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Report & Financial Statements
Syndicate 4020
2024
Ark Syndicate Management Limited
Syndicate 4020
2
Contents
Directors and administration
2
Syndicate Information
3
Managing agent’s report
4
Statement of managing agent’s responsibilities
9
Independent auditors’ report to the member of Syndicate 4020
10
Income statement and Statement of comprehensive income
13
Statement of financial position
14
Statement of changes in member’s balances
16
Statement of cash flows
17
Notes to the financial statements
18
Ark Syndicate Management Limited
Syndicate 4020
2
Directors and administration
Managing agent
Directors
C Atkin
(Non-executive Chairman)
I Beaton
(Chief Executive)
N Brothers
M Burch
(Non-executive)
P Dawson
N Fox
P McIntosh
M Raven
M Rountree
(Non-executive)
N Smith
J Wardrop
(Non-executive)
J Welman
(Non-executive)
Company secretary
J Masson
Managing agent’s registered office
30 Fenchurch Avenue
London
EC3M 5AD
Managing agent’s company registration number
05887810
Ark Syndicate Management Limited
Syndicate 4020
3
Syndicate information
Active underwriters
N Fox
M Raven
Bankers
Lloyds TSB Bank plc
Citibank NA
Royal Bank of Canada
Investment managers
Conning Asset Management Limited
55 King William Street
London
EC4R 9AD
Independent auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
Ark Syndicate Management Limited
Syndicate 4020
4
Managing agent’s report
The directors of the managing agent present their annual report and audited accounts for the year to 31 December 2024 . (Prior period: year to 31 December 2023 )
Principal activity and review of the business
The principal activity of the Syndicate is the underwriting of direct and reinsurance business in the Lloyd’s market. The managing agent of the Syndicate is Ark Syndicate
Management Limited (“ASML”), a company incorporated in the UK. ASML also manages the affairs of Syndicate 3902. In 2024 Ark established KEN 3832 which
operates as an Additional Central Settlement Number (“ACSN”) within syndicate 4020, and houses the new A&H, Marine and Crisis Management teams. KEN 3832 is
not required to produce a stand-alone set of financial statements, and the KEN 3832 classes are included within the Syndicate 4020 statements. Gross written premium
income for the Year of Account (“YOA”) and calendar (“Cal”) year is set out below, along with a brief description of each class of business:
2024
2023
2022
2024
2023
YOA Estimate
YOA Estimate
YOA Estimate
Cal year
Cal year
£’000
£’000
£’000
£’000
£’000
Marine & Energy
131,780
88,949
82,585
135,628
93,284
Property
392,566
353,412
262,913
389,700
356,235
Casualty
15,559
11,263
7,576
17,474
12,069
Specialty
199,764
155,691
152,871
215,089
161,076
739,669
609,315
505,945
757,891
622,664
Line of business
Reserving class and description
Marine & Energy
Cargo & Specie: Cargo is made up of general cargo transit and storage as well as higher value and more complex risks such as satellites, heavy
lift, tows and project cargo. Specie includes fine art, metals, securities and vault risk written on an excess basis.
Marine & Energy
Marine & Energy Liabilities: Marine includes the reinsurance of the International Group of protection & indemnity (“P&I”) Clubs together with
insurance and reinsurance of legal and contractual related to the marine and energy industry segments.
Marine & Energy
Marine Hull & Liabilities: Insurance of low profile, smaller fleet business and specialised tonnage, with some vessel construction, marine property
and marine war.
Marine & Energy
Energy Upstream: Insurance of exploration and production property (on/offshore), control of well, removal of wreck, business interruption,
construction and renewable energy from a broad geographic spread.
Property
Property Reinsurance: Predominantly non-proportional, balanced between US and Rest of World (“ROW”) exposures.
Property
Property Direct & Facultative: Mostly low fire hazard occupancies, avoiding higher risk exposed classes such as mining, mineral processing and
other heavy industries.
Property
Property Programmes: US and Canadian binding authorities, avoiding highly competitive middle market/larger commercial property accounts.
Property
Global Property: US biased, worldwide portfolio with 80%/20% Excess/Primary split. Occupancies include power, industrial, municipal and real
estate.
Casualty
Casualty Reinsurance: Predominantly US Medical Malpractice, Professional Liability and some General Liability.
Casualty
Specialty Programmes: Professional liability includes architects and engineers, insurance professionals and real estate agents Errors &
Omissions (“E&O”), Allied Health, Cyber Liability and Miscellaneous E&O. Contingency and Crisis management were discontinued in 2016.
Specialty
Accident & Health: Includes exposure across war, key man, disability, travel and credit card personal accident on insurance and reinsurance.
Specialty
Specialty Reinsurance: Consists of Aviation and Specialty reinsurance, including crop and satellite.
Specialty
Terrorism & Political Risk: Terror is primarily pure Terrorism physical damage and business interruption, with a small amount of broad-form
political violence, including war on land. Political risk focus is contract frustration and confiscation / expropriation. War on land is also written.
Peak exposures are in emerging countries.
Specialty
Fine Art & Specie: Includes jewellers block, cash in transit, general specie and fine art written both primary and excess.
Specialty
Product Contamination & Defect – food, beverage and consumer good risks, writing on quota share, primary and excess basis. Mainly North
America and UK exposures. This class was discontinued in 2023.
Ark Syndicate Management Limited
Syndicate 4020
5
Managing agent’s report
Principal risks and uncertainties
ASML maintains a risk register within its risk management framework. Identified risk events are grouped into major risk categories according to the nature of the
potential threat they pose to the business. The risk management framework allows risks to be identified and controls to be put in place as necessary, either to prevent
the occurrence of the event or to mitigate its impact. The principal risks of the Syndicate are set out in note 2 of the accounts.
Seven year summary – closed years
2022
YOA
2021
YOA
2020
YOA
2019
YOA
2018
YOA
2017
YOA
2016
YOA
Syndicate allocated capacity (£m)
350.0
350.0
300.0
300.0
300.0
300.0
400.0
Number of Underwriting Members
1
1
1
1
1
1
2
Aggregate net premiums (£‘000)
340,470
248,507
203,124
154,238
151,718
171,020
218,742
Illustrative share of £10,000
%
%
%
%
%
%
%
Gross premium written (% of illustrative share)
117.9
90.1
87.8
65.3
63.3
66.7
66.5
Net premium written (% of illustrative share)
96.9
72.0
67.8
53.1
51.7
54.8
54.4
Profit / (Loss) (% of gross premium)
22.7
26.7
12.5
10.0
(7.3)
4.6
0.9
Profit / (Loss) (% of capacity)
26.7
24.1
11.0
6.5
(4.6)
3.1
0.6
Results for illustrative share of £10,000
£
£
£
£
£
£
£
Gross premiums written
11,785
9,011
8,778
6,530
6,332
6,667
6,650
Net premiums
9,688
7,195
6,777
5,311
5,170
5,484
5,435
RITC from an earlier year of account
6,894
7,344
10,081
8,999
8,835
9,389
7,496
Net claims
(5,162)
(4,433)
(5,488)
(3,423)
(4,849)
(4,842)
(4,635)
Reinsurance to close
(7,867)
(6,894)
(8,988)
(9,161)
(8,927)
(9,052)
(7,279)
Underwriting profit
3,553
3,212
2,382
1,726
229
979
1,017
Other syndicate operating expenses
(1,028)
(873)
(942)
(972)
(687)
(778)
(763)
Movement on foreign currency translation
(152)
(36)
126
(40)
45
75
(178)
Investment return
1,131
875
(71)
200
90
192
130
Illustrative personal expenses:
Managing agent’s fee
(75)
(75)
(75)
(75)
(75)
(75)
(77)
Profit commission (“PC”)
(668)
(616)
(262)
(129)
(16)
(16)
(6)
Other personal expenses
(88)
(76)
(63)
(56)
(61)
(67)
(66)
Profit / (Loss) after illustrative personal
expenses / PC
2,673
2,411
1,095
654
(475)
310
57
Underwriting performance
YOA:
The 2022 YOA has closed with a profit of £93.5m after all standard personal expenses, equivalent to a profit on stamp capacity of 26.7%. The claims experience for
the YOA has been good, with Hurricane Ian and Winter Storm Elliott the largest losses to impact the year. Investment return for the YOA was also better than plan,
boosted by increased interest rates.
The 2023 YOA is forecast at the 24 months to make a mid-point profit of £131.4m. The YOA has benefited from a low incidence of major natural catastrophe losses to
date. A forecast is not currently required for the 2024 YOA.
Ark Syndicate Management Limited
Syndicate 4020
6
Managing agent’s report
Underwriting performance (continued)
2024 YOA
2023 YOA
Capacity
£600.0m
£525.0m
Forecast results (% of capacity)
na
22.5% - 27.5%
Calendar year:
The profit for the 2024 calendar year is £124.1m (2023: £134.7m), which is better than plan. Premium growth has been strong, driven primarily by new A&H, marine
and crisis management classes and despite an active US wind season, underwriting returns are healthy. The premium growth and favourable claims environment have
led to strong inwards underwriting cashflow in the year while investment returns in the year have been boosted by elevated interest rates. The calendar year result
together with key performance indicators is shown below:
2024
2023
Profit for the financial year (£’000)
124,145
134,650
Claims ratio (%)
45.9%
39.8%
Expense ratio (%)
39.9%
40.1%
Combined ratio (%)
85.8%
79.9%
The claims ratio is the ratio of claims incurred net of reinsurance to earned premiums net of reinsurance. The expense ratio is the ratio of operating expenses and
acquisition costs (excluding foreign exchange movements) to earned premiums net of reinsurance. The claims ratio reflects the underwriting issues noted above, and
the expense ratio is broadly in line with plan. The combined ratio including all foreign exchange movements is 85.0% (2023: 80.9%).
Operating expenses
Operating expenses, as set out below, are in line with plan.
2024
2023
£’000
£’000
Acquisition costs – brokerage and commissions
123,531
105,476
Acquisition costs – other
7,846
6,693
Administrative expenses
64,436
44,718
Managing agency fee
4,256
3,675
Personal expenses
30,863
33,886
Operating expenses
230,932
194,448
Cash flow
There was a net cash flow decrease of £7.6m (2023: £4.5m) in the year arising from normal operating activities. Profit releases on open years of £36.2m (2023: £51.6m)
were made during the year. On 26 February 2025, the ASML board approved a profit release of £117.3m for the 2023 YOA.
Investment return
Syndicate funds are actively managed by third party investment managers. The Syndicate has a diversified portfolio in corporate debt, cash, property funds and
investment funds with an average duration that is appropriate compared to the expected liability duration. As set out below, the investment portfolio has performed well
in the 2024 calendar year.
2024
2023
Average funds available for investment in Syndicate 4020 and Syndicate 3902 (US$’000)
1,152,450
950,782
Investment return for the year before allocation to Syndicate 3902 (US$’000)
60,375
53,329
Annualised investment return (%)
5.2%
5.6%
Investment gains in the Syndicate totalled £42.1m, generated from average assets of £816.6m.
Ark Syndicate Management Limited
Syndicate 4020
7
Managing agent’s report
Financial position
The main components of the statement of financial position are technical provisions and investments and cash.
Technical provisions include a provision for outstanding claims of £636.2m (2023: £519.8m) and a provision for unearned premiums of £351.2m (2023: £284.6m). The
reinsurers’ share of technical provisions is £85.1m (2023: £76.3m) in respect of unearned premiums and £27.1m (2023: £15.8m) for outstanding claims. The provision
for outstanding claims is based on evaluations of reported claims and estimates for losses incurred but not reported (“IBNR”). As claims may not be settled for a number
of years after they are incurred, the setting of provisions involves a degree of judgement as to the ultimate exposure to losses. Investments and cash total £755.4m
(2023: £647.2m) the majority of which are actively managed by third party investment managers.
Auditors and Annual general meeting
As permitted under the Syndicate Meeting (Amendment No.1) Byelaw it is not proposed to hold a Syndicate Annual General Meeting. The member of the Syndicate
appointed PricewaterhouseCoopers LLP as auditors for the financial year ending 31 December 2024.
Disclosure of information to auditors
The directors of ASML who held office at the date of approval of this report confirm that, so far as they are each aware, there is no relevant audit information of which
the auditors of the Syndicate are unaware; and each director has taken all the steps that they ought to have taken as a director to make themselves aware of any
relevant audit information and to establish that the auditors of the Syndicate are aware of that information.
Directors
The directors of ASML served from 1 January 2024 to the date of this report, unless stated otherwise. Shareholdings in the ultimate parent company of ASML, Ark
Insurance Holdings Limited (“AIHL”) are stated as at 31 December 2024.
A1
Ordinary
shares
A2
Ordinary
shares
A3
Ordinary
shares
B1
Ordinary
shares
B3
Ordinary
shares
Z
Ordinary
shares
Z1
Ordinary
shares)
C1
Ordinary
shares
C2
Ordinary
shares
Name
No.
No.
No.
No.
No.
No.
No.
No.
No.
C Atkin
-
-
-
-
-
-
-
-
-
I Beaton
129,803
18,309
-
78,777
-
908,621
555,439
76,894
12,857
N Brothers
-
-
6,970
-
4,230
-
-
12,726
2,127
M Burch
-
-
-
-
-
-
-
-
-
P Dawson
-
-
24,729
-
15,008
-
-
35,632
5,957
N Fox
-
-
18,079
-
10,972
-
-
22,906
3,830
P McIntosh
-
-
21,046
-
12,773
-
-
15,271
2,553
M Raven
-
-
18,079
-
10.972
-
-
22,906
3,830
M Rountree
-
-
-
-
-
-
-
-
-
N Smith
-
-
19,577
-
11,881
-
-
35,632
5,957
J Wardrop
-
-
-
-
-
-
-
-
-
J Welman
-
-
-
-
-
-
-
-
-
Going concern
The directors of ASML have reviewed the business plan, liquidity and operational resilience of the company, including the risks associated with the ongoing conflict in
Ukraine and the recent wildfires in California. They have concluded that there are no material uncertainties that could cast significant doubt over the Syndicate’s
ability to continue as a going concern for at least a year from the date of approval of the Syndicate annual accounts. Management's assessment of going concern is
set out in note 1 on page 17.
Ark Syndicate Management Limited
Syndicate 4020
8
Managing agent’s report
Future developments
The capacity of the Syndicate for the 2025 YOA is £750.0m (2024 YOA: £600.0m). The capacity of Syndicate 3902 for the 2025 YOA is £250.0m (2024 YOA: £250.0m).
N Fox, Active Underwriter, 6 March 2025 M Raven, Active Underwriter, 6 March 2025
Ark Syndicate Management Limited
Syndicate 4020
9
Statement of managing agent’s responsibilities
The directors of the managing agent are responsible for preparing the Syndicate annual accounts in accordance with applicable law and regulations.
The Insurance Accounts Directive (Lloyds’s Syndicate and Aggregate Accounts) Regulations 2008 requires the directors of the managing agent to prepare their
Syndicate’s annual accounts for each financial year. Under that law they have elected to prepare the annual accounts in accordance with UK Accounting Standards
and applicable law (UK Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.
Under Insurance Accounts Directive (Lloyds’s Syndicate and Aggregate Accounts) Regulations 2008 the directors of the managing agent must not approve the annual
accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Syndicate and of the profit or loss of the Syndicate for that period. In
preparing these annual accounts, the directors of the managing agent are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the annual accounts;
• assess the syndicate’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
• use the going concern basis of accounting unless they either intend to cease trading, or have no realistic alternative but to do so.
The directors of the managing agent are responsible for the preparation and review of 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 issued by Lloyd’s, whether due to fraud or error.
The directors of the managing agent are responsible for keeping adequate accounting records that are sufficient to show and explain the Syndicate’s transactions and
disclose with reasonable accuracy at any time the financial position of the Syndicate and enable them to ensure that the Syndicate annual accounts comply with the
Insurance Accounts Directive (Lloyds’s Syndicate and Aggregate Accounts) Regulations 2008. They are responsible for such internal control as they determine is
necessary to enable the preparation of Syndicate annual accounts that are free from material misstatement, whether due to fraud or error, and have general responsibility
for taking such steps as are reasonably open to them to safeguard the assets of the Syndicate and to prevent and detect fraud and other irregularities.
The directors of the managing agent are responsible for the maintenance and integrity of the Syndicate and financial information included on the Syndicate’s website.
Legislation in the UK governing the preparation and dissemination of Syndicate annual accounts may differ from legislation in other jurisdictions.
On behalf of the board
Neil Smith
Director
6 March 2025
Ark Syndicate Management Limited
Syndicate 4020
10
Independent auditors’ report to the member of Syndicate 4020
Opinion
In our opinion, 4020’s syndicate annual accounts:
• give a true and fair view of the state of the syndicate’s affairs as at 31 December 2024 and of its profit and cash flows for the year then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards,
including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law); and
• have been prepared in accordance with the requirements of The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations
2008 and the requirements within the Lloyd’s Syndicate Accounts Instructions version 2.0 as modified by the Frequently Asked Questions issued by Lloyd’s
version 1.1 (“the Lloyd’s Syndicate Instructions”).
We have audited the syndicate annual accounts included within the Report and Financial Statements (the “Annual Report”), which comprise: the statement of financial
position as at 31 December 2024; the income statement, the statement of comprehensive income, the statement of cash flows and the statement of changes in member’s
balances for the year then ended; and the notes to the syndicate annual accounts which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”), The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate
Accounts) Regulations 2008, the Lloyd’s Syndicate Instructions and other applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’
responsibilities for the audit of the syndicate annual accounts section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the syndicate in accordance with the ethical requirements that are relevant to our audit of the syndicate annual accounts in the UK, which
includes the FRC’s Ethical Standard, as applicable to other entities of public interest, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.
Conclusions relating to going concern
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast
significant doubt on the syndicate’s ability to continue as a going concern for a period of at least twelve months from when the syndicate annual accounts are authorised
for issue.
In auditing the syndicate annual accounts, we have concluded that the Managing Agent’s use of the going concern basis of accounting in the preparation of the syndicate
annual accounts is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the syndicate's ability to continue as a going concern.
Our responsibilities and the responsibilities of the Managing Agent with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the syndicate annual accounts and our auditors’ report thereon. The Managing
Agent is responsible for the other information. Our opinion on the syndicate annual accounts does not cover the other information and, accordingly, we do not express
an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the syndicate annual accounts, our responsibility is to read the other information and, in doing so, consider whether the other information
is materially inconsistent with the syndicate annual accounts or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an
apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the syndicate
annual accounts or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Managing Agent’s Report (the “Managing Agent’s Report”), we also considered whether the disclosures required by The Insurance Accounts
Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 have been included.
Ark Syndicate Management Limited
Syndicate 4020
11
Independent auditors’ report to the member of Syndicate 4020
Based on our work undertaken in the course of the audit, The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 requires us
also to report certain opinions and matters as described below.
Managing Agent’s Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Managing Agent’s Report for the year ended 31 December 2024 is
consistent with the syndicate annual accounts and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the syndicate and its environment obtained in the course of the audit, we did not identify any material misstatements in
the Managing Agent’s Report.
Responsibilities for the syndicate annual accounts and the audit
Responsibilities of the Managing Agent for the syndicate annual accounts
As explained more fully in the Statement of Managing Agent’s Responsibilities, the Managing Agent is responsible for the preparation of the syndicate annual accounts
in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Managing Agent is also responsible for such internal control
as they determine is necessary to enable the preparation of syndicate annual accounts that are free from material misstatement, whether due to fraud or error.
In preparing the syndicate annual accounts, the Managing Agent is responsible for assessing the syndicate’s ability to continue as a going concern, disclosing as
applicable, matters related to going concern and using the going concern basis of accounting unless it is intended for the syndicate to cease operations, or it has no
realistic alternative but to do so.
Auditors’ responsibilities for the audit of the syndicate annual accounts
Our objectives are to obtain reasonable assurance about whether the syndicate annual accounts as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these syndicate annual accounts.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to
detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is
detailed below.
Based on our understanding of the syndicate and industry, we identified that the principal risks of non-compliance with laws and regulations related to breaches of
regulatory principles, such as those governed by the Prudential Regulation Authority and the Financial Conduct Authority, and those regulations set by the Council of
Lloyd’s, and we considered the extent to which non-compliance might have a material effect on the syndicate annual accounts. We also considered those laws and
regulations that have a direct impact on the syndicate annual accounts such as The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts)
Regulations 2008 and the Lloyd’s Syndicate Instructions . We evaluated management’s incentives and opportunities for fraudulent manipulation of the syndicate annual
accounts (including the risk of override of controls), and determined that the principal risks were related to the risk of fraud in revenue recognition, journal entries, and
the potential for management bias in significant accounting estimates, particularly in relation to incurred but not reported claims provisions included in technical provisions
and the estimation of gross written premiums. Audit. Audit procedures performed by the engagement team included:
• Discussions with senior management involved in the Risk and Compliance functions, including consideration of known or suspected instances of
noncompliance with laws and regulation and fraud;
• Assessment of any matters reported in the fraud suspicion log and the compliance issues and breach log and the results of management’s investigation of
such matters;
• Reading key correspondence with Lloyd’s, the Prudential Regulation Authority and the Financial Conduct Authority in relation to compliance with laws and
regulations;
• Reviewing relevant meeting minutes including those of the Board and Audit and Risk Assurance Committee;
• Testing journal entries identified in accordance with our fraud risk assessment.
Ark Syndicate Management Limited
Syndicate 4020
12
Independent auditors’ report to the member of Syndicate 4020
• Testing and challenging where appropriate the assumptions and judgements made by management in their significant accounting estimates, particularly in
relation to incurred but not reported provisions included in technical provision and the estimation of gross written premiums; and
• Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations
that are not closely related to events and transactions reflected in the syndicate annual accounts. Also, the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or
through collusion.
A further description of our responsibilities for the audit of the syndicate annual accounts is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the syndicate’s member in accordance with part 2 of The Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Under The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Managing Agent in respect of the syndicate; or
• certain disclosures of Managing Agent remuneration specified by law are not made; or
• the syndicate annual accounts are not in agreement with the accounting records.
We have no exceptions to report arising from this responsibility.
Other matter
We draw attention to the fact that this report may be included within a document to which iXBRL tagging has been applied. This auditors’ report provides no assurance
over whether the iXBRL tagging has been applied in accordance with section 2 of the Lloyd’s Syndicate Instructions version 2.0.
Sean Forster (Senior statutory auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
6 March 2025
Ark Syndicate Management Limited
Syndicate 4020
13
Income statement
For the year ended 31 December 2024
2024 | 2023 | ||
Notes | £’000 | £’000 | |
Technical account | |||
Earned premiums, net of reinsurance | |||
Gross premiums written | 3 | ||
Outward reinsurance premiums | ( | ( | |
Change in the provision for unearned premiums | |||
Gross amount | ( | ( | |
| Reinsurers’ share | |||
Earned premiums, net of reinsurance | |||
Allocated investment return transferred from the non-technical account | 4 | ||
Claims incurred, net of reinsurance | |||
Claims paid | |||
Gross amount | ( | ( | |
| Reinsurers’ share | |||
( | ( | ||
Change in the provision for claims | |||
Gross amount | ( | ||
| Reinsurers’ share | ( | ||
( | ( | ||
Claims incurred, net of reinsurance | ( | ( | |
| Operating expenses | 5 | ( | ( |
Balance on the technical account for general business | |||
| Non-technical account | |||
Investment return | |||
Allocated investment return transferred to technical account | ( | ( | |
Profit for the financial year |
Statement of comprehensive income
For the year ended 31 December 2024
2024
2023
Notes
£’000
£’000
Profit for the financial year
124,145
134,650
Foreign exchange translation differences
(5,003 )
Total comprehensive income for the year
13
All operations are continuing. The notes on pages 18 to 40 form part of these accounts.
Ark Syndicate Management Limited
Syndicate 4020
14
Statement of financial position
As at 31 December 2024
2024
2023
Notes
£’000
£’000
Assets
Financial Investments
Deposit with ceding undertakings
Investments
7
Provision for unearned premium
Claims outstanding
8
Reinsurers’ share of technical provisions
Debtors arising out of direct insurance operations
10
Debtors arising out of reinsurance operations
11
Other debtors
Debtors
Cash at bank and in hand
12
Deferred acquisition costs
9
Other prepayments and accrued income
Prepayments and accrued income
Total assets
Ark Syndicate Management Limited
Syndicate 4020
15
Statement of financial position (continued)
As at 31 December 2024
Notes | 2024 £’000 | 2023 £’000 | |
| Capital, reserves and liabilities | |||
Capital and reserves | |||
| Member’s balances attributable to underwriting participations | 14 | ||
Liabilities | |||
Provision for unearned premium | 13 | ||
Claims outstanding | 13 | ||
Technical provisions | |||
Creditors arising out of direct insurance operations | 15 | ||
| Creditors arising out of reinsurance operations | 16 | ||
Creditors | |||
Accruals and deferred income | |||
Total liabilities | |||
Total capital, reserves and liabilities |
Comparative has been presented in compliance with the Lloyd’s syndicate Accounts Instructions. Further details provided in notes 1 and 22.
The notes on pages 18 to 40 form part of these accounts. The accounts were approved by the Board of Ark Syndicate Management Limited on 26 February 2025
and signed on its behalf by
N Smith
Director
6 March 2025
Ark Syndicate Management Limited
Syndicate 4020
16
Statement of changes in member’s balances
For the year ended 31 December 2024
2024
2023
Notes
£’000
£’000
Members balances brought forward at 1 January
Total comprehensive income for the year
Payments of profit to members’ personal reserve funds
(69,827 )
(103,193 )
Other
(1 )
Members balances carried forward at 31 December
14
The notes on pages 18 to 39 form part of these accounts.
Ark Syndicate Management Limited
Syndicate 4020
17
Statement of cash flows
For the year ended 31 December 2024
Notes | 2024 £’000 | 2023 £’000 | |
Profit for the financial year | |||
Change in gross technical provisions | ( | ||
| Change in reinsurers’ share of gross technical provisions | ( | ||
Change in debtors arising out of insurance operations and other debtors | ( | ||
Change in creditors arising out of insurance operations | ( | ||
Change in deferred acquisition costs and other assets/ liabilities | ( | ||
Investment return | ( | ( | |
Foreign exchange | |||
Net cash flows from operating activities | |||
Purchase of equity and debt instruments | ( | ( | |
Sale of equity and debt instruments | |||
Investment income received | |||
Investment management fees | ( | ( | |
Net cash flows used in investing activities | ( | ( | |
Distribution (profit) / loss | ( | ( | |
Open year profit release | 14 | ( | ( |
Net cash flows used in financing activities | ( | ( | |
Net decrease in cash and cash equivalents | ( | ( | |
Cash and cash equivalents at 1 January | |||
Foreign exchange on cash and cash equivalents | ( | ( | |
Cash and cash equivalents at 31 December | 12 |
The notes on pages 18 to 40 form part of these accounts.
Ark Syndicate Management Limited
Syndicate 4020
18
Notes to the financial statements
1. Statement of accounting policies
The financial statements have been prepared in accordance with the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and
Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (“FRS 102”) as issued in August 2015, and Financial
Reporting Standard 103 Insurance Contracts (“FRS 103”) as issued in March 2015, as well as the Lloyd’s Syndicate Accounts Instructions Version 2.0 as modified by
the Frequently Asked Questions Version 1.1 issued by Lloyd’s.
Basis of preparation
The financial statements are prepared using the historical cost convention except that financial investments and derivative financial instruments are stated at their fair
value. All amounts presented are stated in Sterling, unless stated otherwise.
The financial statements have been prepared on a going concern basis. The directors of ASML have performed an assessment of the Syndicate’s ability to continue as
a going concern, including the impact of the ongoing Ukraine conflict and the recent wildfires in California. A going concern assessment has been undertaken, taking
into consideration availability of capital, liquidity and stress testing. The Syndicate is expected to remain a key underwriting platform for the Ark group. Ark Corporate
Member Limited (“ACML”) has already provided capital to support the 2025 YOA. On the basis of this and the improvement in performance as a result of rate increases,
ACML is also expected to have the ability and intention to form a 2026 underwriting year. The directors of ASML have therefore concluded that there are no material
uncertainties that could have cast significant doubt over the ability of the company to continue as a going concern for at least a year from the date of approval of the
financial statements.
During 2024, Lloyd’s introduced changes to the syndicate accounts process to rationalise and standardise financial reporting across the market. As a result, certain
comparative information has been restated to ensure consistency with current year presentation and compliance with the Lloyd’s Syndicate Accounts Instructions.
These changes comprise of reclassification and aggregation changes and are presented in further detail with note 22.
Use of judgements and estimates
In preparing these accounts, the directors of ASML 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. Actual results may differ from these estimates. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. The measurement of written premium inwards, and the provision for claims
outstanding are the two most critical estimates and both involve judgements and assumptions about the future that have a significant effect on the amounts recognised
in the financial statements. Refer to the Premiums written and earned section and note 13 (Technical provisions) for further details on these estimates.
Insurance contracts
Insurance contracts (including inwards reinsurance contracts) are defined as those containing significant insurance risk. Insurance risk is considered significant if, and
only if, an insured event could cause Ark to pay significant additional benefits in any scenario, excluding scenarios that lack commercial substance. Such contracts
remain insurance contracts until all rights and obligations are extinguished or expire.
Premiums written and earned
Gross premium written is initially based on estimated premium income (“EPI”) of each contract. EPI is based on information provided by the brokers, policyholders,
coverholders, past underwriting experience, and the contractual terms of the policy. Uncertainty arises because EPI could be different to the signed premium ultimately
received. This risk is mitigated by detailed reviews of EPI and signed premium and regular reviews that coverholder income is coming through as expected.
Gross premium written includes an estimation for reinstatement premium which is determined based on incurred losses held in the technical provisions. Reviews of the
reinstatement premiums held is carried out on a regular basis as part of the reserve review process.
Ark Syndicate Management Limited
Syndicate 4020
19
Notes to the financial statements
1. Statement of accounting policies (continued)
Written premiums are recognised as earned according to the risk profile of the policy. Unearned premiums represent the proportion of premiums written in the year
that relate to unexpired terms of policies in force at the statement of financial position date. The provision is calculated on a policy by policy basis.
Reinsurance premiums ceded
Outwards reinsurance premiums are accounted for in the same accounting year as the premiums for the direct or inwards business being reinsured.
Claims provisions and related recoveries
The provision for claims comprises amounts set aside for claims notified and IBNR. Claims incurred comprise claims and claims handling expenses paid in the year
and the movement in provision for outstanding claims and future claims handling expenses. Recoverable amounts arising out of subrogation and salvage together with
reinsurance recoveries are deducted from the cost of gross claims.
Outstanding claims consist of amounts set aside for notified claims and a provision for IBNR claims. The amount included in respect of IBNR is arrived at by considering
the actuarially calculated provision, using techniques that generally involve statistical techniques of estimation applied by ASML’s actuaries and reviewed by external
consulting actuaries, as well as the opinion of the class underwriters and executive management. The actuarial 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 for more recent underwriting having regard to variations
in the business accepted and the underlying terms and conditions. Large claims are generally assessed individually, being calculated on a case by case basis or
projected separately to allow for the possible distortive effects of the developments of these claims on the balance of the data. The provision for claims also includes
amounts in respect of internal and external claims handling costs.
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, the claims experience for the year and the current security rating of the reinsurance
companies involved. The Syndicate uses a number of statistical techniques to assist in making these estimates.
Accordingly the two most critical assumptions as regards 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. 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 amount of claims provisions established
in prior years are reflected in the financial statements for the year in which the adjustments are made. The methods used, and the estimates made, are reviewed
regularly.
Acquisition costs
Acquisition costs, comprising brokerage and taxes and duties levied on them are deferred to the extent that they are attributable to premiums unearned at the statement
of financial position date.
Foreign currency translation
a) Functional and presentation currency
Items included in the financial statements are measured using the US dollar, the currency of the primary economic environment in which the Syndicate operates
(“functional currency”). The financial statements are presented in Sterling, being the presentation currency of the Syndicate. Differences arising from the translation
from the functional to presentation currency are presented in the statement of other comprehensive income.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using average exchange rates applicable to the period in which the transactions take place
and where the company considers these to be a reasonable approximation of the transaction rate. Foreign exchange gains and losses resulting from the settlement
of such transactions and from translation at the period end of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of profit
or loss. Non-monetary items recorded at historical cost in foreign currencies are translated using the exchange rate on the date of the initial transaction. For the
purposes of foreign currency translation, unearned premiums and deferred acquisition costs are treated as if they are monetary items.
Ark Syndicate Management Limited
Syndicate 4020
20
Notes to the financial statements
1. Statement of accounting policies (continued)
Investments
Investments are recognised in the statement of financial position at such time as the Syndicate becomes a party to the contractual provisions of the investment.
Purchases and sales of investments are recognised on the trade date, which is the date the Syndicate commits to purchase or sell the asset. An investment is
derecognised when the contractual rights to receive cash flows from the investments expire, or where the investments have been transferred, together with substantially
all the risks and rewards of ownership. Financial liabilities are derecognised if the obligations specified in the contract expire, are discharged or cancelled.
On acquisition of an investment, the Syndicate is required to classify the asset into one of the following categories: investments at fair value through the statement of
profit or loss, loans and receivables, assets held to maturity and assets available for sale. The Syndicate has classified its investments as investments at fair value
through profit or loss because they are managed and their performance is evaluated on a fair value basis. Information about these investments is provided internally
on a fair value basis to management, and the investment strategy is to invest and evaluate their performance with reference to their fair values.
Fair value is the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date.
When available, the fair value of an instrument is measured using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices
are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis. If a market for a financial instrument is
not active, the fair value is established using a valuation technique.
Valuation techniques include using recent orderly transactions between market participants (if available), reference to the current fair value of other instruments that
are substantially the same, discounted cash flow analyses and option pricing models. The chosen valuation technique makes maximum use of market inputs, relies as
little as possible on specific estimates, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic
methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors
inherent in the financial instrument.
Where possible, valuation techniques are calibrated and tested for validity using prices from observable current market transactions in the same instrument or based
on other available observable market data.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e. the fair value of the consideration given or received, unless
the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument (i.e. without modification or
repackaging) or based on a valuation technique whose variables include only data from observable markets. When transaction price provides the best evidence of fair
value at initial recognition, the financial instrument is initially measured at the transaction price and any difference between this price and the value initially obtained
from a valuation model is subsequently recognised in profit or loss depending on the individual facts and circumstances of the transaction but not later than when the
valuation is supported wholly by observable market data or the transaction is closed out.
Upon initial recognition, attributable transaction costs relating to financial instruments at fair value through profit or loss are recognised in the statement of profit or loss
when incurred. Investments at fair value through profit or loss are continually measured at fair value, and changes therein are recognised in the statement of profit or
loss. Net changes in the fair value of investments at fair value through profit or loss exclude interest and dividend income, as these items are accounted for separately
as set out below.
Debtors and creditors arising out of insurance operations
Debtors and creditors arising out of insurance operations are recognised when due. These include amounts due to and from agents, brokers and insurance contract
holders. Debtors arising out of insurance operations are classified as ‘loans and receivables’ as they are non-derivative investments with fixed or determinable payments
that are not quoted on an active market. Debtors arising out of insurance operations are measured at amortised cost less any impairment losses. Insurance payables
are stated at amortised cost.
Other receivables
Other receivables are carried at amortised cost less any impairment losses.
Ark Syndicate Management Limited
Syndicate 4020
21
Notes to the financial statements
1. Statement of accounting policies (continued)
Investment return
Investment return consists of dividends, interest, realised and unrealised gains and losses and foreign exchange gains and losses on investments at fair value through
the statement of profit or loss. Dividends on equity securities are recorded as revenue on the ex-dividend date. Interest is recognised separately on an amortised cost
basis using the effective interest rate method for investments at fair value through the statement of profit or loss. The realised gains or losses on disposal of an
investment are the difference between the proceeds and the original cost of the investment. Unrealised investment gains and losses represent the difference between
the carrying value at the reporting date, and the carrying value at the previous period end or purchase value during the period.
Creditors arising out of insurance operations
Creditors arising out of insurance operations are stated at amortised cost determined on the effective interest rate method.
Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand, deposits held at call with banks and other short-term highly liquid investments with maturities of three
months or less from the date of acquisition. They are classified as loans and receivables and carried at amortised cost less any impairment losses.
2. Management of risk
Approach to risk management
Ark’s core business relies on the assumption of internal and external risk within the appetites and tolerances established by the Board. Primarily Ark’s business is the
assumption of Insurance Risk and Market Risk, with the additional categories of Credit Risk, Liquidity Risk, Operational Risk and Group Risk. Managing these risks in
a manner that is consistent with the strategy, appetites and tolerances established by the Board requires that Ark has in place a systematic, objective, and robust set
of governance arrangements and processes for identifying and quantifying the risks to which it is exposed. This enables Ark to determine appropriate strategies and
approaches for prevention and mitigation.
The effectiveness with which Ark manages risk is a key determinant of the level of capital resources required to run the business and its ability to achieve its strategic
objectives including, in relation to capital efficiency and the production of acceptable levels of return.
Insurance risk
This is the risk arising from the uncertainties in timing, frequency and severity of insured losses, relative to the expectations made at the time of business planning or
underwriting. Ark’s business is based on the seeking and assumption of insurance risk. The Syndicate writes a balanced and diversified book of business through a
team of experienced underwriters with the objective of charging appropriate premiums to cover claims and operational costs whilst optimising the expected return on
equity. Target returns are assessed each year, taking into account the insurance market outlook and realistic expectations of return on equity. Insurance risk comprises
the following elements:
a) Exposure management risk
This is the risk of exposure to an event, or a series of events, which causes a potential financial loss that exceeds expectations. The nature of Ark’s business and
underwriting portfolio includes the assumption of a high degree of catastrophe, non-catastrophe and accumulative exposure to different events. This is managed through
the purchase of reinsurance and diversification of business lines and geographical areas to balance exposures, with the aim of reducing the risk that one event, or a
series of events, will cause unacceptable loss to the business. Ark’s catastrophe and non-natural catastrophe modelling processes incorporate Ark-specific disaster
scenarios, aggregate caps and cross-class modelling which reflect the diversity of the portfolio.
b) Underwriting quality risk
This is the risk of inappropriate underwriting or the inadequate pricing of risks which can lead to unprofitable business or inefficient line utilisation and risk selection.
The management of underwriting quality can be difficult in a competitive market where underwriters are often under pressure to meet premium and pricing targets. Ark
operates an underwriting controls framework which includes individual underwriting authorities, continual quality monitoring and peer review of risks. The framework
aims to ensure a high quality of underwriting through monitoring of pricing and rate change, contract certainty and agreement of appropriate terms and conditions.
Ark Syndicate Management Limited
Syndicate 4020
22
Notes to the financial statements
1. Management of risk (continued)
c) Delegated underwriting quality risk
This is the risk of exposure to inappropriate risks through the delegation of underwriting authorities to third parties or the delegation of authority to inappropriate third
parties. The nature of delegated underwriting naturally increases the risk of underwriting, through the ability of third parties being able to bind the Syndicate to risks
without detailed review of the risk involved. This risk is mitigated through the application of strict guidelines, managed by a dedicated team within the Compliance
department. This team reviews coverholder and third party authority (“TPA”) approvals pre-bind and monitors a programme of audits to ensure compliance with
regulations and guidelines.
D) Claims management risk
This is the risk that claims made are not managed in an appropriate manner, leading to material adverse results through an increase in claims, payments or exposure
to legal issues. The management of claims is conducted in accordance with claims procedures, which are, in turn, in line with the Lloyd’s Minimum Standards. This
includes the management of claims workflows and response times, reviews of major claims to ensure accurate estimates, regular reserving reviews and management
of complaints. These processes are enhanced through communication with underwriting teams to understand the policy or portfolio and with the Compliance department
to manage coverholders and TPAs.
e) Reserving risk
This is the risk that the estimated claims reserves differ materially from the ultimate cost of the claim or event. Reserving risk is a significant category in the Internal
Model and has the potential to significantly impact profitability. The potential impact is controlled through the use of a mix of actuarial models and methods, industry
data and underwriter experience to produce reliable estimates that are based on up to date information, and consistently applied over time and across classes of
business. Reserves for losses arising from the Ukraine conflict are included in the normal process as a major loss. This does not pose a potential threat to the business
or risk of going concern. These estimates are subject to an external review each year.
f) Reinsurance purchasing
This is the risk of purchasing insufficient or inappropriate reinsurance, or the exhaustion of reinsurance, leading to excessive or unexpected losses. The process of
reinsurance purchasing forms a major part of Ark’s business planning process and includes the use of the Internal Model as a tool for decision making. Reinsurance
is purchased for a mixture of risk and event losses across the majority of classes, in a mixture of excess of loss and proportional cover, dependent on the scale and
characteristics of the class or treaty concerned. Ark also employs controls and monitoring around the use of insurers, credit ratings and concentration risk.
g) Underwriting management
This is the risk that returns from the policies written are different from expectations or are not in line with the business plan. Examples include a failure to reduce or exit
from unprofitable business or a failure of underwriters to follow the business plan which sets out the parameters, classes, limitations and profitability expectation of
underwriting teams for the forthcoming year. Communication of the business plan to the underwriting teams is therefore imperative. The performance of each class
and the syndicate portfolio as a whole is reviewed against the business plan on a regular basis by the Board and various committees using information available from
the management information portal. Various controls are in place to ensure constant vigilance including underwriting authorities, monitoring of risk codes, geographical
aggregates and data quality.
General insurance business sensitivities 2024
+5%
£’000
-5%
£’000
Claims outstanding - gross of reinsurance
31,812
(31,812)
Claims outstanding – net of reinsurance
27,556
(27,556)
General insurance business sensitivities 2023
+5%
£’000
-5%
£’000
Claims outstanding - gross of reinsurance
40,220
(40,220)
Claims outstanding – net of reinsurance
35,618
(35,618)
Ark Syndicate Management Limited
Syndicate 4020
23
Notes to the financial statements
1. Management of risk (continued)
Credit risk
Credit risk arises when counterparties fail to meet their obligations in full as they fall due. The key areas where credit risk can arise include reinsurers, brokers,
coverholders and investment counterparties.
The probability of reinsurer default is modelled by the Actuarial team as part of the Internal Model. Ark seeks to reduce this risk by avoiding over-reliance on specific
reinsurers through the application of concentration limits and thresholds. This is monitored by the Security Advisory Committee (“SAC”). Prior to the transaction of
business, broker and coverholder default is mitigated through the application of due diligence on new and existing counterparties, and a rolling audit schedule post-
bind. Overdue premium is also monitored by class, broker and age of debt. The investment portfolio is managed in line with asset allocation guidelines which are
monitored by type, counterparty, quality and duration. Ark outsources the management of a significant proportion of its investment portfolio to managers who monitor
and report on performance and adherence to guidelines on a regular basis.
2024 – credit risk analysis
AAA
£’000
AA
£’000
A
£’000
BBB
£’000
Other
£’000
Not rated
£’000
Total
£’000
Shares and other variable securities
-
-
-
-
-
233,031
233,031
Debt securities
54,042
50,475
122,648
154,005
-
21,162
402,332
Participation in investment pools
67,754
7,241
7,212
5,338
-
848
88,393
Syndicate loan to central fund
-
-
3,122
-
-
-
3,122
Overseas deposits
7,064
1,329
1,621
1,311
974
8,649
20,948
Deposits with ceding undertakings
-
-
-
-
-
16,395
16,395
Reinsurers share of claims outstanding
-
6,532
51,795
-
58
26,736
85,121
Debtors arising out of insurance
operations
-
-
-
-
-
239,079
239,079
Debtors arising out of reinsurance
operations
-
596
16,247
-
76
34,523
51,442
Cash at bank and in hand
-
-
-
-
-
7,589
7,589
Other debtors and accrued interest
-
-
-
-
-
6,405
6,405
128,860
66,173
202,645
160,654
1,108
594,417
1,153,857
2023 – credit risk analysis
AAA
£’000
AA
£’000
A
£’000
BBB
£’000
Other
£’000
Not rated
£’000
Total
£’000
Shares and other variable securities
-
-
-
-
-
111,746
111,746
Debt securities
47,279
125,105
128,465
81,486
-
5,070
387,405
Participation in investment pools
71,461
4,848
7,285
4,212
-
-
87,806
Syndicate loan to central fund
-
-
3,787
-
-
-
3,787
Overseas deposits
9,077
1,245
1,498
1,222
1,012
11,008
25,062
Deposits with ceding undertakings
-
-
-
-
-
16,183
16,183
Reinsurers share of claims outstanding
-
11,610
34,295
-
217
30,152
76,274
Debtors arising out of insurance
operations
-
-
-
-
-
178,021
178,021
Debtors arising out of reinsurance
operations
-
3,158
6,132
-
-
22,555
31,845
Cash at bank and in hand
-
-
-
-
-
15,227
15,227
Other debtors and accrued interest
-
-
-
-
-
3,668
3,668
127,817
145,966
181,462
86,920
1,229
393,630
937,024
Ark Syndicate Management Limited
Syndicate 4020
24
Notes to the financial statements
2. Management of risk (continued)
Debtors arising out of insurance operations and other debtors balances have not been impaired, based on all evidence available, and no impairment provision has been
recognised in respect of these assets. Inwards premium receivables are credit controlled by third-party managers. Ark monitors third party coverholders’ performance
and their financial processes through the coverholder management team. A provision for doubtful debts is included within reinsurers' share of technical provisions of
£2.3m (2023: £1.9m).
Financial assets that are past due or impaired
The Syndicate has debtors arising from direct insurance and reinsurance operations that are past due but not impaired at the reporting date. An analysis of the carrying
amounts of past due or impaired debtors is presented in the table below:
2024
Neither past due nor impaired
£’000
Past due but not impaired
£’000
Total
£’000
Financial Investments
233,031
-
233,031
Debt securities
402,332
-
402,332
Participation in investment pools
88,393
-
88,393
Syndicate loan to central fund
3,122
-
3,122
Overseas deposits
20,948
-
20,948
Deposits with ceding undertakings
16,395
-
16,395
Reinsurers share of claims outstanding
85,121
-
85,121
Debtors arising out of insurance operations
216,744
22,335
239,079
Debtors arising out of reinsurance operations
33,325
18,117
51,442
Cash at bank and in hand
7,589
-
7,589
Other debtors and accrued interest
6,405
-
6,405
1,113,405
40,452
1,153,857
2023
Neither past due nor impaired
£’000
Past due but not impaired
£’000
Total
£’000
Financial Investments
111,746
-
111,746
Debt securities
387,405
-
387,405
Participation in investment pools
87,806
-
87,806
Syndicate loan to central fund
3,787
-
3,787
Overseas deposits
25,062
-
25,062
Deposits with ceding undertakings
16,183
-
16,183
Reinsurers share of claims outstanding
76,274
-
76,274
Debtors arising out of insurance operations
160,773
17,248
178,021
Debtors arising out of reinsurance operations
23,990
7,855
31,845
Cash at bank and in hand
15,227
-
15,227
Other debtors and accrued interest
3,668
-
3,668
911,921
25,103
937,024
Ark Syndicate Management Limited
Syndicate 4020
25
Notes to the financial statements
2. Management of risk (continued)
The table below sets out the age analysis of insurance assets that are past due but not impaired at the balance sheet date:
0-3 months past
due
3-6 months past
due
6-12 months past
due
Total
2024
£’000
£’000
£’000
£’000
Debtors arising out of direct insurance operations
13,733
6,471
2,131
22,335
0-3 months past
due
3-6Months past
due
6-12 months past
due
Total
2023
£’000
£’000
£’000
£’000
Debtors arising out of direct insurance operations
10,958
3,703
2,587
17,248
Market risk
This is the risk that the value of assets and liabilities changes as a result of market movements e.g. foreign exchange rates, interest rates and market prices.
a) Foreign exchange risk
The functional currency of the Syndicate is the US dollar and the presentation currency in which the Syndicate reports its results is Sterling. Therefore the Syndicate
is exposed to fluctuations in exchange rates for non-dollar denominated transactions. The Syndicate operates in five main currencies: US dollars, Sterling, Canadian
dollars, Australian dollars and Euros. The underwriting capital is matched by currency to the principal underlying currencies of its written premiums. This helps to
mitigate the risk that the capital required to underwrite business is materially affected by any future movements in exchange rates.
Sterling
US dollars
Euros
Canadian dollars
Australian dollars
Total
2024 - Currency analysis
£’000
£’000
£’000
£’000
£’000
£’000
Investments
18,345
615,297
20,058
80,070
30,451
764,221
Reinsurers’ share of technical provisions
6,848
111,235
(7,430)
950
614
112,217
Debtors
26,943
210,390
37,466
6,153
9,684
290,636
Cash
5,858
35
1,015
-
681
7,589
Prepayments and accrued income
14,091
61,700
5,229
2,110
2,230
85,360
Total assets
72,085
998,657
56,338
89,283
43,660
1,260,023
Technical provisions
91,542
806,608
40,305
31,033
17,922
987,410
Creditors
1,555
35,579
3,732
306
(4)
41,168
Accruals and deferred income
33,569
3,200
3,306
-
-
40,075
Total liabilities
126,666
845,387
47,343
31,339
17,918
1,068,653
Total Capital and reserves
(54,581)
153,270
8,995
57,944
25,742
191,370
Ark Syndicate Management Limited
Syndicate 4020
26
Notes to the financial statements
2. Management of risk (continued)
Sterling
US dollars
Euros
Canadian dollars
Australian dollars
Total
2023 - Currency analysis
£’000
£’000
£’000
£’000
£’000
£’000
Investments
20,980
474,639
29,223
82,506
24,642
631,990
Reinsurers’ share of technical provisions
6,518
74,766
9,237
744
786
92,051
Debtors
21,232
165,549
13,263
6,549
3,324
209,917
Cash
12,345
50
2,740
-
92
15,227
Prepayments and accrued income
11,887
48,538
3,732
2,218
1,031
67,406
Total assets
72,962
763,542
58,195
92,017
29,875
1,016,591
Technical provisions
86,321
622,902
52,150
31,347
11,687
804,407
Creditors
712
23,889
3,864
(56)
205
28,614
Accruals and deferred income
51,312
-
-
-
-
51,312
Total liabilities
138,345
646,791
56,014
31,291
11,892
884,333
Total capital and reserves
(65,383)
116,751
2,181
60,726
17,983
132,258
The table below gives an indication of the impact on profit after tax and net assets of a percentage change in the relative strength of the US dollar against the value of
the main currencies, simultaneously.
2024
2024
2023
2023
Impact on
profit
Impact on net
assets
Impact on
profit
Impact on net
assets
Sensitivity to foreign exchange risk
£’000
£’000
£’000
£’000
USD weakens by 10% against other currencies
(26,864)
(26,864)
(19,466)
(19,466)
USD strengthens by 10% against other currencies
32,834
32,834
23,792
23,792
EURO weakens by 10% against other currencies
(839)
(839)
(1,385)
(1,385)
EURO strengthens by 10% against other currencies
1,025
1,025
1,693
1,693
b) Interest rate risk
Some of the financial instruments, including certain investments at fair value, cash and cash equivalents and borrowings, are exposed to movements in market interest
rates. Interest rate risk is managed by primarily investing in short-duration investments and cash and cash equivalents. The duration of assets is monitored on a regular
basis. The duration of assets exposed to movements in market interest rates is 1.29 (2023: 1.19). Changes in interest rates, with all other variables constant, would
result in changes in the capital value of debt securities and borrowings as well as subsequent interest receipts and payments.
Ark Syndicate Management Limited
Syndicate 4020
27
Notes to the financial statements
2. Management of risk (continued)
2024
2024
2023
2023
Impact on
profit
Impact on net
assets
Impact on
profit
Impact on net
assets
Sensitivity to interest rate risk
£’000
£’000
£’000
£’000
50 basis point increase in interest rates
(5,185)
(5,185)
(4,700)
(4,700)
50 basis point decrease in interest rates
5,269
5,269
5,068
5,068
c) Price risk
Investments recognised at fair value are exposed to movements in market prices, an assessment of which is set out below.
2024
2024
2023
2023
Impact on
profit
Impact on net
assets
Impact on
profit
Impact on net
assets
Sensitivity to price risk
£’000
£’000
£’000
£’000
5% increase in stock market prices
(21)
(21)
637
637
5% decrease in stock market prices
21
21
(317)
(317)
Liquidity risk
Liquidity risk arises where cash may not be available to pay obligations when they fall due without incurring unreasonable penalties or expense costs. The risk is
minimised by holding sufficient liquid assets to enable large and unexpected payments, predominately claims, to be made in all but the most extreme scenarios. Ark’s
Catastrophe Event Response Plan provides information to quantify liquidity implications of losses, reinsurance recoveries, cashflows and trust funds in the event of a
catastrophe or large loss. The process is stress tested using historic scenarios to determine the behaviour of the portfolio following an event or series of events.
0-1yr
1-3yrs
3-5yrs
>5yrs
Total
2024 – Maturity analysis
£’000
£’000
£’000
£’000
£’000
Gross claims outstanding
67,958
355,963
130,780
81,532
636,233
Creditors
41,168
-
-
-
41,168
109,126
355,963
130,780
81,532
677,401
0-1yr
1-3yrs
3-5yrs
>5yrs
Total
2023 – Maturity analysis
£’000
£’000
£’000
£’000
£’000
Gross claims outstanding
85,348
282,933
94,385
57,176
519,842
Creditors
28,614
-
-
-
28,614
113,962
282,933
94,385
57,176
548,456
In the above analysis, assets with no duration are included as “less than one year”.
Ark Syndicate Management Limited
Syndicate 4020
28
Notes to the financial statements
2. Management of risk (continued)
The estimated maturity of net claims liabilities is set out below.
<1yr
1-3yrs
3-5yrs
>5yrs
Total
Weighted
average term
Net claim liability cashflow timing
£’000
£’000
£’000
£’000
£’000
(years)
2024
58,866
308,339
113,283
70,624
551,112
3.12
2023
72,826
241,420
80,537
48,787
443,570
3.01
Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes or systems. Risks are identified within the risk register and are modelled via
operational scenarios. Ark aims to minimise its exposure to operational risk by monitoring controls and management information in the form of key indicators that
indicate changes to the risk profile.
Ark outsources a number of key functions, such as investment management, inwards premium credit control and human resources. This introduces the risk that the
Syndicate may be exposed to liability or may fail to achieve its objectives due to inappropriately arranged, or a failure of, outsource arrangements. This risk is mitigated
through pre-contract due diligence and performance review throughout the contract life cycle.
Ark recognises that the success of a business depends on the ability to retain the services of existing key staff and to attract and retain additional people in the future,
both in underwriting and support functions. This risk is managed through the provision of sufficient education and development, support for qualifications and competitive
remuneration packages.
Ark is also impacted by the risk of information technology system failure or disruption. This is mitigated through a control framework which includes network security,
data, hardware and applications and is complimented by detailed planning around back-ups, contingency and disaster recovery, all of which are monitored and tested
on a regular basis.
Regulatory risk
Regulatory risk is the risk of censure following a breach of regulatory or legal requirements, or a failure to respond to deadlines or information requests from regulators
in a satisfactory and timely manner.
Ark is regulated, overseen or required to report to the Prudential Regulation Authority (“PRA”), the Financial Conduct Authority (“FCA”), Lloyd’s and other overseas
regulators. Each body requires adherence to specific requirements and guidelines. In order to mitigate this, Ark seeks to conform to the regulations as they apply to
each functional area. Much of this is operated through training and awareness to promote correct behaviour at source, as opposed to corrective action at a later stage.
The overall risk is managed by the Compliance department which seeks to ensure that deadlines are met and changes in regulation are communicated in a timely
manner.
Ark has put in place processes and controls to identify and manage the conduct risk associated with the business it underwrites. Ark will continue to lead high product
risk business where risks are consistent with the probability targets taking into account the additional requirements for oversight and monitoring conduct risk.
Ark Syndicate Management Limited
Syndicate 4020
29
Notes to the financial statements
2. Management of risk (continued)
Capital management risk
Capital is primarily required to support underwriting at Lloyd’s. Lloyd’s applies capital requirements at member level and centrally to ensure that Lloyd’s complies with
Solvency II, and beyond that to meet its own financial strength, licence and ratings objectives.
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.
Each member of a syndicate is liable for its own share of underwriting liabilities on the syndicate(s) on which it is participating. Each member’s SCR is 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, an uplift is applied by Lloyd’s to the member’s capital requirement, known as the Economic Capital Assessment (“ECA”).
3. Segmental analysis
An analysis of the underwriting result before investment return is set out below.
Gross
Premium
written
Gross
Premium
earned
Gross
Claims
incurred
Gross
Operating
expense
Reinsurance
balance
Underwriting
profit
2024
£’000
£’000
£’000
£’000
£’000
£’000
Direct insurance:
Accident and health
35,766
33,118
(22,521)
(12,325)
(1,470)
(3,198)
Motor (third party liability)
151
183
69
(66)
11
197
Motor (other classes)
4,383
5,278
(1,826)
(2,160)
(215)
1,077
Marine aviation and transport
136,844
115,695
(108,555)
(38,520)
17,949
(13,431)
Fire and other damage to property
382,018
347,249
(123,926)
(118,868)
(39,141)
65,314
Third party liability
19,980
16,362
(957)
(6,190)
(1,250)
7,965
579,142
517,885
(257,716)
(178,129)
(24,116)
57,924
Reinsurance
178,749
166,722
(57,648)
(52,803)
(32,143)
24,128
757,891
684,607
(315,364)
(230,932)
(56,259)
82,052
Ark Syndicate Management Limited
Syndicate 4020
30
Notes to the financial statements
3. Segmental analysis (continued)
Gross
Premium
written
Gross
Premium
earned
Gross
Claims
incurred
Gross
Operating
expense
Reinsurance
balance
Underwriting
profit
2023
£’000
£’000
£’000
£’000
£’000
£’000
Direct insurance:
Accident and health
28,608
30,679
(17,954)
(11,636)
1,214
2,303
Motor (third party liability)
317
314
(265)
(142)
(15)
(108)
Motor (other classes)
5,422
5,524
(732)
(2,182)
(221)
2,389
Marine aviation and transport
91,012
87,516
(43,152)
(30,470)
(2,376)
11,518
Fire and other damage to property
347,680
306,182
(114,443)
(100,306)
(47,851)
43,582
Third party liability
12,157
10,992
(3,560)
(4,305)
(566)
2,561
485,196
441,207
(180,106)
(149,041)
(49,815)
62,245
Reinsurance
137,468
131,332
(27,651)
(45,407)
(23,336)
34,938
622,664
572,539
(207,757)
(194,448)
(73,151)
97,183
The gross premiums written for direct insurance location of risk is presented in the table below:
2024
2023
£’000
£’000
United Kingdon
15,967
12,462
US
290,311
151,920
Rest of the world
272,864
320,814
579,142
485,196
4. Investment return
2024
2023
£’000
£’000
Income on financial investments at fair value
12,847
7,674
Interest on cash and cash equivalents
7,312
5,823
Gains on the realisation of investments
4,648
5,265
Unrealised gains on investments
17,918
22,232
Unrealised losses on investments
(196)
(3,197)
Investment management charges
(436)
(330)
42,093
37,467
Ark Syndicate Management Limited
Syndicate 4020
31
Notes to the financial statements
5. Operating expenses
2024
2023
£’000
£’000
Acquisition costs
147,587
120,216
Change in deferred acquisition costs
(16,210)
(8,047)
Administrative expenses
64,436
44,718
Managing agency fee
4,256
3,675
Personal expenses
30,863
33,886
230,932
194,448
Total commission for direct insurance business for the year amounted to:
2024
2023
£’000
£’000
Total commission for direct insurance business
116,127
81,172
Administrative expenses are incurred on behalf of the Syndicate by ASML. These expenses include:
2024
2023
£’000
£’000
Fees payable to the Syndicate’s auditors for the audit of these financial statements
217
199
Other services pursuant to legislation and tagging
154
134
Performance related pay
21,276
18,486
6. Directors and employees
All executive directors and staff are employed and remunerated by ASML. The following staff and related costs were recharged to the syndicate.
2024
2023
£’000
£’000
Wages and salaries
15,197
13,286
Social security costs
5,050
3,173
Pension costs
1,829
1,471
22,076
17,930
Included above are the employment costs of underwriters attributable to acquisition of business and those of claims staff treated within the technical accounts as
acquisition costs and claims handling costs respectively.
The average number of employees employed by ASML but working on syndicate matters during the year is set out below.
2024
2023
Number
Number
Underwriting
118
103
Claims
20
19
Administration
52
51
190
173
Ark Syndicate Management Limited
Syndicate 4020
32
Notes to the financial statements
6. Directors and employees (continued)
The active underwriters received the following remuneration charged as a syndicate expense.
2024
2023
£’000
£’000
Emoluments of the Active Underwriters
1,589
1,130
No contributions were made to money purchases pension schemes in the year in respect of the Active Underwriters (2023: Nil).
7. Investments
Cost
Value
Cost
Value
2024
2024
2023
2023
Investments at fair value:
£’000
£’000
£’000
£’000
Shares and other variable yield securities
229,450
233,031
108,650
111,746
Debt and other fixed income securities
395,767
402,330
381,155
387,405
Participation in investment pools
87,038
88,396
86,544
87,807
Syndicate loan to central fund
3,122
3,122
3,787
3,787
Overseas Deposits
20,947
20,947
25,062
25,062
Deposits with ceding undertakings
16,183
16,395
17,068
16,183
752,507
764,221
622,266
631,990
The amount expected to mature before and after one year is:
£’000
Before one year
264,558
After one year
499,663
764,221
The fair values of investments are based on prices provided by investment managers who obtain market data from numerous independent pricing services. The pricing
services used by the investment manager obtain actual transaction prices for securities that have quoted prices in active markets. For those securities which are not
actively traded, the pricing services use common market valuation pricing models. Observable inputs used in common market valuation pricing models include, but are
not limited to, broker quotes, credit ratings, interest rates and yield curves, prepayment speeds, default rates and other such inputs which are available from market
sources.
Level 1 includes fair values measured using quoted prices (unadjusted) in active markets for identical instruments. Level 2 includes fair values measured using directly
or indirectly observable inputs or other similar valuation techniques for which all significant inputs are based on market observable data. Level 3 includes fair values
measured using valuation techniques for which significant inputs are not based on market observable data.
The fair value of these assets is based on the prices obtained from both investment managers and investment custodians.
2024
2023
Fair value hierarchy:
£’000
£’000
Level 1
181,655
118,715
Level 2
544,701
470,093
Level 3
37,865
43,182
764,221
631,990
Ark Syndicate Management Limited
Syndicate 4020
33
Notes to the financial statements
8. Reinsurers’ share of technical provisons
2024
£’000
2023
£’000
Reinsurers’ share of claims reported
36,302
42,858
Reinsurers’ share of claims incurred but not reported
48,819
33,415
85,121
76,273
9. Deferred acquisition costs
2024
£’000
2023
£’000
Balance at 1 January
63,789
58,182
Additions
138,934
113,437
Amortisation charge
(122,724)
(105,390)
Foreign exchange movement
(929)
(2,440)
At 31 December
79,070
63,789
10. Debtors arising out of direct insurance operations
2024
£’000
2023
£’000
Due within one year
239,079
178,021
11. Debtors arising out of reinsurance operations
2024
2023
£’000
£’000
Due within one year
51,409
31,838
Due after one year
33
7
51,442
31,845
12. Cash at bank and in hand
2024
2023
£’000
£’000
Cash at bank and in hand
7,589
15,227
Ark Syndicate Management Limited
Syndicate 4020
34
Notes to the financial statements
13. Technical provisions
2024
£’000
2023
£’000
Claims reported and loss adjustment expenses
232,605
214,801
Claims incurred but not reported
403,628
305,042
Gross claims liabilities
636,233
519,843
Unearned premiums
351,177
284,564
987,410
804,407
Movements in technical provisions and reinsurers' share of technical provisions are as follows:
2024
2024
2024
2023
2023
2023
Gross
Reinsurance
Net
Gross
Reinsurance
Net
Claims and loss adjustment expenses
£’000
£’000
£’000
£’000
£’000
£’000
At 1 January
519,843
76,273
443,570
560,438
107,872
452,566
Claims paid
(206,796)
(42,215)
(164,581)
(221,433)
(41,169)
(180,264)
Movement arising from current years
358,900
65,408
293,492
244,197
34,966
209,231
Movement arising from prior years
(43,536)
(15,287)
(28,249)
(36,440)
(20,291)
(16,149)
Net exchange differences
7,822
942
6,880
(26,919)
(5,105)
(21,814)
At 31 December
636,233
85,121
551,112
519,843
76,273
443,570
2024
2024
2024
2023
2023
2023
Gross
Reinsurance
Net
Gross
Reinsurance
Net
Unearned premiums
£’000
£’000
£’000
£’000
£’000
£’000
At 1 January
284,564
15,778
268,786
246,640
15,169
231,471
Increase in the year
757,891
119,333
638,558
622,664
90,655
532,009
Release in the year
(684,607)
(106,380)
(578,227)
(572,539)
(87,826)
(484,713)
Net exchange differences
(6,671)
(1,635)
(5,036)
(12,201)
(2,220)
(9,981)
At 31 December
351,177
27,096
324,081
284,564
15,778
268,786
Assumptions and processes
a) The reserving process
Ark uses a quarterly process to set its reserves. Several actuarial and statistical methods are used to estimate the ultimate premium and claims costs, with the most
appropriate method selected depending on the nature of each class of business. In addition, the underwriting teams review the development of the incurred loss ratio
over time, work with the claims team to set reserve estimates for identified claims and utilise their detailed understanding of both risks underwritten and the nature of
the claims to establish an alternative estimate of ultimate claims cost, which is compared to the actuarially established figures. The Reserving Committee then
determines the reserves held for accounting purposes. An annual independent actuarial review is undertaken to ensure that the reserves established are not lower
than an independently established best estimate.
Ark Syndicate Management Limited
Syndicate 4020
35
Notes to the financial statements
13. Technical provisions (continued)
Chain-ladder techniques are applied to premiums, paid claims and incurred claims (i.e. paid claims plus case estimates). The basic technique involves the analysis of
historical claims development factors and the selection of estimated development factors based on historical patterns. The selected development factors are then
applied to cumulative claims data for each underwriting year that is not yet fully developed to produce an estimated ultimate claims cost for each underwriting year. The
Bornhuetter-Ferguson method uses a combination of a benchmark / market-based estimate and an estimate based on claims experience. The former is based on a
measure of exposure such as premiums; the latter is based on the paid or incurred claims observed to date. The two estimates are combined using a formula that gives
more weight to the experience-based estimate as time passes.
The choice of selected results for each underwriting year of each class of business depends on an assessment of the technique that has been most appropriate to
observed historical developments. In certain instances, this has meant that different techniques or combinations of techniques have been selected for individual
underwriting years or groups of underwriting years within the same class of business. As such, there are many assumptions used to estimate general insurance liabilities.
Triangulations of the paid / outstanding claim ratios are also reviewed as a way of monitoring any changes in the strength of the outstanding claim estimates between
underwriting years so that adjustments can be made to mitigate any subsequent over/(under) reserving.
Where significant large losses impact an underwriting year, the development is usually very different from the attritional losses. In these situations, the large loss total
is extracted from the remainder of the data and analysed separately by the respective claims managers using exposure analysis of the policies in force in the areas
affected. Further assumptions are required to convert gross of reinsurance estimates of ultimate claims cost to a net of reinsurance level and to establish reserves for
unallocated claims handling expenses and reinsurance bad debt.
b) Major assumptions
The main assumption underlying these techniques is that the Syndicate’s past claims development experience (with appropriate adjustments for known changes) can
be used to project future claims development and hence ultimate claims costs. As such these methods extrapolate the development of premiums, paid and incurred
losses, average costs per claim and claim numbers for each underwriting year based on the observed development of earlier years. Throughout, judgement is used to
assess the extent to which past trends may not apply in the future; for example, to reflect changes in external or market factors such as economic conditions, public
attitudes to claiming, levels of claims inflation, premium rate changes, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy conditions
and claims handling procedures.
The loss development tables below provide information about historical claims development by the identified operating segments. The tables are by underwriting year
which in our view provides the most transparent reserving basis. The top part of the table illustrates how the estimate of the claims ratio for each underwriting year has
changed at successive year ends. The bottom half of the table reconciles the gross and net claims to the amount appearing in the statement of financial position. While
the information in the table provides a historical perspective on the adequacy of the claims liabilities established in previous years, users of these financial statements
are cautioned against extrapolating past redundancies or deficiencies on current claims liabilities. The Syndicate believes that the estimate of total claims liabilities
selected is adequate. However, due to inherent uncertainties in the reserving process, it cannot be assured that such balances will ultimately prove to be adequate.
Ark Syndicate Management Limited
Syndicate 4020
36
Notes to the financial statements
13. Technical provisions (continued)
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
Total
Gross claims
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
End of yr one
238,879
127,037
187,131
112,435
85,178
60,643
86,632
138,614
79,620
88,423
One year later
-
204,865
260,397
180,037
155,398
116,899
143,476
208,692
169,755
178,625
Two years later
-
-
262,401
186,320
155,760
126,079
175,399
220,621
197,365
197,387
Three years later
-
-
-
190,501
151,522
122,981
177,539
214,709
187,592
194,991
Four years later
-
-
-
-
149,855
122,177
181,249
213,522
187,888
199,304
Five years later
-
-
-
-
-
119,069
185,923
215,056
190,193
194,987
Six years later
-
-
-
-
-
-
189,338
215,547
190,996
196,710
Seven years later
-
-
-
-
-
-
-
214,310
190,375
198,087
Eight years later
-
-
-
-
-
-
-
-
189,772
198,992
Nine years later
-
-
-
-
-
-
-
-
-
196,323
Gross claims
238,879
204,865
262,401
190,501
149,855
119,069
189,338
214,310
189,772
196,323
1,955,313
PY provision
44,458
Less paid claims
(19,393)
(75,505)
(160,008)
(146,537)
(126,002)
(105,767)
(161,561)
(201,893)
(180,612)
(186,260)
(1,363,538
)
Claims reserve
219,486
129,360
102,393
43,964
23,853
13,302
27,777
12,417
9,160
10,063
636,233
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
Total
Net claims
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
End of yr one
192,303
112,022
130,303
80,328
72,011
58,935
72,961
57,065
75,612
70,404
One year later
-
184,523
208,659
138,449
135,367
106,056
131,809
111,005
137,091
139,589
Two years later
-
-
212,160
140,836
136,499
111,955
153,644
138,469
170,360
156,214
Three years later
-
-
-
145,677
131,004
109,595
155,209
134,441
163,382
154,052
Four years later
-
-
-
-
128,789
108,978
157,705
135,240
164,527
158,578
Five years later
-
-
-
-
-
106,360
162,179
134,808
164,151
154,900
Six years later
-
-
-
-
-
-
164,641
135,657
165,206
153,640
Seven years later
-
-
-
-
-
-
-
134,697
164,958
152,161
Eight years later
-
-
-
-
-
-
-
-
164,367
152,479
Nine years later
-
-
-
-
-
-
-
-
-
177,943
Net claims
192,303
184,523
212,160
145,677
128,789
106,360
164,641
134,697
164,367
177,943
1,611,460
PY provision
40,509
Less paid claims
(19,045)
(64,915)
(124,407)
(110,941)
(98,392)
(95,954)
(147,018)
(115,910)
(155,400)
(168,875)
(1,100,857
)
Net claims reserve
173,258
119,608
87,753
34,736
30,397
10,406
17,623
18,787
8,967
9,068
551,112
Ark Syndicate Management Limited
Syndicate 4020
37
Notes to the financial statements
14. Member’s balances attributable to underwriting participations
2024 YOA
2023 YOA
2022 YOA
Total
2024
£’000
£’000
£’000
£’000
At 1 January
-
62,720
36,210
98,930
Profit for the year
33,873
52,862
37,410
124,145
Other recognised losses
2,483
1,739
571
4,793
Distribution
-
(36,498)
(36,498)
At 31 December
36,356
117,321
37,693
191,370
2023 YOA
2022 YOA
2021 YOA
Total
2023
£’000
£’000
£’000
£’000
At 1 January
-
20,024
52,927
72,951
Profit for the year
63,896
37,035
33,719
134,650
Other recognised losses
(1,176)
(1,542)
(2,285)
(5,003)
Distribution
-
(19,307)
(51,033)
(70,340)
At 31 December
62,720
36,210
33,328
132,258
The member participates on the Syndicate by reference to YOA and the ultimate result, assets and liabilities are assessed with reference to policies incepting in that
YOA in respect of the membership of a particular year.
15. Creditors arising out of direct insurance operations
2024
2023
£’000
£’000
Due within one year
600
595
Due after one year
-
-
600
595
16. Creditors arising out of direct reinsurance operations
2024
2023
£’000
£’000
Due within one year
40,568
28,019
Due after one year
-
-
40,568
28,019
Ark Syndicate Management Limited
Syndicate 4020
38
Notes to the financial statements
17. Movement in opening and closing portfolio investments and cash net of financing
2024
2023
£’000
£’000
Net cash outflow for the year
(7,496)
(4,494)
Cash flow – portfolio investments
133,381
111,094
Movement arising from cash flows
125,885
106,600
Changes in market values and exchange rates
(1,292)
(24,299)
Total movement in portfolio investments net of financing
124,593
82,301
Balance brought forward at 1 January
647,217
564,916
Balance carried forward at 31 December
771,810
647,217
18. Movement in cash and portfolio investments
At 1 January
2024
Cash flow
Change in
market value
At 31 December
2024
£’000
£’000
£’000
£’000
Cash at bank and in hand
15,227
(7,496)
(142)
7,589
Shares and other variable yield securities
115,533
115,837
1,661
233,031
Debt and other fixed income securities
387,405
12,709
2,216
402,330
Participation in investment pools
87,807
5,311
(4,722)
88,396
Other investments
25,062
(433)
(560)
24,069
Deposit with ceding undertakings
16,183
(43)
255
16,395
Total portfolio investments
631,990
133,381
(1,150)
764,221
Total cash and portfolio investments
647,217
125,885
(1,292)
771,810
19. Related parties
The registered office of the ultimate parent company, White Mountains Insurance Group, Ltd. is Clarendon House, 2 Church Street, Hamilton, HM11, Bermuda. The
parent company of the Ark group is AIHL, and the immediate parent company of ASML is Group Ark Insurance Holdings Limited (“GAIHL”).
The key management compensation charged to the syndicate is disclosed in note 6.
N Brothers serves without fee as a director of Accident & Health Underwriting Limited (“AHU”), a wholly owned subsidiary of GAIHL. The Syndicates underwrite business
through AHU under a binding authority. Gross premium income, excluding brokerage and commissions, due to the Syndicates under this binding authority amounted
to £5.5m (2023: £5.6m). Brokerage and commissions paid in the year by the Syndicates to AHU amounted to £3.4m (2023: £3.5m).
GAIHL is a member controlling 50% of Accident & Health Claims Services LLP (“AHC”), the other 50% being controlled by AHU. AHC provides claims handling services
to the Syndicates. Fees paid in the year by the Syndicates in respect of these services amounted to £0.3m (2023: £0.4m).
Until 30
th
April 2024, I Beaton served without fee as a director of Optio Group Limited (“Optio”), a managing general agent (“MGA”) focused on emerging insurance
risks. Optio owns Northcourt Limited, a specialty MGA. Gross premium income, excluding brokerage and commissions, due to the Syndicates under this binding
authority amounted to £1.7m (2023: £0.3m). Commissions paid to Northcourt during the year were £0.5m. (2023: £0.1m).
N Bonnar serves without fee as a director of Solis Re Agency Inc. (“Solis Re”), an MGA and Lloyd's Coverholder. ASML holds shares in Solis Re giving 20% of the
voting rights and 6% of the capital rights. The Syndicates entered into a binding authority agreement with Solis Re. Gross premium income, excluding brokerage and
commissions, due to the Syndicates amounted to £1.2m (2023: £3.1m). Commissions paid by the Syndicate in the year to Solis Re amounted to £0.2m (2023: £0.4m).
Ark Syndicate Management Limited
Syndicate 4020
39
Notes to the financial statements
19. Related parties (continued)
N Bonnar owns 8% of the share capital of Phenomen, a French MGA. The Syndicates have entered into a Binding Authority with Phenomen. Gross premium income,
excluding brokerage and commissions, due to the Syndicates amounted to £0.5m (2023: £0.7m). Commissions paid by the Syndicates to Phenomen amounted to
£0.3m (2023: £0.4m).
C Atkin serves as a director of Alwen Hough Johnson Limited ("AHJ"), a Lloyd's broker. During the year the Syndicates wrote business with premium of £6.0m (2023:
£4.0m) through AHJ. Commissions paid to AHJ in the year totalled £0.9m (2023: £0.7m).
C Atkin serves as a director of AmWins, which owns a number of insurance intermediaries acting as Brokers and Coverholders of business to the Lloyd's Market,
including AmWins Global Risks Limited (AGR), who act as a Lloyd's Broker. During the year the Syndicates wrote business with premium of £28.3m through AGR
(2023: £20.8m). Commissions paid to AGR in the year were £5.7m (2023: £5.0m). AGR also placed reinsurance protection for the syndicates. During the year ORI
premiums paid through AGR amounted to £1.3m (2023: £1.1m).
C Atkin serves as a director of Whitespace Software Limited (“Whitespace”), a software company providing a Lloyd's recognised electronic placing system. The
Syndicates use Whitespace to accept risks from brokers. License fees paid to Whitespace during the year are less than £0.1m (2023: less than £0.2m).
20. Foreign exchange rates
The following currency exchange rates have been used for principal foreign currency transactions.
1 January
31 December
2024
1 January
31 December
2023
2024
2024
Average
2023
2023
Average
Rate
Rate
Rate
Rate
Rate
Rate
Sterling
Euro
US dollar
Australian dollar
Canadian dollar
21. Post balance sheet events
The California wildfires in January 2025 represent a significant industry loss event. Industry estimates are still preliminary and range widely. The Syndicate will have
exposure to this event primarily through the property line of business. At this time, the directors of ASML do not expect the wildfire losses will cause full year 2025
actual catastrophe losses to diverge materially from those planned for.
22. Representation of Comparative Information.
2023
Represented
2023
Statement of financial position
£’000
£’000
Assets
Financial Investments
615,807
-
Deposit with ceding undertakings
16,183
-
Investments
-
631,990
Ark Syndicate Management Limited
Syndicate 4020
40
Notes to the financial statements
22. Representation of Comparative Information. (continued)
2023
Represented
2023
Statement of financial position
£’000
£’000
Assets
Provision for unearned premium
15,778
-
Claims outstanding
76,273
-
Reinsurers’ share of technical provisions
-
92,051
Debtors arising out of direct insurance operations
178,021
-
Debtors arising out of reinsurance operations
31,845
-
Debtors arising out of insurance operations
-
209.866
Liabilities
Provision for unearned premium
284,564
-
Claims outstanding
519,843
-
Technical provisions
-
804,407
Creditors arising out of direct insurance operations
595
-
Creditors arising out of reinsurance operations
28,019
-
Creditors arising out of insurance operations
-
28,614
