Managing Agent is also
responsible for such internal control as they determine is necessary to enable the preparation of
syndicate annual accounts that are free from material misstatement, whether due to fraud or error.
In preparing the syndicate annual accounts, the Managing Agent is responsible for assessing the
syndicate’s ability to continue as a going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless it is intended for the syndicate to
cease operations, or it has no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the syndicate annual accounts
Our objectives are to obtain reasonable assurance about whether the syndicate annual accounts as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these syndicate annual accounts.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect
of irregularities, including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below.
Based on our understanding of the syndicate and industry, we identified that the principal risks of non-
compliance with laws and regulations related to breaches of regulatory principles, such as those
governed by the Prudential Regulation Authority and the Financial Conduct Authority, and those
regulations set by the Council of Lloyd’s, and we considered the extent to which non-compliance might
have a material effect on the syndicate annual accounts. We also considered those laws and
regulations that have a direct impact on the syndicate annual accounts such as The Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the Lloyd’s
Syndicate Instructions. We evaluated management’s incentives and opportunities for fraudulent
manipulation of the syndicate annual accounts (including the risk of override of controls), and
determined that the principal risks were related to the risk of fraud in revenue recognition and
management override of controls, including the potential for management bias in significant
accounting estimates. Audit procedures performed by the engagement team included:
● Discussions with the Board, management, internal audit and the compliance function of the
Managing Agent, including consideration of known or suspected instances of non-compliance with
laws and regulations, and fraud;
● Assessment of matters reported on the Managing Agent’s whistleblowing helpline and the
results of the investigation of such matters;
● Reviewing relevant meeting minutes and correspondence with regulatory authorities;
● Testing and challenging where appropriate the assumptions and judgements made in
establishing significant accounting estimates;
● Identifying and testing journal entries identified as potential indicators of fraud; and
● Designing audit procedures to incorporate unpredictability around the nature, timing and
extent of testing.
Brit Syndicate 2987 Annual Report 2024 12
There are inherent limitations in the audit procedures described above. We are less likely to become
aware of instances of non-compliance with laws and regulations that are not closely related to events
and transactions reflected in the syndicate annual accounts. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud
may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or
through collusion.
A further description of our responsibilities for the audit of the syndicate annual accounts is located on
the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the syndicate’s member in
accordance with part 2 of The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate
Accounts) Regulations 2008 and for no other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Under The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations
2008 we are required to report to you if, in our opinion:
● we have not obtained all the information and explanations we require for our audit; or
● adequate accounting records have not been kept by the Managing Agent in respect of the
syndicate; or
● certain disclosures of Managing Agent remuneration specified by law are not made; or
● the syndicate annual accounts are not in agreement with the accounting records.
We have no exceptions to report arising from this responsibility.
Other matter
We draw attention to the fact that this report may be included within a document to which iXBRL
tagging has been applied. This auditors’ report provides no assurance over whether the iXBRL tagging
has been applied in accordance with section 2 of the Lloyd’s Syndicate Instructions version 2.0.
Paul Pannell (Senior statutory auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
5 March 2025
Income Statement
Technical Account – General Business for the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 13
| 2024 | 2023 | ||
Note | $’000 | $’000 | |
Gross premiums written | 4 | ||
Outward reinsurance premiums | ( | ( | |
Net premiums written | |||
Change in the gross provision for unearned premiums | 12 | ( | |
Change in the provision for unearned premiums, reinsurers’ share | 12 | ( | ( |
Net change in the provision for unearned premiums | ( | ( | |
Earned premiums, net of reinsurance | | ||
Allocated investment return transferred from the non- technical account | |||
Total technical income | 1,970,951 | 1,911,505 | |
Claims paid: | |||
Gross amount | 13 | ( | ( |
| Reinsurers’ share | 13 | ||
Net claims paid | ( | ( | |
Change in the provision for claims: | |||
Gross amount | ( | ( | |
| Reinsurers’ share | ( | ||
Net change in the provision for claims | ( | ( | |
Claims incurred, net of reinsurance | 13 | ( | ( |
Net operating expenses | 5 | ( | ( |
Total technical charges | (1,690,873) | (1,605,585) | |
Balance on the technical account for general business |
The accompanying notes are an integral part of these accounts.
Income Statement
Non-Technical Account for the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 14
| 2024 | 2023* | ||
Note | $’000 | $’000 | |
Balance on the technical account for general business | |||
| Investment income | 8 | ||
Realised gains/(loss) on investments | 8 | ( | |
Unrealised (loss)/gains on investments | 8 | ( | |
Investment expenses and charges | 8 | ( | ( |
Total investment return | |||
Allocated investment return transferred to general business technical account | ( | ( | |
(Loss)/Gain on exchange | ( | ||
Profit for the financial year | |||
*Investment income, realised gains/losses, unrealised gains/losses and investment expenses and charges have
been re-presented from the prior year to align to the Lloyd’s Illustrative Accounts. In the prior year, realised gains
were presented within investment income, realised losses were presented within investment expenses and charges
and unrealised gains were presented separately to unrealised losses. Full disclosure of each of these balances can
be found in Note 8.
There was no other comprehensive income or expense in the current or prior year. The total
comprehensive income for the financial year is equal to the profit for the financial year.
Statement of Financial Position
Assets
as at 31 December 2024
Brit Syndicate 2987 Annual Report 2024 15
| 2024 | 2023 | ||
Note | $’000 | $’000 | |
Assets | |||
Investments: | |||
Financial investments | 10 | ||
Deposits with ceding undertakings | |||
| Reinsurers’ share of technical provisions: | |||
Provision for unearned premium | 12 | ||
Claims outstanding | 13 | ||
Debtors: | |||
Debtors arising out of direct insurance operations | 15 | ||
Debtors arising out of reinsurance operations | 16 | ||
Other debtors | 17 | ||
Other assets: | |||
Cash at bank and in hand | 18 | ||
Other | 19 | ||
Prepayments and accrued income: | |||
Deferred acquisition costs | 20 | ||
Other prepayments and accrued income | |||
Total assets |
The accompanying notes are an integral part of these accounts.
Statement of Financial Position
Liabilities
as at 31 December 2024
Brit Syndicate 2987 Annual Report 2024 16
| 2024 | 2023* | ||
Note | $’000 | $’000 | |
| Member's balance and liabilities | |||
| Member's balance | |||
| Technical provisions: | |||
| Provision for unearned premium | 12 | ||
| Claims outstanding | 13 | ||
| Creditors: | |||
| Creditors arising out of direct insurance operations | 21 | ||
| Creditors arising out of reinsurance operations | 22 | ||
| Other creditors | 23 | ||
| Accruals and deferred income | 24 | ||
| Total liabilities | |||
| Total member's balance and liabilities |
*Certain liability balances have been re-presented from the prior year to align to the Lloyd’s Illustrative Accounts. In
the prior year, the derivative liability was presented as a separate line on the Statement of Financial Position. This
has now been re-presented within the Other Creditors total. Refer to Note 23 for the breakdown of the Other Creditors
balance.
The accompanying notes are an integral part of these accounts.
The annual accounts on pages 13 to 61 were approved by the Board of Brit Syndicates Limited on 4 March
2025 and signed on its behalf by:
Gavin Wilkinson Martin Thompson
Director Director
Statement of Changes in Member’s Balance
for the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 17
The Member’s balance comprises the following:
| 2024 | 2023 | ||
Note | $’000 | $’000 | |
| Member’s balance brought forward at 1 January | |||
Total comprehensive income for the financial year | |||
Cash calls | |||
Closed year of account Distribution | 9 | ( | ( |
Other | ( | ( | |
| Member’s balance carried forward at 31 December |
The accompanying notes are an integral part of these accounts.
Statement of Cash Flows
for the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 18
| 2024 | Restated* 2023 | ||
Note | $’000 | $’000 | |
| Cash flows from operating activities | |||
| Profit for the financial year | |||
| Increase in gross technical provisions | |||
| Decrease in reinsurers’ share of technical provisions | |||
| Decrease/(increase) in debtors | ( | ||
| Decrease in creditors | ( | ( | |
| Movement in other assets/liabilities | ( | ||
Net investment return | ( | ( | |
| Foreign exchange on operating activities | ( | ||
| Net cash flows from operating activities | |||
Cash flows from investing activities | |||
| Purchase of equity and debt instruments | ( | ( | |
| Sale of equity and debt instruments | |||
| Purchase of derivatives** | ( | ||
| Sale of derivatives** | |||
| Investment income received | |||
| Other | |||
| Net cash flows from investing activities | ( | ( | |
| Cash flows from financing activities | |||
| Distribution | 9 | ( | ( |
| Open year cash calls made | |||
Other | |||
| Net cash flows from financing activities | ( | ||
| Net increase/(decrease) in cash and cash equivalents | ( | ||
| Cash and cash equivalents at 1 January | |||
| Foreign exchange on cash and cash equivalents | ( | ||
| Cash and cash equivalents at 31 December | 18 |
*Refer to note 25 for details of the restatement.
**Purchase and sale of derivatives have been re-presented from the prior year to align to the Lloyd’s Illustrative
Accounts. In the prior year, the net purchase of derivatives was presented, which has now been split out to show the
purchase of derivatives and sale of derivatives separately.
The accompanying notes are an integral part of these accounts.
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 19
1 Accounting policies, statement of compliance and basis of preparation
1.1 Statement of compliance and basis of preparation
The financial statements have been prepared in compliance with FRS 102 and FRS 103, being the applicable
UK GAAP accounting standards, and in accordance with The Insurance Accounts Directive (Lloyd’s Syndicate
and Aggregate Accounts) Regulations 2008 (The Regulations 2008), and where appropriate the provisions of
Schedule 3 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008
(The Regulations) relating to insurance companies. The financial statements have also been prepared in
accordance with the Lloyd’s Syndicate Accounts Instructions version 2.0, as modified by the Frequently Asked
Questions version 1.1 issued by Lloyd’s.
The principal accounting policies applied in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
The financial statements are prepared under the historical cost convention, as modified by the recognition of
certain financial assets and liabilities measured at fair value. The annual basis of accounting has been applied
to all classes of business written by the Syndicate.
The Directors of the Managing Agent have prepared the annual accounts on the going concern basis that the
Syndicate will continue to write future business.
The financial statements are reported in US dollars ($), which is the functional and presentational currency of
the Syndicate, and rounded to the nearest $’000, unless otherwise stated.
The 2023 accounts were rounded to the nearest $0.1m, unless otherwise stated. The 2023 comparatives have
therefore been re-presented to the nearest $1,000 in this document, which may lead to minor rounding
differences compared to the prior year accounts.
Furthermore, 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 re-
presented to ensure consistency with current year presentation and compliance with the Lloyd's Syndicate
Accounts Instructions. These changes have been detailed within the impacted financial statements and note
disclosures. The changes have been applied retrospectively and have no impact on previously reported profit,
total comprehensive income, total assets, total liabilities or total capital and reserves.
1.2 Product classification
Insurance contracts are those contracts that transfer significant insurance risk. The significance of insurance risk
is dependent on both the probability of an insured event and the magnitude of its potential effect to the
policyholder. Once a contract has been classified as an insurance contract, it remains an insurance contract for
the remainder of its lifetime, even if the insurance risk reduces significantly during this period.
1.3 Significant accounting policies
1.3.1 Insurance contracts
a. Premiums
Premiums written relate to business incepted during the year, together with any differences between booked
premiums for prior years and those previously accrued, and include estimates of premiums due but not yet
receivable or notified, less an allowance for cancellations. Premiums are accreted to the technical account (i.e.
earned) on a pro rata basis over the term of the related policy, except for those contracts where the period of risk
differs significantly over the contract period. In these circumstances, premiums are recognised over the period of
risk in proportion to the amount of insurance protection provided. Reinstatement premiums are accreted to the
technical account on a pro rata basis over the term of the original policy to which it relates. Premiums are shown
net of premium taxes and other levies on premiums. Pipeline premium estimates (estimated premium income)
are derived from ultimate premium estimates which are typically based on standard actuarial projection
techniques (e.g. Basic Chain Ladder) on the key assumption that historical development of premiums is
representative of future development.
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 20
1 Accounting policies, statement of compliance and basis of preparation (continued)
b. Profit commissions
Profit commission income arising from whole account quota share contracts is recognised when the economic
benefits are highly probable. These are netted off against commission costs which are included within the
‘acquisition costs’ line in the technical account.
c. Deferred acquisition costs
Commission and other acquisition costs incurred during the financial period that are related to securing new
insurance contracts and/or renewing existing insurance contracts, but which relate to subsequent financial
periods, are deferred to the extent that they are recoverable out of future revenue margins. Deferred acquisition
costs are capitalised and amortised over the life of the policy to which they relate on a basis consistent with the
earnings pattern of that policy.
d. Claims
Claims incurred comprise claims and claims handling costs paid in the year and changes in the outstanding
claims provisions, including provisions for claims incurred but not reported (IBNR) and related expenses, together
with any adjustments to claims from prior years. Claims handling costs are mainly external costs related to the
negotiation and settlement of claims.
Internal costs to negotiate, manage, and settle claims (unallocated loss adjustment expenses) are apportioned
to paid claims. The apportionment utilises the annual ULAE assumption that is agreed by the Reserving
Committee.
Outstanding claims represent the estimated ultimate cost of settling all claims (including direct and indirect claims
settlement costs) arising from events which have occurred up to the date of the statement of financial position,
including IBNR, less any amounts paid in respect of those claims. The Syndicate does not discount its liabilities
for unpaid claims, the ultimate cost of which cannot be known with certainty at the date of the statement of
financial position.
Claims provisions have been established on an individual class of business basis. The underwriting and
management teams conduct a quarterly review of each class of business. Claims are projected to the ultimate
position and provision is made for known claims and claims IBNR.
While the Directors consider that the estimate of claims outstanding is fairly calculated on the basis of the
information currently available to them, there is inherent uncertainty in relation to the ultimate liability which will
vary as a result of subsequent information and events. Adjustments to the amounts of the claims provisions
established in prior years are reflected in the technical account for the period in which the adjustments are made.
e. Provision for unearned premiums
The proportion of written premiums that relate to unexpired terms of policies in force at the date of the statement
of financial position is deferred as a provision for unearned premiums, generally calculated on a time apportioned
basis. The movement in the provision is taken to the technical account in order that revenue is recognised over
the period of the risk.
f. Unexpired risks provision
Provision is made for any deficiencies arising when unearned premiums, net of related deferred acquisition costs,
are insufficient to meet expected claims and expenses. The expected claims are calculated having regard to
events that are relevant to the provision at the date of the statement of financial position.
Unexpired risk surpluses and deficits are offset where business classes are managed together, and a provision
is made if an aggregate deficit arises. At 31 December 2024, the Syndicate reported an unexpired risks provision
of $nil (2023: $nil).
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 21
1 Accounting policies, statement of compliance and basis of preparation (continued)
g. Reinsurance
The Syndicate assumes and cedes reinsurance in the normal course of business. Premiums and claims on
reinsurance assumed are recognised in the technical account along the same basis as direct business, taking
into account the product classification. Reinsurance premiums ceded and reinsurance recoveries on claims
incurred are included in the respective expense and income accounts. Reinsurance outwards premiums are
earned according to the nature of the cover. ‘Losses occurring during’ policies are earned evenly over the policy
period. ‘Risks attaching’ policies are expensed on the same basis as the inwards business being protected.
Reinstatement premiums on both inwards and outwards business are accreted to the technical account on a pro
rata basis over the term of the original policy to which they relate.
Reinsurance assets include amounts recoverable from reinsurance companies for paid and unpaid losses and
loss adjustment expenses, and ceded unearned premiums. Amounts recoverable from reinsurers are calculated
with reference to the claims liability associated with the reinsured risks. Revenues and expenses arising from
reinsurance agreements are therefore recognised in accordance with the underlying risk of the business
reinsured.
Gains or losses on buying reinsurance are recognised immediately in the technical account.
If a reinsurance asset is impaired, the Syndicate reduces its carrying amount accordingly, and will immediately
recognise the impairment loss in the technical account. A reinsurance asset will be deemed to be impaired if
there is objective evidence, as a result of an event that occurred after initial recognition of that asset, that the
Syndicate may not receive all amounts due to it under the terms of the contract, and that the event has a reliably
measurable impact on the amounts that the Syndicate will receive from the reinsurer.
Gains or losses on buying retroactive reinsurance are recognised immediately in the technical account and are
not deferred and amortised. Premiums ceded and claims reimbursed are presented on a gross basis in the
technical account and statement of financial position as appropriate.
h. Expenses
The Managing Agent has charged the Syndicate an annual fixed fee and has borne all the management expenses
of the Syndicate, other than those related to the direct cost of underwriting and investment management charges.
Investment management charges are netted off against investment return, as disclosed in note 8. Any internal or
external claims adjustment or settlement costs are included within gross claims paid.
1.3.2 Investments
a. Financial investments
The Syndicate has designated on initial recognition its financial assets held for investment purposes
(investments) at fair value through profit or loss (FVTPL). This is in accordance with the Syndicate’s documented
investment strategy and consistent with investment risk being assessed on a portfolio basis. Information relating
to investments is provided internally to the Directors of the Managing Agent and management personnel on a fair
value basis.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value of financial assets and liabilities traded in
active markets (which are the principal markets or the most advantageous markets that maximise the amount
that would be received to sell the asset or minimises the amount that would be paid to transfer the liability) is
based on quoted market bid and ask price for both financial assets and financial liabilities respectively.
The fair value of financial assets and liabilities that are not traded in an active market, including over-the-counter
derivatives, is determined using valuation techniques. The Syndicate uses a variety of methods and makes
assumptions that are based on market conditions existing at each reporting date. Valuation techniques include
the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the
same, discounted cash flow analysis, option pricing models and others commonly used by market participants
and which make the maximum use of observable inputs.
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 22
1 Accounting policies, statement of compliance and basis of preparation (continued)
Gains and losses on investments designated as FVTPL are recognised through the technical account. Interest
income from investments in bonds and short-term investments is recognised at the effective interest rate.
b. Investment return
Investment return comprises all investment income, interest receivable, dividend income, overseas deposit
income and realised and unrealised investment gains and losses and investment expenses and charges. Interest
income is recognised using the effective interest rate method.
Realised gains and losses on investments carried at market value are calculated as the difference between sale
proceeds and purchase price and are recognised when the sale transaction occurs. Unrealised gains and losses
on investments represent the difference between the valuation at the date of the statement of financial position
and their valuation at the previous statement of financial position, or purchase price if acquired during the year,
together with the reversal of unrealised gains and losses recognised in earlier accounting periods in respect of
investment disposals in the current period. Investment expenses and charges relate to those costs incurred in
relation to investment activities.
Investment return is initially recorded in the non-technical account. A transfer is made from the non-technical
account to the general business technical account to reflect the investment return on funds supporting
underwriting business. All investment return is considered to arise on such funds except to the extent that
investment income arises on Funds at Lloyd’s retained at the Syndicate level, also known as ‘Funds in Syndicate’
(FIS), that income remains in the non-technical account.
1.3.3 Measurement of other financial assets and financial liabilities
Other financial assets and financial liabilities are initially recognised at transaction price and subsequently
measured at amortised cost using the effective interest rate method.
1.3.4 Recognition and derecognition of financial assets and financial liabilities
Financial assets and financial liabilities are recognised when the Syndicate becomes a party to the contractual
provisions of the contract. A financial asset is derecognised when either the contractual rights to the asset’s cash
flows expire, or the asset is transferred and the transfer qualifies for derecognition under a combination of risks
and rewards and control tests.
A financial liability is derecognised when it is extinguished which is when the obligation in the contract is
discharged, cancelled or expired.
All ‘regular way purchases and sales’ of financial assets are recognised on the trade date, i.e. the date that the
Syndicate commits to purchase or sell the asset. Regular way purchases and sales are purchases and sales of
financial assets that require delivery of assets within the time frame generally established by regulation or
convention in the marketplace.
If the carrying value of an asset is impaired, it is reduced to the recoverable amount by an immediate charge to
the income statement. The recoverable amount is the higher of an asset’s fair value less costs to sell and value
in use.
1.3.5 Derivatives
Derivative financial instruments include foreign exchange contracts, forward rate agreements, interest rate
futures, currency and interest rate swaps and other financial instruments that derive their value mainly from
underlying interest rates, foreign exchange rates, credit indices, commodity values or equity instruments. All
derivatives are initially recognised in the statement of financial position at their fair value, which represents their
cost. They are subsequently remeasured at their fair value, with movements in this value recognised in the
technical account. Fair values are obtained from quoted market prices or, if these are not available, by using
valuation techniques such as discounted cash flow models or option pricing models.
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 23
1 Accounting policies, statement of compliance and basis of preparation (continued)
All derivatives are carried as assets when the fair values are positive and as liabilities when the fair values are
negative. Derivative contracts may be traded on an exchange or over-the-counter (OTC). Exchange-traded
derivatives are standardised and include certain futures and option contracts. OTC derivative contracts are
individually negotiated between contracting parties and include forwards and swaps.
Derivatives are subject to various risks including market, liquidity and credit risk, similar to those related to the
underlying financial instruments. Many OTC transactions are contracted and documented under International
Swaps and Derivatives Association (ISDA) master agreements or their equivalent, which are designed to provide
legally enforceable set-off in the event of default, reducing the Syndicate’s exposure to credit risk. The notional
or contractual amounts associated with derivative financial instruments are not recorded as assets or liabilities
on the statement of financial position as they do not represent the fair value of these transactions.
1.3.6 Taxation
Under Schedule 19 of the Finance Act 1993, Managing Agents are not required to deduct basic rate income tax
from trading income. In addition, all UK basic rate income tax deducted from Syndicate investment income is
recoverable by Managing Agents and consequently the distribution made to members or their members agents
is gross of tax. Capital appreciation falls within trading income and is also distributed gross of tax.
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
statement of financial position under the heading ‘Member’s balance’.
No provision has been made for any overseas tax payable by the member on underwriting results.
1.3.7 Pension costs
Brit Group Services Limited operates a defined contribution pension scheme on behalf of the Managing Agent.
Contributions are charged to the Syndicate within the annual fixed fee.
1.3.8 Foreign currencies
In accordance with FRS102, the functional currency is the currency of the primary economic environment in which
the Syndicate operates. The functional currency for Syndicate 2987 is the United States dollar ($). Items included
in the annual accounts are measured using the functional currency which is also the Syndicate’s presentational
currency.
Unless otherwise stated, transactions in sterling, Canadian dollars and Euros are translated into the functional
currency at the average rates of exchange. Transactions in foreign currencies other than sterling, US dollars,
Canadian dollars and Euros are translated at the rate of exchange ruling at the date the transaction is processed.
Monetary assets and liabilities in currencies other than the functional currency are translated at the rate of
exchange ruling at 31 December of each year. Exchange profits or losses arising on the translation of foreign
currency amounts relating to the Syndicate insurance operations are included within the non-technical account
as prescribed by FRS 103.
1.3.9 Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial position only
when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a
net basis, or to realise the assets and settle the liability simultaneously.
2 Critical accounting estimates and judgements in applying accounting policies
The Syndicate makes various assumptions about the future, and other major sources of estimation uncertainty
at the end of the reporting period, that have a significant risk of resulting in a material adjustment to the reported
amounts of assets and liabilities within the next financial year.
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 24
2 Critical accounting estimates and judgements in applying accounting policies (continued)
Estimates and judgements are regularly re-evaluated and are based on a combination of historical experience
and other factors, including exposure analysis, expectations of future experience and expert judgement.
2.1 Estimation and judgement in relation to determining the ultimate liability arising from claims
made under Insurance contracts
The estimation of the ultimate liability arising from claims made under insurance contracts is the Syndicate’s most
critical accounting estimate. There are several sources of uncertainty that need to be considered in the estimate
of the amounts that the Syndicate will ultimately pay to settle such claims. Significant areas requiring estimation
and judgement include:
• Estimates of the amount of any liability in respect of claims notified but not settled and incurred but not
reported claims (IBNR) to be included within provisions for inwards insurance and reinsurance contracts;
• The corresponding estimate of the amount of outwards reinsurance recoveries which will become due
as a result of the estimated claims on inwards business;
• The recoverability of amounts due from reinsurers; and
• Estimates of the proportion of exposure which has expired in the period as represented by the earned
proportion of premiums written.
The assumptions used and the manner in which these estimates and judgements are made are set out below,
including the reserving process for the estimation of gross, and net of reinsurance, ultimate premiums and claims:
• Quarterly statistical data is produced in respect of gross and net premiums and claims (paid and
incurred);
• Projections of ultimate premiums, reinstatement premiums and claims are produced by the internal
actuarial department using standard actuarial projection techniques (e.g. Basic Chain Ladder,
Bornhuetter- Ferguson, Initial Expected Loss Ratio). The Basic Chain Ladder and Bornhuetter-Ferguson
projection methods are based on the key assumption that historical development of premiums and
claims is representative of future development. Claims inflation is taken into account in the initial
expected loss ratio selections but is otherwise assumed to be in line with historical inflation trends,
unless explicit adjustments for other drivers of inflation such as legislative developments are deemed
appropriate;
• Some classes of business have characteristics which do not necessarily lend themselves easily to
statistical estimation techniques e.g. due to low data volumes. In such cases, for example, a policy-by-
policy review may also be carried out to supplement statistical estimates;
• In the event of catastrophe losses, and prior to detailed claims information becoming available, claims
provision estimates are compiled using a combination of output from specific recognised modelling
software and detailed reviews of contracts exposed to the event in question.
• Underlying key assumptions and methodology, are discussed with class underwriters, divisional
underwriting directors and the claims team at the ‘Pre-Meet’ meetings. The actuarial department use the
information gathered to help inform the initial ultimate selections following these meetings;
• A peer review process takes place within the Actuarial department of the initial ultimates and they are
also presented to the relevant MDs by senior members of the Actuarial team. This informs the ‘Pre-
Close’ ultimate selections, assumptions, methodology and uncertainties are presented to the Reserving
Committee for discussion and debate;
• Following the review of the ‘Pre-Close’ estimate, the Reserving Committee is presented a range of
suggested changes following the Senior Actuarial management review and feedback from the MDs.
• The Reserving Committee then recommends the committee estimates to be adopted in the financial
statements.
The estimates and judgements are applied in line with the overall reserving philosophy and seek to state the
claims provisions on a best estimate, undiscounted basis. A management risk margin is also applied over and
above the actuarial best estimate to allow for the inherent uncertainty within the best estimate reserve position.
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 25
2 Critical accounting estimates and judgements in applying accounting policies (continued)
The Syndicate has carefully considered the impact of the higher levels of inflation. The Syndicate’s reserves
continue to be set at a margin above the actuarial estimate which is set on a best estimate basis. As part of the
year-end reserving exercise, the impact of inflation has been considered in detail by the internal Actuarial team
to ensure that assumptions are consistent with the Syndicate’s forward looking expectations for claims inflation.
Various techniques have been considered in line with guidance from Lloyd’s and regulators.
In addition to claims provisions, the reserve for future loss adjustment expenses is also subject to estimation with
consideration being given to the level of internal and third-party loss adjustment expenses incurred annually. The
estimated loss adjustment expenses are expressed as a percentage of gross claims reserves and the
reasonableness of the estimate is assessed through benchmarking. Further judgements are made as to the
recoverability of amounts due from reinsurers. Provisions for bad debts are made specifically, based on the
solvency of reinsurers, internal and external ratings, payment experience with them and any disputes of which
the Syndicate is aware.
2.2 Estimation of pipeline premiums
Premium income reported by the Syndicate includes estimates for ultimate premiums for certain contracts, in
particular those written under delegated authority agreements. These ultimate premiums are written in line with
expected attachments of the underlying policies. The Syndicate considers relevant information when determining
estimates, including information provided by brokers and coverholders, past underwriting experience, market
conditions, and the contractual terms of policies. As updated information relating to such variables becomes
available, for example when bordereaux are received, adjustments to estimates are recorded in the period in
which they are determined, and will impact gross premiums written and provisions for unearned premium in the
technical account.
2.3 Estimation of premium earnings
The Syndicate attributes earning of gross written premium to each period on the basis of the passage of time.
However, if the expected pattern of release of risk during the coverage period differs significantly from the
passage of time, for example a group of contracts that is exposed to large natural catastrophe risk concentrated
in the first or second half of the year, then the allocation is made on the basis of the expected timing of claims
incurred. At a portfolio level this is considered to provide a reasonable estimate for the full year of the pattern of
risk over the coverage period.
2.4 Estimation and judgements in respect of fair value of financial investments
Financial investments are carried in the statement of financial position at fair value. Determining the fair value of
certain investments requires estimation.
The Syndicate values investments using designated methodologies, estimations and assumptions. These
securities, which are reported at fair value on the statement of financial position, represent the majority of the
invested assets. The measurement basis for assets carried at fair value is categorised into a ‘fair value hierarchy’
in accordance with the valuation inputs and consistent with UK GAAP. The fair value hierarchy gives the highest
priority to quoted prices in active markets for identical assets or liabilities (level one); the middle priority to fair
values other than quoted prices based on observable market information (level two); and the lowest priority to
unobservable inputs that reflect the assumptions that the Syndicate considers market participants would normally
use (level three). To the extent that valuation is based on models or inputs that are unobservable in the market,
the determination of fair value requires more judgement and, accordingly, those instruments included in level
three will require a greater degree of judgement to be exercised during valuation than for those included in level
two or level one. At 31 December 2024, financial investments amounting to $330,282k (2023: $301,842k) were
classified as level three.
The classification within the fair value hierarchy is based on the lowest level of significant input to its valuation.
Any change to investment valuations may affect the Syndicate results of operations and reported financial
condition. For further information, refer to note 10.
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 26
3 Principal risks and uncertainties
3.1 Insurance risk
Insurance risk arises from the possibility of an adverse financial result due to actual experience being different
from that expected when an insurance product was designed and priced. The actual performance of insurance
contracts is subject to the inherent uncertainty in the occurrence, timing and amount of the final insurance
liabilities. This is the principal risk the Syndicate is exposed to as its primary function is to underwrite insurance
contracts. The risk arises due to the possibility of insurance contracts being under-priced, under-reserved or
subject to unforeseen catastrophe claims.
The areas of insurance risk discussed below include: underwriting (including aggregate exposure management),
reinsurance and reserving.
a. Underwriting risk
Underwriting risk is the risk that insurance premiums will not be sufficient to cover the future losses and associated
expenses. It arises from the fluctuations in the frequency and severity of financial losses incurred through the
underwriting process by the Syndicate as a result of unpredictable events.
The Syndicate is also exposed to the risks resulting from its underwriters accepting risks for premiums which are
insufficient to cover the ultimate claims which result from such policies. The underwriting and economic
environment and the associated impact on premium rates, including trends due to the underwriting cycle and
inflation, are factored into the Syndicate’s pricing models and risk management tools, and is continually monitored
to assess whether any corrective action is required. Additional controls over the underwriting strategy are
described in the section below.
The Syndicate writes all its business through Lloyd’s and therefore can take advantage of Lloyd’s centralised
infrastructure and service support. Lloyd’s also has an established global distribution framework, with extensive
licensing agreements providing the Syndicate access to over 200 territories. Exclusively using the Lloyd’s
platform subjects the Syndicate to a number of resulting underwriting risks. The Syndicate relies on the efficient
functioning of the Lloyd’s market. In particular any damage to the brand or reputation of Lloyd’s or deterioration
in Lloyd’s asset base when compared with its liabilities may have a material adverse effect on the Syndicate’s
ability to write new business.
The Syndicate also benefits from the ability to write business based on the Lloyd’s financial rating, which allows
the Syndicate to write more business as part of the Lloyd’s platform. A downgrade in Lloyd’s financial strength
ratings may have an adverse effect on the Syndicate.
(i) Controls over underwriting strategy
The BSL Board sets the Syndicate’s underwriting strategy for accepting and managing underwriting risk. The
Syndicate Underwriting Committee, chaired by the Active Underwriter, meets regularly to drive the underwriting
strategy and to monitor performance against the plans. The assessment of underwriting performance is all-
encompassing applying underwriting key performance indicators (KPIs), technical pricing management
information (MI), premium monitoring, delegated underwriting operations and claims. The risks are managed by
the committee in line with the underwriting risk policy and within the risk tolerance set by the Board. The
underwriting risk policy also sets out a number of controls, which are summarised below.
The Managing Agent carries out a detailed annual business planning process for each of the Syndicate’s
underwriting units. The resulting plans set out premium, territorial and aggregate limits and reinsurance protection
thresholds for all classes of business and represent a key tool in managing concentration risk. Performance
against the plans is monitored on a regular basis by the Underwriting Committee as well as by the Board. A
dedicated Risk Aggregation team also performs catastrophe modelling and Realistic Disaster Scenarios (RDS)
on a regular basis to ensure that the Syndicate’s net losses remain within its risk appetite.
The Managing Agent has developed underwriting guidelines, limits of authority and business plans for the
Syndicate which are binding upon all staff authorised to underwrite. These are detailed and specific to
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 27
3 Principal risks and uncertainties (continued)
underwriters and classes of business. Gross and net line size limits are in place for each class of business with
additional restrictions in place on catastrophe exposed business.
A proportion of the Syndicate’s insurance risks are written by third parties under delegated underwriting
authorities, with the remaining being written through individual risk acceptances or through reinsurance treaties.
The third parties are closely vetted in advance and are subject to tight reporting requirements. In addition, the
performance of these contracts is closely monitored by underwriters and/or portfolio managers, with regular audits
being carried out.
The technical pricing framework ensures that the pricing process in the Syndicate is appropriate. It ensures
pricing methodologies are demonstrable and transparent and that technical (or benchmark) prices are assessed
for each risk. The underwriting and actuarial functions work together to maintain the pricing models and assess
the difference between technical price and actual price. The framework also ensures that sufficient data is
recorded and checked by underwriters to enable the Syndicate to maintain an effective rate monitoring process.
Compliance is checked through both a peer review process and, periodically, by the Managing Agent’s Internal
Audit department which is entirely independent of the underwriting units.
In order to limit risk, the number of reinstatements per policy is limited, deductibles are imposed, policy exclusions
are applied and whenever allowed by statute, maximum indemnity limits are put in place per insured event.
(ii) Underwriting risk profile
The core insurance portfolio of property, marine, energy and casualty covers a variety of largely uncorrelated
events and also provides some protection against the underwriting cycle as different classes are at different
points in the underwriting cycle. The underwriting portfolio is managed to target top quartile underwriting
performance and the mix of business is continually adjusted based on the current environment (including the
current pricing strength of each class). This assessment is conducted as part of the business planning process,
which operates annually, is an ongoing strategy process and uses inputs from the technical pricing framework.
The business plan is approved by the BSL Board and is monitored monthly.
(iii) Geographical concentration of premium
The Syndicate enters into policies with policyholders from all over the world, with the underlying risk relating to
premiums spread worldwide. This allows the Syndicate to benefit from a wide geographic diversification of risk.
The principal location of the Syndicate’s policyholders is the United States. The concentration of insurance
premium before and after reinsurance by the location of the underlying risk is summarised below:
Premiums written
Gross
Net
2024
$’000
$’000
United States
1,366,811
937,991
United Kingdom
177,681
116,503
Europe (excluding UK)
111,294
67,966
Other (including worldwide)
1,207,132
852,176
Total
2,862,918
1,974,636
Premiums written
Gross
Net
2023
$’000
$’000
United States
1,371,544
899,753
United Kingdom
168,851
99,461
Europe (excluding UK)
89,265
44,623
Other (including worldwide)
1,110,463
746,128
Total
2,740,123
1,789,965
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 28
3 Principal risks and uncertainties (continued)
The nature of the London Market business is such that the insureds and reinsureds are often operating on a
multi-territory or worldwide basis and hence coverage is often provided on a worldwide basis. Premiums written
on a multi-territory or worldwide basis are included in ‘Other’ in the table above.
(iv) Portfolio mix
The Syndicate’s breakdown of gross premium written by principal categories is summarised below:
2024
2023
Variance
Premium by Portfolio
$’000
$’000
%
Financial and Professional Liability
510,585
456,501
11.8
Programmes and Facilities
450,782
466,938
(3.5)
Property
638,415
493,395
29.4
Specialty
472,749
459,783
2.8
Casualty Treaty
319,559
410,912
(22.2)
Property Treaty
395,105
339,285
16.5
Other
73,917
80,854
(8.6)
Discontinued
1,806
32,455
(94.4)
Total
2,862,918
2,740,123
4.5
The Syndicate underwrites a business mix of both insurance and reinsurance, long and short tailed business
across a number of geographic areas which results in a diversification of the Syndicate’s portfolio. The business
mix is monitored on an ongoing basis with particular focus on the short tail vs. long tail split and the proportion of
delegated underwriting business. Long tail business is currently 32% of the portfolio in the year to 31 December
2024 (2023: 30%) and delegated underwriting represents 40% (2023: 43%). Underwriting risk is mainly driven
by US catastrophe exposure. Casualty Treaty is also a driver due to its long-tail exposure.
(v) Aggregate exposure management
The Syndicate closely monitors aggregation of exposure to natural catastrophe events against agreed risk
appetites using stochastic catastrophe modelling tools, along with knowledge of the business, historical loss
information, and geographical accumulations. Climate change impacts natural catastrophe events. Analysis and
monitoring also measures the effectiveness of the Syndicate’s reinsurance programmes.
Aggregations of exposure to man-made catastrophes are monitored using inhouse scenario analysis and Lloyd’s
Realistic Disaster Scenarios (RDSs). Catastrophe risk tolerances are reviewed by the Board on an annual basis.
Actual results may differ materially from the modelled losses given the significant uncertainties within model
assumptions, techniques and simulations applied to calculate these event loss estimates. There could also be
non-modelled losses which result in actual losses exceeding these figures. Moreover, the portfolio of insured
risks changes dynamically over time.
Stress and scenario tests are also run, such as Lloyd’s and internally developed Realistic Disaster Scenarios
(RDSs). Below are the key RDS losses to the Syndicate for all classes combined as at 1
st
October 2024
(unaudited):
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 29
3 Principal risks and uncertainties (continued)
Lloyd’s Prescribed RDS Event
Estimated
Modelled Syndicate
Loss at 1 October 2024
(i)
Modelled Syndicate
Loss at 1 October 2023
(ii)
Industry
Loss (i)
$’000
Gross
Net
Gross
Net
Gulf of Mexico Windstorm
111,000,000
931,509
408,803
936,000
274,000
Florida Miami Windstorm
131,000,000
504,104
206,057
566,000
152,000
US North East Windstorm
81,000,000
912,758
261,435
917,000
186,000
San Francisco Earthquake
80,000,000
1,449,563
587,879
1,432,000
373,000
Japan Earthquake
55,885,726
288,854
150,847
294,000
133,000
Japan Windstorm
11,875,717
87,981
43,330
99,000
44,000
European Windstorm
26,800,000
108,008
56,276
121,000
59,000
(i): At 31 December 2024 foreign exchange rates.
(ii): At 31 December 2023 foreign exchange rates.
Actual results may differ materially from the losses above given the significant uncertainties within model
assumptions, techniques and simulations applied to calculate these event loss estimates. There could also be
non-modelled losses which result in actual losses exceeding these figures. Moreover, the portfolio of insured
risks changes dynamically over time.
(vi) Sensitivity to changes in insurance liabilities
The following table presents the profit and loss impact of 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. The amount disclosed in the table represents the profit or loss impact
of an increase or decrease in the insurance liability as a result of applying the sensitivity. The amount disclosed
for the impact on claims outstanding – net of reinsurance represents the impact on both the profit and loss for
the year and member’s balance.
General insurance business sensitivities as at 31 December 2024
Sensitivity
+5.0%
-5.0%
$’000
$’000
Claims outstanding – gross of reinsurance
297,297
(297,297)
Claims outstanding – net of reinsurance
156,785
(156,785)
General insurance business sensitivities as at 31 December 2023
Sensitivity
+5.0%
-5.0%
$’000
$’000
Claims outstanding – gross of reinsurance
281,820
(281,820)
Claims outstanding – net of reinsurance
143,076
(143,076)
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 30
3 Principal risks and uncertainties (continued)
b. Reinsurance risk
The Syndicate purchases reinsurance to manage exposure to individual risks and aggregation of risks arising
from individual large claims and catastrophe events. This allows the Syndicate to mitigate exposure to insurance
losses against the risk appetite, reduce volatility of reported results and protect capital.
Proportional quota share reinsurance is purchased to provide protection against claims arising either from
individual large claims or aggregations of losses. Quota share reinsurance is also used to manage the Syndicate‘s
net exposure to classes of business where the Syndicate’s risk appetite is lower than the efficient operating scale
of the class of business on a gross of reinsurance basis. These placements are reviewed on the basis of market
conditions.
The Syndicate also has in place a comprehensive programme of excess of loss reinsurances to protect itself
from severe size or frequency of losses:
(i) Facultative reinsurance is used to reduce risk relating to individual contracts. The amount of cover bought
varies by class of business. Facultative reinsurance is also used as a tool to manage the net line size on
individual risks to within tolerance.
(ii) Risk excess of loss reinsurance is used to protect a range of individual inwards contracts which could give
rise to individual large claims. The optimal net retention per risk is assessed for each class of business given
the Syndicate’s risk appetite during the business planning exercise.
(iii) An aggregate catastrophe excess of loss cover is in place to protect the Syndicate against combined property
claims from multiple policies resulting from catastrophe events. This is supplemented by specific covers for
peril regions, catastrophe swaps, catastrophe bonds and industry loss warranties where they are a cost-
efficient means to ensure that the Syndicate remains within its catastrophe risk appetite.
In December 2020 Sussex Capital UK PCC Limited issued a catastrophe bond which provides $300m of
reinsurance Excess of Loss protection to Syndicate 2987. The bond has a four-year term and covers losses from
US named windstorms and US earthquakes. The catastrophe bond expired on 31 December 2024 and was not
renewed.
Given the fundamental importance of reinsurance protection to the Syndicate’s risk management, the Managing
Agent has in place internal controls and processes to ensure that the reinsurance arrangements provide
appropriate protection of capital and maintain our ability to meet policyholder obligations. The Head of Outwards
Reinsurance Placement proposes external reinsurance arrangements with input from class underwriters and the
BSL Chief Risk Officer. All reinsurance purchases are reviewed by the Underwriting Committee. The Head of
Outwards Reinsurance Placement monitors and reports on the purchase of reinsurance protections.
The Syndicate remains exposed to a number of risks relating to its reinsurance programme:
• It is possible for extremely severe losses to exhaust the reinsurance purchased. Any losses exceeding
the reinsurance protection would be borne by the Syndicate.
• Some parts of the programme have limited reinstatements which limit the amount that may be recovered
from second or subsequent claims. If the entirety of the cover is exhausted, it may not be possible to
purchase additional reinsurance at a reasonable price.
• A dispute may arise with a reinsurer which may mean the recoveries received are lower than anticipated.
• Basis risk on reinsurance which responds to something other than the Syndicate’s Ultimate Net Loss.
These risks are managed through a combination of techniques and controls including risk aggregation
management, capital modelling and internal actuarial review of outward reinsurance costs. The counterparty risk
in relation to reinsurance purchased is managed by the Credit Committee. This is further discussed in the Credit
risk section below.
c. Reserving risk
Reserving risk arises where the actual cost of losses for policyholder obligations incurred before the reporting
date may differ from the established reserves due to inaccurate assumptions or unforeseen circumstances. This
is a key risk for the Syndicate as the reserves for unpaid losses represent the largest component of the
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 31
3 Principal risks and uncertainties (continued)
Syndicate’s liabilities and are inherently uncertain. The BSL Reserving Committee is responsible for the
management of the Syndicate’s reserving risk.
The Syndicate has a rigorous process for establishing reserves for insurance claim liabilities and a number of
controls are used to mitigate reserving risk. The reserving process starts with controls over claims data which
ensure complete and accurate recording of all paid and notified claims. Claims adjusters validate policy terms
and conditions, adjust claims and investigate suspicious or disputed claims in accordance with the Syndicate’s
claims policy. Case reserves are set for notified claims using the experience of specialist claims adjusters,
underwriters and external experts where necessary.
Whilst the case reserve is expected to be sufficient to meet the claims amount when it is settled, incurred but not
reported (IBNR) claims require additional reserves. This is particularly the case for the longest tailed classes of
business where the final settlement can occur several years after the claim occurred. Actuarial triangulation
techniques are employed by the Syndicate’s experienced actuaries to establish the IBNR reserves.
These techniques project IBNR reserves based on historical development of paid and incurred claims by
underwriting year. For the most uncertain claims, the triangulation techniques are supplemented by additional
methods to ensure the established reserves are appropriate. The actuarial team work closely with other business
functions such as underwriting, claims and risk aggregation to ensure that they have a full understanding of the
emerging claims experience across the Syndicate. Inflation is considered as part of reserve setting process.
The Syndicate’s reserving policy sets out the approach to estimating claims provisions and is designed to produce
accurate and reliable estimates that are consistent over time and across classes of business. The actuarial best
estimate set out in the policy is subject to sign-off by the Reserving Committee, as part of the formal governance
arrangements for the Syndicate. The estimate agreed by the committees is used as a basis for the Syndicate
financial statements. A management risk margin is also applied over and above the actuarial best estimate to
allow for the inherent uncertainty within the best estimate reserve position and wider inherent uncertainty across
the economic and insurance environment. This margin increases the reserves reflected in the Syndicate financial
statements above the mean expectation. Finally, the reserves in the financial statements are presented to the
Audit Committee for recommendation to the BSL Board.
The reserves can be more or less than is required to meet the claims arising from earned business. The level of
uncertainty varies significantly between the classes written by the Syndicate but typically is highest for those
classes where there are significant delays in the settlement of the final claim amount. More specifically, the key
areas of uncertainty within the Syndicate’s reserves are considered to be claims from the long-tailed direct and
reinsurance classes. The issues contributing to this high uncertainty are common to all entities which write such
business.
3.2 Liquidity risk
This is the risk the Syndicate may encounter difficulty in meeting obligations associated with financial liabilities
that are settled by delivering cash or another financial asset. The predominant liquidity risk the Syndicate faces
is the daily calls on its available cash resources in respect of claims arising from insurance contracts.
The Managing Agent monitors the levels of cash and cash equivalents on a daily basis, ensuring adequate
liquidity to meet the expected cash flow requirements due over the short-term.
The Syndicate also limits the amount of investment in illiquid securities in line with the investment policy set by
the Board. This involves ensuring sufficient liquidity to withstand an internally developed stressed scenario which
includes a severe catastrophe event (with associated payment and funding requirements) and financial market
volatility. Contingent liquidity also exists in the form of the Group’s revolving credit facility.
The tables below present the undiscounted value of monetary liabilities of the Syndicate into their relevant
maturing groups based on the remaining period at the end of the year to their contractual maturities or expected
repayment dates.
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 32
3 Principal risks and uncertainties (continued)
As at 31 December 2024
Liabilities (undiscounted
values)
Up to a
year
$’000
1-3 years
$’000
3-5 years
$’000
Over 5
years
$’000
Total
$’000
Claims outstanding
1,700,061
1,883,911
962,450
1,399,512
5,945,934
Derivative liabilities
3,150
-
-
-
3,150
Creditors
652,412
-
-
-
652,412
Accruals and deferred
income
1,802
-
-
-
1,802
Total
2,357,425
1,883,911
962,450
1,399,512
6,603,298
As at 31 December 2023
Liabilities (undiscounted
values)
Up to a
year
$’000
1-3 years
$’000
3-5 years
$’000
Over 5
years
$’000
Total
$’000
Claims outstanding
1,535,139
1,763,280
959,783
1,378,190
5,636,392
Derivative liabilities
16,496
-
-
-
16,496
Creditors*
867,126
-
-
-
867,126
Accruals and deferred
income*
1,324
-
-
-
1,324
Total
2,420,085
1,763,280
959,783
1,378,190
6,521,338
*The Creditors and Accruals and deferred income lines have been re-presented since prior year, to align to the Lloyd’s
Illustrative Accounts. In the prior year these lines were presented in aggregate as ‘Creditors’ in the table, with a footnote to
disclose the breakdown. Furthermore, Accruals and deferred income previously included Reinsurers’ share of deferred
acquisition costs, which is no longer included in the liquidity risk disclosure.
3.3 Credit risk
This is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to
discharge an obligation in a timely manner. The main sources of credit risk relate to:
• Reinsurers: through the failure to pay valid claims against a reinsurance contract held by the Syndicate;
• Brokers and coverholders: where counterparties fail to pass on premiums or claims collected or paid on
behalf of the Syndicate;
• Investments: through the issuer default of all or part of the value of a financial instrument or derivative
financial instrument; and
• Cash and cash equivalents: through the default of the banks holding the cash and cash equivalents.
The insurance and non-insurance related counterparty credit risks are managed separately by the Syndicate.
a. Investments credit risk
(i) Investment credit risk management process
The Investment Committee is responsible for the management of investment credit risk. The Investment
Guidelines and Investment Policy set out clear limits and controls around the level of investment credit risk. The
Syndicate has established concentration guidelines that restrict the exposure to any individual counterparty. The
investment guidelines further limit the type, credit quality and maturity profile of both the Syndicate’s cash and
investments. In addition, the investment risk framework further limits potential exposure to credit risk through
monitoring of the aggregate investment risk limits.
Insurance Credit Risk management process
Insurance credit risk arises primarily from reinsurers (whereby reinsurers fail to pay recoveries due to the
Syndicate in a timely manner) and brokers and coverholders (whereby intermediaries fail to pass on premiums
due to the Syndicate in a timely manner).
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 33
3 Principal risks and uncertainties (continued)
The Credit Committee, chaired by the Brit Group Chief Financial Officer, is responsible for the management of
credit risk arising from insurance activities.
Reinsurer credit risk is managed by transacting only with reinsurance counterparties that satisfy a minimum level
of financial strength or provide appropriate levels of collateral and have been approved for use by the Credit
Committee. The reinsurer security list, which sets out the list of approved reinsurance counterparties, is reviewed
at least annually and following any significant change in risk profile, which includes any changes to reinsurers'
financial ratings. Credit risk appetite limits are set for reinsurance entities and groups to limit accumulations of
risk. These positions are monitored quarterly against current statement of financial position exposures and in
relation to a number of extreme loss scenarios.
Reinsurance aged debt is monitored and managed against the management risk appetite limits set by the Credit
Committee. A bad debt provision is held against all non-rated reinsurers or any reinsurer where there is deemed
to be a specific risk of non-payment.
Any breaches of credit risk tolerance and/or appetite are reported to the Risk Oversight Committee and the Board
on at least a quarterly basis.
(ii) Credit risk profile
A summary of the credit risk exposures for the Syndicate is set out in the tables below:
$’000
AAA
AA
A
BBB
Other
Not
Rated
Total
As at 31 December 2024
Financial Investments
Shares and other variable
yield securities and units in
unit trusts
85,577
3,983
-
-
-
457,276
546,836
Debt securities
1,910,357
39,285
513,965
113,598
940
10,355
2,588,500
Derivative assets
-
-
7,404
-
-
1,720
9,124
Syndicate loans to central
fund
-
-
-
-
-
26,792
26,792
Deposits with ceding
undertakings
-
-
-
-
-
3,172
3,172
Total Investments
1,995,934
43,268
521,369
113,598
940
499,315
3,174,424
Reinsurers’ share of claims
outstanding
3,035
1,188,820
1,467,718
1,130
319
149,211
2,810,233
Debtors arising out of direct
insurance operations
-
-
-
-
-
932,240
932,240
Debtors arising out of
reinsurance operations
-
-
-
-
-
539,045
539,045
Cash at bank and in hand
-
-
4,251
-
-
-
4,251
Other assets
149,994
17,622
26,696
11,306
17,301
-
222,919
Other debtors and accrued
interest
-
-
-
-
-
30,610
30,610
Total
2,148,963
1,249,710
2,020,034
126,034
18,560
2,150,421
7,713,722
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 34
3 Principal risks and uncertainties (continued)
*The columns in this table have been re-presented since prior year, to align to the Lloyd’s Illustrative Accounts. In particular,
in the prior year, ‘BBB and below’ were grouped into one column, which has now been split out into ‘BBB’ and ‘Other’.
Collateral of $1,045,275k (2023: $1,306,900k) is held in third party trust accounts or as a letter of credit (‘LOC’)
to guarantee Syndicate 2987 against reinsurance counterparties and is available for immediate drawdown in the
event of a default. As at 31 December 2024, collateral of $7,932k (2023: $7,912k) had been drawn against
reinsurance assets.
The table below shows the maximum exposure to credit risk for the components of the statement of financial
position. The maximum exposure is shown gross, before the effect of mitigation through collateral agreements.
$’000
AAA
AA
A
BBB*
Other*
Not
Rated
Total
As at 31 December 2023
Financial Investments
Shares and other variable yield
securities and units in unit
trusts
80,123
720
-
-
68
394,390
475,301
Debt securities
1,802,700
29,417
339,134
153,981
44,131
11,047
2,380,410
Derivative assets
-
-
-
-
-
5,348
5,348
Syndicate loans to central fund
-
-
-
-
-
34,361
34,361
Deposits with ceding
undertakings
-
-
-
-
-
5,534
5,534
Total Investments
1,882,823
30,137
339,134
153,981
44,199
450,680
2,900,954
Reinsurers’ share of claims
outstanding
6,889
1,149,626
1,401,945
3,165
316
212,923
2,774,864
Debtors arising out of direct
insurance operations
-
-
-
-
-
856,941
856,941
Debtors arising out of reinsurance
operations
-
-
-
-
-
814,646
814,646
Cash at bank and in hand
6,580
-
1,105
-
-
7,685
Other assets
178,799
17,935
23,851
14,657
14,042
-
249,284
Other debtors and accrued
interest
-
-
-
-
-
29,136
29,136
Total
2,075,091
1,197,698
1,766,035
171,803
58,557
2,364,326
7,633,510
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 35
3 Principal risks and uncertainties (continued)
$'000
Neither past due
nor impaired
assets
Past due
but not
impaired
assets
Gross
value of
impaired
assets
Impairment
allowance
Total
As at 31 December 2024
Shares and other variable
yield securities and units in
unit trusts
546,836
-
-
-
546,836
Debt securities
2,588,500
-
-
-
2,588,500
Derivative assets
9,124
-
-
-
9,124
Syndicate loans to central
fund
26,792
-
-
-
26,792
Deposits with ceding
undertakings
3,172
-
-
-
3,172
Reinsurer' share of claims
outstanding
2,810,233
-
-
-
2,810,233
Debtors arising out of direct
insurance operations
931,583
657
-
-
932,240
Debtors arising out of
reinsurance operations
475,616
40,829
30,532
(7,932)
539,045
Other debtors and accrued
interest
30,610
-
-
-
30,610
Cash at bank and in hand
4,251
-
-
-
4,251
Other assets
222,919
-
-
-
222,919
Total
7,649,636
41,486
30,532
(7,932)
7,713,722
$'000
Neither past due
nor impaired
assets
Past due
but not
impaired
assets
Gross value
of impaired
assets
Impairment
allowance
Total
As at 31 December 2023
Shares and other variable yield
securities and units in unit
trusts
475,301
-
-
-
475,301
Debt securities
2,380,410
-
-
-
2,380,410
Derivative assets
5,348
-
-
-
5,348
Syndicate loans to central fund
34,361
-
-
-
34,361
Deposits with ceding
undertakings
5,534
-
-
-
5,534
Reinsurer' share of claims
outstanding
2,774,864
-
-
-
2,774,864
Debtors arising out of direct
insurance operations
855,406
1,535
-
-
856,941
Debtors arising out of
reinsurance operations
564,063
180,894
77,601
(7,912)
814,646
Other debtors and accrued
interest
29,136
-
-
-
29,136
Cash at bank and in hand
7,685
-
-
-
7,685
Other assets
249,284
-
-
-
249,284
Total
7,381,392
182,429
77,601
(7,912)
7,633,510
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 36
3 Principal risks and uncertainties (continued)
The table below sets out a reconciliation of changes in impairment allowance during the period for each relevant
class of financial asset at the balance sheet date:
01-Jan
New
impairment
charges
added in
year
Changes in
impairment
charges
Released
to profit
and loss
account
Foreign
exchange
Other
31-Dec
2024
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Debtors arising out of
reinsurance operations
7,912
-
-
329
(309)
-
7,932
Total
7,912
-
-
329
(309)
-
7,932
The table below sets out the age analysis of financial assets that are past due but not impaired at the balance
sheet date:
3.4 Market risk
This is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk.
Credit risk on financial investments and cash is covered in the credit risk section.
New
impairment
charges
added in
year
Changes in
impairment
charges
Released
to profit
and loss
account
Foreign
exchang
e
Other
31-Dec
01-
Jan
2023
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Debtors arising out of
reinsurance operations
8,501
-
-
(282)
(307)
-
7,912
Total
8,501
-
-
(282)
(307)
-
7,912
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
As at 31 December 2024
$'000
$'000
$'000
$'000
$'000
Debtors arising out of direct insurance operations
124
78
83
372
657
Debtors arising out of reinsurance operations
22,150
3,113
7,483
8,083
40,829
Total
22,274
3,191
7,566
8,455
41,486
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
As at 31 December 2023
$'000
$'000
$'000
$'000
$'000
Debtors arising out of direct insurance operations
436
404
61
634
1,535
Debtors arising out of reinsurance operations
136,224
17,034
23,552
4,084
180,894
Total
136,660
17,438
23,613
4,718
182,429
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 37
3 Principal risks and uncertainties (continued)
a. Currency risk
Currency risk is the risk that movements in exchange rates impact the financial performance or solvency position
of the Syndicate. The split of assets and liabilities for each of the Syndicate’s main currencies, converted to US
dollars, is set out in the tables below:
Converted $’000
As at 31 December 2024
UK £
US $
CAD $
EUR €
AUD $
Total
Investments
67,267
2,577,409
488,156
41,592
-
3,174,424
Reinsurers’ share of technical provisions
424,334
2,422,898
139,372
171,566
-
3,158,170
Debtors
147,404
1,103,575
128,646
93,577
-
1,473,202
Other assets
60,795
48,906
55,504
690
61,275
227,170
Prepayments and accrued income
63,580
228,550
13,039
14,479
-
319,648
Total assets
763,380
6,381,338
824,717
321,904
61,275
8,352,614
Technical provisions
(824,961)
(5,715,869)
(295,998)
(339,759)
-
(7,176,587)
Creditors
(120,034)
(478,506)
(21,021)
(36,001)
-
(655,562)
Accruals and deferred income
(5,997)
(30,575)
(1,379)
(2,174)
-
(40,125)
Total liabilities
(950,992)
(6,224,950)
(318,398)
(377,934)
-
(7,872,274)
Net assets / (liabilities) excluding the
effect of currency derivatives
(187,612)
156,388
506,319
(56,030)
61,275
480,340
Adjustment for foreign exchange
derivatives
(3,598)
297,065
(357,461)
63,994
-
-
Adjusted net assets / (liabilities)
(191,210)
453,453
148,858
7,964
61,275
480,340
Converted $’000
As at 31 December 2023
UK £
US $
CAD $
EUR €
AUD $
Total
Investments
88,637
2,224,547
498,966
88,804
-
2,900,954
Reinsurers’ share of technical provisions
439,088
2,427,044
146,161
182,684
-
3,194,977
Debtors
240,720
1,279,638
69,870
82,678
-
1,672,906
Other assets
61,154
58,811
66,232
729
70,043
256,969
Prepayments and accrued income
62,461
213,866
13,323
10,669
-
300,319
Total assets*
892,060
6,203,906
794,552
365,564
70,043
8,326,125
Technical provisions
(784,422)
(5,358,717)
(310,703)
(351,245)
-
(6,805,087)
Creditors
(145,619)
(643,269)
(52,866)
(41,868)
-
(883,622)
Accruals and deferred income
(5,854)
(33,412)
(1,712)
(2,847)
-
(43,825)
Total liabilities
(935,895)
(6,035,398)
(365,281)
(395,960)
-
(7,732,534)
Net assets / (liabilities) excluding the
effect of currency derivatives
(43,835)
168,508
429,271
(30,396)
70,043
593,591
Adjustment for foreign exchange
derivatives
(67,020)
435,297
(406,719)
38,442
-
-
Adjusted net assets / (liabilities)
(110,855)
603,805
22,552
8,046
70,043
593,591
*The total assets balances have been re-presented and restated since the prior year, to split out the AUD currency component
of other assets (which was previously contained within UK £ as AUD $ is not one of the Syndicate’s core currencies) to align
to the Lloyd’s Illustrative Accounts, and to update a misclassification between currencies.
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 38
3 Principal risks and uncertainties (continued)
The non-US dollar denominated net assets of the Syndicate may lead to profit or losses (depending on the mix
relative to the liabilities), should the US dollars vary relative to these currencies.
The Syndicate manages its exposure in each of the main four currencies and the net asset position is rebalanced
periodically. Where mismatches occur, these may lead to FX gains and losses reported through the income
statement.
Foreign currency forward contracts may be used to achieve the desired exposure to each currency. From time
to time the Syndicate may also choose to utilise foreign currency derivatives to manage the risk of reported losses
due to changes in foreign exchange rates. The degree to which derivatives are used is dependent on the
prevailing cost versus the perceived benefit to the Syndicate from reducing the chance of a reported loss due to
changes in foreign exchange rates. The details of all foreign currency derivatives contracts entered into are given
in Note 11.
b. Sensitivity to changes in foreign exchange rates
The table below gives an indication of the impact on the result of a percentage movement in the relative strength
of the US dollar against the value of sterling, Canadian dollar and Euro simultaneously, after taking into
consideration the effect of hedged positions. The analysis is based on the information at 31 December of each
year end:
Impact on result for the financial year
and net assets
$’000
2024
2023
US dollar weakens
10% against other currencies
2,689
(1,125)
20% against other currencies
5,378
(2,250)
US dollar strengthens
10% against other currencies
(2,689)
1,125
20% against other currencies
(5,378)
2,250
c. Interest rate risk and price risk
Interest rate risk is the risk that the fair value and/or future cash flows of a financial instrument will fluctuate
because of changes in interest rates. The Syndicate is exposed to interest rate risk through its investment
portfolio, borrowings and cash and cash equivalents. The sensitivity of the price of these financial exposures is
indicated by their respective durations. The greater the duration of a security, the greater the possible price
volatility.
Insurance liabilities are measured on an undiscounted basis and therefore the reported liabilities are not sensitive
to changes in interest rates.
The Syndicate takes into account the duration of its required capital, targeting an investment portfolio duration
that, under a variation in interest rates, preserves the solvency ratio of the Syndicate. The duration of the
investment portfolio is then set within an allowable range relative to the targeted duration.
The analysis below is performed for reasonably possible movements in market indices on financial instruments
with all other variables held constant, showing the impact on the result before tax due to changes in fair value of
financial assets and liabilities (whose fair values are recorded in the profit and loss account) and member’s
balances. The analysis is based on the information at 31 December of each year end:
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 39
3 Principal risks and uncertainties (continued)
$’000
2024 Impact
on results
before tax
2024 Impact
on member’s
balances
2023 Impact
on results
before tax
2023 Impact
on member’s
balances
$’000
$’000
$’000
$’000
Interest rate risk
+50 basis points shift in yield
curves
(59,514)
(59,514)
(54,481)
(54,481)
-50 basis points shift in yield curves
59,514
59,514
54,481
54,481
Equity price risk
5% increase in equity prices
16,235
16,235
13,088
13,088
5% decrease in equity prices
(16,235)
(16,235)
(13,088)
(13,088)
3.5 Operational Risk
Operational risk is the potential for loss arising from the failure of people, process or technology or the impact of
external events. The nature of operational risk means that it is dispersed across all functional areas of the Brit
Group which the syndicate is managed by. Operational risk exposures are managed through a consistent set of
management processes that drive risk identification, assessment, control and monitoring.
The BSL Operations Committee, chaired by the Group Head of Claims and Operations, is a key governance
committee reporting to the Executive Committee. The BSL Operations Committee is responsible for managing
operational risk in line with the operational risk policy and the risk tolerance and management appetite limits set
by the BSL Board and management respectively. Each individual risk committee is provided with relevant
operational risk updates and these committees include operational risk owners within executive management
who actively manage operational risk within their respective areas (such as Underwriting, Claims, Investments
and Finance).
An operational risk management framework is in place to ensure an appropriate standard approach is taken to
managing operational risk across the Brit Group. The key elements of this framework are:
• Allocation of responsibility for the identification and assessment of operational risk. Standard tools are
used to facilitate these assessments;
• Definition of standard elements of sound operating controls that are expected to be in place to address
all identified operational risks;
• A process that integrates with Brit’s internal model to support the setting and monitoring of operational
risk appetite and tolerances;
• Governance, reporting and escalation for operational risk;
• Infrastructure supporting the operational risk management framework; and
• Operational risk management training and awareness.
A conduct risk framework is in place across the Brit Group to ensure Brit’s products and services continue to
meet the needs of our customers.
3.6 Emerging risks
Brit undertakes a formal emerging risk review annually with the results reported to the Risk Oversight Committee
and included in the Own Risk & Solvency Assessment (ORSA) report and Commercial Insurer’s Solvency Self-
Assessment (CISSA) reports of the underwriting entities. The review is an important part of the risk identification
aspect of the Risk Management Framework and includes horizon scanning of the internal and external risk
environment to identify potential new or developing risks to Brit. These risks can then be included in the risk
register and managed appropriately as required.
Notes to the Accounts
For the year ended 31 December 2024
Brit Syndicate 2987 Annual Report 2024 40
3 Principal risks and uncertainties (continued)
The emerging risk review has previously identified risks such as climate change and cyber risk. These risks have
been managed throughout their development and are now monitored as part of the business-as-usual risk
management process.
3.6.1 Climate Change
Risk Management Framework
Climate change has been recognised as an emerging risk since 2014 and has been an area of focus since having
been identified as a high priority by Brit’s 2018 emerging risks analysis. Its potential impact on the insurance
industry is an area of focus for the wider insurance market and its regulators.
The financial risks to insurers may include the potential for increased frequency and severity of weather-related
natural catastrophes, for example, hurricanes and wildfires. The three main areas of risk identified for Brit are
natural catastrophes, liability claims and investment losses.
Climate risk management
Natural catastrophe risk
Natural catastrophe risk relates to the physical risks of increased frequency and severity of weather-related
natural catastrophes. This could result in additional claims. Climate change to date may already be affecting
present-day weather events and therefore claims.
Brit’s Research and Development team within the Risk Management Function are responsible for developing the
natural catastrophe modelling. Vendor models such as’ Verisk’ and ‘KatRisk’ (developed by scientists and
specialists) are used for the most material and established perils. The modelling is supplemented using the ‘Brit
View of Risk’ which is a set of in-house adjustments used to apply Brit’s view of risk to vendor model outputs. Brit
continuously monitors scientific studies, and regularly reviews both the completeness of existing models and the
application of the Brit View of Risk.
The natural catastrophe modelling is leveraged in pricing, outwards reinsurance purchasing and the risk appetite
framework. Brit Group, which the syndicate is part of, seeks to ensure a balanced and well diversified portfolio
(including exposure to weather perils). Brit has reviewed its property underwriting strategy in recent years and
has sought to reduce exposure in peak catastrophe regions.
Brit’s exposure to natural catastrophe risks at an overall and peril-region level at key return periods is monitored
on an ongoing basis by the Risk Management Function. Board limits are in place to ensure Brit is not over-
exposed to natural catastrophe risk, and reinsurance is purchased to manage tail risk.
Liability risk
Climate change could result in liability claims arising from litigation against Brit’s clients. For example, claims
could arise from firms being held responsible for directly contributing to climate change, not taking climate change
into account in business decisions or inadequate disclosures.
The Syndicate’s exposure is managed by use of limits on gross underwriting exposure, contract wording and
through the purc