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Syndicate 4242
Annual Report and Accounts for the year ended
Contents
Directors and administration .................................................................................................. 1
Active Underwriter’s report .................................................................................................... 2
Managing Agent's report ....................................................................................................... 4
Statement of Managing Agent’s responsibilities .................................................................. 10
Independent Auditor's Report to the Members of Syndicate 4242……………………………..11
Statement of profit or loss and other comprehensive income .............................................. 15
Statement of financial position ............................................................................................ 17
Statement of changes in Members' balances ...................................................................... 19
Statement of cash flows ...................................................................................................... 20
1. Basis of preparation ..................................................................................................... 21
2. Critical accounting estimates and judgements ............................................................. 21
3. Significant accounting policies ..................................................................................... 23
4. Analysis of underwriting result ...................................................................................... 30
5. Technical provisions .................................................................................................... 32
6. Net operating expenses ............................................................................................... 33
7. Auditor’s remuneration ................................................................................................. 33
8. Key management personnel compensation ................................................................. 33
9. Staff costs .................................................................................................................... 34
10. Investment return ......................................................................................................... 34
11. Financial Investments .................................................................................................. 35
12. Debtors arising out of direct insurance operations ........................................................ 37
13. Debtors arising out of reinsurance operations .............................................................. 37
14. Other debtors ............................................................................................................... 37
15. Creditors arising out of direct insurance operations ...................................................... 37
16. Creditors arising out of reinsurance operations ............................................................ 38
17. Other creditors ............................................................................................................. 38
18. Cash and cash equivalents .......................................................................................... 38
19. Related parties ............................................................................................................. 39
20. Disclosure of interests .................................................................................................. 40
21. Funds at Lloyd's ........................................................................................................... 40
22. Off-balance sheet items ............................................................................................... 40
23. Risk management ........................................................................................................ 41
24. Post balance sheet events ........................................................................................... 49
1
Directors and administration
Managing Agent
Directors
P A Jardine (Chairman)*
R P Barke
C V Barley
S Bradbury
E M Catchpole*
S Fisher*
L Harfitt
D B Jones
L J M McMaster
A F J Neden*
S D Redmond*
K Shah*
Non-Executive Directors*
Managing Agent's registered office
5th Floor
20 Gracechurch Street
London
EC3V 0BG
Managing Agent's registered number
1918744
Active Underwriter
A Cunningham
Bankers and investment managers
Barclays
Royal Bank of Canada
Citibank
New England Asset Management
Registered Auditor
Ernst & Young LLP
Signing Actuary
Ernst & Young LLP
2
Active Underwriter’s report
2024 – a season without a trophy but encouraging signs against a difficult backdrop.
Like many teams after a period of change, during 2024 the syndicate has established itself
more firmly in its position. The players have been assembled, the character of the team has
formed, united behind a common goal, and the new additions that have arrived will strengthen
the squad in particular areas, following the overhaul of the preceding years. Results, while
positive, haven’t quite reached the levels aimed for something we continue to strive for as we
move forward.
As anticipated last year, we completed the onboarding of our new Credit and Accident & Health
teams during the year and, moreover, added a further pair in the US writing smaller commercial
property and executive risk liability business, further enhancing the ability to optimise the
business and strengthen the stability of performance.
Gross written premium income by class of business for the calendar year was as follows;
2024
2023
$'000
$'000
US Binders
108,049
94,018
Alternative Risks Binders
63,388
86,575
Specialty Treaty Reinsurance
56,310
92,763
Global D&F
51,834
70,650
E&O
30,271
37,358
Energy
28,668
20,500
Credit
23,394
0
Directors & Officers
17,338
23,013
Cyber and Tech E&O
5,352
14,687
Accident and Health
5,275
0
US property insurance in catastrophe exposed regions
42
6
Invoice factoring insurance
25
66
389,946
439,636
2022 is the YOA closing at this point with an NCOR of 96.6% which is 8.0pp above plan. Given
that we experienced the effects of Hurricane Ian, the second largest insured catastrophe loss
of all time, the outbreak of the Ukrainian War with Russia, and the heights of the post-Covid
inflationary environment that year, with a particularly strong impact on the construction
segments of our portfolio, being able to post a strongly positive result reflects the robustness
of the model that we have been working so hard to develop.
As of 1 January 2025, the Syndicate has successfully externally Reinsured-to-Close the 2022
and prior underwriting years into Syndicate 3500, managed by Riverstone Managing Agency
Limited. This crystalises the result for the Syndicate on these years providing certainty and
therefore removes the risks associated with the market backdrop described above and no
liabilities on the 2022 and prior underwriting years will be passed to the Syndicate’s open
underwriting years.
YOA 2023 is running relatively favourably against plan at this stage with a 93.0% NCOR
against a plan of 91.8% despite a 19% shortfall in gross written premiums against plan as our
underwriters strive to achieve the profitability ambitions of their plans rather than top line
growth. This was another year which again contained over $100bn of insured market losses,
including the most expensive year on record for severe convective storm activity in the US,
Hurricane Idalia, wildfires in Hawaii, the cyclones and flooding in Australia and New Zealand,
and the Turkish earthquake. The YOA will also largely bear the impact of the Baltimore Bridge
collapse event from early 2024. The closeness to plan despite all this, on top of the premium
miss and adverse developments in our motor and construction segments, demonstrates the
robustness of our business model in aligning the underwriting teams to the performance
3
mindset. Underwriters and senior management within 4242 have meaningful sums invested
in the profitability of their portfolios and consequently are fully aligned in writing a smaller
amount of business with sufficient forecast profit than diluting returns with risk which does not
meet our collective return criteria.
2024 YOA has again seen heightened loss activity all around the world. For the fifth
consecutive year, nat cat losses surpassed the $100bn mark. The year got off to a frightening
start when New Year’s Day gave rise to a magnitude 7.5 earthquake in Japan, shaking the
country’s west coast and generating insured losses of around $2.5bn. Hurricanes Helene and
Milton struck the US in September and October, respectively, and were the costliest disasters
of the year with insured losses of $16bn and $25bn. In Europe, extreme flooding in Spain near
the provincial capital of Valencia, the deadliest natural disaster Spain has seen in 50 years,
cost over 200 people their lives and more than $4bn in insured losses. Further flooding in
Europe, Brazil, and Dubai as well as Typhoon Yagi contributed further to the significant nat cat
impacts on insurance markets worldwide. On the non-natural catastrophe side major events
included the Baltimore Bridge Collapse, the Hellas Oil Refinery explosion in Greece, and the
Crowdstrike cyber event.
Markets have generally started to turn and the syndicate has noted a risk adjusted rate change
of 0% against a plan of 2.1%.
For the Syndicate, many of the events of 2024 produced only modest impacts, predominantly
driven by control of risk appetites. NCOR is currently 2.8pp above plan at 93.9% through a
combination of a 16% premium shortfall, the Baltimore Bridge Collapse, the Hellas Oil Refinery
explosion and re-evaluations of the performance of construction and motor segments within
the portfolio. As with prior years, the ability to hold the line on performance and withstand the
impacts of heightened claims and catastrophe activity in the marketplace helps to keep us the
right side of the line and deliver continuing positive returns.
Against this backdrop, 4242 is posting a total recognised result for the calendar year of a
$16.1m profit (2023: profit of $40.8m) with a net combined ratio of 96.5% (2023: 89.8%). The
2024 calendar year result aggregates the performance during the year of all open years of
account (2022, 2023 and 2024) as well as movements from prior closed years.
Once again, the commitment to the cause from the team of people that we have assembled to
manage the syndicate is remarkable and to be commended. We have continued to add talent
to support that which is already there and can see the pride taken in representing Beat. They
work tirelessly on your behalf and we thank them all, effusively, for their efforts.
This report highlights the challenges and achievements of the syndicate over the past three
years. Despite facing significant losses from major events like Hurricane Ian and the Ukrainian
War, the syndicate has shown resilience and adaptability. The team has worked hard to
develop a robust model, and while there have been some setbacks, there are also encouraging
signs of progress. The focus on strengthening the squad and addressing areas of
underperformance will be crucial as we move forward into the next season.
Andrew Cunningham
Active Underwriter
6 March 2025
4
Managing Agent's report
The Syndicate's Managing Agent is a company registered in England and Wales. The
Directors of the Managing Agent present their report for the year ended 31 December 2024.
The financial statements herein have been 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”).
Results
The result for calendar year 2024 is a profit of $16.1m (2023: profit of $40.8m).
The Syndicate presents its results under FRS102, the Financial Reporting Standard applicable
in the UK and Republic of Ireland. In accordance with FRS102, the Syndicate has identified its
insurance contracts and accounted for them in accordance with FRS103 Insurance Contracts.
Principal activity and review of the business
The Syndicate’s principal activity is the underwriting of direct insurance and reinsurance
business in the Lloyd’s market.
A further review is included in the Active Underwriter’s report on page 2.
The Syndicate's financial key performance indicators during the year were as follows:
2024
2023
Change
$'000
$'000
Gross written premiums
389,946
439,636
-11%
Profit for the financial year
16,089
40,795
-57%
Net Loss Ratio
53.3%
50.6%
2%
Net Combined Ratio
96.5%
89.8%
6%
*The loss ratio is the ratio of net claims incurred to net premiums earned in the calendar year.
The combined ratio is the ratio of net claims incurred and net operating expenses to net
premiums earned in the calendar year. Lower ratios represent better performance.
The performance of the Syndicate has been assessed by measuring, as a percentage of
underwriting capacity, the 36-month forecasted result on a funded accounting basis for an
individual underwriting year of account (“YOA”). The return on capacity for each underwriting
year is shown below.
Note that the 2022 underwriting year is now closed. As of 1 January 2025, the Syndicate has
successfully externally Reinsured-to-Close the 2022 and prior underwriting years to Syndicate
3500, managed by Riverstone Managing Agency Limited.
2024
2023
2022
YoA
YoA
YoA
Open
Open
Closed
Capacity ($'000)
300,000
325,000
281,250
Forecast ($'000)
20,954
26,308
20,035
Forecast result on capacity (%)
7.0%
8.1%
7.1%
5
Managing Agent’s report continued
Principal risks and uncertainties
The Syndicate sets risk appetite annually, which is approved by the Agency as part of the
Syndicate’s business planning and Solvency Capital Requirement (“SCR”) process. The
Agency Risk and Solvency Committee meets at least quarterly to oversee the risk
management framework. The Syndicate Board, a sub-committee of the Agency Board,
reviews the risk profile as reflected in the risk register, and monitors performance against risk
appetite using a series of key risk indicators. The principal risk and uncertainties facing the
Syndicate are as follows:
Insurance risk
Insurance risk includes the risks that a policy will be written for too low a premium or provide
inappropriate cover (underwriting risk), that the frequency or severity of insured events will be
higher than expected (claims risk), or that estimates of claims subsequently prove to be
insufficient (reserving risk). The Syndicate Board and Underwriting Committee manages
insurance risk through challenge and oversight of the approved business plan, which sets out
targets for volumes, pricing, line sizes and retention by class of business. The Syndicate
Board then monitors performance against the business plan and the aggregation of risk
through exposure management reporting through the year. The Syndicate Board considers
any proposed underwriting that impacts the Syndicate’s Environmental, Social and
Governance (“ESG”) profile to ensure consistency with the agreed ESG approach. Reserve
adequacy is monitored through quarterly review by the Asta Actuarial team and the Reserving
Committee.
Credit risk
The key aspect of credit risk is reinsurance counterparty risk which is the risk of default by one
or more of the Syndicate’s reinsurers and intermediaries. The Syndicate’s policy is to only use
approved reinsurers, supported by collateralisation where required. The Agency Reinsurance
Security Committee sets approval and usage criteria, monitors reinsurer ratings and is required
to approve and oversee the application of the reinsurer approval policy. The Syndicate may
also be exposed to broker credit risk, in particular where risk transfer arrangements are in
place. Aged debt reporting for premiums is reviewed in the Syndicate Board.
6
Managing Agent’s report continued
Market risk
Market risk exposure impacting the Syndicate relates to fluctuations in interest rates or
exchange rates and inflation. The Syndicate is exposed to foreign exchange movements as
a result of mismatches between the currencies in which assets and liabilities are denominated.
The Agency’s policy is to maintain received income or incurred expenditure in the core
currencies in which they were received or paid. Any surplus or deficit in a core currency would
be subject to review by the Syndicate Board.
Investments are monitored through Investment Managers with quarterly Investment
Committees that review the performance, duration and ESG ratings for the investments.
Liquidity risk
This is the risk that the Syndicate will not be able to meet its liabilities as they fall due, owing
to a shortfall in cash or can only meet obligations at excessive cost. To mitigate this risk the
Syndicate Board and Investment Committee reviews cash flow projections regularly and
ensures that, where needed, the Syndicate has liquidity facilities in place or has utilised the
option of a cash call from Capital providers.
The Syndicate had in place a trade loan with Barclays of $25 million. No funds were drawn on
the facility during the year. It has since expired on the 31 December 2024.
Operational risk
This is the risk that errors caused by people, processes, systems and external events lead to
losses to the Syndicate. The Agency seeks to manage this risk through a robust operational
risk and control framework including detailed procedure manuals and a thorough training
programme. This is underpinned by a structured programme of testing of processes and
systems by internal audit, who serve as an independent line of assurance, reporting directly to
the Chair of the Agency Audit Committee. Business continuity and disaster recovery plans
are in place and are regularly updated and tested.
Regulatory risk is the risk of loss owing to a breach of regulatory requirements or failure to
respond to regulatory change. The Agency is required to comply with the requirements of the
Financial Conduct Authority (FCA), Prudential Regulatory Authority (PRA) and Lloyd’s. Lloyd’s
requirements include those imposed on the Lloyd’s market by overseas regulators. The
Agency has a Compliance and Governance Director who manages a function that monitors
business activity and regulatory developments to assess any effects on both the Agency and
the Syndicate.
The Syndicate has no appetite for failing to adhere to the requirements of the FCA Consumer
Duty regulations and continues its focus on ensuring that it is treating customers fairly. The
Syndicate manages and monitors consumer duty risk through a suite of risk indicators and
reporting metrics as part of its documented consumer duty risk framework. The consumer duty
risk framework is consistently applied across all Asta syndicates and is overseen by the
Conduct Oversight Group (COG), which is an Agency Board Committee that includes a non-
executive director as a member who fulfils the role of Consumer Duty Champion.
7
Managing Agent’s report continued
Group and strategic risk
Group Risk is the risk of contagion that arises from being associated with key stakeholders
and the impact that activities and events that occur within other connected or third parties has
on the business.
Strategic risk covers the risks faced by the Syndicate due to changes in underlying strategy of
the business or that of its key stakeholders (including strategic conflicts of interest).
Going Concern
The Directors of the managing agent have prepared the annual accounts on a going concern
basis. In adopting the going concern basis, the Syndicate’s current and forecast solvency
and liquidity positions for the next 12 months and beyond has been reviewed. As part of the
consideration of the appropriateness of adopting the going concern basis, the Directors used
scenario analysis to assess the robustness of the Syndicate’s solvency and liquidity positions.
See note 1 for further information.
Future developments
The Syndicate will continue to transact the current classes of general direct insurance and
reinsurance business. If opportunities arise to write new classes of business, these will be
investigated at the appropriate time.
The capacity for the 2025 underwriting year is $275.0m (2024 underwriting year: $300.0m).
Environmental, Social and Governance (ESG) and sustainability
The Syndicate has documented a position with regard to ESG and sustainability, which is
submitted annually to Lloyd’s as part of business planning. The position has been developed
in alignment with Lloyd’s principles and expectations, broader regulatory requirements, and to
support the Syndicate’s strategic objectives. Lloyd’s published an updated version of its
“Insuring the Transition” Roadmap as well as its principles for doing business regarding
sustainability, and the Syndicate continues to ensure its approach aligns with those
expectations.
Following the Prudential Regulation Authority’s (PRA) Supervisory Statement in 2019 and
subsequent Dear CEO letter in 2020, Asta have built a climate change framework, applicable
to all syndicates, covering physical, transition and liability climate change risks, based on the
underlying business written by each syndicate. Asta’s managed syndicates accept climate
change risk where it is an inherent part of an insurance business model, providing it is
understood, managed, and controlled and/or compensated. There is no appetite for
uncontrolled, unmanaged exposure to the financial risks of climate change.
The framework ensures Board-level engagement and accountability with Lloyd’s and PRA’s
requirements and expectations, assigning clear responsibilities for managing the financial risks
associated with climate change. The Agency’s Chief Risk Officer, who is a Board member, is
responsible for the climate change framework, including identifying and managing financial
climate related risks.
Asta monitors regulatory guidance and expectations on managing the financial risks of climate
change.
8
Managing Agent’s report continued
Emerging risks
An emerging risk or opportunity is defined as “a developing issue, triggered externally, with
the potential to have a significant business impact but which may not be sufficiently understood
or accounted for”. The business impact in this case could represent a downside risk or an
upside opportunity. Emerging risks and opportunities include:
• Syndicate insurable risks, as areas of potential future losses or new product offerings;
• Those risks that may affect a syndicate’s ability to carry out normal business operations
and/or lead to unplanned significant costs/income;
• Both new risks and those which are re-emerging in a new context.
The Agency and Syndicate continue to monitor the impact of emerging risks on the Syndicate’s
business, taking into account their impacts on the strategic direction of the Syndicate.
Monitoring takes place in various forums, including the Asta Emerging Risks and Opportunities
Group (“EROG”) which meets quarterly and considers emerging risks and opportunities from
both an internal and external lens. Specific areas of focus over the external environment
across the year at Syndicate and Asta level include:
• The geopolitical landscape from a tension and broader political risk impact, including
any exposures stemming from regional conflicts (e.g. Russia – Ukraine conflict).
• The heightened inflationary environment and subsequent volatility surrounding inflation
risk. This has also been considered by the Syndicate within their annual business
planning process and reserve reviews.
Directors
Details of the Directors of the Managing Agent that were serving at the date of signing these
financial statements are provided on page 1. Changes to Directors from the last report were
as follows:
K A Green Resigned 30 September 2024
A F J Neden Appointed 1 January 2025
S Fisher Appointed 1 February 2025
9
Managing Agent’s report continued
Disclosure of information to the auditor
So far as each person who was a Director of the Managing Agent at the date of approving the
report is aware, there is no relevant audit information, being information needed by the
Syndicate auditor in connection with the auditor’s report, of which the auditor is unaware.
Having made enquiries of fellow Directors of the Agency and the Syndicate’s auditors, each
Director has taken all the steps that he or she ought to have taken as a Director to become
aware of any relevant audit information and to establish that the Syndicate’s auditor is aware
of that information.
Auditor
The Managing Agent intends to reappoint Ernst & Young LLP as the Syndicate’s auditor.
Syndicate Annual General Meeting
In accordance with the Syndicate Meetings (Amendment No 1) Byelaw (No 18 of 2000) the
Managing Agent does not propose holding an annual meeting this year; objections to this
proposal or the intention to reappoint the auditors for a further 12 months can be made by
Syndicate members within 21 days of this notice.
On behalf of the Board
C V Barley
Director
6 March 2025
10
Statement of Managing Agent’s responsibilities
The Managing Agent is responsible for preparing the financial statements 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 financial statements at 31 December each year
in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law) including FRS 102 the Financial Reporting
Standard applicable in the UK and Republic of Ireland. The financial statements 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 financial statements, the managing agent is required to:
• select suitable accounting policies and then apply them consistently subject to changes
arising on the adoption of new accounting standards in the year;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable Accounting Standards have been followed, subject to any
material departures disclosed and explained in the notes to the Syndicate accounts;
and
• prepare the Syndicate 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 Managing Agent is responsible for keeping adequate 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 the prevention and detection of fraud and other
irregularities.
The Managing Agent is responsible for the maintenance and integrity of the corporate and
financial information included on the business’ website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
The Managing Agent is responsible for the preparation and review the iXBRL tagging that has
been applied to the Syndicate Accounts in accordance with the instructions issued by Lloyd’s,
including designing, implementing and maintaining systems, processes and internal controls
to result in tagging that is free from material non-compliance with the instructions, whether due
to fraud or error.
11
Independent Auditor’s Report to the Members of Syndicate 4242
Opinion
We have audited the syndicate annual accounts of syndicate 4242 (‘the syndicate’) for the year ended
31 December 2024 which comprise the Income Statement, the Statement of Comprehensive Income,
the Statement of Members’ Balances, the Statement of Financial Position, the Statement of Cash Flows
and the related notes 1 to 24, including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable law including The Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, United Kingdom
Accounting Standards including FRS 102 “The Financial Reporting Standard applicable in the UK and
Republic of Ireland” and FRS 103 “Insurance Contracts” (United Kingdom Generally Accepted
Accounting Practice), and Section 1 of the Lloyd’s Syndicate Accounts Instructions V2.0 as modified by
the Frequently Asked Questions Version 1.1 issued by Lloyd’s (the Syndicate Accounts Instructions).
In our opinion, the syndicate annual accounts:
• give a true and fair view of the syndicate’s affairs as at 31 December 2024 and of its profit for the
year then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice; and
• have been prepared in accordance with the requirements of The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the Syndicate Accounts
Instructions.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)), The
Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, the
Syndicate Accounts Instructions, and other applicable law. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the syndicate annual accounts
section of our report. We are independent of the syndicate in accordance with the ethical requirements
that are relevant to our audit of the syndicate annual accounts in the UK, including the FRC’s Ethical
Standard as applied to other entities of public interest, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Conclusions relating to going concern
In auditing the 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.
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 12 months from when the syndicate annual accounts are
authorised for issue.
Our responsibilities and the responsibilities of the managing agent with respect to going concern are
described in the relevant sections of this report. However, because not all future events or conditions
can be predicted, this statement is not a guarantee as to the syndicate’s ability to continue as a going
concern.
12
Independent auditors’ report continued
Other information
The other information comprises the information included in the annual report, other than the syndicate
annual accounts and our auditor’s report thereon. The directors of the managing agent are responsible
for the other information contained within the annual report.
Our opinion on the syndicate annual accounts does not cover the other information and, except to the
extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the syndicate annual accounts or our knowledge obtained in
the course of the audit or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the syndicate annual accounts themselves. If, based on the work we
have performed, we conclude that there is a material misstatement of the other information, we are
required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by The Insurance Accounts Directive (Lloyd’s Syndicate
and Aggregate Accounts) Regulations 2008
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 financial year in which the syndicate
annual accounts are prepared is consistent with the syndicate annual accounts; and
• the managing agent’s report has been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the syndicate and its environment obtained in the
course of the audit, we have not identified material misstatements in the managing agent’s report.
We have nothing to report in respect of the following matters where The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 requires us to report to you, if in our
opinion:
• the managing agent in respect of the syndicate has not kept adequate accounting records; or
• the syndicate annual accounts are not in agreement with the accounting records; or
• certain disclosures of the managing agents’ emoluments specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
13
Independent auditors’ report continued
Responsibilities of the managing agent
As explained more fully in the Statement of Managing Agent’s Responsibilities on page 10, the
managing agent is responsible for the preparation of the syndicate annual accounts and for being
satisfied that they give a true and fair view, and for such internal control as the managing agent
determines is necessary to enable the preparation of the 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 in operation, disclosing, as applicable, matters related to its ability to
continue in operation and using the going concern basis of accounting unless the managing agent either
intends to cease to operate the syndicate, or has no realistic alternative but to do so.
Auditor’s 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 auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these syndicate annual accounts.
Explanation as to what extent the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. 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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed
below. However, the primary responsibility for the prevention and detection of fraud rests with both those
charged with governance of the managing agent and management.
Our approach was as follows:
• We obtained a general understanding of the legal and regulatory frameworks that are applicable to
the syndicate and determined that the most significant are direct laws and regulations related to
elements of Lloyd’s Byelaws and Regulations, and the financial reporting framework (UK GAAP),
and requirements referred to by Lloyd’s in the Syndicate Accounts instructions. Our considerations
of other laws and regulations that may have a material effect on the syndicate annual accounts
included permissions and supervisory requirements of Lloyd’s of London, the Prudential Regulation
Authority (‘PRA’) and the Financial Conduct Authority (‘FCA’).
• We obtained a general understanding of how the syndicate is complying with those frameworks by
making enquiries of management, internal audit, and those responsible for legal and compliance
matters of the syndicate. In assessing the effectiveness of the control environment, we also
reviewed significant correspondence between the syndicate, Lloyd’s of London and other UK
regulatory bodies; reviewed minutes of the Board and Risk Committee of the managing agent; and
gained an understanding of the managing agent’s approach to governance. We also performed
procedures to understand the culture of compliance and governance including the obtainment and
review of the code of conduct, employee handbook and whistleblowing policy. Furthermore in order
to assess the internal views of risks and their likelihoods, we have reviewed the risk register and
risk event summary for the syndicate.
• For direct laws and regulations, we considered the extent of compliance with those laws and
regulations as part of our procedures on the related syndicate annual accounts’ items.
14
Independent auditors’ report continued
• For both direct and other laws and regulations, our procedures involved: making enquiries of the
directors of the managing agent and senior management for their awareness of any non-
compliance of laws or regulations, enquiring about the policies that have been established to
prevent non-compliance with laws and regulations by officers and employees, enquiring about the
managing agent’s methods of enforcing and monitoring compliance with such policies, and
inspecting significant correspondence with Lloyd’s, the FCA and the PRA.
• The syndicate operates in the insurance industry which is a highly regulated environment. As such
the Senior Statutory Auditor considered the experience and expertise of the engagement team to
ensure that the team had the appropriate competence and capabilities, which included the use of
specialists where appropriate.
• We assessed the susceptibility of the syndicate’s annual accounts to material misstatement,
including how fraud might occur by considering the controls that the managing agent has
established to address risks identified by the managing agent, or that otherwise seek to prevent,
deter or detect fraud. We also considered areas of significant judgement, complex transactions,
performance targets, economic or external pressures and the impact these have on the control
environment. Where this risk was considered to be higher, on the valuation of net IBNR reserves
and estimated premium income we performed audit procedures to address each identified fraud
risk.These procedures included testing manual journals and were designed to provide reasonable
assurance that the syndicate annual accounts were free from fraud or error.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Other matter
Our opinion on the syndicate annual accounts does not cover the iXBRL tagging included within these
syndicate annual accounts, and we do not express any form of assurance conclusion thereon.
Use of our report
This report is made solely to the syndicate’s members, as a body, in accordance with The Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008. Our audit work has
been undertaken so that we might state to the syndicate’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than the syndicate and the syndicate’s members
as a body, for our audit work, for this report, or for the opinions we have formed.
Robert Bruce (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
6 March 2025
15
Statement of profit or loss and other comprehensive income
Technical account – general business
For the year ended 31 December 2024
Notes | 2024 $’000 | 2023 $’000 |
Gross premiums written 4 | ||
Outward reinsurance premiums | ( | ( |
| Premiums written, net of reinsurance | ||
| Changes in unearned premium | ||
Change in the gross provision for unearned premiums | ( | |
Change in the provision for unearned premiums reinsurers’ share | ||
| Net change in provisions for unearned premiums 5 | ||
Earned premiums, net of reinsurance | ||
Allocated investment return transferred from the non-technical account | ||
Other technical income, net of reinsurance | ||
Claims paid | ||
Gross amount | ( | ( |
| Reinsurers’ share | ||
Net claims paid | ( | ( |
Changes in the provision for claims | ||
Gross amount | ( | ( |
| Reinsurers’ share | ( | |
| Net change in provisions for claims 5 | ( | ( |
Claims incurred, net of reinsurance | ( | ( |
Net operating expenses 6 | ( | ( |
| Balance on the technical account – general business |
All the amounts above are in respect of continuing operations.
The notes on pages 21 to 49 form part of these financial statements.
16
Statement of profit or loss and other comprehensive income continued
Non-technical account – general business
For the year ended 31 December 2024
Notes | 2024 $’000 | 2023 $’000 |
| Balance on the technical account – general business | ||
Investment income | ||
Realised gains on investments | ||
Unrealised gains/(losses) on investments | ( | |
Investment expenses and charges | ( | ( |
Total investment return | ||
Allocated investment return transferred to the general business technical account | ( | ( |
Gain/(loss) on foreign exchange | ( | |
Profit for the financial year |
There were no recognised gains and losses in the year other than those reported in the
statement of profit or loss, and hence no statement of other comprehensive income has been
presented.
All the amounts above are in respect of continuing operations.
The notes on pages 21 to 49 form part of these financial statements.
17
Statement of financial position
As at 31 December 2024
Notes
2024
$’000
2023
$’000
Assets
Investments
Financial investments
Deposits with ceding undertakings
Reinsurers' share of technical provisions
Provision for unearned premiums
5
Claims outstanding
5
Debtors
Debtors arising out of direct insurance operations
Debtors arising out of reinsurance operations
Other debtors
Other assets
Cash at bank and in hand
Other
Prepayments and accrued income
Deferred acquisition costs
5
Other prepayments and accrued income
Total assets
The notes on pages 21 to 49 form part of these financial statements.
18
Statement of financial position continued
As at 31 December 2024
Notes | 2024 $’000 | 2023 $’000 |
| Members’ balance and liabilities | ||
Capital and reserves | ||
| Members’ balances | ||
| Technical provisions | ||
| Provision for unearned premiums 5 | ||
Claims outstanding 5 | ||
| Creditors | ||
| Creditors arising out of direct insurance operations | ||
Creditors arising out of reinsurance operations | ||
| Reinsurers’ share of deferred acquisition costs 5 | ||
Amounts owed to credit institutions | ||
Other creditors including taxation and social security | ||
Accruals and deferred income | ||
Total liabilities | ||
| Total liabilities, capital and reserves |
The notes on pages 21 to 49 form part of these financial statements.
The financial statements on pages 15 to 18 were approved by Board of Directors on 25
February 2025 and were signed on its behalf by:
R P Barke
Director
6 March 2025
19
Statement of changes in Members' balances
For the year ended 31 December 2024
| 2024 $’000 | 2023 $’000 | |
| Members’ balances brought forward at 1 January | ||
Total comprehensive income for the year | ||
| Payments of profit to members’ personal reserve funds | ( | ( |
Losses collected on closure of underwriting year | ||
Cash calls on open underwriting years | ||
Members agent fees | ( | ( |
Net movement on funds in syndicate | ||
Other | ( | ( |
| Members’ balances carried forward at 31 December |
20
Statement of cash flows
For the year ended 31 December 2024
Notes
2024
2023
Cash flows from operating activities
$'000
$'000
Profit for the financial year
Adjustments
Increase in gross technical provisions
(Increase) in reinsurers’ share of technical provisions
(41,805 )
(28,559 )
(Increase)/decrease in debtors
(23,644 )
Decrease in creditors
(Increase)/decrease in deposits received from reinsurers
Movement in other assets/liabilities
(4,784 )
Foreign exchange
(3,243 )
Investment return
(11,310 )
(9,549 )
Net cash flows from operating activities
Cash flows from investing activities
Purchase of equity and debt instruments
(280,447 )
(613,513 )
Sale of equity and debt instruments
Investment income received
Net cash flows from investing activities
(102,910 )
Cash flows from financing activities
Distribution of profit
(13,272 )
(22,037 )
Collection of losses
Injection/(release) of Funds in Syndicate
Other
(1,825 )
(247 )
Net cash flows from financing activities
(15,097 )
(22,284 )
Net increase/(decrease) in cash and cash
equivalents
(66,709 )
Cash and cash equivalents at the beginning of
the year
Foreign exchange on cash and cash equivalents
Cash and cash equivalents at the end of the year
21
Notes to the financial statements
1. Basis of preparation
Statement of compliance
The financial statements have been prepared in accordance with The Insurance Accounts
Directive (Lloyd's Syndicate and Aggregate Accounts) Regulations 2008, applicable
Accounting Standards in the United Kingdom and the Republic of Ireland, including Financial
Reporting Standard 102 (FRS 102), Financial Reporting Standard 103 (FRS 103) in relation
to insurance contracts, and the Lloyd’s Syndicate Accounts Instructions Version 2.0 as
modified by the Frequently Asked Questions Version 1.0 issued by Lloyd’s.
The financial statements have been prepared on the historical cost basis, with the exception
of certain financial assets which are measured at fair value through the profit and loss account.
The financial statements are presented in USD, the functional currency of the Syndicate is
USD. All amounts have been rounded to the nearest thousand, unless otherwise indicated.
Going Concern
The Directors of the Managing Agent have assessed the Syndicate’s ability to continue as a
going concern. As part of this assessment, the Directors have considered cash forecasts, the
availability of financial resources, consistency of loss ratios, credit worthiness of reinsurers,
capital support for the existing underwriting years, business plans for future underwriting years
and availability of future capital support. Following this assessment, the Directors consider it
appropriate to adopt the going concern basis in preparing the annual report and financial
statements.
2. Critical accounting estimates and judgements
In preparing these financial statements, the Directors of the Managing Agent have made
judgements, estimates and assumptions that affect the application of the Syndicate’s
accounting policies and the reported amounts of assets, liabilities, income and expenses.
The following critical accounting estimates have been made in applying the Syndicate’s
accounting policies:
• Valuation of claims reserves
The measurement of the provision for claims outstanding involves judgements and
assumptions about the future that have a significant effect on the value recognised in
the financial statements.
The provision for claims outstanding comprises the estimated cost of settling all claims
incurred but unpaid at the balance sheet date, whether reported or not. This is a
judgemental and complex area due to the subjectivity inherent in estimating the impact
of claims events that have occurred but for which the eventual outcome remains
uncertain.
22
Critical accounting estimates and judgements continued
Case estimates are generally set by skilled claims technicians applying their experience and
knowledge to the circumstances of individual claims. Critical judgement is applied when
estimating the value of amounts that should be provided for claims that have been incurred at
the reporting date but have not yet been reported (IBNR) to the Syndicate. This is a source of
significant estimation uncertainty.
The ultimate cost of outstanding claims is estimated using a range of techniques including
actuarial and statistical projections, benchmarking, case by case review and judgement.
Statistical techniques assume that past claims development experience can be used as a
basis to project ultimate claims costs. Typical methods employed include, but are not limited
to, the chain ladder method and the Bornhuetter-Ferguson method, whilst plan and pricing loss
ratios are also considered.
The reserving process will disaggregate the insured risks into reserving classes – these are
collections of risks of a similar profile. Each reserving class will be assessed separately, and
corresponding claims development patterns will be selected as bases against which to forecast
expected claims. Judgement is used to assess the extent to which past trends may not apply
in the future. When selecting historic data to use for claims forecasting purposes, the suitability
and reliability of the dataset is considered.
A dataset that most closely resembles the expected risk profile of a given reserving class will
be selected. The benchmark data provided by Lloyd’s is generally used reserving development
patterns, but these can be substituted by or blended with additional data, providing that this
additional data has an established track record and is relevant.
Whilst the Directors consider that the claims reserves are fairly stated based on the information
currently available to them, the ultimate liability will vary as a result of subsequent information
and events.
Sensitivities relating to this critical judgement have been assessed in further detail in note 23.
• Estimated premium income (“EPI”)
For the majority of assumed (inwards) reinsurance policies, EPI is initially used as the
basis for reporting gross premiums written. EPI is a measure of expected premium
income over the life of a policy. These estimates, typically supplied by the cedent, are
judgemental and could result in misstatements of revenue recorded in the financial
statements.
• Pipeline premium
Pipeline premium relates to premium that has likely been written as at the report date,
but due to reporting delays through the distribution chain, the premium has not yet
been reported to the Syndicate. Reasons for the reporting delay typically revolve
around a natural lag in receiving the premium bordereaux from brokers or coverholders
– bordereaux are generally produced monthly or quarterly in arrears. Pipeline premium
is included within Gross Premiums Written on the statement of profit of loss.
23
Critical accounting estimates and judgements continued
There is significant uncertainty when estimating pipeline premium. Estimates are frequently
based upon information provided by the business producers, or sometimes a statistical
approach is adopted based on past experience. Given that pipeline premium relates to
hypothetical policies that have been bound just before the balance sheet date, the vast majority
of this premium is usually unearned.
3. Significant accounting policies
The following principal accounting policies have been applied consistently in dealing with items
which are considered material in relation to the Syndicate’s financial statements.
Gross premiums
Gross written premiums comprise the total premiums receivable for the whole period of cover
provided by the contracts entered into during the reporting period, regardless of whether these
are wholly due for payment in the reporting period, together with any adjustments arising in
the reporting period to such premiums receivable in respect of business written in prior
reporting periods. They are recognised on the date on which the policy commences. This is
applicable to both direct premium and assured (inwards reinsurance) premium. Gross written
premiums are stated gross of brokerage payable to intermediaries, and exclude taxes and
duties levied on the policyholder.
Estimated premium income in respect of facility contracts and long term policies, for example
binding authorities and lines slips, are deemed to be written in a manner that reflects the
expected profile of the underlying business which has been written.
Ceded reinsurance premiums
Reinsurance written premiums comprise the total premiums payable for the whole cover
provided by contracts entered into the period, including portfolio premiums payable, and are
recognised on the date on which the policy incepts. Premiums include any adjustments arising
in the accounting period in respect of reinsurance contracts incepting in prior accounting
periods. They are recognised on the date on which the policy commences.
Provisions for unearned premiums
Unearned premiums are those proportions of premiums written up to the reporting date that
relate to periods of risk after the reporting date. In respect of general insurance business,
written premiums are recognised as earned over the period of the policy on a time
apportionment basis having regard where appropriate, to the incidence of risk. The proportion
attributable to subsequent periods is deferred as a provision for unearned premiums.
Unearned reinsurance premiums are those proportions of ceded premiums written up to the
reporting date that relate to periods of risk after the reporting date. Ceded reinsurance
premiums are earned on the same basis as the inwards business being protected.
Claims incurred
Claims incurred comprise claims and claims handling expenses (both internal and external)
paid in the year and the movement in provision for outstanding claims and settlement
expenses processed in the year. The provision for claims comprises amounts set aside for
claims notified and claims incurred, but not yet reported (IBNR). The Syndicate does not
discount its liability for outstanding claims.
24
Significant accounting policies continued
The amount included in respect of IBNR is based on statistical techniques of estimation applied
by actuaries. These techniques generally involve projecting from past experience of the
development of claims over time to form a view of the likely ultimate claims to be experienced,
having regard to variations in the business accepted and the underlying terms and conditions.
The provision for claims also includes amounts in respect of internal and external claims
handling costs. For the most recent years, where a high degree of volatility arises from
projections, estimates may be based in part on output from rating and other models of the
business accepted and assessments of underwriting conditions. An element of IBNR can also
relate to specific large losses.
The reinsurers’ share of provisions for claims is based on calculated amounts of outstanding
claims and projections for IBNR, net of estimated irrecoverable amounts, having regard to the
reinsurance programme in place for the class of business and the claims experience for the
year. The Syndicate uses a number of statistical techniques to assist in making these
estimates where relevant.
Accordingly, the two most critical assumptions with regards to claims provisions are that the
past is a reasonable predictor of the likely level of claims development and that the rating and
other models used for current business are fair reflections of the likely level of ultimate claims
to be incurred.
The Directors consider that the provisions for gross claims and related reinsurance recoveries
are fairly stated on the basis of the information currently available to them. However, ultimate
liability will vary as a result of subsequent information and events and this may result in
significant adjustments to the amounts provided.
Adjustments to the amounts of claims provisions established in prior years are reflected in the
financial statements for the period in which the adjustments are made. The methods used,
and the estimates made, are reviewed regularly.
Unexpired risks
A provision for unexpired risks is made where claims and related expenses are likely to arise
after the end of the financial period in respect of contracts concluded before that date, are
expected to exceed the unearned premiums and premiums receivable under these contracts,
after the deduction of any acquisition costs deferred.
The provision for unexpired risks is calculated separately by reference to classes of business
which are managed together.
As at 31 December 2024, the Syndicate had a nil net unexpired risk provision, (2023: nil).
Reinsurance assets
The Syndicate cedes insurance risk in the normal course of business. Reinsurance assets
represent balances due from reinsurance companies. Amounts recoverable from reinsurers
are estimated in a manner consistent with the outstanding claims provision including IBNR or
settled claims associated with the reinsurer's policies and are in accordance with the related
reinsurance contract.
25
Significant accounting policies continued
Reinsurance assets are reviewed for impairment at each reporting date, or more frequently if
an indication of impairment arises during the reporting year. Impairment occurs when there is
objective evidence as a result of an event that occurred after initial recognition of the
reinsurance asset that the Syndicate may not receive all outstanding amounts due under the
terms of the contract and the event has a reliably measurable impact on the amounts that the
Syndicate will receive from the reinsurer. The impairment loss is recorded in the statement of
profit or loss.
Gains or losses on buying reinsurance are recognised in the statement of profit or loss
immediately at the date of purchase and are not amortised.
Ceded reinsurance arrangements do not relieve the Syndicate from its obligations to
policyholders.
Acquisition costs
Acquisition costs comprise costs arising from the conclusion of insurance contracts, such as
intermediary brokerage and commissions. It is not the Syndicate’s policy to reallocate a portion
of indirect costs, such as the advertising costs or the administrative expenses connected with
the processing of proposals and the issuing of policies, to acquisition costs.
The deferred acquisition cost asset represents the proportion of acquisition costs
corresponding to the proportion of gross premiums written that is unearned at the balance
sheet date. Deferred acquisition costs are amortised over the period in which the related
premiums are earned.
Foreign currencies
Transactions denominated in currencies other than the functional currency are initially
recorded in the functional currency at the exchange rate ruling at the date of the transactions.
Monetary assets and liabilities (which include all assets and liabilities arising from insurance
contracts including unearned premiums and deferred acquisition costs) denominated in foreign
currencies are retranslated into the functional currency at the exchange rate ruling on the
reporting date.
Foreign exchange differences are recorded in the non-technical account.
The following currency exchange rates have been used for principal foreign currency
transactions:
| 2024 | 2024 | 2024 | 2023 | 2023 | 2023 | |
Start of Period Rate | End of Period Rate | Average Rate | Start of Period Rate | End of Period Rate | Average Rate | |
GBP | ||||||
USD | ||||||
CAD | ||||||
EUR | ||||||
AUD | ||||||
JPY |
26
Significant accounting policies continued
Financial assets and liabilities
In applying FRS 102, the Syndicate has chosen to apply the recognition and measurement
provisions of IAS 39 Financial Instruments: Recognition and Measurement (as adopted for use
in the UK).
The accounting classification of financial assets and liabilities determines the way in which
they are measured and changes in those values are presented in the statement of profit or
loss and other comprehensive income. Financial assets and liabilities are classified on their
initial recognition.
The initial classification of a financial instrument shall take into account contractual terms
including those relating to future variations. Once the classification of a financial instrument is
determined at initial recognition, reassessment is only required subsequently when there has
been a modification of contractual terms that is relevant to an assessment of the classification.
Financial assets and financial liabilities are classified at initial recognition as either fair value
through profit and loss or designated at amortised cost. Investments in shares and other
variable yield securities, units in unit trusts, and debt and other fixed income securities are
designated as at fair value through profit or loss on initial recognition, as they are managed on
a fair value basis in accordance with the Syndicate’s investment strategy.
Deposits with credit institutions, debtors, and accrued interest are classified as loans and
receivables.
Financial instruments are recognised when the Syndicate becomes a party to the contractual
provisions of the instrument. Financial assets are derecognised if the Syndicate’s contractual
rights to the cash flows from the financial assets expire or if the Syndicate transfers the
financial asset to another party without retaining control of substantially all risks and rewards
of the asset. A financial liability is derecognised when its contractual obligations are
discharged, cancelled or expired.
Regular way purchases and sales of financial assets are recognised and derecognised, as
applicable, on the trade date, i.e., the date that the Syndicate commits itself to purchase or sell
the asset.
A financial asset or financial liability is measured initially at fair value plus, for a financial asset
or financial liability not at fair value through profit or loss, transaction costs that are directly
attributable to its acquisition or issue.
Financial assets at fair value through profit or loss are measured at fair value with fair value
changes recognised immediately in profit or loss. Net gains or net losses on financial assets
measured at fair value through profit or loss includes foreign exchange gains/losses arising on
their translation to the functional currency but excludes interest and dividend income.
A financial asset initially measured at the transaction price and subsequently measured as
amortised cost uses the effective interest method. The interest rate used is generally that as
stated in the loan agreement/bond (if applicable) or a standard market rate for a similar
product. The unwinding of the associated discount is subsequently recognised in the
statement of profit or loss.
27
Significant accounting policies continued
Loans and receivables and non-derivative financial liabilities are measured at amortised cost
using the effective interest method, except Syndicate Loans to the Central Fund which are
measured at fair value through profit or loss.
Objective evidence that financial assets are impaired includes observable data that comes to
the attention of the Syndicate about any significant financial difficulty of the issuer, or significant
changes in the technological, market, economic or legal environment in which the issuer
operates.
Impairment losses on available for sale financial assets are recognised by reclassifying the
losses accumulated in other comprehensive income to profit or loss. The net cumulative loss
that is reclassified from other comprehensive income to profit or loss is the difference between
the acquisition cost, net of any principal repayment, and the current fair value, less any
impairment loss recognised previously in profit or loss. If, in a subsequent period, the fair value
of an impaired available for sale debt security increases and the increase can be related
objectively to an event occurring after the impairment loss was recognised, the impairment
loss is reversed through profit or loss. Otherwise it is reversed through the statement of
comprehensive income.
Financial assets and financial liabilities are offset, and the net amount presented in the balance
sheet when, and only when, the Syndicate currently has a legal right to set off the amounts
and intends either to settle on a net basis or to realise the asset and settle the liability
simultaneously.
Investment return
Investment return comprises investment income and movements in unrealised gains and
losses on financial instruments at fair value through profit or loss, less investment management
expenses, interest expense, realised losses and impairment losses. Investment income
comprises interest income, dividends receivable and realised investment gains.
For the purpose of separately presenting investment income and unrealised gains and losses
for financial assets at fair value through profit or loss, interest income is calculated using the
effective interest method excluding transaction costs that are expensed when incurred. For
investments at fair value through profit or loss, realised gains and losses represent the
difference between the net proceeds on disposal and the purchase price.
Unrealised investment gains and losses represent the difference between the fair value at the
balance sheet date and the fair value at the previous balance sheet date, or purchase price if
acquired during the year. Movements in unrealised investment gains and losses comprise the
increase/decrease in the reporting period in the value of the investments held at the reporting
date and the reversal of unrealised investment gains and losses recognised in earlier reporting
periods in respect of investment disposals of the current period.
Investment return is initially recorded in the non-technical account. The return is transferred in
full to the general business technical account to reflect the investment return on funds
supporting underwriting business.
28
Significant accounting policies continued
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of three
months or less from the acquisition date that are subject to an insignificant risk of changes in
fair value and are used by the Syndicate in the management of its short-term commitments.
Cash and cash equivalents are carried at amortised cost in the statement of financial position.
Bank overdrafts that are repayable on demand and form an integral part of the Syndicate’s
cash management are included as a component of cash and cash equivalents for the purpose
of the statement of cash flows.
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 (currently at
20%) 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 other overseas tax payable by members on underwriting
results or investment earnings. Any payments on account made by the Syndicate during the
year have been included in the balance sheet under the heading ‘other debtors’.
Profit commission
Profit commission is charged by the managing agent at 5%. Such commission is recognised
when the year of account becomes profitable but does not become payable until after the
appropriate year of account closes normally at 36 months.
Deposits with ceding undertakings
Deposits with ceding undertakings are funds held by Lloyd’s Europe on behalf of the Syndicate
to settle Part VII claims. These funds are held at amortised cost in the balance sheet.
Operating expenses
Where expenses are incurred by the Managing Agent for the administration of managed
syndicates, these expenses are apportioned using various methods depending on the type of
expense. Expenses which are incurred jointly are apportioned between the Managing Agent
and the Syndicate depending on the amount of work performed, resources used, and volume
of business transacted.
Reinsurers’ commission and profit participation
Reinsurers’ commissions and profit participations, which include reinsurance profit
commission and overriding commission, are treated as a contribution to expenses.
29
Significant accounting policies continued
Debtors and creditors
Insurance debtors and creditors include amounts due to and from agents, brokers and
insurance contract holders. These are classified as debt instruments as they are non-derivative
financial assets with fixed or determinable payments that are not quoted on an active market.
Insurance debtors are measured at amortised cost less any provision for impairments.
Insurance creditors are stated at amortised cost. The Syndicate does not have any debtors
directly with policyholders, all transactions occur via an intermediary.
Where permitted under UK GAAP accounting standards, insurance creditors are netted off
against insurance debtors where the legally enforceable right to offset exists.
Reinsurance debtors and creditors include amounts due to and from reinsurers. These are
classified as debt instruments as they are non-derivative financial assets with fixed or
determinable payments that are not quoted on an active market. Reinsurance debtors are
measured at amortised cost less any provision for impairments. Reinsurance creditors are
stated at amortised cost. Reinsurance debtor principally relates to claims recoveries where the
underlying claim has been settled and the recovery is due. Reinsurance creditors are primarily
premiums payable for reinsurance contracts and are recognised as an expense when due.
Bad Debt
Bad debts are provided for only where specific information is available to suggest a debtor
may be unable or unwilling to settle its debt to the Syndicate. The provision is calculated on a
case-by-case basis.
Reinsurance-to-close (RITC)
The net reinsurance to close premium is determined based on estimated outstanding
liabilities and related claims settlement costs (including claims IBNR), net of estimated
collectible reinsurance recoveries, relating to the closed year of account and all previous
years of account reinsured therein. The estimate of claims outstanding is assessed on an
individual case basis and is based on the estimated ultimate cost of all claims notified but not
settled by the balance sheet date. It also includes the estimated cost of claims IBNR at the
balance sheet date. The reinsurer share is based on the amounts of outstanding claims and
projections for IBNR, net of estimated irrecoverable amounts, having regard to the
reinsurance programme in place. Statistical methods are used to assist in making these
estimates. The Directors consider that the estimates of gross claims and related reinsurance
recoveries are fairly stated based on the information currently available to them.
30
4. Analysis of underwriting result
An analysis of the underwriting result before investment return is presented in the table below:
2024
Gross
written
premium
Net
premium
earned
Gross
premiums
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
result
Direct
Accident & Health
3,481
730
957
(464)
(251)
(115)
127
Motor (Third party
liability)
1,284
5,535
6,967
(3,679)
(2,038)
(728)
522
Motor (Other
classes)
3,794
4,276
5,409
(3,161)
(1,784)
(529)
(65)
Marine
172
117
158
(84)
(41)
(20)
13
Aviation
1,071
1,120
2,000
(1,491)
(294)
(501)
(286)
Transport
2,184
1,849
2,331
(1,343)
(683)
(234)
71
Energy - Marine
8,873
2,358
3,946
(3,899)
(719)
(39)
(711)
Energy Non-Marine
17,911
11,186
20,680
(13,490)
(3,265)
(3,612)
313
Fire and other
damage to property
165,919
93,883
161,605
(53,424)
(49,607)
(45,619)
12,955
Third party liability
55,142
35,444
67,681
(40,560)
(12,621)
(14,162)
338
Pecuniary loss
39,540
14,235
19,385
(14,442)
(9,356)
(1,915)
(6,328)
Total Direct
299,371
170,733
291,119
(136,037)
(80,659)
(67,474)
6,949
Reinsurance
Acceptances
90,575
61,444
105,659
(63,217)
(19,705)
(21,631)
1,106
389,946
232,177
396,778
(199,254)
(100,364)
(89,105)
8,055
Credit and suretyship is included in the Pecuniary loss line.
31
Analysis of underwriting result continued
2023
Gross
written
premium
Net
premium
earned
Gross
premiums
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
result
Direct
Accident & Health
`
343
519
(1,833)
131
(222)
(1,405)
Motor (Third party
liability)
12,078
9,616
12,363
(7,522)
(3,735)
(1,469)
(363)
Motor (Other
classes)
5,960
4,668
6,016
(3,576)
(1,771)
(743)
(74)
Marine
34
22
32
(15)
(7)
(6)
4
Aviation
3,273
1,892
2,622
(1,391)
(513)
(475)
243
Transport
2,535
2,040
2,624
(1,511)
(807)
(302)
4
Energy - Marine
7,669
1,174
1,971
(905)
(398)
(521)
147
Energy Non-Marine
11,606
2,724
4,783
(445)
(987)
(2,869)
482
Fire and other
damage to property
168,943
82,102
127,139
(17,417)
(40,888)
(60,038)
8,796
Third party liability
78,347
41,614
77,050
(39,260)
(16,646)
(13,725)
7,419
Pecuniary loss
16,403
15,113
19,588
(13,962)
(5,106)
(2,874)
(2,354)
Total Direct
306,975
161,308
254,707
(87,837)
(70,727)
(83,244)
12,899
Reinsurance
Acceptances
132,661
105,353
153,745
(73,783)
(33,904)
(31,758)
14,300
439,639
266,661
408,452
(161,620)
(104,631)
(115,002)
27,199
Credit and suretyship is included in the Pecuniary loss line.
The gross premiums written for direct insurance by underwriting location is presented in the
table below:
2024
2023
$'000
$'000
United Kingdom
389,946
439,636
European Union Member States
0
0
US
0
0
Rest of the world
0
0
389,946
439,636
No gains or losses were recognised in profit or loss during the year on buying reinsurance
(2023: nil).
32
5. Technical provisions
Gross Provisions
Reinsurance
Assets
Net
2024
$'000
$'000
$'000
Claims Outstanding:
Balance at 1 January
406,165
(138,232)
267,933
Claims incurred during the year
66,216
(31,488)
34,728
Effect of movement in exchange rates
(3,552)
1,150
(2,402)
Balance at 31 December
468,829
(168,570)
300,259
Unearned premiums
Balance at 1 January
205,639
(78,528)
127,111
Change in unearned premiums
(6,832)
(12,043)
(18,875)
Effect of movement in exchange rates
(2,881)
576
(2,305)
Balance at 31 December
195,926
(89,995)
105,931
Deferred acquisition costs
Balance at 1 January
59,217
-
59,217
Change in deferred acquisition costs
(3,262)
-
(3,262)
Effect of movement in exchange rates
(835)
-
(835)
Balance at 31 December
55,120
-
55,120
Gross Provisions
Reinsurance
Assets
Net
2023
$'000
$'000
$'000
Claims Outstanding:
Balance at 1 January
368,995
(142,746)
226,249
Claims incurred during the year
36,073
4,741
40,814
Effect of movement in exchange rates
1,097
(227)
870
Balance at 31 December
406,165
(138,232)
267,933
Unearned premiums
Balance at 1 January
172,501
(45,455)
127,046
Change in unearned premiums
31,183
(32,860)
(1,677)
Effect of movement in exchange rates
1,955
(213)
1,742
Balance at 31 December
205,639
(78,528)
127,111
Deferred acquisition costs
Balance at 1 January
39,098
-
39,098
Change in deferred acquisition costs
8,400
-
8,400
Effect of movement in exchange rates
11,719
-
11,719
Balance at 31 December
59,217
-
59,217
33
6. Net operating expenses
2024
2023
$'000
$'000
Acquisition Costs
(112,080)
(124,582)
Change in deferred acquisition costs
(3,262)
8,400
Reinsurance commissions and profit participation
44,693
32,238
Administration expenses
(29,715)
(20,686)
Net operating expenses
(100,364)
(104,631)
Total commissions for direct insurance business for the year amounted to $88.6m (2023: $78.1m).
7. Auditor’s remuneration
2024
2023
$’000
$’000
Fees payable to the Syndicate’s auditor for the audit of these
financial statements
(429)
(387)
Other services pursuant to Regulations and Lloyd’s Byelaws
(89)
(80)
Fees payable to the Syndicate’s auditor and its associates in
respect of other services pursuant to legislation
(109)
(99)
Total
(627)
(566)
Auditors’ remuneration is included as part of administrative expenses in note 3.
8. Key management personnel compensation
The active underwriter received the following aggregate remuneration charged to the
Syndicate:
2024
2023
$’000
$’000
Emoluments
(609)
(417)
The aggregate emoluments of the Directors and staff of the Asta Group are charged to
companies of the Asta Group in accordance with the proportion of their time associated with
each company. Further disclosures regarding Directors’ emoluments are provided in the
financial statements of Asta Managing Agency Ltd.
No emoluments of the Directors of Asta Managing Agency Ltd were directly charged to the
Syndicate. No other compensation was payable to key management personnel.
34
9. Staff costs
2024
2023
$'000
$'000
Wages and salaries
(12,164)
(7,753)
Social security costs and other pension costs
-
-
(12,164)
(7,753)
Staff are employed by a service company, and their salary costs per the table above are
recharged to the Syndicate with a mark-up. Staff costs are included as part of the
administrative expenses in note 6 to the financial statements.
10. Investment return
2024
2023
$'000
$'000
Income from investments
- Fair value through profit or loss designated upon initial recognition
9,151
4,929
Income from investments
- Held at amortised cost
413
-
Gains on realisation of investments
- Fair value through profit or loss designated upon initial recognition
2,601
2,985
Total investment income
12,166
7,914
Losses on realisation of investments
- Fair value through profit or loss designated upon initial recognition
(77)
(48)
Investment management expenses
(127)
(146)
(204)
(194)
Unrealised gains on investments
- Fair value through profit or loss designated upon initial recognition
829
1,843
Unrealised losses on investments
- Fair value through profit or loss designated upon initial recognition
(1,480)
(14)
Total investment return
11,310
9,549
35
11. Financial Investments
The Syndicate classifies its financial instruments held at fair value in its balance sheet using
a fair value hierarchy based on the inputs used in the valuation techniques as follows:
• Level 1 – financial assets that are measured by reference to published quotes in an
active market. A financial instrument is regarded as quoted in an active market if quoted
prices are readily and regularly available from an exchange, dealer, broker, industry
group, pricing service or regulatory agency and those prices represent actual and
regularly occurring market transactions on an arm’s length basis.
• Level 2 – financial assets measured using a valuation technique based on assumptions
that are supported by prices from observable current market transactions. For
example, assets for which pricing is obtained via pricing services but where prices have
not been determined in an active market, financial assets with fair values based on
broker quotes, investments in private equity funds with fair values obtained via fund
managers and assets that are valued using the Syndicate’s own models whereby the
significant inputs into the assumptions are market observable.
• Level 3 – financial assets measured using a valuation technique (model) based on
assumptions that are neither supported by prices from observable current market
transactions in the same instrument nor are they based on available market data.
Therefore, unobservable inputs reflect the Syndicate's own assumptions about the
assumptions that market participants would use in pricing the asset or liability (including
assumptions about risk). These inputs are developed based on the best information
available, which might include the Syndicate’s own data.
The following table shows financial investments recorded at fair value analysed between the
three levels in the fair value hierarchy
Assets Held at Fair Value
Assets
Held at
Amortised
Cost
Level 1
Level 2
Level 3
Subtotal
Total
31 December 2024
$'000
$'000
$'000
$'000
$'000
$'000
Shares and other variable yield
securities and units in unit trusts
49,030
-
3,049
52,079
-
52,079
Debt securities and other fixed
income securities
94,412
61,933
-
158,345
103,019
259,364
Loans and Deposits with credit
institutions
20,000
-
-
20,000
-
20,000
Overseas Deposits
1,869
15,425
-
17,294
-
17,294
Total
165,311
77,358
3,049
245,718
103,019
348,737
36
Financial investments continued
Assets Held at Fair Value
Assets
Held at
Amortised
Cost
Level 1
Level 2
Level 3
Subtotal
Total
31 December 2023
$'000
$'000
$'000
$'000
$'000
$'000
Shares and other variable yield
securities and units in unit trusts
5,087
-
4,192
9,279
-
9,279
Debt securities and other fixed
income securities
45,174
117,434
-
162,608
-
162,608
Loans and Deposits with credit
institutions
-
-
-
-
-
-
Overseas Deposits
2,415
15,731
-
18,146
-
18,146
Total
52,676
133,165
4,192
190,033
-
190,033
The table below presents an analysis of financial investments by their measurement
classification:
2024
2023
$’000
$’000
Financial assets measured at fair value through profit or loss
245,718
190,033
Financial assets measured at fair value as available for sale
-
-
Financial assets measured at amortised cost
103,019
-
Total financial investments
348,737
190,033
The amount repayable at maturity on the investments valued at amortised cost is $109.2m
(2023: nil).
Information on the methods and assumptions used to determine fair values for each major
category of financial instrument measured at fair value is provided below.
Debt securities are generally valued using prices provided by external pricing vendors. Pricing
vendors will often determine prices by consolidating prices of recent trades for identical or
similar securities obtained from a panel of market makers into a composite price. The pricing
service may make adjustments for the elapsed time from a trade date to the valuation date to
take into account available market information. Lacking recently reported trades, pricing
vendors will use modelling techniques to determine a security price.
Some government and supranational securities are listed on recognised exchanges and are
generally classified as level 1 in the fair value hierarchy. Those that are not listed on a
recognised exchange are generally based on composite prices of recent trades in the same
instrument and are generally classified as level 2 in the fair value hierarchy.
Corporate bonds, including asset backed securities, that are not listed on a recognised
exchange or are traded in an established over the counter market are also mainly valued using
composite prices. Where prices are based on multiple quotes and those quotes are based on
actual recent transactions in the same instrument the securities are classified as level 2,
otherwise they are classified as level 3 in the fair value hierarchy.
At the reporting date Level 1 and Level 2 financial assets and liabilities were valued using
valuation techniques based on observable market data. All of the investments categorised as
Level 3 are fair valued based on the inputs to the valuation technique used
37
12. Debtors arising out of direct insurance operations
2024
2023
$’000
$’000
Due within one year
171,280
169,399
Due after one year
-
-
Total
171,280
169,399
13. Debtors arising out of reinsurance operations
2024
2023
$’000
$’000
Due within one year
17,108
27,843
Due after one year
71
11
Total
17,179
27,854
14. Other debtors
2024
2023
$’000
$’000
Due after one year
2,907
1,505
Total
2,907
1,505
15. Creditors arising out of direct insurance operations
2024
2023
$’000
$’000
Due within one year
398
3,084
Due after one year
-
4
Total
398
3,088
38
16. Creditors arising out of reinsurance operations
2024
2023
$’000
$’000
Due within one year
89,363
62,871
Due after one year
43,987
56,601
Total
133,350
119,472
17. Other creditors
2024
2023
$’000
$’000
Profit Commissions payable
6,753
10,678
Other liabilities
3,123
-
Total
9,876
10,678
18. Cash and cash equivalents
2024
2023
$’000
$’000
Cash at bank and in hand
13,500
126,294
Deposits with credit institutions
49,030
5,087
Shares and other variable yield securities and units in unit trusts
-
-
Bank overdrafts
-
-
Total cash and cash equivalents
62,530
131,381
Shares and other variable yield securities and units in unit trusts are investments in nature but
are treated as cash and cash equivalents for cash flow purposes, so therefore are included in
both Financial investments and Cash and cash equivalents.
Deposits with credit institutions with maturities of three months or less that are used by the
Syndicate in the management of its short-term commitments are included in cash and cash
equivalents.
Of the total cash and cash equivalents, the following amount was held in regulated bank
accounts in overseas jurisdictions:
2024
2023
$’000
$’000
Total cash and cash equivalents held in regulated accounts in overseas
jurisdictions
-
-
39
19. Related parties
The ultimate parent company of Asta Managing Agency Ltd is Tennessee Topco Limited.
Asta Capital Ltd, the parent of Asta Managing Agency Ltd, is owned by the Davies Group but
maintains a level of independence by virtue of separate boards and a separate governance
structure. Other entities within the wider Davies Group provide insurance-related services to
the syndicates under Asta’s management. The provision of these services is managed by a
separate management team distinct from Asta, and these services are provided at an arm’s
length basis.
Asta provides services and support to Syndicate 4242 in its capacity as Managing Agent.
During the year, Managing Agency Fees of $2.2m (2022: $1.8m) were charged to the
Syndicate.
Asta also charged $2.6m (2022: $2.4m) of service fees in the year and as at 31 December
2023 an amount of $0.5m (2022: $1.6m) was owed to Asta in respect of this service. Agency
staff are employed and paid by a service company, Asta Management Services Limited.
From time to time, syndicates managed by Asta enter into (re)insurance contracts with one
another. All such transactions are subject to Asta’s internal controls which ensure that all are
compliant with Lloyd’s Related Party Byelaw provisions. All transactions are entered into on
normal market conditions.
This table below details amounts expensed to Asta.
2024
2023
$'000
$'000
Managing Agent fees on insurance capacity
(2,108)
(2,241)
Service fees
(2,763)
(2,620)
Recharges (expenses)
(15)
(234)
Profit commissions
(1,076)
-
(5,962)
(5,095)
There are certain individuals that are part of Beat Capital Partners Limited, which provide
administration and underwriting services to the Syndicate, who participate on the Syndicate
as a capital provider. The following table shows their participation as a proportion of the overall
capital providers. None of the individuals are in the Managing Agency's governance structure.
2017
2020
2021
2022
2023
2024
Beat Individuals
-
6.11%
6.53%
1.49%
1.49%
1.61%
40
20. Disclosure of interests
During 2024 Asta was the Managing Agent for the following syndicates on behalf of third-party
capital providers:
• Syndicates 1322, 1609, 1699, 1892, 1985, 1988, 2525, 2689, 2786, 3123, 4242 and
4747,
• Special Purpose Arrangement 1416,
• Syndicates-in-a-Box 1796, 1902, 1922, 1966, 2427, 2880, 3456 and 5183.
During 2024, Asta took on management of the following syndicates:
• Syndicate 1922 on 1 January 2024
• Syndicate 1966 on 13 June 2024
• Syndicate 2427 on 1 May 2024
• Syndicate 3123 on 1 July 2024.
On 1 January 2024, Asta reinsured to close Syndicate 2288 into Renaissance Re Syndicate
1458.
On 1 January 2025, Asta took on management of Syndicate 1618.
The agency also provides administrative services to syndicates and special purpose
arrangements, also undertaking several ancillary roles for other clients.
The Financial Statements of the Managing Agency can be obtained by application to the
Registered Office (see page 1).
21. Funds at Lloyd's
Every member is required to hold capital at Lloyd's which is held in trust and known as Funds
at Lloyd's (“FAL”). These funds are intended primarily to cover circumstances where Syndicate
assets prove insufficient to meet participating members' underwriting liabilities. The level of
FAL that Lloyd's requires a member to maintain is determined by Lloyd's based on PRA
requirements and resource criteria. FAL has regard to a number of factors including the nature
and amount of risk to be underwritten by the member and the assessment of the reserving risk
in respect of business that has been underwritten. Since FAL is not under the management of
the managing agent, no amount has been shown in these financial statements by way of such
capital resources. However, the managing agent is able to make a call on the members' FAL
to meet liquidity requirements or to settle losses.
22. Off-balance sheet items
The Syndicate has not been party to any arrangement, which is not reflected in its statement
of financial position, where material risks and benefits arise for the Syndicate. The Syndicate
as at 31 December 2024, had utilised $0m of the available $25m trade loan arrangement with
Barclays Bank PLC (Barclays). Nothing was drawn down during the year. This has expired as
at the year end.
41
23. Risk management
a) Governance framework
The Syndicate's risk and financial management framework aims to protect the Syndicate's
members capital from events that might otherwise prevent the Syndicate from meeting its
policyholder obligations, while maximising the returns to its members. The Directors recognise
the critical importance of having efficient and effective risk management systems in place.
Asta maintains a risk management function for the Syndicate with clear terms of reference
from the Syndicate Board, its committees and sub committees.
Asta supplements this with a clear organisational structure with documented delegated
authorities and responsibilities from the main Asta Managing Agency board to the Syndicate
who perform the underwriting activities. Lastly, the Syndicate policy framework sets its risk
management and control and business conduct standards for operations. Asta reviews and
monitors each policy to ensure compliance with the policy throughout the Syndicate.
The Syndicate Board approves the risk management policies and meets regularly to approve
any commercial, regulatory and organisational requirements of such policies. These policies
define the identification of risk and its interpretation to ensure the appropriate quality and
diversification of assets, align underwriting and reinsurance strategy to the Syndicate goals,
and specify reporting requirements. The Syndicate Board places significant emphasis on the
assessment and documentation of risks and controls, including the articulation of the
Syndicate's risk appetite.
b) Capital management objectives, policies and approach
Capital framework at Lloyd's
The Society of Lloyd's (Lloyd's) is a regulated undertaking and subject to the supervision of
the Prudential Regulatory Authority (PRA) under the Financial Services and Markets Act 2000.
Within the supervisory framework, Lloyd's applies capital requirements at member level and
centrally to ensure that Lloyd's complies with Solvency II capital requirements, and beyond
that to meet its own financial strength, licence and ratings objectives.
Although Lloyd's capital setting processes use a capital requirement set at Syndicate level as
a starting point, the requirement to meet Solvency II and Lloyd's capital requirements apply at
overall and member level only respectively, not at Syndicate level. Accordingly the capital
requirement in respect of the Syndicate is not disclosed in these financial statements.
Lloyd's capital setting process
In order to meet Lloyd's requirements, each Syndicate is required to calculate its Solvency
Capital Requirement (SCR) for the prospective underwriting year. This amount must be
sufficient to cover a 1 in 200 year loss, reflecting uncertainty in the ultimate run-off of
underwriting liabilities (SCR 'to ultimate'). The Syndicate must also calculate its SCR at the
same confidence level but reflecting uncertainty over a one year time horizon (one year SCR)
for Lloyd's to use in meeting Solvency II requirements. The SCRs of each Syndicate are
subject to review by Lloyd's and approval by the Lloyd's Capital and Planning Group.
The SCRs of each Syndicate are subject to review by Lloyd's and approval by the Lloyd's
Capital and Planning Group.
42
Risk management continued
A Syndicate may be comprised of one or more underwriting members of Lloyd's. Each member
is liable for its own share of underwriting liabilities on the Syndicate on which it is participating
but not other members' shares. Accordingly, the capital requirement that Lloyd's sets for each
member operates on a similar basis. Each member's SCR shall thus be determined by the
sum of the member's share of the Syndicate SCR 'to ultimate'. Where a member participates
on more than one Syndicate, a credit for diversification is provided to reflect the spread of risk,
but consistent with determining an SCR which reflects the capital requirement to cover a 1 in
200 year loss 'to ultimate' for that member. Over and above this, Lloyd's applies a capital uplift
to the member's capital requirement, known as the Economic Capital Assessment (ECA). The
purpose of this uplift, which is a Lloyd's not a Solvency II requirement, is to meet Lloyd's
financial strength, licence and ratings objectives. The capital uplift applied for 2024 was 35%
of the member's SCR 'to ultimate'.
Provision of capital by members
Each member may provide capital to meet its ECA either by assets held in trust by Lloyd's
specifically for that member (funds at Lloyd's), held within and managed within a Syndicate
(funds in Syndicate) or as the member's share of the members' balances on each Syndicate
on which it participates. Accordingly, the ending members balances reported on the Statement
of Financial Position on page 18, represent resources available to meet members' and Lloyd's
capital requirements.
c) Insurance risk
The principal risk the Syndicate faces under insurance contracts is that the actual claims and
benefit payments or the timing thereof, differ from expectations. This is influenced by the
frequency of claims, severity of claims, actual benefits paid and subsequent development of
long-term claims. Therefore, the objective of the Syndicate is to ensure that sufficient reserves
are available to cover these liabilities.
The risk exposure is mitigated by diversification across a large portfolio of insurance contracts
and geographical areas. The variability of risks is also improved by careful selection and
implementation of underwriting strategy guidelines, as well as the use of reinsurance
arrangements.
The Syndicate purchases reinsurance as part of its risk mitigation programme. The Syndicate’s
reinsurance program is made up of a variety of proportional and non-proportional contracts on
both a losses occurring during and risks attaching during basis. Amounts recoverable from
reinsurers are estimated in a manner consistent with the outstanding claims provision and are
in accordance with the reinsurance contracts. The Syndicate's placement of reinsurance is
diversified such that it is neither dependent on a single reinsurer nor are the operations
substantially dependent upon any single reinsurance contract.
Sub committees of the Syndicate Board oversee the management of reserving risk. The use
of standardised and internal modelling techniques, as well as benchmarking and the review of
claims development are key in mitigating reserving risk. The purpose of these underwriting,
reinsurance and reserving strategies is to limit exposure to catastrophes or large losses based
on the Syndicate's risk appetite as decided by the Syndicate Board.
The Syndicate uses both its own and commercially available risk management software to
assess catastrophe exposure. However, there is always a risk that the assumptions and
techniques used in these models are unreliable or that claims arising from an un-modelled
event are greater than those arising from a modelled event.
43
Risk management continued
Key assumptions
The principal assumption underlying the liability estimates is that the future claims
development will follow a similar pattern to past claims development experience. This includes
assumptions in respect of average claim costs, claim handling costs, claim inflation factors
and claim numbers for each underwriting year. Additional qualitative judgements are used to
assess the extent to which past trends may not apply in the future, for example: once-off
occurrence; changes in market factors such as public attitude to claiming: economic
conditions: as well as internal factors such as portfolio mix, policy conditions and claims
handling procedures. Judgement is further used to assess the extent to which external factors
such as judicial decisions and government legislation affect the estimates.
Other key circumstances affecting the reliability of assumptions include variation in interest
rates, delays in settlement and changes in foreign currency rates.
Sensitivities
The claim liabilities are sensitive to the key assumptions that follow. It has not been possible
to quantify the sensitivity of certain assumptions, such as legislative changes, uncertainty in
the estimation process. The following analysis is performed for reasonably possible
movements in key assumptions with all other assumptions held constant, showing the impact
on net liabilities, profit and members' balances. The correlation of assumptions will have a
significant effect in determining the ultimate claims liabilities, but to demonstrate the impact
due to changes in assumptions, assumptions had to be changed on an individual basis. It
should be noted that movements in these assumptions are non-linear.
The method used for deriving sensitivity information and significant assumptions did not
change from the previous period.
Sensitivity
General insurance business sensitivities as at 31
December 2024
+5.0%
$’000
-5.0%
$’000
Claims outstanding – gross of reinsurance
(23,441)
23,441
Claims outstanding – net of reinsurance
(15,013)
15,013
Impact on members balance
(15,013)
15,013
Impact on profit (movement in year)
(15,013)
15,013
Sensitivity
General insurance business sensitivities as at 31
+5.0%
$’000
-5.0%
$’000
Claims outstanding – gross of reinsurance
(20,308)
20,308
Claims outstanding – net of reinsurance
(13,397)
13,397
Impact on members balance
(13,397)
13,397
Impact on profit (movement in year)
(13,397)
13,397
44
Risk management continued
Claims development
The tables below show the Syndicate's cumulative incurred claims development, including
both claims notified and IBNR for each underwriting year, together with the cumulative
payments to date on a gross and net of reinsurance basis at the balance sheet date.
The Syndicate has elected to translate estimated claims and claims payments at a consistent
rate of exchange as determined by the balance sheet date.
The uncertainty associated with the ultimate claims experience of an underwriting year is
greatest when the underwriting year is at an early stage of development and the margin for
future experience potentially being more adverse than assumed is at its highest. As claims
develop, and the ultimate cost of the claims becomes more certain, the relative level of margin
should decrease. Due, however, to the uncertainty inherent in the claims estimation process,
initial reserves may not always be in a surplus. This is particularly so for large catastrophe
claims where uncertainly is initially great.
Underwriting Year 2018 & Prior 2019 2020 2021 2022 2023 2024
Estimate of ultimate gross claims
At end of first underwriting year 365,646 52,369 205,340 112,716 87,786 91,171 96,921
One Year Later 675,057 213,888 277,550 185,131 174,276 173,271
Two Years Later 714,339 205,266 284,712 204,719 187,303
Three Years Later 726,212 188,099 274,920 208,419
Four Years Later 731,191 174,723 273,671
Five Years Later 710,179 175,948
Six Years Later 696,836
Seven Years Later 465,622
Eight Years Later 142,865
Nine Years Later 44,040
Ten Years Later
Less cumulative gross paid (684,743) (162,672) (237,378) (131,512) (83,384) (33,130) (5,487)
Gross claims reserves 6,858 13,276 36,293 76,907 103,919 140,141 91,434
Underwriting Year 2018 & Prior 2019 2020 2021 2022 2023 2024
Estimate of ultimate net claims
At end of first underwriting year 174,657 38,621 101,245 81,651 54,890 57,742 56,438
One Year Later 291,279 101,054 142,910 141,390 113,741 110,688
Two Years Later 289,754 100,165 167,408 162,854 124,710
Three Years Later 286,619 102,935 166,743 164,230
Four Years Later 293,158 102,488 167,554
Five Years Later 276,481 100,978
Six Years Later 273,392
Seven Years Later 176,779
Eight Years Later 79,376
Nine Years Later 35,935
Ten Years Later
Less cumulative gross paid (265,821) (97,912) (135,434) (108,046) (61,558) (22,363) (2,883)
Net claims reserves 3,857 3,066 32,120 56,184 63,152 88,325 53,555
45
Risk management continued
d) Financial risk
The focus of financial risk management for the Syndicate is ensuring that the proceeds from
its financial assets are sufficient to fund the obligations arising from its insurance contracts.
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss by failing
to discharge an obligation. The Syndicate has the following policies and procedures in place
to mitigate the exposure to credit risk:
• Reinsurance is placed with counterparties that have a good credit rating and
concentration of risk is avoided by following policy guidelines in respect of
counterparties' limits. If the counterparty is downgraded or does not have a good credit
rating, then collateral is sought to mitigate any risk. This is monitored by the Syndicate
Board.
The tables below show the maximum exposure to credit risk (including an analysis of financial
assets exposed 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 and the use of credit derivatives.
Neither
past due
or
impaired
Past due
Impaired
Total
2024
2024
2024
2024
$'000
$'000
$'000
$'000
Other financial investments
348,738
-
-
348,738
Reinsurers share of claims outstanding
168,570
-
-
168,570
Insurance debtors
144,771
26,509
-
171,280
Reinsurance debtors
11,557
-
-
11,557
Other Debtors
161,426
-
-
161,426
Cash and cash equivalents
13,500
-
-
13,500
Total
848,562
26,509
-
875,071
Neither
past due
or
impaired
Past due
Impaired
Total
2023
2023
2023
2023
$'000
$'000
$'000
$'000
Other financial investments
190,033
-
-
190,033
Reinsurers share of claims outstanding
138,232
-
-
138,232
Insurance debtors
169,399
-
-
169,399
Reinsurance debtors
20,486
-
-
20,486
Other Debtors
156,856
-
-
156,856
Cash and cash equivalents
126,294
-
-
126,294
Total
801,300
-
-
801,300
46
Risk management continued
The table below provides information regarding the credit risk exposure of the Syndicate at the
reporting date by classifying assets according to independent credit ratings of the
counterparties. AAA is the highest possible rating.
Credit Risk Ratings
2024
AAA
AA
A
BBB
BBB or
less
NR
Total
Shares and other variable
yield securities
0
3,049
49,030
-
-
-
52,079
Debt Securities
18,459
237,474
3,431
-
-
-
259,364
Loans with credit
institutions
-
-
20,000
-
-
-
20,000
Overseas Deposits
8,419
1,410
1,902
1,339
1,628
2,597
17,295
Deposits with ceding
undertakings
-
-
329
-
-
-
329
Reinsurers share of
claims outstanding
-
15,871
139,243
-
-
13,456
168,570
Reinsurance debtors
-
2,438
7,068
-
-
2,051
11,557
Cash and cash
equivalents
-
-
13,500
-
-
-
13,500
Total
26,878
260,242
234,503
1,339
1,628
18,104
522,694
2023
AAA
AA
A
BBB
BBB
or
less
NR
Total
Shares and other variable
yield securities
5,087
-
4,193
-
-
-
9,280
Debt Securities
130,385
27,796
4,427
-
-
-
162,608
Loans with credit
institutions
-
-
-
-
-
-
-
Overseas Deposits
9,162
1,114
1,479
1,263
1,802
3,326
18,146
Deposits with ceding
undertakings
-
-
226
-
-
-
226
Reinsurers share of claims
outstanding
-
13,015
114,183
-
-
11,034
138,232
Reinsurance debtors
-
4,321
12,529
-
-
3,636
20,486
Cash and cash
equivalents
-
-
126,294
-
-
-
126,294
Total
144,634
46,246
263,331
1,263
1,802
17,996
475,272
47
Risk management continued
Maximum credit exposure
It is the Syndicate's policy to maintain accurate and consistent risk ratings across its credit
portfolio. This enables management to focus on the applicable risks and the comparison of
credit exposures across all lines of business.
During the year, no credit exposure limits were exceeded.
Liquidity risk
Liquidity risk is the risk that the Syndicate may not have enough cash to pay insurance claims
and other liabilities. This risk is reduced by reviewing the Syndicate’s expected cash
obligations on a weekly basis and keeping adequate cash on deposit to meet those obligations.
Further, a Liquidity Committee meets monthly to review liquidity strength and forthcoming
liquidity needs on a monthly basis.
The table below summarises the maturity profile of the Syndicate's financial liabilities based
on remaining undiscounted contractual obligations, including interest payable and outstanding
claim liabilities based on the estimated timing of claim payments resulting from recognised
insurance liabilities. Repayments which are subject to notice are treated as if notice were to
be given immediately.
Carrying
amount
No
stated
maturity
0-1 Year
1-3 Years
3-5 Years
5 Years+
Total
2024
$'000
$'000
$'000
$'000
$'000
$'000
$'000
Claims outstandings
-
-
183,701
166,945
68,784
49,398
468,828
Creditors
-
-
93,867
49,756
-
-
143,623
Total
-
-
277,568
216,701
68,784
49,398
612,451
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument or
insurance contract will fluctuate because of changes in market prices. Market risk comprises
three types of risk: currency risk, interest rate risk and other price risk. Other price risk has
been assessed as negligible, given that the Syndicate does not invest in equities.
The objective of market risk management is to manage and control market risk exposures
within acceptable parameters, while optimising the return on risk.
a) Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates.
The Syndicate's functional currency is US Dollar and its exposure to foreign exchange risk
arises primarily with respect to transactions in Sterling, Euro, Canadian Dollar and Australian
Dollar. The Syndicate seeks to mitigate the risk by matching the estimated foreign currency
denominated liabilities with assets denominated in the same currency.
48
Risk management continued
The Syndicate matches its currency position, so it holds net assets across a number of
currencies. The Syndicate takes into consideration the underlying currency of the Syndicate's
required capital and invests its assets proportionately across these currencies so as to protect
the solvency of the Syndicate, against variation in foreign exchange rates.
The following table summarises the exposure of the financial assets and liabilities to foreign
currency exchange risk at the reporting date, as follows, with all numbers reported in converted
US Dollars:
2024
$'000
GBP
USD
EUR
CAD
Total
Investments
11,745
268,390
12,444
56,158
348,738
Reinsurers' share of technical provisions
18,946
221,458
6,494
11,668
258,565
Debtors
64,857
111,306
7,895
4,401
188,458
Other assets
2,906
7,856
2,738
-
13,500
Prepayments and accrued income
6,277
51,825
2,655
5,053
65,809
Total Assets
104,730
660,835
32,226
77,280
875,071
Technical provisions
(63,686)
(532,141)
(26,579)
(42,349)
(664,755)
Deposits received from reinsurers
-
-
-
-
-
Creditors
8,738
(129,354)
(4,074)
(9,058)
(133,748)
Accruals and deferred income
(9,108)
(33,242)
(96)
(248)
(42,694)
Total Liabilities
(64,056)
(694,738)
(30,748)
(51,654)
(841,197)
Total capital and reserve
40,674
(33,903)
1,478
25,626
33,875
2023
$'000
GBP
USD
EUR
CAD
Total
Investments
12,965
124,804
64
52,427
190,260
Reinsurers' share of technical provisions
15,268
187,413
2,701
11,379
216,761
Debtors
65,591
125,781
(235)
6,118
197,255
Other assets
18,150
150,490
10,558
8,338
187,536
Prepayments and accrued income
321
9,061
-
105
9,487
Total Assets
112,295
597,549
13,088
78,367
801,299
Technical provisions
(58,462)
(497,394)
(10,410)
(45,539)
(611,805)
Deposits received from reinsurers
-
-
-
-
Creditors
5,984
(128,519)
(1,747)
(8,957)
(133,239)
Accruals and deferred income
(3,573)
(17,984)
(253)
(1,664)
(23,474)
Total Liabilities
(56,051)
(643,897)
(12,410)
(56,160)
(768,518)
Total capital and reserve
56,244
(46,348)
678
22,207
32,781
49
Risk management continued
Sensitivity to changes
The table below gives an indication of the impact on profit of a percentage change in the
relative strength of the US Dollar against the value of Sterling, Euro, Canadian Dollar and
Australian Dollar simultaneously. The analysis is based on the information as at the reporting
date.
2024
2023
$'000
$'000
USD Weakens
10% against other currencies
6,778
7,913
20% against other currencies
13,556
15,829
USD Strengthens
10% against other currencies
(6,778)
(7,913)
20% against other currencies
(13,556)
(15,829)
b) Interest rate risk
Interest rate risk is the risk that the value or future cash flows of a financial instrument will
fluctuate in response to changes in market interest rates.
Floating rate instruments expose the Syndicate to cash flow interest risk, whereas fixed rate
instruments expose the Syndicate to fair value interest risk.
The analysis below is performed for reasonably possible movements in market interest rates
with all other variables held constant, showing the impact on the result before tax due to
changes in fair value of financial assets (whose fair values are recorded in the profit and loss
account) and members’ balances.
2024
2023
$’000
$’000
Interest rate risk
Impact of 50 basis points increase on result
(56)
(49)
Impact of 50 basis points decrease on result
56
49
Impact of 50 basis points increase on net assets
(56)
(49)
Impact of 50 basis points decrease on net assets
56
49
Insurance liabilities are not discounted and therefore are not exposed to interest rate risk.
24. Post balance sheet events
The Syndicate will distribute the 2022 underwriting year profits to members during 2025. The
Directors evaluated other events after the balance sheet date through to 6 March 2025, the
date the Syndicate issued these annual accounts. As of 1 January 2025 the Syndicate has
successfully externally Reinsured-to-close into Syndicate 3500, managed by Riverstone
Managing Agency Limited. These annual accounts reflect the RITC transaction.
