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Syndicate 2786
Annual Report and Accounts for the year ended
Contents
Directors and administration .................................................................................................. 1
Managing Agent's report ....................................................................................................... 2
Statement of Managing Agent's responsibilities .................................................................... 9
Independent auditor’s report to the members of Syndicate 2786 ......................................... 10
Statement of profit or loss and other comprehensive income .............................................. 15
Statement of financial position ............................................................................................ 17
Statement of changes in Members' balances ...................................................................... 19
Statement of cash flows ...................................................................................................... 20
1. Basis of preparation ..................................................................................................... 21
2. Critical accounting estimates and judgements ............................................................. 21
3. Significant accounting policies ..................................................................................... 23
4. Analysis of underwriting result...................................................................................... 30
5. Technical provisions .................................................................................................... 33
6. Net operating expenses ............................................................................................... 34
7. Auditor’s remuneration ................................................................................................. 34
8. Key management personnel compensation ................................................................. 35
9. Staff numbers and costs .............................................................................................. 35
10. Investment return ..................................................................................................... 35
11. Financial Investments ............................................................................................... 36
12. Debtors arising out of direct insurance operations .................................................... 39
13. Debtors arising out of reinsurance operations .......................................................... 39
14. Other debtors ........................................................................................................... 40
15. Creditors arising out of direct insurance operations .................................................. 40
16. Creditors arising out of reinsurance operations ......................................................... 40
17. Other creditors .......................................................................................................... 40
18. Cash and cash equivalents....................................................................................... 41
19. Related parties ......................................................................................................... 42
20. Disclosure of interests .............................................................................................. 42
21. Funds at Lloyd's ....................................................................................................... 43
22. Off-balance sheet items ............................................................................................ 43
23. Risk management .................................................................................................... 43
24. Post balance sheet events........................................................................................ 59
1
Directors and administration
Managing Agent
Directors
P A Jardine (Chairman)*
R P Barke
C V Barley
S Bradbury
E M Catchpole*
S Fisher*
L Harfitt
D B Jones
L J M McMaster
A F J Neden*
S D Redmond*
K Shah*
Non-Executive Directors*
Managing Agent's registered office
5th Floor
20 Gracechurch Street
London
EC3V 0BG
Managing Agent's registered number
1918744
Active Underwriter
P Dreblow
Bankers and investment managers
Royal Bank of Canada
Citibank
Lloyds Bank
New England Asset Management
Registered Auditor
KPMG LLP
Signing Actuary
Ernst & Young
2
Managing Agent's report
The Syndicate's Managing Agent is a company registered in England and Wales. The
Directors of the Managing Agent present their report for the year ended 31 December 2024.
The financial statements herein have been prepared using the annual basis of accounting as
required by Statutory Instrument No 1950 of 2008, The Insurance Accounts Directive (Lloyd's
Syndicate and Aggregate Accounts) Regulations 2008 (“Lloyds Regulations 2008”).
Results
The result for calendar year 2024 is a profit of £10,460,804 (2023: profit of £17,625,407).
The Syndicate presents its results under FRS102, the Financial Reporting Standard applicable
in the UK and Republic of Ireland. In accordance with FRS102, the Syndicate has identified its
insurance contracts and accounted for them in accordance with FRS103 Insurance Contracts.
Principal activity and review of the business
The Syndicate’s principal activity is the underwriting of direct insurance and reinsurance
business in the Lloyd’s market.
Gross written premium income by class of business for the calendar year was as follows:
2024
£’000
2023
£’000
Accident and Health
21,242
12,735
Commercial management Liability
12,057
17,902
Contingency
102
3,146
Cyber
16,160
15,857
Energy
18,486
9,990
Financial Institutions
16,889
17,583
Latent Defects
10
60
Liability
29,831
25,220
Marine
3,547
38,289
Marine Cargo
27,369
-
Marine Hull
20,250
-
Marine Liability
23,556
-
Medical Malpractice
21,760
18,692
Political Violence & Terrorism
4,836
-
Professional Indemnity
57,633
46,569
Property
45,518
33,495
Reinsurance
74
18
Specie
9,632
11,728
Warranty and Indemnity
(153)
(384)
328,799
250,900
3
Managing Agent’s report continued
The Syndicate's financial key performance indicators during the year were as follows:
2024
£’000
2023
£’000
Gross premiums written
328,799
250,900
Profit for the financial year
10,461
17,625
Combined ratio*
97.9%
95.8%
*The combined ratio is the ratio of net claims incurred and net operating expenses to net
premiums earned in the calendar year. Lower ratios represent better performance.
The performance of the Syndicate has been assessed by measuring, as a percentage of
underwriting capacity, the 36-month forecasted result on a funded accounting basis for an
individual underwriting year of account (“YOA”). The return on capacity for each underwriting
year is shown below.
Note that the 2022 underwriting year is now closed, as of 31 December 2024.
2024 YOA
Open
2023 YOA
Open
2022 YOA
Closed
Capacity (£’000)
340,000
320,000
200,000
Forecast result (£’000)
25,130
27,083
8,487
Forecast return on capacity (%)
7.4%
8.5%
4.2%
4
Managing Agent’s report continued
Principal risks and uncertainties
The Syndicate sets risk appetite annually, which is approved by the Agency as part of the
Syndicate’s business planning and Solvency Capital Requirement (“SCR”) process. The
Agency Risk and Solvency Committee meets at least quarterly to oversee the risk
management framework. The Syndicate Board, a sub-committee of the Agency Board,
reviews the risk profile as reflected in the risk register, and monitors performance against risk
appetite using a series of key risk indicators. The principal risk and uncertainties facing the
Syndicate are as follows:
Insurance risk
Insurance risk includes the risks that a policy will be written for too low a premium or provide
inappropriate cover (underwriting risk), that the frequency or severity of insured events will be
higher than expected (claims risk), or that estimates of claims subsequently prove to be
insufficient (reserving risk). The Syndicate Board and Underwriting Committee manages
insurance risk through challenge and oversight of the approved business plan, which sets out
targets for volumes, pricing, line sizes and retention by class of business. The Syndicate
Board then monitors performance against the business plan and the aggregation of risk
through exposure management reporting through the year. The Syndicate Board considers
any proposed underwriting that impacts the Syndicate’s Environmental, Social and
Governance (“ESG”) profile to ensure consistency with the agreed ESG approach. Reserve
adequacy is monitored through quarterly review by the Asta Actuarial team and the Reserving
Committee.
Credit risk
The key aspect of credit risk is reinsurance counterparty risk which is the risk of default by one
or more of the Syndicate’s reinsurers and intermediaries. The Syndicate’s policy is to only use
approved reinsurers, supported by collateralisation where required. The Agency Reinsurance
Security Committee sets approval and usage criteria, monitors reinsurer ratings and is required
to approve and oversee the application of the reinsurer approval policy. The Syndicate may
also be exposed to broker credit risk, in particular where risk transfer arrangements are in
place. Aged debt reporting for premiums is reviewed in the Syndicate Board.
5
Managing Agent’s report continued
Market risk
Market risk exposure impacting the Syndicate relates to fluctuations in interest rates or
exchange rates and inflation. The Syndicate is exposed to foreign exchange movements as
a result of mismatches between the currencies in which assets and liabilities are denominated.
The Agency’s policy is to maintain received income or incurred expenditure in the core
currencies in which they were received or paid. Any surplus or deficit in a core currency would
be subject to review by the Syndicate Board.
Investments are monitored through Investment Managers with quarterly Investment
Committees that review the performance, duration and ESG ratings for the investments.
Liquidity risk
This is the risk that the Syndicate will not be able to meet its liabilities as they fall due, owing
to a shortfall in cash or can only meet obligations at excessive cost. To mitigate this risk the
Syndicate Board and Investment Committee reviews cash flow projections regularly and
ensures that, where needed, the Syndicate has liquidity facilities in place or has utilised the
option of a cash call from Capital providers.
Operational risk
This is the risk that errors caused by people, processes, systems and external events lead to
losses to the Syndicate. The Agency seeks to manage this risk through a robust operational
risk and control framework including detailed procedure manuals and a thorough training
programme. This is underpinned by a structured programme of testing of processes and
systems by internal audit, who serve as an independent line of assurance, reporting directly to
the Chair of the Agency Audit Committee. Business continuity and disaster recovery plans
are in place and are regularly updated and tested.
Regulatory risk is the risk of loss owing to a breach of regulatory requirements or failure to
respond to regulatory change. The Agency is required to comply with the requirements of the
Financial Conduct Authority (FCA), Prudential Regulatory Authority (PRA) and Lloyd’s. Lloyd’s
requirements include those imposed on the Lloyd’s market by overseas regulators. The
Agency has a Compliance and Governance Director who manages a function that monitors
business activity and regulatory developments to assess any effects on both the Agency and
the Syndicate.
The Syndicate has no appetite for failing to adhere to the requirements of the FCA Consumer
Duty regulations and continues its focus on ensuring that it is treating customers fairly. The
Syndicate manages and monitors consumer duty risk through a suite of risk indicators and
reporting metrics as part of its documented consumer duty risk framework. The consumer duty
risk framework is consistently applied across all Asta syndicates and is overseen by the
Conduct Oversight Group (COG), which is an Agency Board Committee that includes a non-
executive director as a member who fulfils the role of Consumer Duty Champion.
6
Managing Agent’s report continued
Group and strategic risk
Group Risk is the risk of contagion that arises from being associated with key stakeholders
and the impact that activities and events that occur within other connected or third parties has
on the business.
Strategic risk covers the risks faced by the Syndicate due to changes in underlying strategy of
the business or that of its key stakeholders (including strategic conflicts of interest).
Future developments
The Syndicate will continue to transact the current classes of general direct insurance and
reinsurance business. If opportunities arise to write new classes of business, these will be
investigated at the appropriate time.
The capacity for the 2025 underwriting year is £355.0m (2024 underwriting year: £340.0m).
Environmental, Social and Governance (ESG) and sustainability
The Syndicate has documented a position with regard to ESG and sustainability, which is
submitted annually to Lloyd’s as part of business planning. The position has been developed
in alignment with Lloyd’s principles and expectations, broader regulatory requirements, and to
support the Syndicate’s strategic objectives. Lloyd’s published an updated version of its
“Insuring the Transition” Roadmap as well as its principles for doing business regarding
sustainability, and the Syndicate continues to ensure its approach aligns with those
expectations.
Following the Prudential Regulation Authority’s (PRA) Supervisory Statement in 2019 and
subsequent Dear CEO letter in 2020, Asta have built a climate change framework, applicable
to all syndicates, covering physical, transition and liability climate change risks, based on the
underlying business written by each syndicate. Asta’s managed syndicates accept climate
change risk where it is an inherent part of an insurance business model, providing it is
understood, managed, and controlled and/or compensated. There is no appetite for
uncontrolled, unmanaged exposure to the financial risks of climate change.
The framework ensures Board-level engagement and accountability with Lloyd’s and PRA’s
requirements and expectations, assigning clear responsibilities for managing the financial risks
associated with climate change. The Agency’s Chief Risk Officer, who is a Board member, is
responsible for the climate change framework, including identifying and managing financial
climate related risks.
Asta monitors regulatory guidance and expectations on managing the financial risks of climate
change.
7
Managing Agent’s report continued
Emerging risks
An emerging risk or opportunity is defined as “a developing issue, triggered externally, with
the potential to have a significant business impact but which may not be sufficiently understood
or accounted for”. The business impact in this case could represent a downside risk or an
upside opportunity. Emerging risks and opportunities include:
• Syndicate insurable risks, as areas of potential future losses or new product offerings;
• Those risks that may affect a syndicate’s ability to carry out normal business operations
and/or lead to unplanned significant costs/income;
• Both new risks and those which are re-emerging in a new context.
The Agency and Syndicate continue to monitor the impact of emerging risks on the Syndicate’s
business, taking into account their impacts on the strategic direction of the Syndicate.
Monitoring takes place in various forums, including the Asta Emerging Risks and Opportunities
Group (“EROG”) which meets quarterly and considers emerging risks and opportunities from
both an internal and external lens. Specific areas of focus over the external environment
across the year at Syndicate and Asta level include:
• The geopolitical landscape from a tension and broader political risk impact, including
any exposures stemming from regional conflicts (e.g. Russia - Ukraine conflict).
• The heightened inflationary environment and subsequent volatility surrounding inflation
risk. This has also been considered by the Syndicate within their annual business
planning process and reserve reviews.
Directors and Officers
Details of the Directors of the Managing Agent that were serving at the date of signing these
financial statements are provided on page 1. Changes to Directors from the last report were
as follows:
K A Green Resigned 30 September 2024
A F J Neden Appointed 1 January 2025
S Fisher Appointed 1 February 2025
Changes to the Active Underwriter from the last report were as follows:
R Crocker Resigned 30 April 2024
P Dreblow Appointed 25 July 2024
8
Managing Agent’s report continued
Disclosure of information to the auditor
So far as each person who was a Director of the Managing Agent at the date of approving the
report is aware, there is no relevant audit information, being information needed by the
Syndicate auditor in connection with the auditor's report, of which the auditor is unaware.
Having made enquiries of fellow Directors of the Agency and the Syndicate's auditors, each
Director has taken all the steps that he or she ought to have taken as a Director to become
aware of any relevant audit information and to establish that the Syndicate's auditor is aware
of that information.
Auditor
Pursuant to Section 14(2) of Schedule 1 of the Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008, the auditor will be deemed to be
reappointed.
Syndicate Annual General Meeting
In accordance with the Syndicate Meetings (Amendment No 1) Byelaw (No 18 of 2000) the
Managing Agent does not propose holding an annual meeting this year; objections to this
proposal or the intention to reappoint the auditors for a further 12 months can be made by
Syndicate members within 21 days of this notice.
On behalf of the Board
L J M McMaster
06 March 2025
9
Statement of Managing Agent's responsibilities
The Managing Agent is responsible for preparing the financial statements in accordance with
applicable law and regulations.
The Insurance Accounts Directive (Lloyd's Syndicate and Aggregate Accounts) Regulations
2008 require the managing agent to prepare financial statements at 31 December each year
in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law) including FRS 102 the Financial Reporting
Standard applicable in the UK and Republic of Ireland. The financial statements are required
by law to give a true and fair view of the state of affairs of the Syndicate as at that date and of
its profit or loss for that year.
In preparing the financial statements, the managing agent is required to:
• select suitable accounting policies and then apply them consistently subject to changes
arising on the adoption of new accounting standards in the year;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable Accounting Standards have been followed, subject to any
material departures disclosed and explained in the notes to the Syndicate accounts;
and
• prepare the Syndicate Accounts on the basis that the Syndicate will continue to write
future business unless it is inappropriate to presume that the Syndicate will do so.
The Managing Agent is responsible for keeping adequate accounting records which disclose
with reasonable accuracy at any time the financial position of the Syndicate and enable it to
comply with the Insurance Accounts Directive (Lloyd's Syndicate and Aggregate Accounts)
Regulations 2008. It is also responsible for safeguarding the assets of the Syndicate and
hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The Managing Agent is responsible for the maintenance and integrity of the corporate and
financial information included on the business' website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
The Managing Agent is responsible for the preparation and review 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,
whether due to fraud or error.
10
Independent auditor’s report to the members of Syndicate 2786
Opinion
We have audited the Syndicate annual accounts of Syndicate 2786 (“the Syndicate”) for the
year ended 31 December 2024 which comprise the Statement of profit or loss and other
comprehensive income, Statement of financial position, Statement of changes in Members’
balances, Statement of cash flows, and related notes, including the accounting policies in note
3.
In our opinion the 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 for the year then ended;
• have been properly prepared in accordance with UK accounting standards, including
FRS 102 The Financial Reporting Standard applicable in the UK and Republic of
Ireland; and
• have been prepared in accordance with the requirements of the Insurance Accounts
Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and Sections
1 and 5 of the Syndicate Accounts Instructions version 2.0 issued by Lloyd’s, as
modified by the Syndicate Accounts Frequently Asked Questions version 1.1 dated 18
February 2025 issued by Lloyd’s (“the Syndicate Accounts Instructions”).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs
(UK)”), applicable law, and, under the terms of our engagement letter dated 25 July 2024 the
Syndicate Account Instructions. Our responsibilities are described below. We have fulfilled our
ethical responsibilities under, and are independent of the Syndicate in accordance with, UK
ethical requirements including the FRC Ethical Standard as applied to other entities of public
interest. We believe that the audit evidence we have obtained is a sufficient and appropriate
basis for our opinion.
Going concern
The Directors of the Managing Agent (“the Directors”) have prepared the Syndicate annual
accounts on the going concern basis as they do not intend to cease underwriting or to cease
its operations, and as they have concluded that the Syndicate’s financial position means that
this is realistic. They have also concluded that there are no material uncertainties that could
have cast significant doubt over its ability to continue as a going concern for at least a year
from the date of approval of the Syndicate annual accounts (“the going concern period”).
In our evaluation of the Directors’ conclusions, we considered the inherent risks to the
Syndicate’s business model and analysed how those risks might affect the Syndicate’s
financial resources or ability to continue operations over the going concern period, including
reviewing correspondence with Lloyd’s to assess whether there were any known impediments
to establishing a further year of account.
Our conclusions based on this work:
• we consider that the Directors’ use of the going concern basis of accounting in the
preparation of the Syndicate annual accounts is appropriate; and
• we have not identified, and concur with the Directors’ assessment that there is not, a
material uncertainty related to events or conditions that, individually or collectively, may
cast significant doubt on the Syndicate’s ability to continue as a going concern for the
going concern period.
11
Independent auditor’s report continued
However, as we cannot predict all future events or conditions and as subsequent events may
result in outcomes that are inconsistent with judgements that were reasonable at the time they
were made, the above conclusions are not a guarantee that the Syndicate will continue in
operation.
Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or
conditions that could indicate an incentive or pressure to commit fraud or provide an
opportunity to commit fraud. Our risk assessment procedures included:
• Enquiring of directors, internal audit and head of compliance and inspection of policy
documentation as to the Syndicate’s high-level policies and procedures to prevent and
detect fraud including the internal audit function, and the Syndicate’s channel for
“whistleblowing”, as well as whether they have knowledge of any actual, suspected or
alleged fraud.
• Reading Board, audit committee, and other relevant meeting minutes.
• Using analytical procedures to identify any unusual or unexpected relationships.
We communicated identified fraud risks throughout the audit team and remained alert to any
indications of fraud throughout the audit.
As required by auditing standards, and taking into account possible pressures to meet profit
targets, we perform procedures to address the risk of management override of controls and
the risk of fraudulent revenue recognition, specifically within estimated premium income, in
particular:
• the risk that management may be in a position to make inappropriate accounting
entries; and
• the risk of bias in accounting estimates such as valuation of claims outstanding and
estimated premium income.
We also identified a fraud risk related to the valuation of claims outstanding, specifically over
incurred but not reported claims.
We performed procedures including:
• Identifying journal entries and other adjustments to test based on risk criteria and
comparing the identified entries to supporting documentation. These included those
posted by senior finance management, those posted without any description and
postings to seldom used accounts;
• Assessing whether the judgements made in making accounting estimates are
indicative of a potential bias.
Identifying and responding to risks of material misstatement related to compliance with laws
and regulations
We identified areas of laws and regulations that could reasonably be expected to have a
material effect on the Syndicate annual accounts from our general commercial and sector
experience and through discussion with the directors and other management (as required by
auditing standards), and from inspection of the Managing agent’s regulatory and legal
correspondence and discussed with the directors and other management the policies and
procedures regarding compliance with laws and regulations.
12
Independent auditor’s report continued
As the Syndicate is regulated, our assessment of risks involved gaining an understanding of
the control environment including the entity’s procedures for complying with regulatory
requirements.
We communicated identified laws and regulations throughout our team and remained alert to
any indications of non-compliance throughout the audit.
The potential effect of these laws and regulations on the Syndicate annual accounts varies
considerably.
Firstly, the Syndicate is subject to laws and regulations that directly affect the Syndicate annual
accounts including financial reporting legislation (including related companies legislation)”
should be changed to “financial reporting legislation (such as the Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, and the Lloyd’s Syndicate
Accounts Instructions), and we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related Annual return items.
Secondly, the Syndicate is subject to many other laws and regulations where the
consequences of non-compliance could have a material effect on amounts or disclosures in
the Annual return, for instance through the imposition of fines or litigation or the loss of
Syndicate’s license to operate. We identified the following areas as those most likely to have
such an effect: health and safety, data protection laws, anti-bribery, employment law,
regulatory capital and liquidity recognising the financial and regulated nature of the Syndicate’s
activities. Auditing standards limit the required audit procedures to identify non-compliance
with these laws and regulations to enquiry of the directors and other management and
inspection of regulatory and legal correspondence, if any. Therefore, if a breach of operational
regulations is not disclosed to us or evident from relevant correspondence, an audit will not
detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have
detected some material misstatements in the Annual Return, even though we have properly
planned and performed our audit in accordance with auditing standards. For example, the
further removed non-compliance with laws and regulations is from the events and transactions
reflected in the Annual Return, the less likely the inherently limited procedures required by
auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect material misstatement. We are
not responsible for preventing non-compliance or fraud and cannot be expected to detect non-
compliance with all laws and regulations.
13
Independent auditor’s report continued
Other information - Report of the Directors of the Managing Agent
The Directors are responsible for the Report of the Directors of the Managing Agent. Our
opinion on the Syndicate annual accounts does not cover that report and we do not express
an audit opinion or, except as explicitly stated below, any form of assurance conclusion
thereon.
Our responsibility is to read the Report of the Directors of the Managing Agent and, in doing
so, consider whether, based on our Syndicate annual accounts audit work, the information
therein is materially misstated or inconsistent with the Syndicate annual accounts or our audit
knowledge. Based solely on that work:
• we have not identified material misstatements in the Report of the Directors of the
Managing Agent;
• in our opinion the information given in the Report of the Directors of the Managing
Agent is consistent with the Syndicate annual accounts; and
• in our opinion the Report of the Directors of the Managing Agent has been prepared in
accordance with the requirements of the Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008.
Matters on which we are required to report by exception
Under the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts)
Regulations 2008, we are required to report to you if, in our opinion:
• adequate accounting records have not been kept on behalf of the Syndicate; or
• the Syndicate annual accounts are not in agreement with the accounting records; or
• certain disclosures of Managing Agent’s emoluments specified by law are not made;
or
• we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
Responsibilities of the Directors of the Managing Agent
As explained more fully in their statement set out on page 9, the Directors of the Managing
Agent are responsible for: the preparation of the Syndicate annual accounts in accordance
with the requirements of the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate
Accounts) Regulations 2008 and the Syndicate Accounts Instructions, and for being satisfied
that they give a true and fair view; 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; 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 they either intend to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities
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 our opinion in an auditor’s report. Reasonable assurance is a high level of
assurance, but does not 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 aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of the Syndicate
annual accounts.
14
Independent auditor’s report continued
A fuller description of our responsibilities is provided on the FRC’s website at
www.frc.org.uk/auditorsresponsibilities.
The Directors of the Managing Agent are required, under the Syndicate Accounts Instructions,
to include these Syndicate annual accounts within a document to which XBRL tagging has
been applied. This auditor’s report provides no assurance over whether the XBRL tagged
document has been prepared in accordance with those requirements.
The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Syndicate’s members, as a body, in accordance with the
Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008
and the terms of our engagement letter by the Managing Agent. Our audit work has been
undertaken so that we might state to the Syndicate’s members those matters we are required
to state to them in an auditor’s report and the further matters we are required to state to them
in accordance with the terms agreed with the Managing Agent and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Syndicate and the Syndicate’s members, as a body, for our audit work, for this report,
or for the opinions we have formed.
Dan Wright (Senior Statutory Auditor)
For and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peter's Square
Manchester
M2 3AE
06 March 2025
15
Statement of profit or loss and other comprehensive income
Technical account – general business
For the year ended 31 December 2024
Notes
2024
£’000
2023
£’000
Gross premiums written
4
Outward reinsurance premiums
(47,295 )
(23,789 )
Premiums written, net of reinsurance
Changes in unearned premium
Change in the gross provision for unearned premiums
(37,351 )
(32,254 )
Change in the provision for unearned premiums
reinsurers’ share
Net change in provisions for unearned premiums
5
(25,857 )
(25,665 )
Earned premiums, net of reinsurance
Allocated investment return transferred from the
non-technical account
Other technical income, net of reinsurance
Claims paid
Gross amount
(66,315 )
(70,925 )
Reinsurers’ share
Net claims paid
(60,568 )
(61,866 )
Changes in the provision for claims
Gross amount
(96,223 )
(43,808 )
Reinsurers’ share
(5,327 )
Net change in provisions for claims
5
(82,126 )
(49,135 )
Claims incurred, net of reinsurance
(142,694 )
(111,001 )
Net operating expenses
6
(107,495 )
(81,903 )
Balance on the technical account – general
business
All the amounts above are in respect of continuing operations.
The notes on pages 21 to 59 form part of these financial statements.
16
Statement of profit or loss and other comprehensive income continued
Non-technical account – general business
For the year ended 31 December 2024
Notes
2024
£’000
2023
£’000
Balance on the technical account – general
business
Investment income
Realised gains on investments
Unrealised gains on investments
Investment expenses and charges
(275 )
(44 )
Total investment return
10
Allocated investment return transferred to the general
business technical account
(16,927 )
(10,634 )
Loss on foreign exchange
(11,924 )
(1,551 )
Profit for the financial year
There were no recognised gains and losses in the year other than those reported in the
statement of profit or loss, and hence no statement of other comprehensive income has been
presented.
All the amounts above are in respect of continuing operations.
The notes on pages 21 to 59 form part of these financial statements.
17
Statement of financial position
As at 31 December 2024
Notes
2024
£’000
2023
£’000
Assets
Investments
Financial investments
11
Deposits with ceding undertakings
Reinsurers' share of technical provisions
Provision for unearned premiums
5
Claims outstanding
5
Debtors
Debtors arising out of direct insurance operations
12
Debtors arising out of reinsurance operations
13
Other debtors
14
Other assets
Cash at bank and in hand
Other
Prepayments and accrued income
Deferred acquisition costs
5
Other prepayments and accrued income
Total assets
The notes on pages 21 to 59 form part of these financial statements.
18
Statement of financial position continued
As at 31 December 2024
Notes | 2024 £’000 | 2023 £’000 | |
| Members’ balance and liabilities | |||
Capital and reserves | |||
| Members’ balances | |||
| Technical provisions | |||
| Provision for unearned premiums | 5 | ||
Claims outstanding | 5 | ||
| Creditors | |||
| Creditors arising out of direct insurance operations | 15 | ||
Creditors arising out of reinsurance operations | 16 | ||
Amounts owed to credit institutions | |||
Other creditors including taxation and social security | 17 | ||
Accruals and deferred income | |||
Total liabilities | |||
| Total liabilities, capital and reserves |
The notes on pages 21 to 59 form part of these financial statements.
The financial statements on pages 15 to 59 were approved by Board of Directors on 18
February 2025 and were signed on its behalf by:
R P Barke
Director
06 March 2025
19
Statement of changes in Members' balances
For the year ended 31 December 2024
| 2024 £’000 | 2023 £’000 | |
| Members’ balances brought forward at 1 January | ( | |
Total comprehensive income for the year | ||
| Payments of profit to members’ personal reserve funds | ( | |
Losses collected on closure of underwriting year | ||
Cash calls on open underwriting years | ||
Members agent fees | ||
Net movement on funds in syndicate | ||
Other | ||
| Members’ balances carried forward at 31 December |
20
Statement of cash flows
For the year ended 31 December 2024
Notes | 2024 £’000 | 2023 £’000 | |
Cash flows from operating activities | |||
Profit for the financial year | |||
Adjustments: | |||
Increase in gross technical provisions | |||
| (Increase)/decrease in reinsurers’ share of technical provisions | ( | ||
Decrease/(increase) in debtors | ( | ||
(Decrease) in creditors | ( | ( | |
(Increase)/decrease in deposits received from reinsurers | |||
Movement in other assets/liabilities | ( | ||
Foreign exchange | ( | ||
Investment return | ( | ( | |
Net cash flows from operating activities | |||
| Cash flows from investing activities | |||
Purchase of equity and debt instruments | ( | ( | |
Sale of equity and debt instruments | |||
Investment income received | |||
Other cash flows from investing activities | ( | ||
Net cash flows from investing activities | ( | ( | |
| Cash flows from financing activities | |||
Distribution of profit | ( | ||
Collection of losses | |||
Injection/(release) of Funds in Syndicate | |||
Other cash flows from financing activities | |||
| Net cash flows from financing activities | ( | ||
Net (decrease) in cash and cash equivalents | ( | ( | |
| Cash and cash equivalents at the beginning of the year | |||
Foreign exchange on cash and cash equivalents | ( | ||
| Cash and cash equivalents at the end of the year | 18 |
21
Notes to the financial statements
1. Basis of preparation
Statement of compliance
The financial statements have been prepared in accordance with The Insurance Accounts
Directive (Lloyd's Syndicate and Aggregate Accounts) Regulations 2008, applicable
Accounting Standards in the United Kingdom and the Republic of Ireland, including Financial
Reporting Standard 102 (FRS 102), Financial Reporting Standard 103 (FRS 103) in relation
to insurance contracts, and the Lloyd’s Syndicate Accounts Instructions Version 2.0 as
modified by the Frequently Asked Questions Version 1.0 issued by Lloyd’s.
The financial statements have been prepared on the historical cost basis, with the exception
of financial assets which are measured at fair value through the profit and loss account.
The financial statements are presented in GBP, the functional currency of the Syndicate is
GBP. All amounts have been rounded to the nearest thousand, unless otherwise indicated.
Going Concern
The Directors of the Managing Agent have assessed the Syndicate’s ability to continue as a
going concern. As part of this assessment, the Directors have considered cash forecasts, the
availability of financial resources, consistency of loss ratios, credit worthiness of reinsurers,
capital support for the existing underwriting years, business plans for future underwriting years
and availability of future capital support. Following this assessment, the Directors consider it
appropriate to adopt the going concern basis in preparing the annual report and financial
statements.
2. Critical accounting estimates and judgements
In preparing these financial statements, the Directors of the Managing Agent have made
judgements, estimates and assumptions that affect the application of the Syndicate’s
accounting policies and the reported amounts of assets, liabilities, income and expenses.
The following critical accounting estimates have been made in applying the Syndicate’s
accounting policies:
• Valuation of claims reserves
The measurement of the provision for claims outstanding involves judgements and
assumptions about the future that have a significant effect on the value recognised in
the financial statements.
The provision for claims outstanding comprises the estimated cost of settling all claims
incurred but unpaid at the balance sheet date, whether reported or not. This is a
judgemental and complex area due to the subjectivity inherent in estimating the impact
of claims events that have occurred but for which the eventual outcome remains
uncertain.
22
Critical accounting estimates and judgements
Case estimates are generally set by skilled claims technicians applying their
experience and knowledge to the circumstances of individual claims. Critical
judgement is applied when estimating the value of amounts that should be provided for
claims that have been incurred at the reporting date but have not yet been reported
(IBNR) to the Syndicate. This is a source of significant estimation uncertainty.
The ultimate cost of outstanding claims is estimated using a range of techniques
including actuarial and statistical projections, benchmarking, case by case review and
judgement. Statistical techniques assume that past claims development experience
can be used as a basis to project ultimate claims costs. Typical methods employed
include, but are not limited to, the chain ladder method and the Bornhuetter-Ferguson
method, whilst plan and pricing loss ratios are also considered.
The reserving process will disaggregate the insured risks into reserving classes – these
are collections of risks of a similar profile. Each reserving class will be assessed
separately, and corresponding claims development patterns will be selected as bases
against which to forecast expected claims. Judgement is used to assess the extent to
which past trends may not apply in the future. When selecting historic data to use for
claims forecasting purposes, the suitability and reliability of the dataset is considered.
A dataset that most closely resembles the expected risk profile of a given reserving
class will be selected. The benchmark data provided by Lloyd’s is generally used as
reserving development patterns, but these can be substituted by or blended with
additional data, providing that this additional data has an established track record and
is relevant.
Whilst the Directors consider that the claims reserves are fairly stated based on the
information currently available to them, the ultimate liability will vary as a result of
subsequent information and events.
Sensitivities relating to this critical judgement have been assessed in further detail in
note 23.
• Estimated premium income (“EPI”)
For the majority of assumed (inwards) reinsurance policies, EPI is initially used as the
basis for reporting gross premiums written. EPI is a measure of expected premium
income over the life of a policy. These estimates, typically supplied by the cedent, are
judgemental and could result in misstatements of revenue recorded in the financial
statements.
• Pipeline premium
Pipeline premium relates to premium that has likely been written as at the report date,
but due to reporting delays through the distribution chain, the premium has not yet
been reported to the Syndicate. Reasons for the reporting delay typically revolve
around a natural lag in receiving the premium bordereaux from brokers or coverholders
bordereaux are generally produced monthly or quarterly in arrears. Pipeline premium
is included within Gross Premiums Written on the statement of profit of loss.
23
Critical accounting estimates and judgements
There is significant uncertainty when estimating pipeline premium. Estimates are
frequently based upon information provided by the business producers, or sometimes
a statistical approach is adopted based on past experience. Given that pipeline
premium relates to hypothetical policies that have been bound just before the balance
sheet date, the vast majority of this premium is usually unearned.
3. Significant accounting policies
The following principal accounting policies have been applied consistently in dealing with items
which are considered material in relation to the Syndicate’s financial statements.
Gross premiums
Gross written premiums comprise the total premiums receivable for the whole period of cover
provided by the contracts entered into during the reporting period, regardless of whether these
are wholly due for payment in the reporting period, together with any adjustments arising in
the reporting period to such premiums receivable in respect of business written in prior
reporting periods. They are recognised on the date on which the policy commences. This is
applicable to both direct premium and assured (inwards reinsurance) premium. Gross written
premiums are stated gross of brokerage payable to intermediaries, and exclude taxes and
duties levied on the policyholder.
Estimated premium income in respect of facility contracts, for example binding authorities and
lines slips, are deemed to be written in a manner that reflects the expected profile of the
underlying business which has been written.
Ceded reinsurance premiums
Reinsurance written premiums comprise the total premiums payable for the whole cover
provided by contracts entered into the period, including portfolio premiums payable, and are
recognised on the date on which the policy incepts. Premiums include any adjustments arising
in the accounting period in respect of reinsurance contracts incepting in prior accounting
periods. They are recognised on the date on which the policy commences.
Provisions for unearned premiums
Unearned premiums are those proportions of premiums written up to the reporting date that
relate to periods of risk after the reporting date. In respect of general insurance business,
written premiums are recognised as earned over the period of the policy on a time
apportionment basis having regard where appropriate, to the incidence of risk. The proportion
attributable to subsequent periods is deferred as a provision for unearned premiums.
Unearned reinsurance premiums are those proportions of ceded premiums written up to the
reporting date that relate to periods of risk after the reporting date. Ceded reinsurance
premiums are earned on the same basis as the inwards business being protected.
Claims incurred
Claims incurred comprise claims and claims handling expenses (both internal and external)
paid in the year and the movement in provision for outstanding claims and settlement
expenses processed in the year. The provision for claims comprises amounts set aside for
claims notified and claims incurred, but not yet reported (IBNR). The Syndicate does not
discount its liability for outstanding claims.
24
Significant accounting policies continued
Claims incurred
The amount included in respect of IBNR is based on statistical techniques of estimation applied
by actuaries. These techniques generally involve projecting from past experience of the
development of claims over time to form a view of the likely ultimate claims to be experienced,
having regard to variations in the business accepted and the underlying terms and conditions.
The provision for claims also includes amounts in respect of internal and external claims
handling costs. For the most recent years, where a high degree of volatility arises from
projections, estimates may be based in part on output from rating and other models of the
business accepted and assessments of underwriting conditions. An element of IBNR can also
relate to specific large losses.
The reinsurers’ share of provisions for claims is based on calculated amounts of outstanding
claims and projections for IBNR, net of estimated irrecoverable amounts, having regard to the
reinsurance programme in place for the class of business and the claims experience for the
year. The Syndicate uses a number of statistical techniques to assist in making these
estimates where relevant.
Accordingly, the two most critical assumptions as regards claims provisions are that the past
is a reasonable predictor of the likely level of claims development and that the rating and other
models used for current business are fair reflections of the likely level of ultimate claims to be
incurred.
The Directors consider that the provisions for gross claims and related reinsurance recoveries
are fairly stated on the basis of the information currently available to them. However, ultimate
liability will vary as a result of subsequent information and events and this may result in
significant adjustments to the amounts provided.
Adjustments to the amounts of claims provisions established in prior years are reflected in the
financial statements for the period in which the adjustments are made. The methods used,
and the estimates made, are reviewed regularly.
Unexpired risks
A provision for unexpired risks is made where claims and related expenses are likely to arise
after the end of the financial period in respect of contracts concluded before that date, are
expected to exceed the unearned premiums and premiums receivable under these contracts,
after the deduction of any acquisition costs deferred.
The provision for unexpired risks is calculated separately by reference to classes of business
which are managed together.
As at 31 December 2024, the Syndicate had a nil net unexpired risk provision, (2023: nil).
Reinsurance assets
The Syndicate cedes insurance risk in the normal course of business. Reinsurance assets
represent balances due from reinsurance companies. Amounts recoverable from reinsurers
are estimated in a manner consistent with the outstanding claims provision including IBNR or
settled claims associated with the reinsurer's policies and are in accordance with the related
reinsurance contract.
25
Significant accounting policies continued
Reinsurance assets are reviewed for impairment at each reporting date, or more frequently if
an indication of impairment arises during the reporting year. Impairment occurs when there is
objective evidence as a result of an event that occurred after initial recognition of the
reinsurance asset that the Syndicate may not receive all outstanding amounts due under the
terms of the contract and the event has a reliably measurable impact on the amounts that the
Syndicate will receive from the reinsurer. The impairment loss is recorded in the statement of
profit or loss.
Gains or losses on buying reinsurance are recognised in the statement of profit or loss
immediately at the date of purchase and are not amortised.
Ceded reinsurance arrangements do not relieve the Syndicate from its obligations to
policyholders.
Acquisition costs
Acquisition costs comprise costs arising from the conclusion of insurance contracts, such as
intermediary brokerage and commissions. It is not the Syndicate’s policy to reallocate a portion
of indirect costs, such as the advertising costs or the administrative expenses connected with
the processing of proposals and the issuing of policies, to acquisition costs.
The deferred acquisition cost asset represents the proportion of acquisition costs
corresponding to the proportion of gross premiums written that is unearned at the balance
sheet date. Deferred acquisition costs are amortised over the period in which the related
premiums are earned.
Profit commissions
During the year management identified that profit commission payable to the MGAs for a
number of previous years had not been recognised or paid. Management believes that the
omission of the expense from each year and the omission of the cumulative amount from the
balance sheet would not fundamentally affect the view of the users of the financial
statements and so no material prior period error exists. Management have therefore chosen
to recognise a catch-up charge of £6.6m, which represents profit commissions for three
previous YOAs, in the current period profit and loss in the Net operating expenses line
Foreign currencies
Transactions denominated in currencies other than the functional currency are initially
recorded in the functional currency at the exchange rate ruling at the date of the transactions.
Monetary assets and liabilities (which include all assets and liabilities arising from insurance
contracts including unearned premiums and deferred acquisition costs) denominated in foreign
currencies are retranslated into the functional currency at the exchange rate ruling on the
reporting date.
Foreign exchange differences are recorded in the non-technical account.
26
Significant accounting policies continued
The following currency exchange rates have been used for principal foreign currency
transactions:
2024
2024
2024
2023
2023
2023
Start of
Period Rate
End of
Period Rate
Average
Rate
Start of
Period Rate
End of
Period Rate
Average
Rate
GBP
USD
CAD
EUR
AUD
JPY
Financial assets and liabilities
In applying FRS 102, the Syndicate has chosen to apply the recognition and measurement
provisions of IAS 39 Financial Instruments: Recognition and Measurement (as adopted for use
in the UK).
The accounting classification of financial assets and liabilities determines the way in which
they are measured and changes in those values are presented in the statement of profit or
loss and other comprehensive income. Financial assets and liabilities are classified on their
initial recognition.
The initial classification of a financial instrument shall take into account contractual terms
including those relating to future variations. Once the classification of a financial instrument is
determined at initial recognition, reassessment is only required subsequently when there has
been a modification of contractual terms that is relevant to an assessment of the classification.
Financial assets and financial liabilities at fair value through profit and loss comprise financial
assets and financial liabilities held for trading and those designated as such on initial
recognition. Investments in shares and other variable yield securities, units in unit trusts, and
debt and other fixed income securities are designated as at fair value through profit or loss on
initial recognition, as they are managed on a fair value basis in accordance with the
Syndicate’s investment strategy. Other financial assets, principally certain debt and other fixed
income securities are classified as available for sale.
Deposits with credit institutions, debtors, and accrued interest are classified as loans and
receivables.
27
Significant accounting policies continued
Financial assets at fair value through profit or loss are measured at fair value with fair value
changes recognised immediately in profit or loss. Net gains or net losses on financial assets
measured at fair value through profit or loss includes foreign exchange gains/losses arising on
their translation to the functional currency but excludes interest and dividend income.
Financial assets classified as available for sale are initially recognised at fair value, which
typically equates to the cost, plus transaction costs directly attributable to its acquisition. After
initial measurement, these assets are subsequently measured at fair value. Interest earned
whilst holding available for sale financial assets is reported as interest income. Impairment
losses and foreign exchange gains or losses are reported in profit or loss. Other fair value
changes are recognised in other comprehensive income. Any gain or loss recognised in OCI
will be recycled to profit and loss on derecognition of the asset.
Loans and receivables and non-derivative financial liabilities are measured at amortised cost
using the effective interest method, except Syndicate Loans to the Central Fund which are
measured at fair value through profit or loss.
Objective evidence that financial assets are impaired includes observable data that comes to
the attention of the Syndicate about any significant financial difficulty of the issuer, or significant
changes in the technological, market, economic or legal environment in which the issuer
operates.
Impairment losses on available for sale financial assets are recognised by reclassifying the
losses accumulated in other comprehensive income to profit or loss. The net cumulative loss
that is reclassified from other comprehensive income to profit or loss is the difference between
the acquisition cost, net of any principal repayment, and the current fair value, less any
impairment loss recognised previously in profit or loss. If, in a subsequent period, the fair value
of an impaired available for sale debt security increases and the increase can be related
objectively to an event occurring after the impairment loss was recognised, the impairment
loss is reversed through profit or loss. Otherwise it is reversed through the statement of
comprehensive income.
Financial assets and financial liabilities are offset, and the net amount presented in the balance
sheet when, and only when, the Syndicate currently has a legal right to set off the amounts
and intends either to settle on a net basis or to realise the asset and settle the liability
simultaneously.
28
Significant accounting policies continued
Investment return
Investment return comprises investment income and movements in unrealised gains and
losses on financial instruments at fair value through profit or loss, less investment management
expenses, interest expense, realised losses and impairment losses. Investment income
comprises interest income, dividends receivable and realised investment gains.
For the purpose of separately presenting investment income and unrealised gains and losses
for financial assets at fair value through profit or loss, interest income is calculated using the
effective interest method excluding transaction costs that are expensed when incurred. For
investments at fair value through profit or loss, realised gains and losses represent the
difference between the net proceeds on disposal and the purchase price.
Unrealised investment gains and losses represent the difference between the fair value at
the balance sheet date and the fair value at the previous balance sheet date, or purchase
price if acquired during the year. Movements in unrealised investment gains and losses
comprise the increase/decrease in the reporting period in the value of the investments held
at the reporting date and the reversal of unrealised investment gains and losses recognised
in earlier reporting periods in respect of investment disposals of the current period.
Investment return is initially recorded in the non-technical account. The return is transferred in
full to the general business technical account to reflect the investment return on funds
supporting underwriting business.
Cash and cash equivalents comprise cash balances and call deposits with maturities of three
months or less from the acquisition date that are subject to an insignificant risk of changes in
fair value and are used by the Syndicate in the management of its short-term commitments.
Cash and cash equivalents are carried at amortised cost in the statement of financial position.
Cash and cash equivalents
Bank overdrafts that are repayable on demand and form an integral part of the Syndicate’s
cash management are included as a component of cash and cash equivalents for the purpose
of the statement of cash flows.
Taxation
Under Schedule 19 of the Finance Act 1993 managing agents are not required to deduct basic
rate income tax from trading income. In addition, all UK basic rate income tax (currently at
20%) deducted from Syndicate investment income is recoverable by managing agents and
consequently the distribution made to members or their members’ agents is gross of tax.
Capital appreciation falls within trading income and is also distributed gross of tax.
No provision has been made for any other overseas tax payable by members on underwriting
results or investment earnings. Any payments on account made by the Syndicate during the
year have been included in the balance sheet under the heading ‘other debtors’.
29
Significant accounting policies continued
Deposits with ceding undertakings
Deposits with ceding undertakings are funds held by Lloyd’s Europe on behalf of the Syndicate
to settle Part VII claims. These funds are held at amortised cost in the balance sheet.
Operating expenses
Where expenses are incurred by the Managing Agent for the administration of managed
syndicates, these expenses are apportioned using various methods depending on the type of
expense. Expenses which are incurred jointly are apportioned between the Managing Agent
and the Syndicate depending on the amount of work performed, resources used, and volume
of business transacted.
Reinsurers’ commission and profit participation
Reinsurers’ commissions and profit participations, which include reinsurance profit
commission and overriding commission, are treated as a contribution to expenses.
Debtors and creditors
Insurance debtors and creditors include amounts due to and from agents, brokers and
insurance contract holders. These are classified as debt instruments as they are non-derivative
financial assets with fixed or determinable payments that are not quoted on an active market.
Insurance debtors are measured at amortised cost less any provision for impairments.
Insurance creditors are stated at amortised cost. The Syndicate does not have any debtors
directly with policyholders, all transactions occur via an intermediary.
Where permitted under UK GAAP accounting standards, insurance creditors are netted off
against insurance debtors where the legally enforceable right to offset exists.
Reinsurance debtors and creditors include amounts due to and from reinsurers. These are
classified as debt instruments as they are non-derivative financial assets with fixed or
determinable payments that are not quoted on an active market. Reinsurance debtors are
measured at amortised cost less any provision for impairments. Reinsurance creditors are
stated at amortised cost. Reinsurance debtor principally relates to claims recoveries where the
underlying claim has been settled and the recovery is due. Reinsurance creditors are primarily
premiums payable for reinsurance contracts and are recognised as an expense when due.
30
4. Analysis of underwriting result
An analysis of the underwriting result before investment return is presented in the table below:
2024
Gross
premiums
written
Gross
premium
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
Result
£’000
£’000
£’000
£‘000
£’000
£’000
Direct
insurance:
Accident and
Health
15,558
13,313
(6,715)
(6,737)
(530)
(669)
Marine
14,477
11,932
(20,489)
(3,987)
3,928
(8,616)
Transport
14,392
11,156
(5,893)
(3,728)
745
2,280
Energy – Non-
marine
8,247
6,568
(2,347)
(1,251)
(2,554)
416
Energy -
Marine
2,113
1,287
(705)
(282)
(155)
145
Fire and other
damage of
property
51,517
35,915
(15,081)
(12,040)
(5,093)
3,701
Third-party
liability
128,262
129,081
(66,935)
(54,637)
(3,743)
3,766
Pecuniary loss
345
431
1,099
(419)
(1,364)
(253)
Total Direct
234,911
209,683
(117,066)
(83,081)
(8,766)
770
Reinsurance
acceptances
93,888
81,765
(45,472)
(24,414)
(7,191)
4,688
Total
328,799
291,448
(162,538)
(107,495)
(15,957)
5,458
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
Gross
premium
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
Result
Additional
analysis
£’000
£’000
£’000
£‘000
£’000
£’000
Fire and damage to property
of which is:
Specialties
-
-
-
-
-
-
Energy
-
-
-
-
-
-
Third party liability of which
is:
Energy
-
-
-
-
-
-
31
Analysis of underwriting result continued
2023
Gross
written
premiums
Gross
premium
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
Result
£’000
£’000
£’000
£‘000
£’000
£’000
Direct
insurance:
Accident and
Health
11,452
4,969
(3,729)
(2,389)
(187)
(1,336)
Marine
20,083
13,572
(9,702)
(4,943)
1,400
327
Transport
10,467
5,949
(3,413)
(2,296)
(392)
(152)
Energy – non-
marine
4,085
809
(606)
147
(272)
78
Fire and other
damage of
property
36,523
28,908
(11,834)
(10,558)
(2,028)
4,488
Third-party
liability
130,904
128,786
(71,273)
(49,518)
(6,720)
1,275
Pecuniary loss
4,785
5,949
(3,333)
(1,891)
8
727
Total Direct
218,299
188,936
(103,890)
(71,448)
(8,191)
5,407
Reinsurance
acceptances
32,601
29,710
(10,843)
(10,455)
(5,277)
3,135
Total
250,900
218,646
(114,733)
(81,903)
(13,468)
8,542
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
Gross
premium
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
Result
Additional
analysis
£’000
£’000
£’000
£‘000
£’000
£’000
Fire and damage to property
of which is:
Specialties
-
-
-
-
-
-
Energy
-
-
-
-
-
-
Third party liability of which
is:
Energy
-
-
-
-
-
-
32
Analysis of underwriting result continued
The gross premiums written for direct insurance by underwriting location is presented in the
table below:
2024
2023
£’000
£’000
United Kingdom
328,799
250,900
European Union Member States
-
-
US
-
-
Rest of the world
-
-
Total gross premiums written
328,799
250,900
No gains or losses were recognised in profit or loss during the year on buying reinsurance
(2023: nil).
33
5. Technical provisions
2024
Gross
provisions
£’000
Reinsurance
assets
£’000
Net
£’000
Claims outstanding
Balance at 1 January
396,431
(32,792)
363,639
Claims paid during the year
(66,315)
5,747
(60,568)
Expected cost of current year claims
154,514
(16,938)
137,576
Change in estimates of prior year provisions
8,024
(2,906)
5,118
Foreign exchange movements
(9,598)
743
(8,855)
Balance at 31 December
483,056
(46,146)
436,910
Unearned premiums
Balance at 1 January
131,973
(13,280)
118,693
Premiums written during the year
328,799
(47,295)
281,504
Premiums earned during the year
(291,448)
35,801
(255,647)
Foreign exchange movements
1,162
(233)
929
Balance at 31 December
170,486
(25,007)
145,479
Deferred acquisition costs
Balance at 1 January
27,365
(1,143)
26,222
Incurred deferred acquisition costs
77,730
(2,160)
75,570
Amortised deferred acquisition costs
(71,397)
2,770
(68,627)
Foreign exchange movements
300
(38)
262
Balance at 31 December
33,998
(571)
33,427
2023
Gross
provisions
£’000
Reinsurance
assets
£’000
Net
£’000
Claims outstanding
Balance at 1 January
364,566
(39,137)
325,429
Claims paid during the year
(70,925)
9,059
(61,866)
Expected cost of current year claims
114,146
(6,030)
108,116
Change in estimates of prior year provisions
587
2,298
2,885
Foreign exchange movements
(11,943)
1,018
(10,925)
Balance at 31 December
396,431
(32,792)
363,639
Unearned premiums
Balance at 1 January
104,340
(7,199)
97,141
Premiums written during the year
250,900
(23,789)
227,111
Premiums earned during the year
(218,646)
17,200
(201,446)
Foreign exchange movements
(4,621)
508
(4,113)
Balance at 31 December
131,973
(13,280)
118,693
Deferred acquisition costs
Balance at 1 January
22,908
-
22,908
Incurred deferred acquisition costs
51,494
(2,357)
49,137
Amortised deferred acquisition costs
(45,773)
1,211
(44,562)
Foreign exchange movements
(1,264)
3
(1,261)
Balance at 31 December
27,365
(1,143)
26,222
34
6. Net operating expenses
2024
2023
£’000
£’000
Acquisition costs
(77,730)
(51,494)
Change in deferred acquisition costs
6,333
5,721
Reinsurance commissions and profit participation
2,770
1,211
Administration expenses
(34,275)
(33,513)
Members’ standard personal expenses
(4,593)
(3,828)
Net operating expenses
(107,495)
(81,903)
Total commissions for direct insurance business for the year amounted to:
2024
2023
£’000
£’000
Total commission for direct insurance business
(60,318)
(39,826)
7. Auditor’s remuneration
2024
2023
£’000
£’000
Fees payable to the Syndicate’s auditor for the audit of these
financial statements
(350)
(182)
Fees payable to the Syndicate’s auditor and its associates in
respect of other services pursuant to legislation
(82)
(57)
Total
(432)
(239)
Auditors’ remuneration is included as part of administrative expenses in note 6.
35
8. Key management personnel compensation
The active underwriter received the following aggregate remuneration charged to the
Syndicate:
2024
2023
£’000
£’000
Emoluments
231
590
The aggregate emoluments of the Directors and staff of the Asta Group are charged to
companies of the Asta Group in accordance with the proportion of their time associated with
each company. Further disclosures regarding Directors’ emoluments are provided in the
financial statements of Asta Managing Agency Ltd.
No emoluments of the Directors of Asta Managing Agency Ltd were directly charged to the
Syndicate. No other compensation was payable to key management personnel.
9. Staff numbers and costs
Staff costs are included as part of bulk recharges from Everest entities and as such are not
separately identifiable.
10. Investment return
2024
2023
From financial assets designated at fair value through profit or
loss
£’000
£’000
Interest and similar income
2,103
2,564
Dividend income
9,870
1,701
Interest on cash at bank
1,858
4,773
Gains on the realisation of investments
662
90
Losses on the realisation of investments
(26)
(9)
Unrealised gains on investments
3,953
1,803
Unrealised losses on investments
(1,218)
(245)
Investment management expenses
(275)
(44)
Total investment return
16,927
10,634
36
11. Financial Investments
31 December 2024
Carrying
value
Cost
£’000
£’000
Shares and other variable yield securities and units in unit trusts
12,529
12,529
Debt securities and other fixed income securities
376,104
373,410
Loans and deposits with credit institutions
-
-
Syndicate loans to central fund
1,962
1,962
Other investments
-
-
Total financial investments
390,595
387,901
Carrying
value
Cost
£’000
£’000
Shares and other variable yield securities and units in unit trusts
19,627
19,627
Debt securities and other fixed income securities
253,265
251,692
Loans and deposits with credit institutions
-
-
Syndicate loans to central fund
2,407
2,407
Other investments
-
-
Total financial investments
275,299
273,726
37
Financial investments continued
The table below presents an analysis of financial investments by their measurement
classification:
2024
2023
£’000
£’000
Financial assets measured at fair value through profit or loss
390,595
275,299
Financial assets measured at fair value as available for sale
-
-
Financial assets measured at amortised cost
-
-
Total financial investments
390,595
275,299
The Syndicate classifies its financial instruments held at fair value in its balance sheet using a
fair value hierarchy based on the inputs used in the valuation techniques as follows:
• Level 1 – financial assets that are measured by reference to published quotes in an
active market. A financial instrument is regarded as quoted in an active market if quoted
prices are readily and regularly available from an exchange, dealer, broker, industry
group, pricing service or regulatory agency and those prices represent actual and
regularly occurring market transactions on an arm’s length basis.
• Level 2 – financial assets measured using a valuation technique based on assumptions
that are supported by prices from observable current market transactions. For
example, assets for which pricing is obtained via pricing services but where prices have
not been determined in an active market, financial assets with fair values based on
broker quotes, investments in private equity funds with fair values obtained via fund
managers and assets that are valued using the Syndicate’s own models whereby the
significant inputs into the assumptions are market observable.
• Level 3 – financial assets measured using a valuation technique (model) based on
assumptions that are neither supported by prices from observable current market
transactions in the same instrument nor are they based on available market data.
Therefore, unobservable inputs reflect the Syndicate's own assumptions about the
assumptions that market participants would use in pricing the asset or liability (including
assumptions about risk). These inputs are developed based on the best information
available, which might include the Syndicate’s own data.
38
Financial investments continued
The following table shows financial investments recorded at fair value analysed between the
three levels in the fair value hierarchy.
2024
£’000
Level 1
Level 2
Level 3
Assets held at
amortised cost
Total
Shares and other variable yield
securities and units in unit
trusts
12,529
-
-
-
12,529
Debt securities and other fixed
income securities
35,674
340,430
-
-
376,104
Loans and deposits with credit
institutions
-
-
-
-
-
Syndicate loans to central fund
-
-
1,962
-
1,962
Other investments
-
-
-
-
-
Total
48,203
340,430
1,962
-
390,595
2023
£’000
Level 1
Level 2
Level 3
Assets held at
amortised cost
Total
Shares and other variable yield
securities and units in unit
trusts
19,627
-
-
-
19,627
Debt securities and other fixed
income securities
35,956
217,309
-
-
253,265
Loans and deposits with credit
institutions
-
-
-
-
-
Syndicate loans to central fund
-
-
2,407
-
2,407
Other investments
4,813
51,386
-
-
56,199
Total
55,583
217,309
2,407
-
275,299
39
Financial investments continued
Information on the methods and assumptions used to determine fair values for each major
category of financial instrument measured at fair value is provided below.
Debt securities are generally valued using prices provided by external pricing vendors. Pricing
vendors will often determine prices by consolidating prices of recent trades for identical or
similar securities obtained from a panel of market makers into a composite price. The pricing
service may make adjustments for the elapsed time from a trade date to the valuation date to
take into account available market information. Lacking recently reported trades, pricing
vendors will use modelling techniques to determine a security price.
Some government and supranational securities are listed on recognised exchanges and are
generally classified as level 1 in the fair value hierarchy. Those that are not listed on a
recognised exchange are generally based on composite prices of recent trades in the same
instrument and are generally classified as level 2 in the fair value hierarchy.
Corporate bonds, including asset backed securities, that are not listed on a recognised
exchange or are traded in an established over the counter market are also mainly valued using
composite prices. Where prices are based on multiple quotes and those quotes are based on
actual recent transactions in the same instrument the securities are classified as level 2,
otherwise they are classified as level 3 in the fair value hierarchy.
At the reporting date Level 1 and Level 2 financial assets and liabilities were valued using
valuation techniques based on observable market data. All of the investments categorised as
Level 3 are fair valued based on the inputs to the valuation technique used.
12. Debtors arising out of direct insurance operations
2024
2023
£’000
£’000
Due within one year
100,958
112,048
Due after one year
-
-
Total
100,958
112,048
13. Debtors arising out of reinsurance operations
2024
2023
£’000
£’000
Due within one year
75,169
74,637
Due after one year
80
-
Total
75,249
74,637
40
14. Other debtors
2024
2023
£’000
£’000
9,658
8,520
Total
9,658
8,520
15. Creditors arising out of direct insurance operations
2024
2023
£’000
£’000
Due within one year
11,972
18,419
Due after one year
-
-
Total
11,972
18,419
16. Creditors arising out of reinsurance operations
2024
2023
£’000
£’000
Due within one year
70,685
81,610
Due after one year
-
-
Total
70,685
81,610
17. Other creditors
2024
2023
£’000
£’000
-
-
Total
-
-
41
18. Cash and cash equivalents
2024
2023
£’000
£’000
Cash at bank and in hand
18,099
42,674
Deposits with credit institutions
-
-
Shares and other variable yield securities and units in unit trusts
12,530
19,627
Bank overdrafts
-
-
Total cash and cash equivalents
30,629
62,301
Shares and other variable yield securities and units in unit trusts are investments in nature but
are treated as cash and cash equivalents for cash flow purposes, so therefore are included in
both Financial investments and Cash and cash equivalents.
Deposits with credit institutions with maturities of three months or less that are used by the
Syndicate in the management of its short-term commitments are included in cash and cash
equivalents.
Of the total cash and cash equivalents, the following amount was held in regulated bank
accounts in overseas jurisdictions:
2024
2023
£’000
£’000
Total cash and cash equivalents held in regulated accounts in overseas
jurisdictions
1,197
2,493
42
19. Related parties
Asta provides services and support to the Syndicate 2786 in its capacity as Managing Agent.
During the year, Managing Agency fees of £2.1m were charged to the Syndicate (2023:
£2.0m). Asta also recharged £2.7m worth of service charges in the year (2023: £2.5m) and as
at 31 December 2024 a cumulative amount of £0.2m is owed to Asta in respect of this service
(2023: £0.4m).
Everest Group Ltd provides 100% of the Syndicate’s insurance capacity. The Group has
recharged expenses to the Syndicate during 2024 of £28.3m (2023: £26.8m).
From time to time, syndicates managed by Asta enter into (re)insurance contracts with one
another. All such transactions are subject to Asta’s internal controls which ensure that all are
compliant with Lloyd’s Related Party Byelaw provisions. All transactions are on an arm’s length
basis.
Asta Capital Ltd, the parent of Asta Managing Agency Ltd, is owned by the Davies Group but
maintains a level of independence by virtue of separate boards and a separate governance
structure. Other entities within the wider Davies Group provide insurance-related services to
the syndicates under Asta’s management. The provision of these services is managed by a
separate management team distinct from Asta, and these services are provided at an arm’s
length basis.
The ultimate parent company of Asta Managing Agency Ltd is Tennessee Topco Ltd.
20. Disclosure of interests
During 2024 Asta was the Managing Agent for the following syndicates on behalf of third-party
capital providers:
• Syndicates 1322, 1609, 1699, 1892, 1985, 1988, 2525, 2689, 2786, 3123, 4242 and
4747,
• Special Purpose Arrangement 1416,
• Syndicates-in-a-Box 1796, 1902, 1922, 1966, 2427, 2880, 3456 and 5183.
During 2024, Asta took on management of the following syndicates:
• Syndicate 1922 on 1 January 2024
• Syndicate 1966 on 13 June 2024
• Syndicate 2427 on 1 May 2024
• Syndicate 3123 on 1 July 2024
On 1 January 2024, Asta reinsured to close Syndicate 2288 into Renaissance Re Syndicate
1458.
On 1 January 2025, Asta took on management of Syndicate 1618.
The agency also provides administrative services to syndicates and special purpose
arrangements, also undertaking several ancillary roles for other clients.
The Financial Statements of the Managing Agency can be obtained by application to the
Registered Office (see page 1).
43
21. Funds at Lloyd's
Every member is required to hold capital at Lloyd's which is held in trust and known as Funds
at Lloyd's (“FAL”). These funds are intended primarily to cover circumstances where Syndicate
assets prove insufficient to meet participating members' underwriting liabilities. The level of
FAL that Lloyd's requires a member to maintain is determined by Lloyd's based on PRA
requirements and resource criteria. FAL has regard to a number of factors including the nature
and amount of risk to be underwritten by the member and the assessment of the reserving risk
in respect of business that has been underwritten. Since FAL is not under the management of
the managing agent, no amount has been shown in these financial statements by way of such
capital resources. However, the managing agent is able to make a call on the members' FAL
to meet liquidity requirements or to settle losses.
22. Off-balance sheet items
The Syndicate has not been party to an arrangement, which is not reflected in its statement
of financial position, where material risks and benefits arise for the Syndicate.
23. Risk management
a) Governance framework
The Syndicate's risk and financial management framework aims to protect the Syndicate's
members capital from events that might otherwise prevent the Syndicate from meeting its
policyholder obligations, while maximising the returns to its members. The Directors recognise
the critical importance of having efficient and effective risk management systems in place.
Asta maintains a risk management function for the Syndicate with clear terms of reference
from the Syndicate Board, its committees and sub committees.
Asta supplements this with a clear organisational structure with documented delegated
authorities and responsibilities from the main Asta Managing Agency board to the Syndicate
who perform the underwriting activities. Lastly, the Syndicate policy framework sets its risk
management and control and business conduct standards for operations. Asta reviews and
monitors each policy to ensure compliance with the policy throughout the Syndicate.
44
Risk management continued
The Syndicate Board approves the risk management policies and meets regularly to approve
any commercial, regulatory and organisational requirements of such policies. These policies
define the identification of risk and its interpretation to ensure the appropriate quality and
diversification of assets, align underwriting and reinsurance strategy to the Syndicate goals,
and specify reporting requirements. The Syndicate Board places significant emphasis on the
assessment and documentation of risks and controls, including the articulation of the
Syndicate's risk appetite.
a) Capital management objectives, policies and approach
Capital framework at Lloyd's
The Society of Lloyd's (Lloyd's) is a regulated undertaking and subject to the supervision of
the Prudential Regulatory Authority (PRA) under the Financial Services and Markets Act 2000.
Within the supervisory framework, Lloyd's applies capital requirements at member level and
centrally to ensure that Lloyd's complies with Solvency II capital requirements, and beyond
that to meet its own financial strength, licence and ratings objectives.
Although Lloyd's capital setting processes use a capital requirement set at Syndicate level as
a starting point, the requirement to meet Solvency II and Lloyd's capital requirements apply at
overall and member level only respectively, not at Syndicate level. Accordingly the capital
requirement in respect of the Syndicate is not disclosed in these financial statements.
Lloyd's capital setting process
In order to meet Lloyd's requirements, each Syndicate is required to calculate its Solvency
Capital Requirement (SCR) for the prospective underwriting year. This amount must be
sufficient to cover a 1 in 200 year loss, reflecting uncertainty in the ultimate run-off of
underwriting liabilities (SCR 'to ultimate'). The Syndicate must also calculate its SCR at the
same confidence level but reflecting uncertainty over a one year time horizon (one year SCR)
for Lloyd's to use in meeting Solvency II requirements. The SCRs of each Syndicate are
subject to review by Lloyd's and approval by the Lloyd's Capital and Planning Group.
A Syndicate may be comprised of one or more underwriting members of Lloyd's. Each member
is liable for its own share of underwriting liabilities on the Syndicate on which it is participating
but not other members' shares. Accordingly, the capital requirement that Lloyd's sets for each
member operates on a similar basis. Each member's SCR shall thus be determined by the
sum of the member's share of the Syndicate SCR 'to ultimate'. Where a member participates
on more than one Syndicate, a credit for diversification is provided to reflect the spread of risk,
but consistent with determining an SCR which reflects the capital requirement to cover a 1 in
200 year loss 'to ultimate' for that member. Over and above this, Lloyd's applies a capital uplift
to the member's capital requirement, known as the Economic Capital Assessment (ECA). The
purpose of this uplift, which is a Lloyd's not a Solvency II requirement, is to meet Lloyd's
financial strength, licence and ratings objectives. The capital uplift applied for 2024 was 35%
of the member's SCR 'to ultimate'.
45
Risk management continued
Provision of capital by members
Each member may provide capital to meet its ECA either by assets held in trust by Lloyd's
specifically for that member (funds at Lloyd's), held within and managed within a Syndicate
(funds in Syndicate) or as the member's share of the members' balances on each Syndicate
on which it participates. Accordingly, the ending members balances reported on the Statement
of Financial Position on page 17, represent resources available to meet members' and Lloyd's
capital requirements.
b) Insurance risk
The principal risk the Syndicate faces under insurance contracts is that the actual claims and
benefit payments or the timing thereof, differ from expectations. This is influenced by the
frequency of claims, severity of claims, actual benefits paid and subsequent development of
long-term claims. Therefore, the objective of the Syndicate is to ensure that sufficient reserves
are available to cover these liabilities.
The risk exposure is mitigated by diversification across a large portfolio of insurance contracts
and geographical areas. The variability of risks is also improved by careful selection and
implementation of underwriting strategy guidelines, as well as the use of reinsurance
arrangements.
The Syndicate purchases reinsurance as part of its risk mitigation programme. The Syndicate’s
reinsurance program is predominantly covered by a whole account, non-proportional losses
occurring during policy which covers the calendar year. Amounts recoverable from reinsurers
are estimated in a manner consistent with the outstanding claims provision and are in
accordance with the reinsurance contracts. The Syndicate's placement of reinsurance is
diversified such that it is neither dependent on a single reinsurer nor are the operations
substantially dependent upon any single reinsurance contract.
Sub committees of the Syndicate Board oversee the management of reserving risk. The use
of standardised and internal modelling techniques, as well as benchmarking and the review of
claims development are key in mitigating reserving risk. The purpose of these underwriting,
reinsurance and reserving strategies is to limit exposure to catastrophes or large losses based
on the Syndicate's risk appetite as decided by the Syndicate Board.
Key assumptions
The principal assumption underlying the liability estimates is that the future claims
development will follow a similar pattern to past claims development experience. This includes
assumptions in respect of average claim costs, claim handling costs, claim inflation factors
and claim numbers for each underwriting year. Additional qualitative judgements are used to
assess the extent to which past trends may not apply in the future, for example: once-off
occurrence; changes in market factors such as public attitude to claiming: economic
conditions: as well as internal factors such as portfolio mix, policy conditions and claims
handling procedures. Judgement is further used to assess the extent to which external factors
such as judicial decisions and government legislation affect the estimates.
The Syndicate uses both its own and commercially available risk management software to
assess catastrophe exposure. However, there is always a risk that the assumptions and
techniques used in these models are unreliable or that claims arising from an un-modelled
event are greater than those arising from a modelled event.
46
Risk management continued
Sensitivities
Other key circumstances affecting the reliability of assumptions include variation in interest
rates, delays in settlement and changes in foreign currency rates.
The claim liabilities are sensitive to the key assumptions that follow. It has not been possible
to quantify the sensitivity of certain assumptions, such as legislative changes, uncertainty in
the estimation process. The following analysis is performed for reasonably possible
movements in key assumptions with all other assumptions held constant, showing the impact
on net liabilities, profit and members' balances. The correlation of assumptions will have a
significant effect in determining the ultimate claims liabilities, but to demonstrate the impact
due to changes in assumptions, assumptions had to be changed on an individual basis. It
should be noted that movements in these assumptions are non-linear.
The method used for deriving sensitivity information and significant assumptions did not
change from the previous period.
Sensitivity
General insurance business sensitivities as at 31
December 2024
+5.0%
£’000
-5.0%
£’000
Claims outstanding – gross of reinsurance
(24,153)
24,153
Claims outstanding – net of reinsurance
(21,846)
21,846
Impact on members balance
(21,846)
21,846
Impact on profit (movement in year)
(21,846)
21,846
Sensitivity
General insurance business sensitivities as at 31
December 2023
+5.0%
£’000
-5.0%
£’000
Claims outstanding – gross of reinsurance
(19,822)
19,822
Claims outstanding – net of reinsurance
(18,182)
18,182
Impact on members balance
(18,182)
18,182
Impact on profit (movement in year)
(18,182)
18,182
47
Risk management continued
Claims development
The tables below show the Syndicate's cumulative incurred claims development, including
both claims notified and IBNR for each underwriting year, together with the cumulative
payments to date on a gross and net of reinsurance basis at the balance sheet date.
The Syndicate has elected to translate estimated claims and claims payments at a consistent
rate of exchange as determined by the balance sheet date.
All numbers presented
in £’000
Underwriting year
2016
2017
2018
2019
2020
2021
2022
2023
2024
Estimate of cumulative
gross claims incurred
At end of first
underwriting year
20,747
39,651
35,674
36,353
62,702
46,827
45,491
58,934
81,939
One year later
48,762
79,141
90,079
112,244
114,894
94,679
94,274
130,938
Two years later
49,742
90,741
103,065
116,338
106,176
95,310
95,223
Three years later
65,073
91,481
103,556
104,289
93,447
86,675
Four years later
67,623
90,676
108,080
109,752
86,345
Five years later
64,680
90,320
115,859
112,828
Six years later
58,955
92,641
126,096
Seven years later
56,883
97,489
Eight years later
59,499
Less gross claims paid
45,761
77,802
83,237
71,645
43,858
32,875
22,011
13,194
3,593
Gross claims reserves
13,738
19,687
42,859
41,183
42,487
53,800
73,212
117,744
78,346
Total gross claims
reserves
483,056
48
Risk management continued
The uncertainty associated with the ultimate claims experience of an underwriting year is
greatest when the underwriting year is at an early stage of development and the margin for
future experience potentially being more adverse than assumed is at its highest. As claims
develop, and the ultimate cost of the claims becomes more certain, the relative level of margin
should decrease. Due, however, to the uncertainty inherent in the claims estimation process,
initial reserves may not always be in a surplus. This is particularly so for large catastrophe
claims where uncertainly is initially great.
c) Financial risk
The focus of financial risk management for the Syndicate is ensuring that the proceeds from
its financial assets are sufficient to fund the obligations arising from its insurance contracts.
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss by failing
to discharge an obligation. The Syndicate has the following policies and procedures in place
to mitigate the exposure to credit risk:
• Reinsurance is placed with counterparties that have a good credit rating and
concentration of risk is avoided by following policy guidelines in respect of
counterparties' limits. If the counterparty is downgraded or does not have a good credit
rating, then collateral is sought to mitigate any risk. This is monitored by the Syndicate
Board.
All numbers presented
in £’000
Underwriting year
2016
2017
2018
2019
2020
2021
2022
2023
2024
Estimate of cumulative
net claims incurred
At end of first
underwriting year
16,366
27,632
28,613
28,266
41,013
34,794
43,653
52,263
68,889
One year later
36,558
58,039
75,058
94,323
87,766
80,813
90,378
120,217
Two years later
39,366
68,370
91,714
100,490
86,933
84,272
92,231
Three years later
44,222
70,784
92,474
90,746
73,976
75,153
Four years later
44,624
69,335
98,108
95,992
68,701
Five years later
43,352
70,171
106,673
98,777
Six years later
43,917
72,693
116,022
Seven years later
42,698
77,718
Eight years later
41,093
Less net claims paid
31,641
58,787
77,093
61,178
30,463
25,364
22,011
12,439
2,915
Net claims reserves
9,452
18,931
38,929
37,599
38,238
49,789
70,220
107,778
65,974
Total net claims
reserves
436,910
49
Risk management continued
The tables below show the maximum exposure to credit risk (including an analysis of financial
assets exposed to credit risk) for the components of the statement of financial position. The
maximum exposure is shown gross, before the effect of mitigation through collateral
agreements and the use of credit derivatives.
2024
£’000
Neither
past due
nor
impaired
assets
Past due
but not
impaired
assets
Gross
value of
impaired
assets
Impairment
allowance
Total
Shares and other variable
yield securities and units in
unit trusts
12,529
-
-
-
12,529
Debt securities and other
fixed income securities
376,104
-
-
-
376,104
Loans and deposits with
credit institutions
-
-
-
-
-
Syndicate loans to central
fund
1,962
-
-
-
1,962
Deposits with ceding
undertakings
551
-
-
-
551
Reinsurers’ share of claims
outstanding
46,146
-
-
-
46,146
Debtors arising out of
reinsurance operations
35,488
-
-
-
35,488
Debtors arising out of direct
insurance operations
100,958
-
-
-
100,958
Cash at bank and in hand
18,099
-
-
-
18,099
Overseas deposits
46,907
-
-
-
46,907
Other debtors and accrued
interest
112,036
-
-
-
112,036
Total
750,780
-
-
-
750,780
50
Risk management continued
2023
£’000
Neither
past due
nor
impaired
assets
Past due
but not
impaired
assets
Gross
value of
impaired
assets
Impairment
allowance
Total
Shares and other variable
yield securities and units in
unit trusts
19,627
-
-
-
19,627
Debt securities and other
fixed income securities
253,265
-
-
-
253,265
Loans and deposits with
credit institutions
-
-
-
-
-
Syndicate loans to central
fund
2,407
-
-
-
2,407
Deposits with ceding
undertakings
697
-
-
-
697
Reinsurers’ share of claims
outstanding
32,792
-
-
-
32,792
Debtors arising out of
reinsurance operations
38,807
-
-
-
38,807
Debtors arising out of direct
insurance operations
112,048
-
-
-
112,048
Cash at bank and in hand
42,674
-
-
-
42,674
Overseas deposits
56,199
-
-
-
56,199
Other debtors and accrued
interest
87,295
-
-
-
87,295
Total
645,811
-
-
-
645,811
51
Risk management continued
The table below sets out the age analysis of financial assets that are past due but not impaired
at the balance sheet date:
2024
£’000
0-3 months
past due
3-6 months
past due
6-12
months
past due
Greater
than 1 year
past due
Total
Shares and other variable
yield securities and units in
unit trusts
-
-
-
-
-
Debt securities and other
fixed income securities
-
-
-
-
-
Loans and deposits with
credit institutions
-
-
-
-
-
Syndicate loans to central
fund
-
-
-
-
-
Other investments
-
-
-
-
-
Reinsurers’ share of claims
outstanding
-
-
-
-
-
Debtors arising out of
reinsurance operations
-
-
-
-
-
Debtors arising out of direct
insurance operations
-
-
-
-
-
Cash at bank and in hand
-
-
-
-
-
Overseas deposits
-
-
-
-
-
Other debtors and accrued
interest
-
-
-
-
-
Total
-
-
-
-
-
52
Risk management continued
2023
£’000
0-3 months
past due
3-6 months
past due
6-12
months
past due
Greater
than 1 year
past due
Total
Shares and other variable
yield securities and units in
unit trusts
-
-
-
-
-
Debt securities and other
fixed income securities
-
-
-
-
-
Loans and deposits with
credit institutions
-
-
-
-
-
Syndicate loans to central
fund
-
-
-
-
-
Other investments
-
-
-
-
-
Reinsurers’ share of claims
outstanding
-
-
-
-
-
Debtors arising out of
reinsurance operations
-
-
-
-
-
Debtors arising out of direct
insurance operations
-
-
-
-
-
Cash at bank and in hand
-
-
-
-
-
Overseas deposits
-
-
-
-
-
Other debtors and accrued
interest
-
-
-
-
-
Total
-
-
-
-
-
53
Risk management continued
The table below provides information regarding the credit risk exposure of the Syndicate at the
reporting date by classifying assets according to independent credit ratings of the
counterparties. AAA is the highest possible rating.
2024
£’000
AAA
AA
A
BBB
Other
Not
Rated
Total
Shares and other
variable yield
securities and units in
unit trusts
-
-
12,529
-
-
-
12,529
Debt securities and
other fixed income
securities
90,871
150,176
131,485
3,572
-
-
376,104
Loans and deposits
with credit institutions
-
-
-
-
-
-
-
Syndicate loans to
central fund
-
1,962
-
-
-
-
1,962
Deposits with ceding
undertakings
-
-
551
-
-
-
551
Reinsurers’ share of
claims outstanding
-
18,857
23,225
-
-
4,064
46,146
Debtors arising out of
reinsurance operations
-
-
35,488
-
-
-
35,488
Debtors arising out of
direct insurance
operations
-
-
-
-
-
100,958
100,958
Cash at bank and in
hand
-
-
18,099
-
-
-
18,099
Overseas deposits
23,974
5,571
4,725
3,072
2,971
6,594
46,907
Other debtors and
accrued interest
-
-
-
-
-
112,036
112,036
Total
114,845
176,566
226,102
6,644
2,971
223,652
750,780
54
Risk management continued
2023
£’000
AAA
AA
A
BBB
Other
Not
Rated
Total
Shares and other
variable yield
securities and units in
unit trusts
-
-
19,627
-
-
-
19,627
Debt securities and
other fixed income
securities
88,410
109,322
55,533
-
-
-
253,265
Loans and deposits
with credit institutions
-
-
-
-
-
-
-
Syndicate loans to
central fund
-
-
2,407
-
-
-
2,407
Deposits with ceding
undertakings
-
-
697
-
-
-
697
Reinsurers’ share of
claims outstanding
-
10,919
21,873
-
-
-
32,792
Debtors arising out of
reinsurance operations
-
-
38,807
-
-
-
38,807
Debtors arising out of
direct insurance
operations
-
-
-
-
-
112,048
112,048
Cash at bank and in
hand
-
-
42,674
-
-
-
42,674
Overseas deposits
32,729
5,380
3,831
3,699
4,406
6,154
56,199
Other debtors and
accrued interest
-
-
-
-
-
87,295
87,295
Total
121,139
125,621
185,449
3,699
4,406
205,497
645,811
Maximum credit exposure
It is the Syndicate's policy to maintain accurate and consistent risk ratings across its credit
portfolio. This enables management to focus on the applicable risks and the comparison of
credit exposures across all lines of business.
55
Risk management continued
Liquidity risk
Liquidity risk is the risk that the Syndicate may not have enough cash to pay insurance claims
and other liabilities. This risk is reduced by reviewing the Syndicate’s expected cash
obligations on a weekly basis and keeping adequate cash on deposit to meet those obligations.
Further, a Liquidity Committee meets monthly to review liquidity strength and forthcoming
liquidity needs on a monthly basis.
The table below summarises the maturity profile of the Syndicate's financial liabilities based
on remaining undiscounted contractual obligations, including interest payable and outstanding
claim liabilities based on the estimated timing of claim payments resulting from recognised
insurance liabilities. Repayments which are subject to notice are treated as if notice were to
be given immediately.
2024
£’000
No stated
maturity
0-1 Year
1-3 Years
3-5 Years
> 5 years
Total
Claims
outstanding
-
131,730
172,071
95,814
83,441
483,056
Creditors
-
82,657
-
-
-
82,657
Total
-
214,387
172,071
95,814
83,441
565,713
2023
£’000
No stated
maturity
0-1 Year
1-3 Years
3-5 Years
> 5 years
Total
Claims
outstanding
-
97,460
139,737
86,180
73,054
396,431
Creditors
-
100,029
-
-
-
100,029
Total
-
197,489
139,737
86,180
73,054
496,460
56
Risk management continued
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument or
insurance contract will fluctuate because of changes in market prices. Market risk comprises
three types of risk: currency risk, interest rate risk and other price risk. Other price risk has
been assessed as negligible, given that the Syndicate does not invest in equities.
The objective of market risk management is to manage and control market risk exposures
within acceptable parameters, while optimising the return on risk.
a) Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates.
The Syndicate's functional currency is GBP and its exposure to foreign exchange risk arises
primarily with respect to transactions in US Dollar, Euro, Canadian Dollar and Australian Dollar.
The Syndicate seeks to mitigate the risk by matching the estimated foreign currency
denominated liabilities with assets denominated in the same currency.
The Syndicate matches its currency position, so it holds net assets across a number of
currencies. The Syndicate takes into consideration the underlying currency of the Syndicate's
required capital and invests its assets proportionately across these currencies so as to protect
the solvency of the Syndicate, against variation in foreign exchange rates.
The following table summarises the exposure of the financial assets and liabilities to foreign
currency exchange risk at the reporting date, as follows, with all numbers reported in converted
sterling:
57
Risk management continued
2024
£’000
GBP
USD
EUR
CAD
AUD
JPY
Other
Total
Investments
39,656
149,316
43,792
83,597
74,234
-
-
390,565
Reinsurers’
share of
technical
provisions
12,885
39,632
6,767
1,795
10,001
62
11
71,153
Debtors
21,312
119,986
11,723
3,493
19,993
(273)
(27)
176,207
Other assets
24,076
21,896
6,045
13,472
38,435
2,392
2,897
109,213
Prepayments
and accrued
income
469
990
966
585
602
-
-
3,612
Total assets
98,398
331,820
69,293
102,942
143,265
2,181
2,881
750,780
Technical
provisions
(163,158)
(257,399)
(65,552)
(59,670)
(106,597)
(950)
(216)
(653,542)
Deposits
received
from
reinsurers
-
-
-
-
-
-
-
-
Creditors
(26,575)
(55,977)
(1,678)
1,440
232
(99)
-
(82,657)
Accruals and
deferred
income
(3,905)
(1,027)
466
(6)
71
-
(1)
(4,402)
Total
liabilities
(193,638)
(314,403)
(66,764)
(58,236)
(106,294)
(1,049)
(217)
(740,601)
Total capital
and
reserves
(95,240)
17,417
2,529
44,706
36,971
1,132
2,664
10,179
58
Risk management continued
2023
£’000
GBP
USD
EUR
CAD
AUD
JPY
Other
Total
Investments
28,290
98,360
33,010
63,051
52,588
-
-
275,299
Reinsurers’
share of
technical
provisions
9,393
19,396
5,087
1,798
10,358
26
14
46,072
Debtors
59,967
82,247
11,577
9,025
21,670
245
(46)
186,685
Other assets
40,908
14,645
10,650
12,142
52,773
1,243
3,094
135,455
Prepayments
and accrued
income
406
468
822
483
121
-
-
2,300
Total assets
138,964
217,116
61,146
86,499
137,510
1,514
3,062
645,811
Technical
provisions
(145,491)
(162,591)
(56,167)
(53,439)
(109,865)
(619)
(232)
(528,404)
Deposits
received
from
reinsurers
-
-
-
-
-
-
-
-
Creditors
(35,494)
(50,282)
(4,606)
(3,700)
(5,768)
(179)
-
(100,029)
Accruals and
deferred
income
(706)
(2,907)
(2,800)
(1)
-
-
-
(6,414)
Total
liabilities
(181,691)
(215,780)
(63,573)
(57,140)
(115,633)
(798)
(232)
(634,847)
Total capital
and
reserves
(42,727)
1,336
(2,427)
29,359
21,877
716
2,830
10,964
Sensitivity to changes
The table below gives an indication of the impact on profit of a percentage change in the
relative strength of the Sterling against the value of the US Dollar, Euro, Canadian Dollar and
Australian Dollar simultaneously. The analysis is based on the information as at the reporting
date.
Currency risk
Impact on profit and member’s balance
2024
2023
£’000
£’000
10 percent increase in GBP/EUR exchange rate
230
(221)
10 percent decrease in GBP/EUR exchange rate
(281)
270
10 percent increase in GBP/USD exchange rate
1,583
121
10 percent decrease in GBP/USD exchange rate
(1,935)
(148)
10 percent increase in GBP/AUD exchange rate
3,361
1,989
10 percent decrease in GBP/AUD exchange rate
(4,108)
(2,431)
10 percent increase in GBP/CAD exchange rate
4,064
2,669
10 percent decrease in GBP/CAD exchange rate
(4,967)
(3,262)
59
Risk management continued
b) Interest rate risk
Interest rate risk is the risk that the value or future cash flows of a financial instrument will
fluctuate in response to changes in market interest rates.
Floating rate instruments expose the Syndicate to cash flow interest risk, whereas fixed rate
instruments expose the Syndicate to fair value interest risk.
The analysis below is performed for reasonably possible movements in market interest rates
with all other variables held constant, showing the impact on the result before tax due to
changes in fair value of financial assets (whose fair values are recorded in the profit and loss
account) and members’ balances.
Interest rate risk
Impact on profit and member’s balance
2024
2023
£’000
£’000
50 basis points increase in yield curves
(3,584)
(2,339)
50 basis points decrease in yield curves
3,642
2,362
Insurance liabilities are not discounted and therefore are not exposed to interest rate risk.
24. Post balance sheet events
The Syndicate will distribute the 2022 underwriting year profits to members during 2025.
