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2024 Syndicate 4141 Annual Report and Accounts
ANNUAL REPORT AND ACCOUNTS
Annual Report and Accounts
Syndicate 4141
HCC Underwriting Agency Ltd
Year ended 31 December 2024
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2024 Syndicate 4141 Annual Report and Accounts
ANNUAL REPORT AND ACCOUNTS
CONTENTS
Page
Directors and Administration
3
Report of the directors of the managing agent
4
Independent auditors’ report to the member of Syndicate 4141
11
Statement of Profit or Loss and other comprehensive income
16
Balance Sheet
18
Statement of Changes in Member’s Balance
20
Statement of Cash Flows
21
Notes to the financial statements
22
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2024 Syndicate 4141 Annual Report and Accounts
DIRECTORS AND ADMINISTRATION
Managing Agent:
Registered Office:
1 Aldgate
London EC3N 1RE
Registered No:
4632146
Directors:
D S Burke (appointed 5 June 2024)
S A Button
B J Cook
N Dattilo (Non-executive) (appointed 17 July 2024)
P Engelberg (Non-executive)
T J G Hervy
D Inoue (Non-executive) (appointed 17 July 2024)
N C Marsh (Non-executive Chair)
C A Scarr (Non-executive)
K Takahiro (appointed 27 August 2024)
G R A White
Syndicate:
Syndicate 4141
Active Underwriter:
S A Button
Company Secretary:
D R Feldman
J L Holliday
Investment Manager:
New England Asset Management Ltd
Independent Auditors:
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
7 More London Riverside
London SE1 2RT
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2024 Syndicate 4141 Annual Report and Accounts
REPORT OF THE DIRECTORS OF THE MANAGING AGENT
The directors of HCC Underwriting Agency Ltd (‘HCCUA’), the Managing Agent, present their Annual Report and
Accounts of Syndicate 4141 (‘the Syndicate’) for the year ended 31 December 2024 (the ‘Annual Accounts’).
The financial statements have been prepared in accordance with the Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008, applicable Accounting Standards in the United Kingdom
and the Republic of Ireland, including Financial Reporting Standard 102 (FRS 102), Financial Reporting Standard
103 (FRS 103) in relation to insurance contracts, and the Lloyd’s Syndicate Accounts Instructions Version 2.1 as
modified by the Frequently Asked Questions Version 1.1 issued by Lloyd’s.
Strategic
Report
Principal Activities
The Syndicate is managed by HCCUA which is authorised by the Prudential Regulation Authority (‘PRA’) and
regulated by both the Financial Conduct Authority (‘FCA’) and the PRA. The principal activity of the Syndicate is
the transaction of general insurance and reinsurance business in the United Kingdom and it operates solely
within the Lloyd’s market from its offices in London. The Syndicate trades through Lloyd’s worldwide licences
and benefits from the Lloyd’s brand. Lloyd’s has an A+ (Superior) rating from A.M. Best, AA- (Very Strong) rating
from Fitch Ratings and AA- (Very strong) from Standard & Poor’s Financial Services LLC.
HCCUA is part of Tokio Marine whose ultimate holding company is Tokio Marine Holdings, Inc. Tokio Marine is
a leading international insurance group headquartered in Tokyo, Japan that has a worldwide network
throughout 44 countries/regions , which undertake non-life and life insurance and operate within the financial
and general business sector (including consulting and real estate).
As of 31 December 2024, Tokio Marine had total assets of ¥30.5 trillion (December 2023: ¥29.9 trillion) and
shareholders’ equity of ¥2.92 trillion (31 December 2023: ¥2.34 trillion). Standard & Poor’s Financial Services
LCC (S&P) has given Tokio Marine and a number of its major insurance companies a financial strength rating of
A+ (Stable).
HCCUA is part of TMHCC International (TMHCCI) which is the operating segment of Tokio Marine outside of the
US. TMHCCI underwrites business on four different insurance platforms: the Syndicate; HCC International
Insurance Company plc, its wholly owned subsidiary, Tokio Marine Europe S.A. (TME), which is a Luxembourg-
based insurance company and Houston Casualty Company (UK Branch). The platform used is based on
prescribed rules and client choice if licensing permits.
Lines of business underwritten include Energy and Marine (including Marine Hull, Marine Liability and Marine
Cargo, Energy, Power Generation) Accident and Health (which includes Travel Medical, International Accident
& Health and Disability), Professional Indemnity, Treaty Reinsurance, Financial Lines, General Liability, Property
(which includes Property Direct and Facultative and the UK Delegated Property portfolio), Contingency and
Credit. Travel Medical business is written exclusively by the Syndicate on behalf of Tokio Marine’s wholly owned
agency, HCC Medical Insurance Services, which is marketed as ‘WorldTrips’ and is based in Indiana, USA. The
Syndicate’s capital is provided by Nameco (No. 808) Limited (‘Nameco’), another Tokio Marine affiliate.
Strategy and Market Conditions
Market conditions for the Syndicate have been mixed, with favourable conditions on certain lines, offset by
continued softening market conditions elsewhere. The Syndicate’s underwriting is concentrated in specifically
defined lines of business where underwriting profit is expected to be achieved. The Syndicate’s underwriting
strategy focuses on risk selection to achieve an underwriting profit, our underwriters only writing business
where we believe the pricing is sufficient to justify the business being written.
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2024 Syndicate 4141 Annual Report and Accounts
REPORT OF THE DIRECTORS OF THE MANAGING AGENT
Despite softening market conditions across London Market lines of business, gross written premium has
remained relatively flat compared to the prior year, where new business opportunities have emerged offsetting
the challenging market. Softening market conditions continue to limit growth in the Canadian General Liability
portfolio, offset by some smaller increases in gross written premium due to growth in new initiatives within
Contingency.
Business Review
Key Performance Indicators (KPIs)
The Managing Agent monitors a number of KPIs for the business:
2024
2023
£m
£m
Gross written premiums
226.2
239.3
Underwriting profit (excluding investment return)
39.9
29.2
Profit for the financial year
52.0
39.2
Net loss ratio
29.6%
37.6%
Net combined ratio
77.1%
84.6%
Investment return
6.5
11.3
Overall, the directors are satisfied with the financial position of the Syndicate as at the year end.
Results and Performance
The Syndicate made a profit for 2024 of £52.0m (2023: £39.2m) driven by strong underwriting results. The
balance on the technical account totalled £48.5m (2023: £34.4m) and reflects a net combined ratio, excluding
investment return, of 77.1% (2023: 84.6%) with 2024 benefitting from lower London Market and Specialty loss
experience and a net loss ratio of 29.6%, 8.0% lower than 2023 driven by positive prior year reserve releases.
Investment return decreased by £4.8m in 2024 to a total gain of £6.5m (2023: £11.3m), largely due to unrealised
losses of £2.0m (2023: £6.2m unrealised gain) reflecting interest rate increases.
The sterling average exchange rate in 2024 for both the US Dollar and the Euro respectively was £1 = $1.28
(2023: $1.24) and £1 = €1.18 (2023: €1.15) reflecting a small degree of strengthening of Sterling against the
Euro.
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2024 Syndicate 4141 Annual Report and Accounts
REPORT OF THE DIRECTORS OF THE MANAGING AGENT
Gross Written Premium
Syndicate 2024 gross written premium for its principal lines of business are presented below:
Gross written premium for 2024 totalled £226.2m compared to £239.3m for 2023, a decrease of £13.1m of
which £7.5m is as a result of foreign exchange movements. The following comments refer to movements in the
year excluding the impact of foreign exchange. The total reduction in GWP of £5.6m excluding foreign exchange
is primarily driven by reductions in Accident and Health (£4.8m) General Liability (£4.0m) and Financial Lines
(£1.7m) being partially offset by increases in Contingency (£2.8m) and other classes (£2.0m).
Overall business mix remained consistent with the prior year, with the recent growth in the Energy and Marine
line of business continuing to be the largest line for the Syndicate.
Energy and Marine
Energy and Marine comprises Marine Hull, Marine Liability, Marine Cargo, Energy and Power Generation. Gross
written premium across these lines of business increased marginally from £73.7m to £74.6m where softening
market conditions were offset by new Marine Cargo and Power Generation business.
Accident and Health
Accident and Health (A&H), is principally comprised of Travel Medical business, marketed as ‘WorldTrips’,
alongside International A&H and Disability. Gross written premium was £67.3m (2023: £72.1m) primarily
relating to WorldTrips with the marginal decrease driven by the adverse impact of persistent delays in US visa
application approvals on the WorldTrips Atlas-America (US-Inbound) product as well as a change during Q3
2024 in the nature of WorldTrips business written by the Syndicate.
General Liability
General Liability comprises Employers and Public Liability business. Challenging market conditions and pressure
on rates have resulted in a decrease of 17% in gross written premium from £24.2m in 2023 to £20.2m in 2024.
Contingency
Gross written premium has increased by 23% from £12.4m to £15.2m, driven by strong renewals and new
business growth from increased product offerings within this line.
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2024 Syndicate 4141 Annual Report and Accounts
REPORT OF THE DIRECTORS OF THE MANAGING AGENT
Property
Property includes Treaty Reinsurance, Property D&F and Delegated Property. Gross written premium increased
marginally to £21.6m from £20.8m with the increase in Treaty Reinsurance of £2.3m (26%) offset by lower
premium in the other two classes.
Professional Indemnity
Gross written premium has improved by 10% from £7.9m to £8.7m mainly driven from an increase in renewals.
Financial Lines
Gross written premium has decreased by 8% from £19.7m to £18.0m largely driven by a subdued M&A market
affecting our Transaction Risk Business as well as by market softening on our core Financial Lines business.
Reinsurance
Reinsurance to cover catastrophe exposed lines is purchased by line of business across the TMHCCI insurance
platforms, and reinsurance premiums for excess of loss programmes are allocated across the platforms based
on gross written premiums of the underlying business. Reinsurance recoveries are allocated based on the share
of gross claims suffered by each entity. In addition, the Syndicate purchases quota share and facultative
reinsurance to balance line size and premium where it is prudent to do so. The Syndicate also purchases excess
of loss reinsurance across all lines of business from an affiliate (see note 26 Related Parties (b)).
Investment Policy and Management
The investment function is overseen by the Investment Committee, which operates under terms of reference
set by the Board. The Committee is responsible for preparing, in conjunction with the Syndicate’s Investment
Managers, the investment policy for approval by the Board. It is also responsible for monitoring investment
performance and recommending the appointment of Investment Managers.
The Syndicate maintains funds in US Dollars, Sterling, Canadian Dollars, Euros and Australian Dollars. Certain
national regulators have requirements for funds to be held and controlled either domestically or by Lloyd’s. The
remaining funds are referred to as unregulated funds and their investment is under the Syndicate’s control
within the framework laid down by the PRA.
New England Asset Management Ltd is the Investment Manager for the non-Lloyd’s controlled regulated funds
and unregulated funds. Each fund consists primarily of a portfolio of highly rated Corporate Bonds which are
rated BBB and above, including Bonds guaranteed by the US, UK and Canadian governments. The average
duration of the aggregate funds at the year-end was 1.30 years (2023: 1.63 years).
Review of Financial Position
The balance sheet of the Syndicate shows total assets of £465.5m (2023: £451.2m). Of the total assets, £245.3m,
52.7% (2023: £251.4m, 55.7%) was represented by financial investments and cash at bank, the decrease
reflecting both the higher underwriting profit and the offset of a high profit distribution and settlement of
affiliate balances.
The Syndicate has a Member's balance of £60.5m as at 31 December 2024 (2023: £54.4m). The increase in the
Member’s balance is principally due to the increased profit for the year of £52.0m less the payment to NameCo
of profits of £47.0m on the 2021 closed year of account.
The directors of the Managing Agent have prepared the accounts on a going concern basis which recognises the
intention of NameCo to continue to provide capital to support future underwriting activities. Member’s Funds
at Lloyd’s are further explained in Note 31 Funds at Lloyd’s. In the unlikely event that the Syndicate might not
be able to meet its obligations as they fall due, the Lloyd’s chain of security would provide support to ensure
that any remaining obligations would be met.
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2024 Syndicate 4141 Annual Report and Accounts
REPORT OF THE DIRECTORS OF THE MANAGING AGENT
Future Outlook
TMHCCI continues to consider profitable opportunities in complimentary and new lines of business, through
expansion of teams, venturing into new territories and potential acquisitions. The Syndicate continues to be an
important platform within TMHCCI which helps facilitate these opportunities. The business portfolio is diverse
and not overly reliant on one line of business.
The Syndicate continues to monitor developing risk events. These include: 1) actual or potential geopolitical
tensions around the world including Russia-Ukraine, Israel-Hamas (to which the syndicate only has limited direct
exposure on a few classes of business) and China-Taiwan with the impact on future business expected to be
limited; and 2) the increasing speed of technological advancement, such as the rising profile surrounding
generative AI. The Syndicate’s cautious investment strategy, long-term focus and a general policy of holding
investments to maturity mean that current market volatility is unlikely to cause any material long-term issues
from an investment perspective. Other indirect exposures are limited by the Syndicate’s robust operational
frameworks.
Principal Risks and Uncertainties
The Board sets risk appetite as part of the Syndicate’s business planning and capital assessment process. The
Managing Agent regularly reviews and updates the risk register and monitors performance against risk appetite
using a series of key risk indicators, which are categorised as Insurance; Strategic, Regulatory and Group;
Market; Operational; Credit; and Liquidity. The risk indicators are considered in detail in Note 5 to the accounts.
Directors
The directors of the Managing Agent, who were in office during the year and up to the date of signing the
accounts, unless otherwise stated, were:
A M Baker (resigned 30 September 2024)
D S Burke (appointed 5 June 2024)
S A Button
B J Cook
N Dattilo (Non-executive) (appointed 17 July 2024)
P Engelberg (Non-executive)
T J G Hervy
D Inoue (Non-executive) (appointed 17 July 2024)
K L Letsinger (resigned 31 December 2024)
N C Marsh (Non-executive Chair)
H Mishima (resigned 4 April 2024)
C A Scarr (Non-executive)
Ko Shimizu (resigned 4 April 2024)
K Takahiro (appointed 27 August 2024)
G R A White
Directors’ Interests
No director participated in the Syndicate.
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2024 Syndicate 4141 Annual Report and Accounts
REPORT OF THE DIRECTORS OF THE MANAGING AGENT
Financial Information on HCC Underwriting Agency Ltd
Summary financial information of the Syndicate’s Managing Agent, HCCUA, is set out below:
2024
£’000
2023
£’000
(unaudited)
(audited)
Managed capacity
225,000
225,000
Fee income
150
150
Commission income
126
613
Expenses net of recharges
(84)
(98)
Other income and expenses
25
19
FX gain/(loss)
31
(184)
Profit before tax
248
500
Net assets
1,853
4,666
A copy of the Managing Agent’s accounts will be available for inspection at its registered office.
Post Balance Sheet Events
There are no significant post balance sheet events to be disclosed.
Statement of managing agent’ responsibilities in respect of the annual report and accounts
The managing agent is responsible for preparing the annual report and accounts in accordance with applicable
law and regulation.
The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 (‘2008
Regulations’) requires the managing agent to prepare annual report and accounts for each financial year in
accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”),
and Financial Reporting Standard 103 Insurance Contracts (“FRS 103”). The annual report and accounts are
required by law to give a true and fair view of the state of affairs of the Syndicate as at that date and of its profit
or loss for that year.
In preparing the Syndicate’s annual report and accounts, the managing agent is required to:
•
select suitable accounting policies and then apply them consistently;
•
state whether applicable United Kingdom Accounting Standards, comprising FRS 102 and FRS 103 have
been followed, subject to any material departures disclosed and explained in the annual report and
accounts;
•
make judgements and accounting estimates that are reasonable and prudent; and
•
prepare the annual report and accounts on the going concern basis unless it is inappropriate to
presume that the Syndicate will continue in business.
The managing agent is 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 managing agent is responsible for safeguarding the assets of the Syndicate and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The managing agent is also 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 annual reports and accounts comply with the 2008
Regulations.
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2024 Syndicate 4141 Annual Report and Accounts
REPORT OF THE DIRECTORS OF THE MANAGING AGENT
The managing agent is responsible for the maintenance and integrity of the corporate and financial information
included on its website. Legislation in the United Kingdom governing the preparation and dissemination of
annual report and accounts may differ from legislation in other jurisdictions.
The Directors of the managing agent confirm that they have complied with the above requirements in preparing
the Syndicate’s annual report and accounts.
Independent Auditors
Deloitte LLP have been appointed as auditors to replace PricewaterhouseCoopers LLP who are resigning as
auditors to certain companies within TMHCCI as part of auditor rotation requirements.
Annual General Meeting
The directors do not propose to hold a Syndicate Annual General Meeting during 2025, as permitted under the
Syndicate Meetings (Amendment No. 1) Byelaw (No. 18 of 2000).
The capacity provider may object to the matter set out above within 21 days of the issue of these accounts. Any
such objection should be addressed to J L Holliday, Company Secretary, at the registered office.
Approved for and on behalf of HCC Underwriting Agency Ltd.
B J Cook
Director
26 February 2025
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Independent auditors’ report to the
member of Syndicate 4141
Report on the audit of the syndicate annual accounts
Opinion
In our opinion, 4141’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 2.0 as modified by the
Frequently Asked Questions issued by Lloyd’s 1.1 (“the Lloyd’s Syndicate Instructions”).
We have audited the syndicate annual accounts included within the Annual Report and Accounts (the
“Annual Report”), which comprise: the Balance Sheet as at 31 December 2024; the Statement of Profit
and Loss Account: Technical Account - general Business, the statement of Profit and Loss Account:
Non-Technical Account, the statement of Cash Flows and the Statement of Changes in Members’
Balances for the year then ended; and the notes to the syndicate annual accounts, which include a
description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”), The
Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, the
Lloyd’s Syndicate Instructions and other applicable law. Our responsibilities under ISAs (UK) are further
described in the Auditors’ responsibilities for the audit of the syndicate annual accounts section of our
report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Independence
We remained independent of the syndicate in accordance with the ethical requirements that are relevant
to our audit of the syndicate annual accounts in the UK, which includes the FRC’s Ethical Standard, as
applicable to other entities of public interest, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s
Ethical Standard were not provided.
Other than those disclosed in note 7, we have provided no non-audit services to the syndicate in the
period under audit.
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2024 Syndicate 4141 Annual Report and Accounts
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2024 Syndicate 4141 Annual Report and Accounts
Independent auditors’ report to the
member of Syndicate 4141
Conclusions relating to going concern
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the syndicate’s ability
to continue as a going concern for a period of at least twelve months from when the syndicate annual
accounts are authorised for issue.
In auditing the syndicate annual accounts, we have concluded that the Managing Agent’s use of the
going concern basis of accounting in the preparation of the syndicate annual accounts is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a
guarantee as to the syndicate's ability to continue as a going concern.
Our responsibilities and the responsibilities of the Managing Agent with respect to going concern are
described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the syndicate
annual accounts and our auditors’ report thereon. The Managing Agent is responsible for the other
information. Our opinion on the syndicate annual accounts does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in
this report, any form of assurance thereon.
In connection with our audit of the syndicate annual accounts, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
syndicate annual accounts or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If we identify an apparent material inconsistency or material misstatement, we are required
to perform procedures to conclude whether there is a material misstatement of the syndicate annual
accounts or a material misstatement of the other information. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report based on these responsibilities.
With respect to the Report of the Directors of the Managing Agent (the “Managing Agent’s Report”), we
also considered whether the disclosures required by The Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008 have been included.
Based on our work undertaken in the course of the audit, The Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008 requires us also to report certain opinions and
matters as described below.
Managing Agent’s Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the
Managing Agent’s Report for the year ended 31 December 2024 is consistent with the syndicate annual
accounts and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the syndicate and its environment obtained in the course
of the audit, we did not identify any material misstatements in the Managing Agent’s Report.
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2024 Syndicate 4141 Annual Report and Accounts
Independent auditors’ report to the
member of Syndicate 4141
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 in respect of the Annual
Reports, 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 valuation of pipeline premiums and insurance claims outstanding. Audit procedures
performed by the engagement team included:
●
Discussions with the Board, management, internal audit, senior management involved in the
Risk and Compliance functions and Syndicate's legal function, including consideration of known or
suspected instances of non-compliance with laws and regulation and fraud;
●
Reading key correspondence with the Prudential Regulation Authority and the Financial
Conduct Authority in relation to compliance with relevant laws and regulations;
●
Reviewing relevant meeting minutes including those of the Audit Committee;
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2024 Syndicate 4141 Annual Report and Accounts
Independent auditors’ report to the
member of Syndicate 4141
●
Identifying and testing journal entries, in particular any journal entries posted with unusual
account combinations or posted by senior management;
●
Challenging assumptions and judgements made by management when determining their
significant accounting estimates, in particular in relation to valuation of the IBNR component of
claims outstanding and pipeline premium;
●
Designing audit procedures to incorporate unpredictability around the nature, timing or extent
of our testing; and
●
Testing any transactions entered into outside of the normal course of the Syndicate’s
business.
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
’
s 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.
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2024 Syndicate 4141 Annual Report and Accounts
Independent auditors’ report to the
member of Syndicate 4141
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.
Philip Watson (Senior statutory auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
26 February 2025
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2024 Syndicate 4141 Annual Report and Accounts
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME:
TECHNICAL ACCOUNT – GENERAL BUSINESS
For the year ended 31 December 2024
Note
2024
£000
2023
£000
Gross premiums written
6
Outwards reinsurance premiums
(48,024 )
(47,116 )
Premiums written, net of reinsurance
Changes in unearned premium
Change in the gross provision for unearned premiums
20
(5,154 )
(6,338 )
Change
in
the
provision
for
unearned
premiums
reinsurers’ share
20
Net change in provisions for unearned premiums
(3,536 )
(2,917 )
Earned premiums, net of reinsurance
Allocated investment return transferred from the
non-technical account
Claims paid
Gross amount
6,20
(81,294 )
(98,756 )
Reinsurers’ share
20
Net claims paid
(47,528 )
(71,621 )
Change in the provision for claims
Gross amount
6,20
Reinsurers’ share
20
(6,483 )
(16,049 )
Net change in provisions for claims
(4,182 )
Claims incurred, net of reinsurance
(51,710 )
(71,157 )
Net operating expenses
7
(83,008 )
(88,870 )
Balance on the technical account - general business
All amounts relate to continuing operations
.
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STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (CONT’D):
NON-TECHNICAL ACCOUNT
For the year ended 31 December 2024
Note
2024
£000
2023
£000
Balance on the technical account – general business
Investment income
10
Realised losses on investments
10
(1,122 )
(1,865 )
Unrealised (losses)/gains on investments
10
(1,993 )
Investment expenses and charges
10
(205 )
(209 )
Total investment return
Allocated investment return transferred to the general business technical account
10
(8,532 )
(5,140 )
Gain/(loss) on foreign exchange
(1,339 )
Profit for the financial year
Other comprehensive income:
Currency translation gain/(loss)
(1,925 )
Total comprehensive income for the year
The accompanying notes from page 22 to 54 form an integral part of these financial statements.
17
2024 Syndicate 4141 Annual Report and Accounts
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18
2024 Syndicate 4141 Annual Report and Accounts
BALANCE SHEET
As at 31 December 2024
ASSETS
Note
2024
£000
2023
£000
Investments
Other Financial investments
Deposits with ceding undertakings
12
Reinsurers’ share of technical provisions
Provision for unearned premiums
Claims outstanding
20
20
Debtors
Debtors arising out of direct insurance operations
Debtors arising out of reinsurance operations
Other debtors
14
15
16
Other assets
Cash at bank and in hand
24
Prepayments and accrued income
Accrued interest and rent
Deferred acquisition costs
17
Total assets
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19
2024 Syndicate 4141 Annual Report and Accounts
BALANCE SHEET
As at 31 December 2024
LIABILITIES
Note
2024
£000
2023
£000
Capital and reserves
Members’ balances
Total Capital and reserves
Technical provisions
Provision for unearned premiums
20
Claims outstanding
20
Creditors
Creditors arising out of direct insurance
21
Operations
Creditors arising out of reinsurance operations
22
Other creditors including taxation and social security
23
Accruals and deferred income
Total liabilities
Total liabilities, capital and reserves
The Balance Sheet should be read in conjunction with the accompanying notes.
The Syndicate accounts on pages 16 to 54 were approved by the Board of HCC Underwriting Agency Ltd and
signed on its behalf by
T J G Hervy
Director
26 February 2025
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20
2024 Syndicate 4141 Annual Report and Accounts
STATEMENT OF CHANGES IN MEMBER’S BALANCE
For the year ended 31 December 2024
2024
£000
2023
£000
Member’s balance brought forward at 1 January
Total comprehensive income for the year
Payments of profit to member’s personal reserve funds
(46,997 )
Losses collected in relation to distribution on closure of underwriting year
Member’s balance carried forward at 31 December
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21
2024 Syndicate 4141 Annual Report and Accounts
STATEMENT OF CASH FLOWS
Note
2024
£000
2023
£000
Cash flows from operating activities
Profit for the financial year
Adjustments:
Increase/(decrease) in net technical provisions
(3,510 )
(Increase)/decrease in debtors
(20,478 )
Increase in creditors
Movement in other assets/liabilities
(1,023 )
Investment return
(6,539 )
(11,321 )
Other movements - foreign currency (gain)/loss on
(4,696 )
translation
Net cash flows from operating activities
Cash flows from investing activities
Purchase of debt instruments
(39,080 )
(98,265 )
Maturity of debt instruments
Investment income received
Net cash flows from investing activities
(54,966 )
Cash flows from financing activities
Distribution (paid)/funding contribution received
(46,997 )
Net cash flows from financing activities
(46,997 )
Net (decrease)/increase in cash and cash
(16 )
equivalents
Cash and cash equivalents at the beginning of the
24
year
Foreign exchange on cash and cash equivalents
(89 )
Cash and cash equivalents at the end of the year
24
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22
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
1.
GENERAL INFORMATION
Syndicate 4141 (‘the Syndicate’) is a fully aligned Syndicate managed by HCCUA which is authorised by the
PRA and regulated by both the FCA and the PRA. The principal activity of the Syndicate remains the
transaction of general insurance and reinsurance business in the United Kingdom and it operates solely
within the Lloyd’s market from its offices in London. HCCUA is a private company limited by shares and is
incorporated in England. The address of its registered office is 1 Aldgate, London EC3N 1RE.
2.
STATEMENT OF COMPLIANCE
These annual accounts have been prepared in accordance with Regulation 5 of The Insurance Accounts
Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and Accounting Standards in the
United Kingdom, including Financial Reporting Standard 102, ‘The Financial Reporting Standard applicable in
the United Kingdom and the Republic of Ireland’ (FRS 102) and Financial Reporting Standard 103, ‘Insurance
Contracts’ (FRS 103). The general result is determined on an annual basis of accounting.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these accounts are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
a.
Basis of preparation
The financial statements have been prepared in accordance with the Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, applicable Accounting Standards in the
United Kingdom and the Republic of Ireland, including Financial Reporting Standard 102 (FRS 102),
Financial Reporting Standard 103 (FRS 103) in relation to insurance contracts, and the Lloyd’s Syndicate
Accounts Instructions Version 2.1 as modified by the Frequently Asked Questions Version 1.1 issued by
Lloyd’s.
The preparation of accounts in conformity with FRS 102 and FRS 103 requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying
the Syndicate’s accounting policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the accounts are disclosed in Note 4.
b.
Going concern
As part of the preparation of these accounts the directors of HCCUA have considered whether the
Syndicate will be able to continue to be a going concern for at least 12 months from the date that these
accounts are approved.
Consideration was given to the adequacy of the Syndicate’s capital and liquidity based on the 2025
Syndicate Business Forecast and included stress testing and reverse stress testing as part of the ORSA
process as well as stress tests performed by the Syndicate’s investment managers. In the light of the
above the Board concluded that there were no material uncertainties that would cast doubt on the
ability of the Syndicate to continue as a going concern for at least 12 months from the date of approval
of these accounts.
c.
Foreign currency
Functional and presentation currency
The Syndicate’s functional currency is US Dollars and consistent with prior years the presentation currency
is Sterling as required by Lloyd’s. Foreign currency transactions are recorded using the spot exchange rates
at the dates of the transactions into the functional currency. At each period end, foreign currency
monetary assets and liabilities are revalued using the closing rate. For this purpose, all assets and liabilities
arising from insurance contracts (including unearned premiums, deferred acquisition costs and unexpired
risks provisions) are considered to be monetary items.
Differences arising on the revaluation of foreign currency amounts to the functional currency are
recognised in the non-technical Profit and Loss Account. The foreign currency exchange arising upon
translation from functional currency to presentational currency is recognised in other comprehensive
income.
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2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
The foreign exchange rates used for translation to the presentation currency are set out below:
a)
Assets and liabilities at the closing rate at the balance sheet date which for Sterling was £1 =
US$1.2567 (2023: US$1.2732); and
b)
Income and expenses at monthly rates during the year. The average rate for the year for Sterling was
£1 = US$1.28 (2023: US$1.24).
d.
Insurance contracts
i.
Classification of insurance and investment contracts
The Syndicate issues insurance contracts that transfer significant insurance risk. The Syndicate does
not issue investment contracts that transfer financial risk.
ii.
Insurance contracts
Results are determined on an annual basis whereby the incurred cost of claims, commission and
related expenses are charged against the earned proportion of premiums, net of reinsurance, as
follows:
a.
Premiums written
Premiums written relate to business incepted during the year, together with adjustments made
in the year to premiums written in prior accounting periods. Premiums are shown gross of
brokerage payable and exclude taxes and duties levied on them. Estimates are made for
unreported, or pipeline, premiums representing amounts due to the Syndicate not yet notified.
b.
Unearned premiums
Unearned premiums represent the proportion of premiums written in the year that relate to
unexpired terms of policies in force at the balance sheet date, calculated on a time
apportionment/risk profile basis.
c.
Acquisition costs
Acquisition costs, which represent commission and other related expenses, are deferred over
the period in which the related premiums are earned. No profit commission is incurred by the
Managing Agent.
d.
Claims incurred
Claims incurred comprise claims and related expenses paid in the year and changes in the
provisions for outstanding claims, including provisions for claims incurred but not reported and
related expenses, together with any other adjustments to claims from previous years.
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24
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
e.
Claims provisions and related reinsurance recoveries
Provision is made at the year-end for the estimated cost of claims incurred but not settled at
the balance sheet date, including the cost of claims incurred but not yet reported to the
Syndicate. The estimated cost of claims includes expenses to be incurred in settling claims. The
Syndicate takes all reasonable steps to ensure that it has appropriate information regarding its
claims exposures. However, given the uncertainty in establishing claims provisions, it is likely
that the final outcome will prove to be different from the original liability established. Gross
claims provisions are calculated gross of any reinsurance recoveries.
The estimate of claims incurred but not reported (‘IBNR’) is generally subject to a greater
degree of uncertainty than the estimate of the cost of settling claims already notified to the
Syndicate, where more information about the claim event is generally available. Claims IBNR
often may not be apparent to the insured until many years after the event giving rise to the
claim has happened. Classes of business where the IBNR proportion of the total reserve is high
will typically display greater variations between initial estimates and final outcomes because of
the greater degree of difficulty of estimating these reserves. Classes of business where claims
are typically reported relatively quickly after the claim event tend to display lower levels of
volatility. In calculating the estimated cost of unpaid claims, the Syndicate uses a variety of
estimation techniques, generally based upon statistical analysis of historical experience, which
assumes that the development pattern of the current claims will be consistent with past
experience. Allowance is made for changes or uncertainties which may create distortions in the
underlying statistics, or which might cause the cost of unsettled claims to increase or reduce
when compared with the cost of previously settled claims including:
•
changes in Syndicate processes which might accelerate or slow down the development
and/or recording of paid or incurred claims compared with the statistics from previous
periods;
•
changes in the legal environment;
•
the effects of inflation;
•
changes in the mix of business;
•
the impact of large claims; and
•
movements in industry benchmarks.
A component of these estimation techniques is usually the estimation of the cost of notified
but not paid claims. In estimating the cost of these, the Syndicate has regard to the claim
circumstance as reported, any information available from loss adjusters and information on
the cost of settling claims with similar characteristics in previous periods.
Large claims impacting each relevant business class are generally assessed separately, being
measured on a case by case basis and projected separately, in order to allow for the possible
distortive effect of the development and incidence of these large claims.
Where possible, the Syndicate adopts multiple techniques to estimate the required level of
provisions. This assists in giving greater understanding of the trends inherent in the data being
projected. The projections given by the various methodologies also assist in setting the range
of possible outcomes. The most appropriate estimation technique is selected taking into
account the characteristics of the business class and the extent of the development of each
accident year.
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25
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
Reinsurance
Reinsurance to cover catastrophe exposed lines or lines with unbalanced line size to premium
is purchased on a shared basis for the international insurance entities. Reinsurance premiums
on excess of loss programmes are allocated across TMHCCI International platforms based on
gross written premiums. Reinsurance recoveries are allocated based on the share of gross
claims suffered by each carrier. Reinsurance to cover catastrophe exposed lines is purchased
by line of business across the TMHCCI insurance platforms, and reinsurance premiums for
excess of loss programmes are allocated across the platforms based on gross written
premiums of the underlying business. Reinsurance recoveries are allocated based on the share
of gross claims suffered by each entity. Purchases of the shared reinsurance programme are
advised to both Lloyd’s and the PRA. In addition, the Syndicate purchases quota share and
facultative reinsurance to balance line size and premium where it is prudent to do so. Since
the beginning of 2021, the Syndicate has purchased excess of loss reinsurance, across all lines
of business, from an affiliate.
e.
Taxation
The reinsurers’ share of claims incurred in the Profit and Loss Account reflects the amounts
received or receivable from reinsurers in respect of those claims incurred during the year.
Reinsurance liabilities are primarily premiums payable for reinsurance contracts and are
recognised in the Profit and Loss Account as “outwards reinsurance premiums”.
Unexpired risks provision
Provisions are made for any deficiencies arising when unearned premiums, net of associated
acquisition costs, are insufficient to meet expected claims and expenses after taking into
account future investment return on the investments supporting the unearned premiums
provision and unexpired risks provision. The expected claims are calculated based on
information available at the balance sheet date including events covered by the Syndicate’s in
force event cancellation policies that were due to take place after that date that had already
been cancelled or postponed resulting in a loss to the policyholder.
Unexpired risk surpluses and deficits are offset where business classes are managed together,
and a provision is made if an aggregate deficit arises. The unexpired risks provision would be
included within ‘Other technical provisions’.
Subrogation and salvage
Recoveries arising out of subrogation or salvage are estimated on a prudent basis and included
within ‘Other debtors’.
Under Schedule 19 of the Finance Act 1993, the Syndicate is not a taxable entity. Corporation tax is
accounted for and payable by the Syndicate’s corporate member, Nameco (No. 808) Limited (‘Nameco’).
For US tax purposes, no provision has been made for any United States Federal Income Tax payable on
underwriting results or investment earnings. Any tax payments made or suffered by the Syndicate
during the year are transferred to Nameco.
f.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly
liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts,
when applicable, are shown within borrowings in current liabilities.
g.
Provisions
Provisions are recognised when:
•
the Syndicate has a present legal or constructive obligation as a result of past events;
•
it is probable that an outflow of resources will be required to settle the obligation; and
•
the amount of the obligation can be estimated reliably.
Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is recognised even
if the likelihood of an outflow with respect to any one item included in the same class of obligations might
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26
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
be small. Provisions for levies are recognised on the occurrence of the event identified by legislation that
triggers the obligation to pay the levy.
h.
Financial instruments
The Syndicate has adopted FRS 102 relating to fair value hierarchy disclosures and applied the recognition
and measurement provisions of IAS 39 (as adopted for use in the UK) and the disclosure requirements of
FRS 102 in respect of financial instruments.
i.
Financial assets
The Syndicate classifies its financial assets into the following categories:
•
Shares and other variable yields securities and units in unit trusts – at fair value through profit or
loss;
•
Debt securities and other fixed-income securities – at fair value through profit or loss; and
•
Loans and receivables.
Management determines the classification of its investments at initial recognition and re-evaluates this at
each reporting date.
Financial assets designated at fair value through profit and loss at inception are those that are managed
and whose performance is evaluated on a fair value basis. Information about these financial assets is
provided internally on a fair value basis to the Syndicate’s key management personnel. The Syndicate’s
investment strategy is to invest in fixed and variable interest rate debt securities and units in unit trusts.
The fair values of financial instruments traded in active markets are based on quoted bid prices on the
balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from
an exchange, dealer, broker, industry group, pricing service or regulatory agency; and those prices
represent actual and regularly occurring market transactions on an arm’s length basis.
The fair values of financial instruments that are not traded in an active market (for example, corporate
bonds), are established by the directors using valuation techniques which seek to arrive at the price at
which an orderly transaction would take place between market participants. Net gains or losses arising
from changes in the fair value of financial assets at fair value through profit or loss are presented in the
Profit and Loss Account within ‘Unrealised gains on investments’ or ‘Unrealised losses on investments’ in
the period in which they arise.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market, other than those that the Syndicate intends to sell in the short term or
that it has designated at fair value through profit or loss. Loans and receivables are subsequently
measured at amortised cost using the effective interest rate method. Receivables arising from insurance
contracts are also classified in this category and are reviewed for impairment as part of the impairment
review of loans and receivables. This basis of valuation is viewed by the directors as having prudent regard
to the likely realisable value.
j.
Impairment of financial assets
For financial assets not at fair value, the Syndicate assesses at each balance sheet date whether there is
objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group
of financial assets is impaired and impairment losses are incurred only if there is objective evidence of
impairment as a result of one or more events that have occurred after the initial recognition of the asset
(a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the
financial asset or group of financial assets that can be reliably estimated. Objective evidence that a
financial asset or group of assets is impaired includes observable data that comes to the attention of the
Syndicate about the following events:
•
significant financial difficulty of the issuer or debtor;
•
a breach of contract such as a default or delinquency in payments;
•
it becoming probable that the issuer or debtor will enter bankruptcy or other financial
reorganisation;
•
the disappearance of an active market for that financial asset because of financial difficulties; or
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27
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
•
observable data indicating that there is a measurable decrease in the estimated future cash flow from
a group of financial assets since the initial recognition of those assets, although the decrease cannot
yet be identified with the individual financial assets in the group, including:
o
adverse changes in the payment status of issuers or debtors in the group; or
o
national or local economic conditions that correlate with defaults on the assets in the
Syndicate.
The Syndicate first assesses whether objective evidence of impairment exists individually for financial
assets that are individually significant. If the Syndicate determines that no objective evidence of
impairment exists for an individually assessed financial asset, whether significant or not, then it includes
the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them
for impairment. Assets that are individually assessed for impairment and for which an impairment loss is
or continues to be recognised are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss has been incurred on loans and receivables the
amount of the loss is measured as the difference between the asset carrying amount and the present
value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The
carrying amount of the asset is reduced and the amount of the loss is recognised in the Profit and Loss
Account for the period. As a practical expedient, the Syndicate may measure impairment on the basis of
an instrument’s fair value using an observable market price.
For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of
similar credit risk characteristics (i.e. on the basis of the Syndicate’s grading process that considers asset
type, industry, geographical location, past-due status and other relevant factors). Those characteristics
are relevant to the estimation of future cash flows for groups of such assets by being indicative of the
issuer’s ability to pay all amounts due under the contractual terms of the debt instrument being evaluated.
If in a subsequent period the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised (such as improved credit rating),
the previously recognised impairment loss is reversed through the Profit and Loss Account for the period.
k.
Financial liabilities
Creditors are financial liabilities and are recognised initially at fair value, net of directly attributable
transaction costs. Long-term creditors are subsequently stated at amortised cost, using the effective
interest method.
l.
Investment return
Interest income is recognised using the effective interest rate method. Investment expenses are
accounted for on an accruals basis.
Realised gains and losses on investments carried at fair value through profit and loss are calculated as the
difference between net sales proceeds and purchase price. Movements in unrealised gains and losses on
investments represent the difference between the fair value at the balance sheet date and their purchase
price and their fair value at the last balance sheet date, together with the reversal of unrealised gains and
losses recognised in earlier accounting periods in respect of investment disposals in the current period.
Investment return is initially recorded in the Non-Technical Account and then earned investment return
is transferred to the Technical Account.
m.
Distributions to Member
Distributions to its Member are made in the year following the year a reporting year of account closes,
which is generally three years after inception of the Reporting Year of Account.
n.
Related party transactions
The Syndicate discloses transactions with related parties. Where appropriate, transactions of a similar
nature are aggregated unless, in the opinion of the directors, separate disclosure is necessary to
understand the effect of the transactions on the Syndicate’s accounts.
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28
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
4.
CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINTY
Judgements and estimates are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
Significant estimates
Estimation of the ultimate net claims incurred from the issuance of insurance contracts involves assumptions
concerning the future, and the resulting accounting estimates will, by definition, seldom equal the related
actual results. The assumptions used in making estimates that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
i.
The ultimate liability arising from claims made under insurance contracts
The estimate of the ultimate liability arising from claims made under insurance contracts is the
Syndicate’s most critical accounting estimate. The carrying amount of the claims outstanding, net of
reinsurance, is £130.6m (2023: £130.5m), see Note 20 Technical Provisions for net claims outstanding.
There are many sources of uncertainty that need to be considered in the estimate of the liability that the
Group will ultimately pay for such claims. The level of provision has been set on the basis of the
information that is currently available, including potential outstanding loss advice, experience of
development of similar claims, historical experience, case law and legislative and judicial actions.
Full analyses of reserves take place at least annually. During the full analyses, attritional claims and large
losses gross and net of reinsurance are projected to ultimate using the following four standard actuarial
methods: Paid Chain Ladder, Incurred Chain Ladder, Incurred Bornhuetter-Ferguson and Loss Ratio
method. The method selected depends on the accident or underwriting year, gross or net of reinsurance
perspective and the line of business. Generally, for more developed years, the Incurred Chain Ladder is
used and for less developed years, the Incurred Bornhuetter-Ferguson method is used. For the years
where the Incurred Bornhuetter-Ferguson or Loss Ratio method is used, the ultimate claim projected is
sensitive to the Initial Expected Ultimate Loss Ratio assumption (also referred to as the ‘prior loss ratio’
assumption).
The most significant assumptions made relate to the level of future claims, the level of future claims
settlements and the legal interpretation of insurance policies. Whilst the directors consider that the gross
provision for claims and the related reinsurance recoveries are fairly stated on the basis of the information
currently available to them, the ultimate liability will vary as a result of subsequent information and events
and may result in significant adjustments to the amount provided. Adjustments to the amounts of
provision are reflected in the accounts for the period in which the adjustments are made. The methods
used and the estimates made are reviewed regularly. Additional qualitative judgement is used to assess
the extent to which past trends may not apply in the future in order to arrive at a point estimate for the
ultimate cost of claims that represents the likely outcome. See Note 19 Claims Development for loss
development triangles.
ii.
Fair value of financial instruments
The fair value of financial instruments traded in active markets is based on quoted bid prices at the balance
sheet date. If quoted prices are not readily available, observable prices for recent arm’s length
transactions for an identical asset are used to determine its fair value. The carrying value of these
instruments is £208.6m (2023: £234.0m), see Note 13 Fair Value Estimation for pricing basis. The
Syndicate uses its judgement to select a variety of methods and make assumptions that are mainly based
on market conditions existing at the end of each reporting period.
iii.
Pipeline premium
The Syndicate makes an estimate of premiums written on a policy by policy basis. Pipeline premium is the
difference between estimated premium and booked premium. For the majority of lines written, premium
is adjusted to equal booked premium two years post expiry. Pipeline premium is recorded within gross
written premium and an assessment is made of the related unearned premium provision and an estimate
of claims incurred but not reported in respect of the earned element. The pipeline premium included
within gross written premium is £42.9m (2023: £36.3m). There are no significant judgements made in
applying the accounting policies.
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2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
5.
RISK MANAGEMENT
The Syndicate has identified the risks arising from its activities and has established policies and procedures
to manage these risks in accordance with its risk appetite. The Syndicate categorises its risks into seven
areas: Insurance; Strategic, Regulatory and Group; Market; Operational; Credit, Liquidity and Sustainability.
The sections below outline the Syndicate’s risk appetite and explain how it defines and manages each
category of risk.
5.1
Insurance risk
The Syndicate’s insurance business assumes the risk of loss from persons or organisations that are
themselves directly exposed to an underlying loss. Insurance risk arises from this risk transfer due to
inherent uncertainties about the occurrence, amount and timing of insurance liabilities. The four key
components of insurance risk are underwriting including delegated authorities, reinsurance purchasing,
claims management and reserving. Each element is considered below.
i.
Underwriting risk
Underwriting risk relates to the potential claims arising from inadequate underwriting. There are four
elements that apply to all insurance products offered by the Syndicate:
•
cycle risk – the risk that business is written without full knowledge as to the (in)adequacy of rates, terms
and conditions;
•
event risk – the risk that individual risk claims or catastrophes lead to claims that are higher than
anticipated in plans and pricing;
•
pricing risk – the risk that the level of expected loss is understated in the pricing process; and
•
expense risk – the risk that the allowance for expenses and inflation in pricing is inadequate.
The Syndicate manages and models these four elements in the following three categories; attritional
claims, large claims and catastrophe events.
The Syndicate’s underwriting strategy is to seek a diverse and balanced portfolio of risks in order to limit
the variability of outcomes. This is achieved by accepting a spread of business over time, segmented
between different products, geographies and sizes.
To manage underwriting exposures, the Syndicate has developed limits of authority and business plans
which are binding upon all staff authorised to underwrite and are specific to underwriters, classes of
business and industry.
These authority limits are enforced through a comprehensive sign-off process for underwriting
transactions including an escalation process for all risks exceeding individual underwriters’ authority
limits. Exception reports are also run regularly to monitor compliance and a rigorous peer and external
review process are in place.
Rate monitoring, including risk adjusted rate change and adequacy against benchmark rates, are
recorded and reported.
The annual Syndicate Business Forecast (‘SBF’) incorporates the Syndicate’s underwriting strategy by line
of business and sets out the classes of business, the territories and the industry sectors in which business
is to be written. The SBF is approved by the directors.
The underwriters calculate premiums for risks written based on a range of criteria tailored specifically to
each individual risk. These factors include, but are not limited to, the financial exposure, loss history, risk
characteristics, limits, deductibles, terms and conditions and acquisition expenses using rating and other
models.
The Syndicate also recognises that insurance events are, by their nature, random and the actual number
and size of events during any one year may vary from those estimated using established statistical
techniques.
To address this, the Syndicate sets out its risk appetite (expressed as Probable Maximum Loss estimates
(‘PML’) and modelled return period events) in certain territories as well as a range of events such as
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2024 Syndicate 4141 Annual Report and Accounts
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natural catastrophes and specific scenarios which may result in large industry claims. As part of the
Lloyd’s market, this is monitored through regular calculation and reporting of Realistic Disaster Scenarios
(‘RDS’) to Lloyd’s. Additionally, the aggregated position is monitored at the time of underwriting a risk
and reports are regularly produced to highlight the key aggregations to which the Syndicate is exposed.
The Syndicate uses a number of modelling tools to monitor its exposures against the agreed risk appetite
set and to simulate catastrophe claims in order to measure the effectiveness of its reinsurance
programmes. Stress and scenario tests are also run using these models.
One of the largest types of event exposure relates to natural catastrophe events such as windstorms or
earthquakes. Where possible, the Syndicate measures geographic accumulations and uses its knowledge
of the business, historical loss behaviour and commercial catastrophe modelling software to assess the
expected range of claims at different return periods. Upon application of the reinsurance coverage
purchased, the key gross and net exposures are calculated on the basis of extreme events at a range of
return periods.
The Syndicate’s catastrophe risk appetite set by the directors is limited to a gross PML aggregate of no
more than 200% of Capital and for a probability of gross catastrophe event exceeding 50% of Capital of
less than 1%. Additionally, the appetite for non-modelled risk and other potential non-natural
catastrophe perils is included within the catastrophe appetites noted above.
The Syndicate continues to monitor developing risk events. These include: 1) actual or potential
geopolitical tensions around the world including Russia-Ukraine, Israel-Hamas and China-Taiwan; and 2)
the increasing speed of technological advancement, such as the rising profile surrounding generative AI
and the use of Deepfakes being used to spread misinformation which raises global security threat levels
in an already volatile geographical climate. Regarding the current conflicts between Russia-Ukraine and
Israel-Hamas, the impact on the Syndicate continues to be limited with only a few classes of business
having direct exposure. The main indirect exposure has been market volatility driven by the continuing
economic impacts arising from these situations, However, the Syndicate’s cautious investment strategy,
long-term focus and a general policy of holding investments to maturity mean that the current state of
affairs is unlikely to cause any material long-term issues from an investment perspective. Other indirect
exposures are limited by the Syndicate’s robust operational frameworks. The impact of the conflicts on
future business is expected to remain limited.
ii.
Reinsurance risk
Reinsurance risk arises where reinsurance contracts:
•
do not perform as anticipated;
•
result in coverage disputes; or
•
prove inadequate in terms of the vertical or horizontal limits purchased.
Failure of a reinsurer to pay a valid claim is considered a credit risk which is detailed in the credit risk
section (see Note 5.5).
The purchase of reinsurance is a key tool utilised to manage underwriting risk. The Syndicate’s
reinsurance programme is comprised predominantly of excess of loss cover. Prior to placement of the
programme, it is modelled against significant historic and modelled events across the peak exposure
areas. The programme is purchased on a class of business basis, modelling catastrophe, large and
attritional claims separately. Since 2021, the Syndicate has purchased excess of loss reinsurance, across
all lines of business, from an affiliate.
Consideration is given to a number of factors when setting minimum retention including the Annual
Aggregate Loss (‘AAL’) for catastrophe exposed lines. Where market opportunity allows, additional
reinsurance is purchased. Quota share and facultative reinsurance is also utilised where considered
appropriate. The Tokio Marine HCC Reinsurance Security Policy Committee examines and approves all
reinsurers to ensure that they possess suitable security. The Syndicate’s reinsurance team ensures that
these guidelines are followed, undertakes the administration of reinsurance contracts and monitors and
instigates our responses to any erosion of the reinsurance programmes.
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2024 Syndicate 4141 Annual Report and Accounts
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iii.
Claims management risk
Claims management risk may arise within the Syndicate in the event of inaccurate or incomplete case
reserves and claims settlements, poor service quality or excessive claims handling costs. These risks may
damage the Syndicate brand and undermine its ability to win and retain business or incur punitive
damages. These risks can occur at any stage of the claim life cycle.
The Syndicate’s claims teams are focused on delivering quality, reliability and speed of service to both
internal and external clients. Their aim is to adjust, and process claims in a fair, efficient and timely
manner, in accordance with the policy’s terms and conditions, the regulatory environment and the
business’ broader interests. Prompt and accurate case reserves are set for all known claims liabilities,
including provisions for expenses, as soon as a reliable estimate can be made of the claims liability.
Sensitivity to insurance risk
The liabilities established could be significantly lower or higher than the ultimate cost of settling the
claims arising. This level of uncertainty varies between the classes of business and the nature of the risk
being underwritten and can arise from developments in case reserving for large losses and catastrophes,
or from changes in estimates of claims IBNR.
The following table presents the sensitivity of the value of insurance liabilities disclosed in the accounts
to potential movements in the assumptions applied within the technical provisions. Given the nature of
the business underwritten by the Syndicate, the approach to calculating the technical provisions for each
class can vary and as a result the sensitivity performed is to apply a beneficial and adverse risk margin to
the total insurance liability.
General insurance business sensitivities as at 31 December 2024
Sensitivity
+5.0%
£000
-5.0%
£000
Claims outstanding – gross of reinsurance
10,878
(10,878)
Claims outstanding – net of reinsurance
6,528
(6,528)
General insurance business sensitivities as at 31 December 2023
Sensitivity
+5.0%
£000
-5.0%
£000
Claims outstanding – gross of reinsurance
11,008
(11,008)
Claims outstanding – net of reinsurance
6,524
(6,524)
iv.
Reserving risk
Reserving risk occurs within the Syndicate where established insurance liabilities are
insufficient through inaccurate forecasting, or where there is inadequate allowance for expenses and
reinsurance bad debts.
The objective of the Syndicate’s reserving policy is to produce accurate and reliable estimates that are
consistent over time and across classes of business. The Syndicate’s reserving process is governed by the
IBNR Committee, a subcommittee of the Board, which meets on a quarterly basis (more frequently if
catastrophic events require). The membership of the IBNR Committee is comprised of executives,
actuarial, claims and finance representatives. A fundamental part of the reserving process involves
information from and recommendations by each underwriting team for each underwriting year and
reserving class of business. These estimates are compared to the actuarial estimates and management’s
best estimate of IBNR is recorded. It is the policy of the Syndicate to carry, at a minimum, the actuarial
best estimate. It is not unusual for management’s best estimate to be higher than the actuarial best
estimate.
The actuarial reserving team uses a range of recognised techniques to project current paid and incurred
claims and monitors claim development patterns. This analysis is then supplemented by a variety of tools
including back testing, scenario testing, sensitivity testing and stress testing. In particular, high level
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2024 Syndicate 4141 Annual Report and Accounts
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sensitivity testing on the impact of changes in future inflation rates has been carried out. An external
independent actuary also performs an annual review to produce a statement of actuarial opinion. The
actuarial analysis considers information drawn from across TM HCC International, allowing the Syndicate
to benefit, where appropriate, from the use of a larger pool of data that is available from its portfolio in
isolation. This mitigates the potential for volatility and data sparseness from considering solely the
comparatively small Syndicate portfolio, noting that there is a common business operating model across
all TM HCC International subsidiary companies.
5.2
Strategic, regulatory and group risk
The Syndicate manages strategic, regulatory and group risk together. Each element is considered below.
i.
Strategic risk
This is the risk that the Syndicate’s strategy is inappropriate or that the Syndicate is unable to
implement its strategy. Where an event exceeds the Syndicate’s strategic plan, this is escalated at the
earliest opportunity through the Syndicate’s monitoring tools and governance structure to the Board
of directors.
On a day-to-day basis, the Syndicate’s management structure encourages organisational flexibility and
adaptability, while ensuring that activities are appropriately coordinated and controlled. By focusing
on the needs of customers and demonstrating both progressive and responsive abilities, staff,
management and outsourced service providers are expected to excel in service and quality. Individuals
and teams are also expected to transact their activities in an open and transparent way. These
behavioural expectations reaffirm low risk tolerance by aligning interests to ensure that routine
activities, projects and other initiatives are implemented to benefit and protect resources of both local
business segments and the Syndicate as a whole.
ii.
Regulatory risk
Regulatory risk is the risk arising from not complying with regulatory and legal requirements. The
operations of the Syndicate are subject to legal and regulatory requirements within the jurisdictions
in which it operates, and the Syndicate’s finance and compliance functions are responsible for ensuring
that these requirements are adhered to. Regulatory risk includes capital management risk.
Capital
The Lloyd’s of London(Lloyd’s) is a regulated undertaking and subject to supervision by the PRA under
the Financial Services and Markets Act 2000, and in accordance with the Solvency II Framework. Within
this supervisory framework, Lloyd’s applies capital requirements at member level and centrally to
ensure that Lloyd’s complies with Solvency II requirements, and beyond that to meet its own financial
strength, licence and ratings objectives. Although, as described below, Lloyd’s capital setting processes
use a capital requirement set at Syndicate level as a starting point, the requirement to meet Solvency
II and Lloyd’s capital requirements apply at overall Society level. Accordingly, the capital requirement
at Syndicate level is not disclosed in these accounts.
In order to meet Lloyd’s requirements, the 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 SCR of the Syndicate is subject to review by Lloyd’s and approval by the Lloyd’s
Capital and Planning Group. Syndicate 4141 is wholly aligned and Nameco does not participate on any
other Syndicate; therefore, the SCR for Nameco is equal to that of the Syndicate.
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2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
Over and above the SCR, Lloyd’s applies capital uplift to the member’s capital requirement, known as
the Economic Capital Assessment (‘ECA’). The purpose of this uplift, which is a Lloyd’s rather than
Solvency II requirement, is to meet Lloyd’s financial strength, licencing and ratings objectives. The
capital uplift applied for 2024 was 35% (2023: 35%) of the member’s SCR ‘to ultimate’. Nameco
provides the capital to meet its ECA by way of a Third-Party Deposit Trust which was set up in 2023 to
provide Tier 1 capital plus Syndicate held Tier 1 assets required by Lloyd’s. During 2024, the Tier 2 bank
letter of credit deposited with Lloyd’s (i.e. Funds at Lloyd’s) was cancelled and any capital shortfalls are
expected to be funded through the Third Party Deposit Trust.
iii.
Group risk
Group risk occurs where business units fail to consider the impact of other parts of a group on the
Syndicate, as well as the risks arising from these activities. There are two main components of group
risk which are explained below.
a)
Contagion
Contagion risk is the risk arising from actions of one part of a group which could adversely affect
any other part of the group. The Syndicate is a member of Tokio Marine and therefore may be
impacted by the actions of any other group company. This risk is managed by operating with clear
and open lines of communication across the group to ensure all group entities are well informed
and working to common goals.
b)
Reputation
Reputation risk is the risk of negative publicity as a result of Tokio Marine’s contractual
arrangements, customers, products, services and other activities. The Syndicate’s preference is to
minimise reputation risks but, it is not possible or beneficial to avoid them, as the benefits of being
part of the group brand are significant.
Reputational risk is considered as an impact on all risk events in the Risk Register, but not as a risk
in its own right.
5.3
Market risk
Market risk arises where the value of assets and liabilities or future cash flows change as a result of
fluctuations in economic variables, such as movements in foreign exchange rates, interest rates and market
prices.
Managing investment risk as a whole is fundamental to the operation and development of our investment
strategy key to the investment of Syndicate assets.
The investment strategy is developed by reference to an investment risk budget, reviewed annually by the
directors as part of the overall risk budgeting framework of the business. In 2024, the investment risk
budget was maintained at a level such that the amount of an investment loss, at the 1-in-200 Tail Value at
Risk (TVaR) level, was limited to the Syndicate’s excess capital (above the regulatory minimum). The
investment risk budget will be at a similar level in 2025.
Investment strategy is consistent with this risk appetite and investment risk is monitored on an ongoing
basis. The internal model includes an asset risk module, which uses an Economic Scenario Generator (‘ESG’)
to simulate multiple simulations of financial conditions, to support stochastic analysis of investment risk.
This is supplemented by bespoke analysis from our investment consultants. Internal model output is used
to assess potential investment downsides, at different confidence levels, including ‘1 in 200’ year event,
which reflects Solvency II modelling requirements. In addition, management undertakes regular scenario
tests (which look at shock events such as yield curve shifts, credit spread widening, or the repeat of historic
events) to assess the impact of potential investment losses.
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2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
ESG outputs are regularly validated against actual market conditions, but (as noted above) management
also uses a number of other qualitative measures to support the monitoring and management of
investment risk.
i.
Foreign exchange risk
The Syndicate’s functional currency is the US Dollar and its presentational currency is Sterling. The
effect of this on foreign exchange risk is that the Syndicate’s profit for the financial year is mainly
exposed to fluctuations in exchange rates for non-US dollar denominated transactions upon
revaluation of monetary assets and liabilities. The US dollar functional currency is translated to Sterling
presentational currency and any foreign exchange gains or losses are recognised in the Statement of
Other Comprehensive Income.
Although net assets in the balance sheet are relatively small, comprising the Member’s balance on the
open Years of Account which are distributed when the YoA closes, foreign exchange risk arises if net
assets in individual foreign currencies are not matched.
The Syndicate operates in six main currencies: US Dollars; Sterling; Canadian Dollars; Australian
Dollars; Swiss Francs and Euros. Transactions in all non-US Dollar currencies are converted to the US
Dollar functional currency on initial recognition with any balances on monetary items at the reporting
date being translated at the US Dollar closing spot rate.
In 2024, the Syndicate managed its foreign exchange risk by periodically assessing its non-US Dollar
exposures and rebalancing where appropriate.
The following table summarises the carrying values of total assets and total liabilities, categorised by the
Syndicate’s main currencies:
Sterling
US dollar
Euro
Canadian
dollar
Australian
dollar
Japanese
yen
Swiss Franc
Total
2024
£000
£000
£000
£000
£000
£000
£000
£000
Investments
12,389
118,396
84
104,629
3,704
-
-
239,202
Reinsurers' share of
8,851
81,400
1,718
11,598
1,895
-
135
105,597
technical provisions
Debtors
5,821
47,570
9,919
24,131
467
-
974
88,882
Other assets
2,861
-
342
-
2,899
-
-
6,102
Prepayments and
3,114
15,103
158
6,901
406
-
12
25,694
accrued income
Total assets
33,036
262,469
12,221
147,259
9,371
-
1,121
465,477
Technical provisions
(24,879)
(172,381)
(2,562)
(97,387)
(8,916)
-
(365)
(306,490)
Creditors
(5,664)
(84,071)
5,222
(6,051)
(897)
-
(494)
(91,955)
Accruals and deferred
(613)
(4,882)
(28)
(693)
(269)
-
(20)
(6,505)
income
Total liabilities
(31,156)
(261,334)
2,632
(104,131)
(10,082)
-
(879)
(404,950)
Total Capital and
reserves
1,880
1,135
14,853
43,128
(711)
-
242
60,527
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2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
2023
Sterling
£000
US dollar
£000
Euro
£000
Canadian
dollar
£000
Australian
dollar
£000
Japanese
Yen
£000
Other
£000
Total
£000
Investments
12,285
126,870
82
101,709
4,316
-
-
245,262
Reinsurers' share of
10,831
80,943
2,102
10,647
2,189
-
125
106,837
technical provisions
Debtors
3,892
42,232
5,024
15,474
724
-
1,058
68,404
Other assets
2,255
-
127
-
3,825
-
-
6,207
Prepayments and
2,851
13,595
119
7,387
537
-
12
24,501
accrued income
Total assets
32,114
263,640
7,454
135,217
11,591
-
1,195
451,211
Technical provisions
(22,474)
(175,474)
(5,753)
(90,280)
(9,982)
-
(412)
(304,375)
Creditors
(7,278)
(70,882)
(1,909)
(5,147)
(1,265)
-
(195)
(86,676)
Accruals and deferred
(603)
(3,916)
(267)
(628)
(308)
-
(11)
(5,733)
income
Total liabilities
(30,355)
(250,272)
(7,929)
(95,055)
(11,555)
-
(618)
(396,784)
Total Capital and
reserves
1,759
13,268
(475)
39,162
36
-
577
*54,427
*
Represented to align with current period presentation under the new basis of preparation as stated in Note 3a
.
Sensitivity analysis
Interest rate risk
Some of the Syndicate’s financial instruments, including cash and certain financial assets at fair value, are
exposed to movements in market interest rates. Changes in interest rates also impact the present values of
estimated Syndicate liabilities, which are used for solvency calculations. Our investment strategy reflects the
matching principle of our liabilities, and the combined market risk of investment assets and estimated liabilities
is monitored and managed within specified limits.
2024
Impact on
results before
tax
£000
2024
Impact
on
members’
balances
£000
2023
Impact on
results before
tax
£000
2023
Impact
on
members’
balances
£000
Interest rate risk
+ 50 basis points shift in yield curves
(923)
(923)
(1,212)
(1,212)
- 50 basis points shift in yield curves
931
931
1,227
1,227
5.4
Operational risk
Operational risk arises from the risk of losses due to inadequate or failed internal processes, people, systems,
service providers or external events. Operational risk includes conduct risk.
The Syndicate actively manages and minimises operational risks where appropriate. This is achieved by
implementing and communicating guidelines and detailed procedures and controls to staff and other third
parties. The Syndicate regularly monitors the performance of its controls and adherence to procedures through
the risk management reporting process. Key components of the Syndicate’s operational control environment
include:
•
modelling of operational risk exposure and scenario testing;
•
management review of activities;
•
documentation of policies and procedures;
•
preventative, directive and detective controls within key processes;
•
contingency planning; and other systems’ controls.
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2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
Addressing Conduct Risk has always been treated as a priority irrespective of the regulatory emphasis on the
selling of financial products, including insurance products, to consumers. The Syndicate’s primary objective is
that all policyholders should receive fair treatment throughout the product lifecycle, which requires the
effective management of Conduct Risk, including the recent and up-coming requirements of Fair Value and
Consumer Duty regulations. However, Conduct Risk is not limited to the fair treatment of customers and the
Conduct Risk Policy broadly defines Conduct Risk as “…the risk that detriment is caused to the Syndicate, our
customers, clients or counterparties because of the inappropriate execution of our business activities.”
As a result, business activities are conducted in a manner that is not only fair, honest and transparent but that
also complies fully with applicable UK and International laws and regulations and internal policies and
procedures. This is clearly communicated from the Board of HCCUA directors downwards to all members of
staff and oversight is provided throughout the governance structure, primarily by way of the Product
Governance and Distribution Committee. Day-to-day responsibility for monitoring the fair treatment of
customers and broader aspects of Conduct Risk resides with the International Compliance Department which
undertakes scheduled reviews as part of a comprehensive Compliance Monitoring schedule.
Operational resilience
In order to meet the requirements of Operational Resilience, the Operational Resilience Office (ORO) was
established in October 2022 with the appointment of the Head of Operational Resilience. The latest annual self-
assessment was undertaken in March 2024, with the conclusion that the full implementation of Operational
Resilience was on track to meet the regulatory deadline of March 2025. Work since the self -assessment
continues to indicate that the conclusion remains valid.
5.5
Credit risk
Credit risk arises where counterparties fail to meet their financial obligations in full as they fall due. The
primary sources of credit risk for the Syndicate are:
•
reinsurers – whereby reinsurers may fail to pay valid claims against a reinsurance contract held by
the Syndicate;
•
brokers and coverholders – whereby counterparties fail to pass on premiums or claims collected or
paid on behalf of the Syndicate;
•
investments – whereby issuer default results in the Syndicate losing all or part of the value of a
financial instrument; and
•
financial institutions holding cash.
The Syndicate’s core business is to accept insurance risk and the appetite for other risks is low. This protects
the Syndicate’s solvency from erosion from non-insurance risks so that it can meet its insurance liabilities.
The Syndicate limits exposure to a single counterparty or a group of counterparties and analyses the
geographical locations of exposures when assessing credit risk.
An approval system exists for all new brokers and coverholders and their performance is carefully
monitored. Regular exception reports highlight trading with non-approved brokers, and the Syndicate’s
credit control function frequently assesses the ageing and collectability of debtor balances. Any large, aged
items are prioritised and where collection is outsourced incentives are in place to support these priorities.
The Investment Committee has established comprehensive guidelines for the Syndicate’s Investment
Manager regarding the type, duration and quality of investments acceptable to the Syndicate to ensure
credit risk relating to the investment portfolio is kept to a minimum. The performance of our Investment
Manager is regularly reviewed to confirm adherence to these guidelines.
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2024 Syndicate 4141 Annual Report and Accounts
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The Syndicate has developed processes to formally examine all reinsurers before entering into new business
arrangements. New reinsurers are approved by the reinsurance approval group, which also reviews
arrangements with all existing reinsurers at least annually. Vulnerable or slow-paying reinsurers are examined
more frequently. To assist in the understanding of credit risks, A.M. Best, Moody’s and Standard & Poor’s
(‘S&P’) ratings are used. The Syndicate’s concentrations of credit risk have been categorised by these ratings
as follows:
Year 2024
AAA
£000
AA
£000
A
£000
BBB
£000
Other
£000
Not
rated
£000
Total
£000
Shares and other variable yield securities
-
48,360
21,539
-
-
-
69,899
Debt securities
44,676
58,510
29,734
5,758
-
- 138,678
Deposits with credit institutions
15,009
1,940
3,787
3,204
1,923
4,679
30,542
Deposits with ceded undertakings
-
83
-
-
-
83
Reinsurers’ share of claims outstanding
48,611
33,404
-
-
4,982
86,997
Debtors arising out of direct insurance operations
-
57,959
-
-
-
57,959
Debtors arising out of reinsurance operations
-
12,872
14,857
-
-
169
27,898
Cash at bank and in hand
-
-
6,102
-
-
-
6,102
Other debtors and accrued interest
-
-
4,183
-
-
-
4,183
Total assets excl. RI UEPR and RI DAC
59,685 170,293 171,648
8,962
1,923
9,830 422,341
Year 2023
AAA
£000
AA
£000
A
£000
BBB
£000
Other
£000
Not
rated
£000
Total
£000
Shares and other variable yield securities
-
30,383
36,925
-
-
-
67,308
Debt securities
34,793
69,392
42,180
1,432
-
-
147,797
Deposits with credit institutions
17,547
1,281
2,901 2,310 1,814
4,261
30,114
Deposits with ceding undertakings
-
-
43
-
-
-
43
Reinsurers’ share of claims outstanding
-
28,460
49,061
-
-
12,153
89,674
Debtors arising out of direct insurance operations
-
-
46,234
-
-
-
46,234
Debtors arising out of reinsurance operations
-
-
19,182
-
-
-
19,182
Cash at bank and in hand
-
-
6,207
-
-
-
6,207
Other debtors and accrued interest
-
-
4,116
-
-
-
4,116
Total assets excl. RI UEPR and RI DAC
52,340
129,516 206,849 3,742
1,814
16,414 410,675
The Syndicate’s largest counterparty exposure at 31 December 2024 is £39.4m (2023 £34.7m) of Canadian
government securities.
Docusign Envelope ID: C7FCF1F6-16E3-41AE-93CD-D9A8B7D8886B
38
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
Insurance receivables and other receivable balances held by the Syndicate have not been impaired based
on available evidence, and no impairment provision has been recognised in respect of these assets. An aged
analysis of the Syndicate’s insurance and reinsurance receivables that are past due at the reporting date is
presented below:
2024
Neither past
due nor
impaired assets
£000
Past due but
not impaired
assets
£000
Gross value of
impaired assets
£000
Impairment
allowance
£000
Total
£000
Shares and other variable yield securities
69,899
-
-
-
69,899
Debt securities
138,678
-
-
-
138,678
Deposits with credit institutions
30,542
-
-
-
30,542
Deposits with ceding undertakings
83
-
-
-
83
Reinsurers’ share of claims outstanding
86,997
-
-
-
86,997
Debtors arising out of direct insurance operations
53,780
4,179
-
-
57,959
Debtors arising out of reinsurance operations
10,476
17,422
-
-
27,898
Cash at bank and in hand
6,102
-
-
-
6,102
Other debtors and accrued interest
4,183
-
-
-
4,183
Total assets excl. RI UEPR and RI DAC
400,740
21,601
-
-
422,341
Neither past due
nor impaired
assets
Past due but
not impaired
assets
Gross value of
impaired assets
Impairment
allowance
Total
2023
£000
£000
£000
£000
£000
Shares and other variable yield securities
67,308
-
-
-
67,308
Debt securities
147,797
-
-
-
147,797
Deposits with credit institutions
30,114
30,114
Deposits with ceding undertakings
43
-
-
-
43
Reinsurers’ share of claims outstanding
89,674
-
-
-
89,674
Debtors arising out of direct insurance
45,430
804
-
-
46,234
operations
Debtors arising out of reinsurance operations
2,410
16,772
-
-
19,182
Cash at bank and in hand
6,207
-
-
-
6,207
Other debtors and accrued interest
4,116
-
-
-
4,116
Total assets excl. RI UEPR and RI DAC
393,099
17,576
-
-
410,675
Docusign Envelope ID: C7FCF1F6-16E3-41AE-93CD-D9A8B7D8886B
39
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
The table below sets out the age analysis of financial assets that are past due but not impaired at the balance
sheet date:
2024
0-3 months
past due
£000
Past due but not impaired
Greater than
3-6 months 6-12 months
1 year past
past due
past due
due
£000
£000
£000
Total
£000
Debtors arising out of direct insurance
2,658
-
-
1,521
4,179
operations
Debtors arising out of reinsurance operations
1,847
3,585
4,356
7,634
17,422
Total
4,505
3,585
4,356
9,155
21,601
Past due but not impaired
0-3 months
past due
3-6 months
past due
6-12 months
past due
Greater
than
1 year past
due
Total
2023
£000
£000
£000
£000
£000
Debtors arising out of direct insurance
operations
316
190
298
-
804
Debtors arising out of reinsurance operations
2,211
5,710
5,049
3,802
16,772
Total
2,527
5,900
5,347
3,802
17,576
5.6
Liquidity risk
Liquidity risk arises where cash may not be available to pay obligations when due at a reasonable cost. The
Syndicate is exposed to daily calls on its available cash resources, principally from claims arising from its
insurance business. In the majority of cases, these claims are settled from premiums received.
The Syndicate’s approach is to manage its liquidity position so that it can reasonably survive a significant
individual or market loss event (see Note 5.1.i). This means that the Syndicate maintains sufficient liquid assets,
or assets that can be readily converted into liquid assets at short notice, to meet expected cash flow
requirements. These liquid funds are regularly monitored using cash flow forecasting to ensure that surplus
funds are invested to achieve a higher rate of return. The Syndicate can also draw on group funds to bridge
short-term cash flow requirements. The following table is an analysis of the net contractual cash flows based
on all the assets and liabilities held at 31 December 2024 and 2023:
Docusign Envelope ID: C7FCF1F6-16E3-41AE-93CD-D9A8B7D8886B
40
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
Year 2024
Carrying
amount
£000
No
maturity
stated
£000
Undiscounted net cash flows
0-1 yrs
1-3 yrs
3-5 yrs
£000
£000
£000
>5 yrs
£000
Total
£000
Shares and other variable yield
69,899
69,899
-
-
-
-
69,899
securities
Debt securities
138,678
-
80,663
40,334
16,538
1,143
138,678
Deposits with credit institutions
30,542
30,542
-
-
-
-
30,542
Cash at bank and in hand
6,102
6,102
-
-
-
-
6,102
Claims outstanding
86,997
-
38,506
29,260
10,334
8,897
86,997
Assets
332,218
106,543
119,169
69,594
26,872
10,040
332,218
Claims outstanding
217,576
-
71,660
71,496
32,923
41,497
217,576
Creditors - direct insurance
15,413
-
15,413
-
-
-
15,413
Creditors - reinsurance
40,372
-
40,372
-
-
-
40,372
Other creditors
36,170
-
36,170
-
-
-
36,170
Liabilities
309,531
-
163,615
71,496
32,923
41,497
309,531
Net
22,687
106,543
(44,446)
(1,902)
(6,051)
(31,457)
22,687
Undiscounted net cash flows
No
Carrying
maturity
amount
stated
0-1 yrs
1-3 yrs
3-5 yrs
>5 yrs
Total
Year 2023
£000
£000
£000
£000
£000
£000
£000
Shares and other variable yield
67,308
67,308
-
-
-
-
67,308
securities
Debt securities
147,797
-
28,862
106,978
11,393
564
147,797
Deposits with credit institutions
30,114
30,114
-
-
-
-
30,114
Cash at bank and in hand
6,207
6,207
-
-
-
-
6,207
Claims outstanding
89,674
-
38,997
33,519
10,826
6,332
89,674
Assets
341,100
103,629
67,859
140,497
22,219
6,896 341,100
Claims outstanding
220,170
-
76,905
74,654
33,529
35,082
220,170
Creditors - direct insurance
6,136
-
6,136
-
-
-
6,136
Creditors - reinsurance
22,884
-
22,884
-
-
-
22,884
Other creditors
57,656
-
57,656
-
-
-
57,656
Liabilities
306,846
-
163,581
74,654
33,529
35,082
306,846
Net
34,254
103,629
(95,722)
65,843
(11,310)
(28,186)
34,254
Docusign Envelope ID: C7FCF1F6-16E3-41AE-93CD-D9A8B7D8886B
41
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
snip
5.7
Sustainability Risk
Sustainability risk was previously being monitored as a Live Risk however the Sustainability Risk and Control
Framework was finalised and approved by the Board in May 2024 for incorporation into the overall Syndicate
risk register.
Sustainability risk is concerned with the considerations made to environmental, social and ethical factors of
performing our insurance business. It is divided into Environmental Risk, Social Risk and Governance Risk.
i.
Environmental Risk
This is the financial risk arising from climate change, nature and biodiversity loss with a particular focus on
how the Syndicate understands the impact of the physical, transitional and liability aspects of climate change
within its underwriting and investment portfolios. It also includes the operational climate responsibilities
which relate to the actions taken by the business to reduce operational impact on the environment. The
primary drivers of this risk are climate change, pollution, resource depletion, waste, and ecological footprint.
ii.
Social Risk
This is the risk of jeopardising the achievement of safety and security of the communities that the Syndicate
works with and its employees. The primary drivers of this risk are working conditions, supply chains, health
& safety, employee engagement, diversity & inclusion and customer relations.
iii.
Governance Risk
This is the risk of jeopardising the commitment of the Syndicate to carrying out its business activities fairly,
honestly, transparently and in accordance with applicable legal and regulatory requirements and high
ethical standards. The drivers of this risk include executive pay, corruption & bribery, Board diversity and
conduct regulations.
The Sustainability risk framework has continued to be refined during 2024. Risk appetites and risk metrics
to monitor them, continue to be scoped. Those relating to investments are most advanced, with some
having started to be measured in 2024. Work on potential quantitative impacts of climate change continues.
The Syndicate’s sustainability approach has continued to be embedded into policies such as the travel and
expense policy which has been updated to embed a Carbon Footprint Policy.
5.8
Other Current Risks
This section identifies risks that have the potential to materially impact the existing risk profiles. It should be
noted that, in addition to monitoring the Syndicate’s existing and established principal risks, the risk
management framework is designed to support the identification of developing and emerging risks; those which
have the potential to impact, or require a review of, the existing strategic objectives. Risks which are more
imminently likely to crystallise are also monitored.
Procurement and Outsourcing
Procurement and Outsourcing is a key focus for the Syndicate, in light of greater reliance on cloud service
providers to ensure system/data back-up capabilities and increased use of coverholders. Strong risk governance
in this area is vital to ensure uninterrupted service to both external and internal stakeholders. It is also a sub-
component of Supply Chain risk, which is an area subject to increased scrutiny with regulatory focus on insurers
and their ability to demonstrate their operational resilience in this regard. Against a backdrop of increased
digitalisation of the insurance market and escalating cyber-security threats, robust supply chain management
is paramount. Over the course of 2024, a new Contract Lifecycle Management System has been implemented
which will enhance the controls in regard to the contracting, due diligence and management of suppliers.
Resilience standards are also in the process of being developed to ensure that any disruption experienced by
the Syndicate’s material outsourcers does not impact the service they provide to the Syndicate.
Docusign Envelope ID: C7FCF1F6-16E3-41AE-93CD-D9A8B7D8886B
42
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
Geopolitical Risk
The geopolitical landscape remains volatile, not least because of various elections around the world. The key
areas of concern remain Russia/Ukraine, China/Taiwan and the Middle East. The impacts for TMHCC
International could come from both direct and indirect exposures. Management have continued to monitor and
review potential direct exposures across the impacted regions with underwriters and appropriate exclusions
(e.g. war exclusion) and notice of cancellation are issued where appropriate. There are several types of indirect
impact, including secondary impacts, legal risks, and security risks.
Technological Advancements
It is recognised that the rapid pace of technological progress can bring both risks and opportunities for the
business, some of which are more imminent than others. In particular, the rise of artificial intelligence and the
existence of both risks and opportunities. For instance, potential advantages could involve automating manual
tasks in the data collection process and analysis. On the other hand, technology could also be used by malicious
actors which may be used to facilitate cyber-attacks and deepfakes. This risk is recognised and monitored
through the Emerging Risk framework, with some specific near-terms aspects considered as part of our current
risks. Updates are provided on a quarterly basis against each of these and presented to the Risk Committee.
6.
ANALYSIS OF UNDERWRITING RESULT
The analysis of the underwriting result set out below applies the Lloyd’s reporting class categories which are
not entirely consistent with the line of business analysis used in managing and monitoring of the business, as
referred to in the Business Review (Pages 5 to 8).
2024
Gross
premiums
written
£000
Gross
premiums
earned
£000
Gross
claims
incurred
£000
Gross
operating
expenses
£000
Reinsurance
balance
£000
Underwriting
result
£000
Direct insurance
Accident and health
65,719
65,183
(24,618)
(34,598)
428
6,395
Marine, aviation, and transport
60,837
55,018
(33,121)
(17,211)
(56)
4,630
Fire
and
other
damage
to
13,834
12,418
(1,869)
(4,332)
(3,994)
2,223
property
Third party liability
43,864
45,872
(15,828)
(21,433)
(1,347)
7,264
Miscellaneous
13,518
13,388
3,873
(189)
(12,064)
5,008
197,772
191,879
(71,563)
(77,763)
(17,033)
25,520
Reinsurance acceptances
28,434
29,173
(7,430)
(5,245)
(2,090)
14,408
Total
226,206
221,052
(78,993)
(83,008)
(19,123)
39,928
The below is an additional disclosure for Lloyd’s reporting purposes and is included to facilitate the classification of the
above segments into the Lloyd’s aggregate classes of business:
2024
Gross
premiums
written
£000
Gross
premiums
earned
£000
Gross
claims
incurred
£000
Gross
operating
expenses
£000
Reinsurance
balance
£000
Underwriting
result
£000
Additional analysis
Fire and damage to property of
which is:
Specialities
-
-
-
-
-
-
Energy
-
-
(175)
38
524
387
Third party liability of which is:
Energy
-
-
-
-
-
-
Docusign Envelope ID: C7FCF1F6-16E3-41AE-93CD-D9A8B7D8886B
43
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
2023
Gross
premiums
written
£000
Gross
premiums
Earned
£000
Gross
claims
incurred
£000
Gross
operating
expenses
£000
Reinsurance
balance
£000
Underwriting
result
£000
Direct insurance
Accident and health
72,079
71,975
(27,195)
(38,545)
(475)
5,760
Marine, aviation, and transport
58,045
52,674
(33,589)
(16,936)
(549)
1,600
Fire and other damage to property
9,398
9,501
(5,100)
(4,016)
1,207
1,592
Third party liability
48,078
50,478
(18,281)
(20,338)
(2,505)
9,354
Miscellaneous
17,074
15,335
7,867
(2,330)
(23,362)
(2,490)
204,674
199,963
(76,298)
(82,165)
(25,684)
15,816
Reinsurance acceptances
34,625
32,998
(5,945)
(6,705)
(6,925)
13,423
Total
239,299
232,961
(82,243)
(88,870)
(32,609)
29,239
The below is an additional disclosure for Lloyd’s reporting purposes and is included to facilitate the classification of the
above segments into the Lloyd’s aggregate classes of business:
2023
Gross
premiums
written
£000
Gross
premiums
earned £000
Gross
claims
incurred
£000
Gross
operating
expenses
£000
Reinsurance
balance £000
Underwriting
result
£000
Additional analysis
Fire and damage to
property of which is:
Specialities
-
-
-
-
-
-
Energy
-
-
193
4
(10)
187
Third party liability
of which is:
Energy
-
-
-
-
-
-
No gains or losses were recognised in the profit and loss account during the year on buying reinsurance (2023:
nil).
The direct gross premiums written by underwriting location of risk is presented in the table below:
2024
£000
2023
£000
United Kingdom
37,507
24,766
European Union Member States
6,965
9,443
US
71,977
70,031
Rest of the world
81,323
100,434
Total direct gross premiums written
197,772
*204,674
*Represented to align with current period presentation under the new basis of preparation as stated in Note 3a.
Docusign Envelope ID: C7FCF1F6-16E3-41AE-93CD-D9A8B7D8886B
44
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
7.
NET OPERATING EXPENSES
2024
£000
2023
£000
Acquisition costs
71,965
75,854
Change in deferred acquisition costs
(1,216)
(1,221)
Administrative expenses
20,548
22,860
Member’s standard personal expenses
3,127
1,874
Reinsurance commissions and profit participation
(11,416)
(10,497)
Net operating expenses
83,008
88,870
Total commissions for direct insurance business for the year amounted to:
2024
£000
2023
£000
Total commission for direct insurance business
66,625
66,400
Administrative expenses include:
2024
£000
2023
£000
Auditors’ remuneration:
fees payable to the Syndicate’s auditor for the audit of these financial statements
246
240
fees payable to the Syndicate’s auditor and its associates in respect of other services
263
243
pursuant to legislation
8.
KEY MANAGEMENT PERSONNEL COMPENSATION
The directors of HCCUA received the following aggregate remuneration recharged to the Syndicate by HCC
Service Corporation (UK). These costs are included in net operating expenses.
2024
£000
2023
£000
Directors’ emoluments
709
628
Pension contributions
3
1
The active underwriter received the following aggregate remuneration charged to the Syndicate.
2024
£000
2023
£000
Emoluments
289
239
Docusign Envelope ID: C7FCF1F6-16E3-41AE-93CD-D9A8B7D8886B
45
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
9.
STAFF NUMBERS AND COSTS
The average number of direct underwriting staff (excluding directors) working for the Syndicate during the year
was twenty six (2023: nineteen).
Number of employees
2024
2023
Underwriting
26
19
All staff are employed by HCC Service Company Inc. (UK branch). The disclosures for staff costs and headcount
above relate to underwriting staff only. The costs of staff providing central services for group entities (including
claims and underwriting support staff) are allocated and recharged to the Syndicate as a management fee. This
staff information is not included in salary costs and average staff numbers as it is not practical to allocate them
to the underlying entities to which the staff provide services.
The following amounts were recharged by the service company to the Syndicate in respect of payroll costs:
2024
£000
2023
£000
Wages and salaries
7,461
8,125
Social security costs
1,069
1,116
Other pension costs
303
292
Total
8,833
9,533
10.
INVESTMENT RETURN
2024
£000
2023
£000
Interest and similar income
From financial assets designated at fair value through profit or loss
Interest and similar income
9,859
7,215
Other income from investments
From financial assets designated at fair value through profit or loss
Losses on the realisation of investments
(1,122)
(1,865)
Unrealised (losses)/gains on investments
(1,993)
6,180
Investment management expenses
(205)
(209)
Total investment return
6,539
11,321
Transferred to the technical account from the non-technical account
(8,532)
(5,140)
Docusign Envelope ID: C7FCF1F6-16E3-41AE-93CD-D9A8B7D8886B
46
2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
11.
DISTRIBUTION AND OPEN YEARS OF ACCOUNT
A distribution of £50.5m to members will be proposed in relation to the closing year of account 2022 (2023:
£47.0m was paid in relation to the closing year of account 2021).
12.
OTHER FINANCIAL INVESTMENTS
Carrying value
Cost
2024
£000
2023
£000
2024
£000
2023
£000
Shares and other variable yield securities
69,899
67,308
69,899
67,308
Debt securities
138,678
147,797
142,742
149,364
Deposits with credit institutions
30,542
30,114
30,625
30,114
Total financial investments
239,119
245,219
243,266
246,786
Of the above, £30.5m (2023: £11.2m) is listed on a recognised exchange (see note 13 Level 1).
The table below presents an analysis of financial investments by their measurement classification.
2024
£000
2023
£000
Financial assets measured at fair value through profit or loss
239,119
245,219
Total financial investments
239,119
245,219
13.
FAIR VALUE ESTIMATION
The following table presents the Syndicate’s financial investments measured at fair value at 31 December 2024
and at 31 December 2023 categorised into levels 1, 2 and 3, reflecting the categorisation criteria specified in
FRS 102.
2024
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
Shares and other variable yield securities
-
69,899
-
69,899
Debt securities and other fixed income securities
-
138,678
-
138,678
Deposits with credit institutions
30,542
-
-
30,542
Total
30,542
208,577
-
239,119
2023
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
Shares and other variable yield securities
-
67,308
-
67,308
Debt securities and other fixed income securities
7,826
139,971
-
147,797
Deposits with credit institutions
3,383
26,731
-
30,114
Total
11,209
234,010
-
245,219
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2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
FRS 102 defines fair value hierarchies as described in Note 3.i as follows:
Level 1
– quoted prices in an active market.
These financial instruments are traded in active markets whose fair value is based on quoted bid prices at
the balance sheet date.
Level 2
– recent transactions in an identical asset in the absence of quoted prices in active markets at the
balance sheet date.
These use observable prices for recent arm’s length transactions for an identical asset that are available
directly as prices or indirectly from prices. Determining whether a market is active requires the exercise of
judgement and is determined based upon the facts and circumstances of the market for the instrument
being measured. The Syndicate has chosen to classify all securities other than Sovereign and overseas
deposits as Level 2 securities; and
Level 3
– use of a valuation technique where there is no active market of other transactions which are a
good estimate of fair value.
These comprise financial instruments where it is determined that there is no active market or that the
application of criteria to demonstrate such as Level 2 securities is impractical. FRS102 requires that fair
value is established through the use of a valuation technique which incorporates relevant information to
reflect appropriate adjustments for credit and liquidity risks and maximises the use of observable market
data where it is available and relies as little as possible on entity specific estimates. The relative weightings
given to differing sources of information and the determination of non-observable inputs to valuation
models can require the exercise of significant judgement. The Syndicate does not hold any Level 3
securities.
No markets for investments were judged to be inactive at year end and as a result there were no
adjustments to the prices or quotes provided by the independent pricing services, third party investment
managers as of 31 December 2024 or 31 December 2023.
14.
DEBTORS ARISING OUT OF DIRECT INSURANCE OPERATIONS
2024
£000
2023
£000
Due within one year
57,959
46,234
Total
57,959
46,234
15.
DEBTORS ARISING OUT OF REINSURANCE OPERATIONS
2024
£000
2023
£000
Due within one year
27,898
19,182
Total
27,898
19,182
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2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
16.
OTHER DEBTORS
2024
£000
2023
£000
Other
3,024
2,988
Total
3,024
2,988
17.
DEFERRED ACQUISITION COSTS
Gross
£000
2024
Reinsurance
£000
Net
£000
Gross
£000
2023
Reinsurance
£000
Net
£000
Balance at 1 January
23,373
(5,110)
18,263
22,960
(3,814)
19,146
Incurred deferred acquisition costs
21,367
4,738
26,105
21,363
(4,451)
16,912
Amortised deferred acquisition
(20,151)
(4,117)
(24,268)
(20,141)
3,435
(16,706)
costs
Foreign exchange movements
(54)
(1,229)
(1,283)
(809)
(280)
(1,089)
Balance at 31 December
24,535
(5,718)
18,817
23,373
(5,110)
18,263
18.
OTHER ASSETS
2024
£000
2023
£000
Cash at bank and in hand
6,102
6,207
Total
6,102
6,207
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2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
19.
CLAIMS DEVELOPMENT
The following tables illustrate the development of the estimates of earned ultimate cumulative claims incurred,
including claims notified and IBNR, for each successive underwriting year, illustrating how amounts estimated
have changed from the first estimates made.
As these tables are on an underwriting year basis, there is an apparent large increase from amounts reported
for the end of the underwriting year to one year later as a large proportion of premiums are earned in the year
of account’s second year of development.
Balances have been translated at exchange rates prevailing at 31 December 2024 in all cases.
Gross
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Total
Pure underwriting
year
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
Estimate of gross claims
at end of underwriting
year
35,699
34,215
84,136
47,638
37,695
50,008
41,419
56,872
62,334
57,120
one year later (*)
69,556
65,287
102,202
95,886 147,891
101,056
78,218
96,299
90,682
two years later
70,866
65,861
131,231
107,850 176,577
106,192
84,055
92,301
three years later
68,015
63,809
127,907
106,199 151,654
105,553
83,038
four years later
62,066
74,242
124,862
107,562 123,815
99,128
five years later
65,727
74,874
123,965
111,602 124,884
six years later
66,994
78,905
127,202
111,629
seven years later
67,123
79,897
129,804
eight years later
66,970
78,696
nine years later
66,729
Estimate of gross
66,729
78,696
129,804
111,629
124,884
99,128
83,038
92,301
90,682
57,120
934,011
claims reserve
Provision in respect
12,254
of prior years
Less; cumulative
65,429
79,454
121,142
100,226
104,238
85,927
61,577
51,610
47,522
11,564
728,689
gross paid claims
Gross claims reserve
1,300
(758)
8,662
11,403
20,646
13,201
21,461
40,691
43,160
45,556
217,576
* the significant increase in the estimate of ultimate claims one year later reflects the earning patterns of in-force policies
beyond the first calendar year.
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2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
Net
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Total
Pure underwriting
year
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
Estimate of net claims
at end of underwriting
year
26,885
32,332
50,667
38,170
33,458
37,483
34,489
43,361
50,121
44,444
one year later (*)
52,073
58,890
74,796
65,268
60,399
61,841
64,517
75,291
70,762
two years later
53,389
58,740
90,851
73,393
63,766
62,410
67,153
70,375
three years later
52,072
57,041
85,844
77,672
68,531
60,904
61,444
four years later
49,456
64,215
85,888
78,145
62,541
55,222
five years later
51,637
64,497
84,143
78,578
62,177
six years later
51,231
64,738
86,296
79,118
seven years later
51,840
63,282
89,254
eight years later
50,968
61,628
nine years later
51,153
Estimate of net
51,153
61,628
89,254
79,118
62,177
55,222
61,444
70,375
70,762
44,444
645,577
claims reserve
Provision in respect
6,101
of prior years
Less; cumulative net
49,345
62,755
92,625
76,203
54,088
49,640
46,797
45,975
32,581
11,090
521,099
paid claims
Net claims reserve
1,808
(1,127)
(3,371)
2,915
8,089
5,582
14,647
24,400
38,181
33,354
130,579
* the significant increase in the estimate of ultimate claims one year later reflects the earning patterns of in-force policies
beyond the first calendar year.
20.
TECHNICAL PROVISIONS
The table below shows changes in the insurance contract liabilities and assets from the beginning of the period to the end
of the period.
Gross
provisions
£000
2024
Reinsurance
assets
£000
Net
£000
Gross
provisions
£000
2023
Reinsurance
assets
£000
Net
£000
Loss reserves
Balance at 1 January
220,170
(89,674)
130,496
245,356
(110,826)
134,530
Claims paid during the year
81,294
(33,766)
47,528
98,756
(27,135)
71,621
Expected cost of current year claims
44,297
(6,311)
37,986
61,047
(17,307)
43,740
Change in estimates of prior year
(127,892)
46,560
(81,332)
(176,316)
60,491
(115,825)
provisions
Effect of movements in exchange
(293)
(3,806)
(4,099)
(8,673)
5,103
(3,570)
rate
Balance at 31 December
217,576
(86,997)
130,579
220,170
(89,674)
130,496
Docusign Envelope ID: C7FCF1F6-16E3-41AE-93CD-D9A8B7D8886B
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2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
Gross
provisions
£000
2024
Reinsurance
assets
£000
Net
£000
Gross
provisions
£000
2023
Reinsurance
assets
£000
Net
£000
Unearned premiums
Balance at 1 January
84,205
(17,163)
67,042
80,677
(14,150)
66,527
Premiums written during the year
226,206
(48,024)
178,182
239,299
47,116
286,415
Premiums earned during the year
(221,052)
46,406
(174,646)
(232,961)
(50,537) (283,498)
Effect of movements in exchange rate
(445)
180
(265)
(2,810)
408
(2,402)
Balance at 31 December
88,914
(18,601)
70,313
84,205
(17,163)
67,042
Refer to Note 5.1 (iii) for the sensitivity analysis performed over the value of insurance liabilities, disclosed in
the accounts, to potential movements in the assumptions applied within the technical provisions.
21.
CREDITORS ARISING OUT OF DIRECT INSURANCE OPERATIONS
2024
£000
2023
£000
Due within one year
15,413
6,136
Total
15,413
6,136
22.
CREDITORS ARISING OUT OF REINSURANCE OPERATIONS
2024
£000
2023
£000
Due within one year
40,372
22,884
Total
40,372
22,884
23.
OTHER CREDITORS INCLUDING TAXATION AND SOCIAL SECURITY
2024
£000
2023
£000
Other related party balances (non-syndicates)
36,170
57,656
Total
36,170
57,656
All amounts are due within one year. Amounts owed to group undertakings are short-term, unsecured,
interest free and have no fixed date of repayment.
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2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
24.
CASH AND CASH EQUIVALENTS
2024
£000
2023
£000
Cash at bank and in hand
6,102
6,207
Total
6,102
6,207
Only deposits with credit institutions with maturities of three months or less that are used by the Syndicate
in the management of its short-term commitments are included in cash and cash equivalents.
Of the total cash and cash equivalents, the following amount was held in regulated bank accounts in
overseas jurisdictions:
2024
£000
2023
£000
Total cash and cash equivalents held in regulated accounts in overseas jurisdictions
-
-
25.
ANALYSIS OF NET DEBT
2024
At 1 January
2024
£’000
Cash
flows
£’000
Acquired
£’000
Fair value and
exchange
movements
£’000
Non-cash
changes
£’000
At 31
December
2024
£’000
Cash at bank and in hand
6,207
(16)
-
(89)
-
6,102
Total
6,207
(16)
-
(89)
-
6,102
2023
At 1
January
2023
£’000
Cash
flows
£’000
Acquired
£’000
Fair value and
exchange
movements
£’000
Non-cash
changes
£’000
At 31
December
2023
£’000
Cash at bank and in hand
4,175
1,812
-
220
-
6,207
Total
4,175
1,812
-
220
-
6,207
26.
RELATED PARTIES
The Syndicate’s capital is provided by Nameco (No. 808) Limited (‘Nameco’). Nameco’s ultimate parent
company is Tokio Marine Holdings, Inc. (‘TMHD’). TMHD is incorporated in Japan and listed on the Tokyo
Stock Exchange. The consolidated accounts of TMHD can be obtained from its website at
http://www.tokiomarinehd.com/en/ir/library/annual_report/index.html.
a.
The Syndicate incurred managing agency fees of £150,000 (2023: £150,000) from its Managing Agent,
HCCUA. HCCUA is a wholly owned subsidiary of HCC Intermediate Holdings Inc. An amount of £0.0m (2023:
£0.0m) was due to HCCUA at the balance sheet date. In addition, £21.2m (2023: £18.5m) was paid to HCC
Service Company Inc. (UK branch) for expenses paid during the year on behalf of the Syndicate and an
amount of £5.6m was due to (2023: £2.4m) HCC Service Company Inc. (UK branch) at the balance sheet
date. Profit related remuneration for the Syndicate’s underwriting staff is charged to the Syndicate.
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2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
b.
The Syndicate shares a reinsurance programme with the other TMHCCI carriers. Reinsurance premiums
are pro-rated across TMHCCI platforms according to their respective gross written premiums. Reinsurance
recoveries are pro-rated based on the share of gross claims suffered by each carrier. The balance due to
HCCII was £1.6m (2023: £6.2m due to HCCII) at the balance sheet date. Reinsurance is also purchased from
affiliate entities comprising:
i.
A whole account Excess of Loss cover was arranged in 2024 with HCCII with a coverage of $19m
excess of $1m (2023: $19m excess of $1m) and premium payable of £2.3m (2023: £1.9m).
An aggregate Excess of Loss cover arranged with HCL for Contingency losses on the 2019 and 2020 years. The
balance due from HCL was £16.5m (2023: £1.5m) at the balance sheet date.
c.
Nameco provides the entire capacity of Syndicate 4141. The immediate controller of Nameco and its sole
shareholder is HCC Intermediate Holdings Inc. and the ultimate controller is TMHD. An amount of £1.4m
was due from NameCo (2023: £10.9m due to) at the balance sheet date.
d.
The Syndicate transacts business with agencies and coverholders that are owned by the HCC group. Full
delegated underwriting authorities have been provided to the following HCC group entities;
i.
HCC Medical Insurance Services.
2024
2023
£’000
£’000
Premium income
69,530
75,248
Net Commission expense
25,959
30,323
Balance due (from)/to the Syndicate at year end
(103)
209
ii.
HCC Global Financial Products LLC.
2024
2023
£’000
£’000
Premium income
1,868
2,321
Net Commission expense
193
238
Balance due to the Syndicate at year end
-
-
e.
The Syndicate transacts business with the following Tokio Marine entities: Lloyd’s Syndicate 1880; Tokio
Marine Brasil Seguradora and Tokio Marine Kiln Group ltd. These arrangements have produced:
2024
£’000
2023
£’000
Gross premium written
27
45
Acquisition costs
(8)
(12)
27.
POST BALANCE SHEET EVENTS
The directors confirm that there are no significant post balance sheet events requiring disclosure.
28.
PENSION COMMITMENTS
TMHCC operates a Group Self Invested Personal Pension Scheme. The assets of the pension scheme are
held separately from those of the Group’s international operations in an independently administered fund.
The pension cost charged to the Syndicate Profit and Loss Account for the year was £303k (2023: £292k).
The accrued pension cost outstanding as at 31 December 2024 was £nil (2023: £nil).
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2024 Syndicate 4141 Annual Report and Accounts
NOTES TO THE ANNUAL ACCOUNTS
29.
CONTINGENCES AND COMMITMENTS
The directors confirm that there are no significant contingencies and commitments requiring disclosure.
30.
FOREIGN EXCHANGE RATES
The following currency exchange rates have been used for principal foreign currency transactions;
2024
Start of
period
rate
2023
End of period
rate
Average
rate
Start of
period
rate
End of period
rate
Average
rate
Sterling
Euro
US dollar
Canadian dollar
Australian dollar
31.
FUNDS AT LLOYD’S
Every member is required to hold capital at Lloyd’s which is held in trust and known as ‘Funds at Lloyd’s’
(‘FAL’). These funds are intended primarily to cover circumstances where the Syndicate’s assets prove
insufficient to meet participating members’ underwriting liabilities.
The level of FAL that Lloyd’s requires a member to maintain is determined by Lloyd’s based on PRA
requirements and resource criteria. FAL has regard to a number of factors including the nature and amount
of risk to be underwritten by the member and the assessment of the reserving risk in respect of business
that has been underwritten (see note 5.2 ii). Since FAL is not under the management of the Managing
Agent, no amount has been shown in these accounts by way of such capital resources. However, the
Managing Agent is able to make a call on the member’s FAL to meet the Syndicate’s liquidity requirements
or to settle its claims.
32.
ULTIMATE CONTROLLING PARTY AND PARENT UNDERTAKING OF WHICH THE RESULTS OF THE
SYNDICATE ARE INCLUDED
Nameco provides 100% of the capital to support the underwriting of the Syndicate and the principal activity
of Nameco is to monitor and support the operations of the Syndicate.
The Syndicate is managed by HCC Underwriting Agency Ltd which is authorised by the Prudential
Regulation Authority (‘PRA’) and regulated by both the Financial Conduct Authority and the Prudential
Regulation Authority.
The results of the Syndicate are reported both within those of Nameco and the larger Tokio Marine HCC
Insurance Holdings, Inc. group.
The ultimate parent company of both the Syndicate and of Nameco is Tokio Marine Holdings, Inc. (TMHD).
TMHD’s head office is located in Tokyo, Japan. TMHD is a leading international insurance group with offices
worldwide.