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Accounts disclaimer
Report and Accounts
2024
Hiscox Syndicate
1
Directors and administration –
Hiscox Syndicate 3624
2
Report of the Directors of the
managing agent
6
Statement of managing
agent’s responsibilities
7
Independent auditors’ report
10
Profit and loss account:
technical account
– general business
11
Profit and loss account:
non-technical account
– general business
12
Balance sheet – assets
13
Balance sheet – liabilities
14
Statement of changes in
members’ balances
15
Statement of cash flows
16
Notes to the accounts
Hiscox Syndicate 3624
1
Hiscox Syndicate 3624
Report and Accounts 2024
Directors and administration
Hiscox Syndicate 3624
Managing agent:
Managing agent
of aligned Syndicate 3624, composite Syndicate 0033, and
Special Purpose Arrangement 6104. HSL is an indirectly
wholly owned subsidiary of Hiscox Ltd.
Directors
M B Boucher – Non Executive (appointed 1 January 2025)
A Dolphin
T W Harris – Non Executive
T C Huerlimann – Non Executive Chairman
H A Hussain
J Illingworth – Non Executive
S E Kemble
P A Lawrence
K J M Markham
J R Musselle
H Rose
Managing agent’s registered office
22 Bishopsgate
London
EC2N 4BQ
United Kingdom
Managing agent’s company number
02590623
Syndicate 3624:
Active underwriter
S E Kemble
Bankers
Lloyds Bank PLC
Citibank
Royal Bank of Canada
Goldman Sachs
Investment manager
Payden & Rygel Global Limited
Fiera Capital Corporation
Independent registered auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
7 More London Riverside
London SE1 2RT
United Kingdom
Hiscox Syndicate 3624
2
Hiscox Syndicate 3624
Report and Accounts 2024
Report of the Directors of the managing agent
Hiscox Syndicate 3624 annual accounts
The Directors of the managing agent present their report
for Syndicate 3624 for the year ended 31 December 2024.
This Annual Report is 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. The Syndicate
continues to adopt the going concern basis in preparing the
syndicate annual accounts.
Results
The result for Syndicate 3624 in calendar year 2024 is a
profit of $58.6 million (2023: profit of $14.6 million). The result
has benefitted from an investment return which has made a
significant contribution to profit, which is driven by fixed income
returns and is primarily underpinned by coupon income and
cash returns. The Syndicate has also experienced favourable
prior-year development across the liability, technology, media
and telecoms, and the run-off reinsurance accounts, and made
a recovery against the Hiscox Group professional indemnity
policy, which has offset other operating expenses. Premium
has declined marginally, mainly due to challenges being
experienced across all lines due to increased competition
and growing rate pressure.
The Syndicate’s key financial performance indicators
during the year were as follows:
2024
$m
2023
$m
%
change
Gross premiums written
234.1
246.5
(5.0)
Gross premiums earned
237.9
254.8
(6.6)
Net premiums earned
228.5
205.3
11.3
Total recognised
profit for the year
58.6
14.6
301.4
Claims ratio (%)
47.6
60.0
(12.4)
Commission ratio (%)
36.2
42.8
(6.6)
Expense ratio (%)
5.8
9.4
(3.6)
Combined ratio (%)
89.6
112.2
(22.6)
Principal activity
The principal activity of Syndicate 3624 is the transaction
of insurance and reinsurance business at Lloyd’s of London.
The majority of the Syndicate’s insurance business is US
business written on a surplus lines basis. Syndicate 3624
trades through the Lloyd’s worldwide licences and rating.
It also benefits from the Lloyd’s brand. Lloyd’s and Lloyd’s
Brussels has an A+ (Superior) rating from A.M. Best,
AA- (Very strong) rating from S&P, AA- (Very strong) from
Fitch and AA- (Very strong) from Kroll Bond Rating Agency.
The geographical and currency split of its business is
shown below:
Geographical split of gross premiums written (%)
2024
2023
UK
9
10
Europe
–
–
North America
90
90
Asia
–
–
Rest of the world
1
–
Geographical premiums written settlement currency (%)
2024
2023
Sterling
7
7
Euro
1
1
US Dollar
92
92
Canadian Dollar
–
–
3
Hiscox Syndicate 3624
Report and Accounts 2024
Hiscox Syndicate 3624
Report of the Directors of the managing agent
Review of the business
The result for the year was a profit of $58.6 million
(2023: profit of $14.6 million). The gross premiums written
by class of business is shown below:
Gross premiums written by class of business ($m)
Division
2024
Gross premiums
written
$m
2023
Gross premiums
written
$m
General liability
9.2
9.5
Liability
193.9
213.4
Technology, media and telecoms
29.4
22.5
Reinsurance
0.1
1.0
Other
1.5
0.1
Total
234.1
246.5
Syndicate 3624 was established as an aligned corporate
syndicate for the 2009 year of account. Initially, all of the
Syndicate’s business was generated through Hiscox owned
distribution channels, in particular Hiscox Inc., the Group’s
service company in the USA.
In subsequent years a number of additional lines of business
were added to the portfolio, some of which were sourced
through Hiscox owned service companies and some through
normal London Market broking channels. However, more
recently, the portfolio has reverted to its original constitution
(albeit much larger) as a result of the remediation actions
to exit unprofitable lines. Syndicate 3624 now exclusively
underwrites through our retail business units in the UK,
Europe and the USA.
The following classes are written through Hiscox owned
service companies and the London Market broking channel.
The Syndicate pays a commission to source business
from the Hiscox offices on the ground in the USA.
General liability
This account covers a broad spectrum of protection including
unexpected and unintentional bodily injury and property
damage. Stand alone US general liability is fully exited
since 2022.
Liability
This account covers the US allied healthcare, architects and
engineers, cyber and miscellaneous errors and omissions
insurance. US directors and officers’ insurance and US
financial lines are fully exited since 2022.
Technology, media and telecoms
This account provides professional indemnity insurance for
the technology and media industries and is sourced from
Hiscox owned service companies in the USA, Europe and
UK. Media also includes entertainment risks which gives both
errors and omissions insurance for TV programmes and films
and also production insurance for the filming of TV programmes
and films.
Reinsurance
This account includes casualty reinsurance written through
the Hiscox service company in Bermuda, which is in run off,
and a small quota share of the property reinsurance business
written by Hiscox Bermuda.
Other
This includes insurance for event cancellation and some
accounts in run-off such as pilot’s loss of licence and
product recall.
2025 and the future
For 2025, the Syndicate has maintained the stamp capacity
at $501 million (£400 million).
4
Hiscox Syndicate 3624
Report and Accounts 2024
Capital
One of the main advantages of trading through Lloyd’s is the
considerably lower capital ratios that are available due to the
diversification of business written in Syndicate 3624 and in
Lloyd’s as a whole. The size of the Syndicate is increased
or reduced according to the strength of the insurance
environment in its main classes.
The HSL internal capital model is used to set the Syndicate’s
capital. Syndicate capital is determined through the
submission and agreement by Lloyd’s of an ultimate
solvency capital requirement (SCR) which is subject to
an uplift determined by the Franchise Board to calibrate the
capital required by Lloyd’s. Lloyd’s unique capital structure
provides excellent financial security to policyholders and
capital efficiency for members. This chain of security provides
the financial strength that ultimately backs insurance policies
written at Lloyd’s and has three links:
1.
all premiums received by syndicates are held in trust
as the first resource for paying policyholders’ claims;
2.
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.
They are set with reference to the SCR together with the
Lloyd’s uplift. Since FAL is not under the control of the
managing agent, no amount has been shown in the
report and accounts. However, the managing agent
is able to make a call on the members’ FAL to meet
liquidity requirements or to settle losses; and
3.
the central assets are available at the discretion of the
Council of Lloyd’s to meet any valid claim that cannot
be met from the resources of any member further up
the chain.
Lloyd’s also retains the right to request a callable
contribution of up to 5% of capacity from the Syndicate.
Lloyd’s works in co-operation with insurance regulators in
the USA and other parts of the world to strengthen further
the security of a Lloyd’s policy. This has resulted in significant
amounts of the Syndicate’s funds being held in various trust
funds. This can place a strain on the Syndicate’s working capital.
Consequently, we may need to make a cash call, at some
time in the future, to improve the Syndicate’s working
capital position.
The Syndicate continues to use the Lloyd’s Brussels platform
to transact European Union risks. Lloyd’s Brussels benefits
from the market’s financial strength through the Central Fund
and has the same financial ratings as Lloyd’s: A.M. Best
A+ (Superior), S&P AA- (Very strong), Fitch AA- (Very strong)
and Kroll Bond Rating Agency AA- (Very strong). The Company
is authorised and regulated by the National Bank of Belgium
and capitalised under Solvency II rules.
Investment report
The investment result for Syndicate 3624 was a gain of
$35.0 million (2023: gain of $37.7 million) equating to a positive
return of 4.9 % (2023: positive return of 5.4%). The Syndicate’s
invested assets totalled $697.8 million at 31 December 2024
(2023: $693.9 million).
Fixed income returns were primarily driven by coupon income
and cash returns. Additionally, mark-to-market bond returns
were enhanced by falling risk-free rates, with a slight increase
in yields observed in late December.
Principal risks and uncertainties
A description of the principal risks and uncertainties facing
the Syndicate is set out in note 4.
Directors’ interests
None of the Directors of the managing agent who served during
the year ended 31 December 2024 were underwriting Names at
Lloyd’s for the 2022, 2023, 2024 or 2025 years of account.
M B Boucher – Non Executive (appointed 1 January 2025)
A Dolphin
T W Harris – Non Executive
T C Huerlimann – Non Executive Chairman
H A Hussain
J Illingworth – Non Executive
S E Kemble
P A Lawrence
K J M Markham
J R Musselle
H Rose
Years of account
2019
2020
2021
2022
2023
2024
2025
Capacity (£m)
360
400
400
400
400
400
400
Capacity ($m)*
451
501
501
501
501
501
501
*Converted at the closing rate at 31 December 2024.
Hiscox Syndicate 3624
Report of the Directors of the managing agent
5
Hiscox Syndicate 3624
Report and Accounts 2024
Disclosure of information to the auditors
The Directors of the managing agent who held office at
the date of approval of this managing agent’s report
confirm that, so far as they are each aware, there is no
relevant audit information of which the Syndicate’s
auditors are unaware; and each Director has taken all
the steps that they ought to have taken as a Director to
make themselves aware of any relevant audit information
and to establish that the Syndicate’s auditors are aware of
that information.
Annual General Meeting
Usually the only formal business conducted at the
Syndicate Annual General Meeting (AGM) is the
appointment of the Syndicate auditors for the following
year, and usually the attendance at the AGM, when it is
held, is minimal.
In accordance with the Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) (the 2008
Regulations) a Syndicate AGM was held in 2016 to appoint
PricewaterhouseCoopers LLP (PwC) as the Syndicate’s
registered auditor. The 2008 Regulations contain provisions
for the re-appointment of the Syndicate’s registered auditor.
Lloyd’s requirements allow managing agents to dispense
with the requirement to hold a Syndicate AGM, providing
certain criteria are met.
This year, we therefore give notice that:
s
Hiscox Syndicates Limited does not propose to hold
an AGM of the members of Syndicate 3624 in 2025;
s
PwC will be deemed to be re-appointed as the
Syndicate’s registered auditor pursuant to the
2008 Regulations;
s
members may object to the matters set out above
within 21 days of this notice.
If no objections to this are received from any members
within the specified period, we shall notify Lloyd’s to
that effect. If any objections are received, depending
on the level or nature of such objections, we shall then
consider whether to:
1.
apply for Lloyd’s consent not to hold an AGM.
Lloyd’s may give its consent subject to any
such conditions and requirements as it may
determine; or
2.
convene an AGM.
By order of the Board
Helen Rose
Chief Financial Officer
24 February 2025
Hiscox Syndicate 3624
Report of the Directors of the managing agent
Hiscox Syndicate 3624
6
Hiscox Syndicate 3624
Report and Accounts 2024
Statement of managing agent’s responsibilities
Hiscox Syndicate 3624 annual accounts
The managing agent is responsible for preparing the Syndicate
Annual Report and Accounts in accordance with applicable law
and regulations.
The Insurance Accounts Directive (Lloyd’s Syndicate and
Aggregate Accounts) Regulations 2008 require the managing
agent to prepare syndicate annual accounts at 31 December
each year in accordance with UK accounting standards and
applicable law (UK Generally Accepted Accounting Practice).
The syndicate annual accounts are required by law to give a
true and fair view of the state of affairs of the Syndicate at that
date and of its profit or loss for that year.
In preparing those syndicate annual accounts, the managing
agent is required to:
s
select suitable accounting policies and then apply them
consistently, subject to changes arising on the adoption
of new accounting standards in the year;
s
make judgements and estimates that are reasonable
and prudent;
s
state whether applicable accounting standards have been
followed, subject to any material departures disclosed
and explained in the syndicate annual accounts; and
s
prepare the syndicate annual accounts on the basis that
the Syndicate will continue to write future business unless
it is inappropriate to presume the Syndicate will do so.
The managing agent is responsible for keeping proper
accounting records that disclose with reasonable accuracy,
at any time, the financial position of the Syndicate and enable
it to ensure that the syndicate annual accounts comply with
the Insurance Accounts Directive (Lloyd’s Syndicate and
Aggregate Accounts) Regulations 2008. It is also responsible
for safeguarding the assets of the Syndicate and hence for
taking reasonable steps for prevention and detection of
fraud and other irregularities.
The managing agent is responsible for the maintenance and
integrity of the corporate and financial information included
on the company’s website. Legislation in the UK governing
the preparation and dissemination of the syndicate annual
accounts may differ from legislation in other jurisdictions.
7
Hiscox Syndicate 3624
Report and Accounts 2024
Hiscox Syndicate 3624
Independent auditors’ report
To the member of Syndicate 3624
Report on the audit of the syndicate annual accounts
Opinion
In our opinion, Syndicate 3624’s syndicate annual accounts:
s
give a true and fair view of the state of the Syndicate’s
affairs as at 31 December 2024 and of its profit and cash
flows for the year then ended;
s
have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, including FRS 102 ‘The
Financial Reporting Standard applicable in the UK and
Republic of Ireland’, and applicable law); and
s
have been prepared in accordance with the requirements
of The Insurance Accounts Directive (Lloyd’s Syndicate
and Aggregate Accounts) Regulations 2008 and the
requirements within the Lloyd’s Syndicate Accounts
Instructions version 2.0 as modified by the Frequently
Asked Questions issued by Lloyd’s version 1.0 (‘the
Lloyd’s Syndicate Instructions’).
We have audited the syndicate annual accounts included within
the Reports and Accounts (the Annual Report), which comprise:
balance sheet – assets and the balance sheet – liabilities as at
31 December 2024; the profit and loss account: technical
account – general business and profit and loss account:
non-technical – general business, the statement of cash flows,
and the statement of changes in members’ balances for the year
then ended; and the notes to the syndicate annual accounts,
which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)), The Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts)
Regulations 2008, the Lloyd’s Syndicate Instructions and other
applicable law. Our responsibilities under ISAs (UK) are further
described in the auditors’ responsibilities for the audit of the
syndicate annual accounts section of our report. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the syndicate in accordance
with the ethical requirements that are relevant to our audit of
the syndicate annual accounts in the UK, which includes the
FRC’s Ethical Standard, as applicable to other entities of public
interest, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard
were not provided.
Other than those disclosed in note 6, we have provided no
non-audit services to the syndicate in the period under audit.
Reporting on other information
The other information comprises all of the information in
the Annual Report other than the syndicate annual accounts
and our auditors’ report thereon. The Managing Agent is
responsible for the other information. Our opinion on the
syndicate annual accounts does not cover the other information
and, accordingly, we do not express an audit opinion or,
except to the extent otherwise explicitly stated in this report,
any form of assurance thereon.
In connection with our audit of the syndicate annual accounts,
our responsibility is to read the other information and, in
doing so, consider whether the other information is materially
inconsistent with the syndicate annual accounts or our
knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material
inconsistency or material misstatement, we are required to
perform procedures to conclude whether there is a material
misstatement of the syndicate annual accounts or a material
misstatement of the other information. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required to
report that fact. We have nothing to report based on
these responsibilities.
With respect to the report of the Directors of the managing
agent (the ‘managing agent’s report’), we also considered
whether the disclosures required by The Insurance Accounts
Directive (Lloyd’s Syndicate and Aggregate Accounts)
Regulations 2008 have been included.
Based on our work undertaken in the course of the audit,
The Insurance Accounts Directive (Lloyd’s Syndicate and
Aggregate Accounts) Regulations 2008 requires us also
to report certain opinions and matters as described below.
Managing agent’s report
In our opinion, based on the work undertaken in the course
of the audit, the information given in the managing agent’s
Report for the year ended 31 December 2024 is consistent
8
Hiscox Syndicate 3624
Report and Accounts 2024
Hiscox Syndicate 3624
Independent auditors’ report
with the syndicate annual accounts and has been prepared
in accordance with applicable legal requirements.
In light of the knowledge and understanding of the syndicate
and its environment obtained in the course of the audit,
we did not identify any material misstatements in the managing
agent’s report.
Responsibilities for the syndicate annual accounts
and the audit
Responsibilities of the managing agent for the syndicate
annual accounts
As explained more fully in the statement of managing agent’s
responsibilities, the managing agent is responsible for the
preparation of the syndicate annual accounts in accordance
with the applicable framework and for being satisfied that
they give a true and fair view. The managing agent is also
responsible for such internal control as they determine is
necessary to enable the preparation of syndicate annual
accounts that are free from material misstatement,
whether due to fraud or error.
In preparing the syndicate annual accounts, the managing
agent is responsible for assessing the syndicate’s ability to
continue as a going concern, disclosing as applicable, matters
related to going concern and using the going concern basis
of accounting unless it is intended for the syndicate to cease
operations, or it has no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the syndicate
annual accounts
Our objectives are to obtain reasonable assurance about
whether the syndicate annual accounts as a whole are free
from material misstatement, whether due to fraud or error,
and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these syndicate
annual accounts.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below.
Based on our understanding of the syndicate and industry,
we identified that the principal risks of non-compliance with laws
and regulations related to breaches of regulatory principles,
such as those governed by the Prudential Regulation Authority
and the Financial Conduct Authority, and those regulations
set by the Council of Lloyd’s, and we considered the extent
to which non-compliance might have a material effect on the
syndicate annual accounts. We also considered those laws
and regulations that have a direct impact on the syndicate
annual accounts such as The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations
2008 and the Lloyd’s Syndicate Instructions. We evaluated
management’s incentives and opportunities for fraudulent
manipulation of the syndicate annual accounts (including the
risk of override of controls), and determined that the principal
risks were related to manual journals and accounting estimates
in respect of premiums and insurance claims outstanding.
Audit procedures performed by the engagement
team included:
s
discussions with senior management, including
those in the risk and compliance functions, including
consideration of known or suspected instances of
non-compliance with laws, regulation and fraud;
s
reading key correspondence with Lloyd’s, in relation
to compliance with laws and regulations;
s
reviewing relevant meeting minutes including those
of the Audit Committee;
s
testing journal entries identified in accordance with
our risk assessment;
s
testing and assessing the appropriateness of insurance
claims reserves;
s
identifying and testing estimated premium income on
a sample basis; and
s
designing audit procedures to incorporate unpredictability
around the nature, timing and extent of our testing.
There are inherent limitations in the audit procedures
described above. We are less likely to become aware of
instances of non-compliance with laws and regulations that
are not closely related to events and transactions reflected in
the syndicate annual accounts. Also, the risk of not detecting
a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve
9
Hiscox Syndicate 3624
Report and Accounts 2024
Hiscox Syndicate 3624
Independent auditors’ report
deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
A further description of our responsibilities for the audit of the
syndicate annual accounts is located on the FRC’s website
at:
frc.org.uk/auditorsresponsibilities
. This description forms
part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and
only for the syndicate’s members as a body in accordance with
part 2 of The Insurance Accounts Directive (Lloyd’s Syndicate
and Aggregate Accounts) Regulations 2008 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
Other required reporting
Under The Insurance Accounts Directive (Lloyd’s Syndicate
and Aggregate Accounts) Regulations 2008 we are required
to report to you if, in our opinion:
s
we have not obtained all the information and explanations
we require for our audit; or
s
adequate accounting records have not been kept by
the managing agent in respect of the Syndicate; or
s
certain disclosures of managing agent remuneration
specified by law are not made; or
s
the syndicate annual accounts are not in agreement
with the accounting records.
We have no exceptions to report arising from this responsibility.
Other matter
We draw attention to the fact that this report may be included
within a document to which iXBRL tagging has been applied.
This auditors’ report provides no assurance over whether the
iXBRL tagging has been applied in accordance with section 2
of the Lloyd’s Syndicate Instructions version 2.0.
Thomas Robb
(Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
24 February 2025
Hiscox Syndicate 3624
10
Profit and loss account:
technical account – general business
Hiscox Syndicate 3624 annual accounts
Year ended 31 December 2024
Notes
2024
$000
2023
$000
Earned premiums, net of reinsurance
Gross premiums written
5
Outward reinsurance premiums
(8,743 )
(48,725 )
Net premiums written
Change in the provision for unearned premiums:
Gross amount
Reinsurers’ share
(632 )
(725 )
Net change in provisions for unearned premiums
Earned premiums, net of reinsurance
Allocated investment return transferred from/(to) the non-technical account
Claims incurred, net of reinsurance
Claims paid:
Gross amount
10
(230,908 )
(238,282 )
Reinsurers’ share
10
Net claims paid
(102,088 )
(92,852 )
Change in the provision for claims:
Gross amount
Reinsurers’ share
(127,047 )
(65,285 )
Net change in provisions for claims
(6,630 )
(30,423 )
Claims incurred, net of reinsurance
(108,718 )
(123,275 )
Net operating expenses
6
(95,837 )
(107,150 )
Balance on the technical account for general business
The notes on pages 16 to 39 form an integral part of these annual accounts.
Hiscox Syndicate 3624
Report and Accounts 2024
11
Hiscox Syndicate 3624
Profit and loss account:
non-technical account – general business
Hiscox Syndicate 3624 annual accounts
Year ended 31 December 2024
Notes
2024
$000
2023
$000
Balance on the technical account for general business
Investment income
8
Realised losses on investments
8
(1,029 )
(14,017 )
Unrealised gains on investments
8
Investment expenses and charges
8
(558 )
(576 )
Total investment return
Allocation of investment return transferred (to)/from the general business account
(35,000 )
(37,706 )
Foreign exchange (losses)/gains
(369 )
Profit for the financial year
There are no recognised gains or losses in the accounting year other than those dealt with in the technical and non-technical
accounts, therefore no statement of other comprehensive income has been presented.
The notes on pages 16 to 39 form an integral part of these annual accounts.
Hiscox Syndicate 3624
Report and Accounts 2024
Hiscox Syndicate 3624
12
Balance sheet – assets
Hiscox Syndicate 3624 annual accounts
At 31 December 2024
Notes
2024
$000
2023
$000
Investments
Financial investments
9
Deposits with ceding undertakings
Reinsurers’ share of technical provisions
Provision for unearned premium
10
Claims outstanding
10, 14
Debtors
Debtors arising out of direct insurance operations
11
Debtors arising out of reinsurance operations
12
Other debtors
13
Other assets
Cash at bank and in hand
19
Other
Prepayments and accrued income
Accrued interest
Deferred acquisition costs
10
Other prepayments and accrued income
Total assets
The notes on pages 16 to 39 form an integral part of these annual accounts.
Hiscox Syndicate 3624
Report and Accounts 2024
*Represented to align with current period presentation – see note 1.
*
13
Hiscox Syndicate 3624
Balance sheet – liabilities
Hiscox Syndicate 3624 annual accounts
At 31 December 2024
Notes
2024
$000
2023
$000
Capital and reserves
Members’ balances
(23,852 )
Technical provisions
Provision for unearned premium
10
Claims outstanding
10, 14
Creditors
Creditors arising out of insurance operations
15
Creditors arising out of reinsurance operations
16
Other creditors
17
Accruals and deferred income
18
Total liabilities
Total liabilities, capital and reserves
The notes on pages 16 to 39 form an integral part of these annual accounts.
The syndicate annual accounts on pages 10 to 39 were approved by the Board of Hiscox Syndicates Limited and were signed on
its behalf by
Helen Rose
Chief Financial Officer
24 February 2025
Hiscox Syndicate 3624
Report and Accounts 2024
*Represented to align with current period presentation – see note 1.
*
Hiscox Syndicate 3624
14
Statement of changes in members’ balances
Hiscox Syndicate 3624 annual accounts
Year ended 31 December 2024
2024
$000
2023
$000
Members’ balances brought forward at 1 January
(23,852 )
(124,399 )
Total recognised gains for the year
Payments of profit to members’ personal reserve funds
Losses collected in relation to distribution on closure of underwriting year
Members’ balances carried forward at 31 December
(23,852 )
Members participate on Syndicates by reference to years of account and their ultimate result, assets and liabilities are assessed
with reference to policies incepting in that year of account in respect of their membership of a particular year.
A profit payment distribution of $42.2 million to members will be proposed in relation to the closing year of account 2022
(2023: loss collection of $40.7 million in relation to the closing year of account 2021). There are no years of account remaining
open after the three year period.
Hiscox Syndicate 3624
Report and Accounts 2024
15
Hiscox Syndicate 3624
Statement of cash flows
Hiscox Syndicate 3624 annual accounts
Year ended 31 December 2024
2024
$000
2023
$000
Cash flows from operating activities
Profit for the year
Decrease in gross technical provisions
(125,980 )
(39,967 )
Decrease in reinsurers’ share of gross technical provisions
Decrease/(increase) in debtors
(726 )
Decrease in creditors
(100,836 )
(63,452 )
Movement in other assets/liabilities
Investment return
(35,000 )
(37,706 )
Foreign exchange
Net cash flows from operating activities
(66,321 )
(46,927 )
Net cash flows from investing activities
Purchase of debt instruments
(264,184 )
(758,289 )
Sale of debt instruments
Settlement of derivatives
Investment income received
Other
(518 )
(753 )
Net cash flows from financing activities
Distribution of profit
Collection of losses
Net increase/(decrease) in cash and cash equivalents
(36,224 )
Effect of exchange rates on cash and cash equivalents
(626 )
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Included within cash and cash equivalents are balances totalling $2.2 million (2023: $2.2 million) not available for immediate
use by the Syndicate.
Hiscox Syndicate 3624
Report and Accounts 2024
Hiscox Syndicate 3624
16
Notes to the accounts
Hiscox Syndicate 3624 annual accounts
1 Basis of preparation
These annual accounts have been prepared in accordance
with regulation 5 of the Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008 and
applicable accounting standards in the United Kingdom,
Financial Reporting Standard 102, The Financial Reporting
Standard applicable in the United Kingdom and the Republic
of Ireland (FRS 102) and Insurance Contracts (FRS 103)
where applicable, and the Lloyd’s Syndicate Accounts
Instructions Version 2.0 as modified by the Frequently Asked
Questions Version 1.1 issued by Lloyd’s.
These annual accounts are presented in US Dollars, which
is the Syndicate’s functional currency. All amounts have been
rounded to the nearest thousand, unless otherwise indicated.
Some disclosure items, for example, Syndicate capacity, are
presented in Sterling as it is denominated in this currency;
US Dollar amounts are converted at the closing rate at
31 December 2024.
The Directors of the managing agent have prepared the annual
accounts on a going concern basis. In adopting the going
concern basis, the Syndicate’s current and forecast solvency
and liquidity positions for the next 12 months and beyond has
been reviewed. As part of the consideration of the appropriateness
of adopting the going concern basis, the Directors used
scenario analysis to assess the robustness of the Syndicate’s
solvency and liquidity positions. Even in a severe downside
scenario, no material uncertainty in relation to going concern
has been identified. This is due to the Syndicate’s strong capital
and liquidity positions, which provide considerable resilience
to these shocks, underpinned by the Syndicate’s approach
to risk management, which is described in note 4.
In addition to the above, Lloyd’s require the Syndicate to
perform an assessment of certain events on the financial
position of the Syndicate by running specific realistic
disaster scenarios (RDS). This is then translated into a
capital requirement which the members must adhere
to. It can be demonstrated that under the selected RDS
scenarios, the Syndicate will continue to operate and any
capital requirements can be provided for from the members’
funds at Lloyd’s (FAL).
In fact, no capital requirement is set for the Syndicate.
Capital requirements are set at the member level and a member
is not allowed to participate in the Syndicate if they have not
met their capital requirement and the capacity of the Syndicate
is adjusted down to reflect this.
The Syndicate benefits from being part of the Lloyd’s capital
structure, often referred to as the chain of security, which
provides excellent financial security to policyholders and
capital efficiency for members. The three elements that
make up the Lloyd’s capital structure are:
1.
syndicate assets – members’ working capital.
All premiums received by the Syndicates are held in
trust by the managing agents as the first resource for
paying policyholders’ claims and to fund regulatory
deposits. Until all liabilities have been provided for, no
profits can be released. Every year, the Syndicates’
reserves for future liabilities are independently audited
and subject to an actuarial review;
2.
funds at Lloyd’s – members’ capital deposited at Lloyd’s.
Each member, whether corporate or individual, must
provide sufficient capital to support their underwriting
at Lloyd’s. Managing agents are required to assess the
solvency capital requirement (SCR) for each syndicate
that they manage. This sets out how much capital the
syndicate requires to cover its underlying business risks
at a 99.5% confidence level; and
3.
Lloyd’s central capital – Lloyd’s central assets, which
include the Central Fund, are available, at the discretion
of the Council of Lloyd’s, to meet any valid claim that
cannot be met from the resources of any member.
After making enquiries, the Directors have a reasonable
expectation that the Syndicate has adequate resources to
continue in operational existence over a period of at least
12 months from the date of this report. For this reason, the
Syndicate continues to adopt the going concern basis in
preparing its annual accounts.
Representation of comparative information
During 2024, Lloyd's introduced changes to the syndicate
accounts process to rationalise and standardise financial
reporting across the market. As a result, certain comparative
information has been represented to ensure consistency with
current year presentation and compliance with the Lloyd's
Syndicate Accounts Instructions. The changes comprise:
1.
certain financial statement line items have been
represented whilst the underlying amounts remain
unchanged. The principal changes are the representation
of money market funds, previously included in cash at
Hiscox Syndicate 3624
Report and Accounts 2024
17
Hiscox Syndicate 3624
Notes to the accounts
1 Basis of preparation
Representation of comparative information
continued
bank and in hand to form part of financial investments.
The comparative balances in the affected notes 4, 9
and 19 have also been represented to align with the
current period presentation;
2.
aggregation changes to align with Lloyd's reporting
requirements whilst maintaining FRS 102 compliance,
certain items have been aggregated or disaggregated
within the financial statements and related notes. This
includes the presentation of realised and unrealised
gains and losses on investments, which are now
shown on a disaggregated basis in the non-technical
account of the Statement of profit or loss and other
comprehensive income.
2 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
annual accounts.
2(a) Premiums
Written gross and outwards reinsurance premiums comprise
premiums on contracts incepting during the financial year,
together with adjustments made in the year to premiums
written in prior years. Written premiums are disclosed
gross of commission payable to intermediaries and
exclude taxes and duties levied on premiums.
Premiums written include estimates for premiums due
but not yet received or notified, less an allowance for
expected cancellations. For certain contracts, premium
is initially recognised based on estimates of ultimate
premium. This occurs where pricing is based on variables,
which are not known with certainty at the point of binding
the policy. In determining the estimated premium, use is
made of information provided by brokers and coverholders,
past underwriting experience, the contractual terms of the
policy and prevailing market conditions.
Subsequently, adjustments to those estimates arise as updated
information relating to those pricing variables becomes
available, for example, due to declarations obtained on binding
authority contracts, reinstatement premium on reinsurance
contracts or other policy amendments. Such adjustments
are recorded in the period in which they are determined and
impact gross premiums written in the income statements and
premiums receivable from insureds and cedants recorded on
the balance sheet.
Outwards reinsurance premiums are also disclosed
gross of commissions and profit participations recoverable
from reinsurers. Retroactive insurance contracts that
contain significant insurance risk and that have an insurance
component and a deposit component are unbundled
providing the deposit component can be measured
separately. The deposit component is recorded directly
into the balance sheet within reinsurers’ share of insurance
liabilities with a corresponding amount in creditors arising out
of reinsurance operations. The reinsurers’ share of insurance
liabilities relating to the contracts is remeasured at each
reporting period with movements taken to the reinsurance
recoveries in the income statement.
Reinsurance transactions that transfer risk but are retroactive
are included in reinsurance assets. The excess of estimated
liabilities for claims and claim expenses over the consideration
paid is established as a deferred credit at inception. The
deferred amounts are subsequently amortised using the
recovery method over the settlement period of the reserve
and reflected through the claims and claim adjustment
expenses line. In transactions where the consideration
paid exceeds the estimated liabilities for claims and claim
adjustment expenses, a loss is recognised immediately.
2(b) Unearned premiums
The provision for unearned premium comprises the
proportion of gross and outwards reinsurance premiums
written, which is estimated to be earned in the following or
subsequent financial years, computed using the daily
pro-rata method.
2(c) Acquisition costs
Acquisition costs comprise all direct and indirect costs
arising from the acquisition of insurance contracts. Deferred
acquisition costs represent the proportion of acquisition
costs incurred, which corresponds to the proportion of
gross premiums written which is unearned at the balance
sheet date.
2(d) Claims
Claims incurred in respect of general business are charged
to profit or loss as incurred, based on the estimated liability for
compensation owed to contract holders or third parties damaged
by the contract holders. They include direct and indirect claims
settlement costs and arise from events that have occurred up to
the balance sheet date, even if they have not yet been reported
to the Syndicate. The Syndicate does not discount its liabilities
for unpaid claims. Liabilities for unpaid claims are estimated
using the input of assessments for individual cases reported to
the Syndicate and statistical analysis for the claims incurred but
not reported, and an estimate of the expected ultimate cost of
more complex claims that may be affected by external factors,
for example, court decisions.
Claims paid are transactions in the period which have been
signed through Lloyd’s Central Accounting or Lloyd’s Direct
Reporting, adjusted for any material backlogs which may
occur between cash paid and the claims being signed through.
Reinsurers’ share of claims paid are all transactions in the
period which have been signed through the London Outwards
Reinsurance System, adjusted to include an accrual for the
balances which have been billed, but remain unsettled at the
balance sheet date. Reinsurers’ share of claims outstanding is
the amount that it is estimated will be recoverable from reinsurers
based upon the gross claims provisions having allowed for
bad debt. Reinsurance recoveries are estimated by reviewing
individual claims including allowance for claims incurred but
not reported, and assessing the reinsurance recovery which
is expected based on the outwards reinsurance protections.
Amounts recoverable from, or due to, reinsurers are measured
consistently with the amounts associated with the reinsured
insurance contracts and in accordance with the terms of each
reinsurance contract. While the Directors consider that the gross
provisions for claims and the related reinsurance recoveries are
fairly stated on the basis of the information currently available
to them, the ultimate liability will vary as a result of subsequent
information and events and may result in significant adjustments
to the amounts provided.
Hiscox Syndicate 3624
Report and Accounts 2024
18
Hiscox Syndicate 3624
Notes to the accounts
2 Accounting policies
2(d) Claims
continued
Adjustments to the amounts of claims provisions established
in prior years are reflected in the annual accounts for the period
in which the adjustments are made. The methods used, and
estimates made, are reviewed regularly.
The benefits to which the Syndicate is entitled under outwards
reinsurance contracts are recognised as reinsurance assets.
These assets consist of short-term balances due from
reinsurers (classified within assets) as well as longer-term
receivables (classified within assets) that are dependent on
the expected claims and benefits arising under the related
reinsured insurance contracts.
Amounts recoverable from, or due to, reinsurers are measured
consistently with the amounts associated with the reinsured
insurance contracts and in accordance with the terms of each
reinsurance contract.
2(e) Unexpired risk
Provision is made for unexpired risks arising from general
business where the expected value of the claims and expenses
attributable to the unexpired periods of policies in force at the
balance sheet date exceeds the unearned premiums provision
in relation to such policies after the deduction of any acquisition
costs deferred. The provision for unexpired risks is assessed at
a business class level which is the level at which the contracts
are managed together.
2(f) Financial assets and liabilities
Financial assets and liabilities include cash at bank and
in hand, financial investments and debtors and creditors.
Financial investments comprise debt securities and other fixed
income securities, shares and other variable yield securities
and units in unit trusts, syndicate loans to central fund and
derivative assets.
i.
Financial investments at fair value through profit and loss
Financial investments are managed on a fair value
through the profit and loss accounts (FVPL) basis as they
are managed and their performance is evaluated on that
basis in accordance with the Syndicate’s investment
strategy. The Syndicate has elected to measure financial
investments at fair value through the profit and loss
non-technical account.
ii.
Debtors and creditors
Debtors and creditors are primarily non-derivative
financial assets and liabilities with fixed or determinable
payments and not quoted on an active market. These
include amounts due to and from agents, brokers and
insurance contract holders.
Debtors are initially recognised when due at transaction
price, and where applicable are subsequently measured
at amortised cost using the effective interest rate method.
The recoverability of these assets is assessed at each
balance date and appropriate provision made to ensure
that the balances properly reflect the amounts that will
ultimately be received, taking into account counterparty
credit risk and the contractual terms of the contract. Where
receivable is impaired, the Syndicate reduces the carrying
amount of the insurance receivable accordingly and
recognises the impairment loss in the profit or loss account.
Creditors are initially recognised at transaction price,
and where applicable are subsequently measured at
amortised cost using the effective interest rate method.
iii.
Derivative financial instruments
Derivative financial instruments are measured at cost
for initial recognition, and subsequently at fair value,
with changes recognised in profit and loss. Transaction
costs incurred in buying and selling derivative financial
instruments are recognised in profit or loss when incurred.
When derivatives are liabilities, they are reported with
other creditors in the balance sheet.
2(g) Investment return
All investment return is initially recognised in the non-technical
account. It is then transferred to the technical account as it all
relates to funds supporting underwriting business.
Realised gains or losses on investments represent the difference
between net sales proceeds and their purchase price.
Unrealised gains and losses on investments represent
the difference between the fair value of investments at
the balance sheet date and their purchase price or their
valuation at the commencement of the year. The movement
in unrealised investment gains/losses includes an adjustment
for previously recognised unrealised gains/losses on
investments disposed of in the accounting year.
2(h) Foreign currency translation
The functional and presentational currency of the Syndicate
is US Dollars which is the currency of the primary economic
environment in which the Syndicate operates.
Transactions denominated in foreign currencies are recorded
at the rates of exchange ruling at the date of the transactions.
At the balance sheet date, monetary assets and liabilities are
translated at the year-end rates of exchange. For the purpose
of foreign currency translation, unearned premiums and deferred
acquisition costs are treated as if they are monetary items.
Differences arising on translation of foreign currency
amounts relating to insurance operations of the Syndicate
are included in profit/(loss) on foreign exchange in the
non-technical account.
2(i) Taxation
Under Schedule 19 of the Finance Act 1993, managing
agents are not required to deduct basic rate income tax
from trading income. In addition, all UK basic rate income
tax deducted from Syndicate investment income is recoverable
by managing agents and, consequently, the distribution made
to members or their members’ agents is gross of tax. Capital
appreciation falls within trading income and is also distributed
gross of tax.
No provision has been made for any US federal income
tax payable on underwriting results or investment earnings.
Any payments on account made by the Syndicate during
the year are included in the balance sheet under the heading
‘other debtors’. No provision has been made for any overseas
tax payable by members on underwriting results.
2(j) Bad debts
Bad debts are provided for only where specific information
Hiscox Syndicate 3624
Report and Accounts 2024
19
Hiscox Syndicate 3624
Notes to the accounts
2 Accounting policies
2(j) Bad debts
continued
is available to suggest a debtor may be unable or unwilling
to settle its debt to the Syndicate. The provision is calculated
on a case-by-case basis.
2(k) Reinsurers’ commissions and profit participations
Reinsurers’ commissions and profit participations,
which include reinsurance profit commission and
overriding commission, are treated as a contribution
to expenses.
2(l) Cash at bank and in hand
This consists of cash at bank and in hand, deposits held at call
with banks, and other highly liquid investments that are readily
convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value.
2(m) Deposits with ceding undertakings
Deposits with ceding undertakings are funds held by Lloyd’s
Brussels on behalf of the Syndicate to settle Part VII claims.
These funds are held at amortised cost in the balance sheet.
3 Judgements and key sources of estimation uncertainty
In the application of the accounting policies, which are
described in note 2, the Directors are required to make
judgements, estimates and assumptions that affect the
amounts reported for assets and liabilities at the balance
sheet date and the amounts reported for revenues and
expenses during the year.
The following judgements, estimations and assumptions
have had the most significant effect on amounts recognised
in the annual accounts.
3(a) Valuation of general insurance contract liabilities
The estimation of the ultimate liability arising from claims
made under insurance contracts is the Syndicate’s most
critical accounting estimate. The carrying amount of the
liability is disclosed in the technical provisions note. For
general insurance contracts estimates are made for the
expected ultimate cost of claims notified at the balance sheet
date and the cost of claims incurred but not yet reported. It
can take a significant period of time before the ultimate cost
of claims can be established with certainty, and the final
outcome may be better or worse than that provided.
The estimation of these claims is based on historical experience
projected forward. The Syndicate’s estimate of claims
and expenses is mainly achieved through the application
of a number of commonly accepted actuarial projection
methodologies based on the following:
s
the development of previously paid claims, where
payments to date are extrapolated for each prior year;
s
the development of claims based on seasonally adjusted
exposure curves;
s
incurred claims development, where incurred claims
to date for each year are extrapolated based upon
observed development of earlier years; and
s
expected loss ratios.
The claims provisions are initially calculated gross of any
reinsurance recoveries. A separate estimate is made of the
amounts recoverable from the Syndicate’s reinsurance
arrangements including excess of loss and quota share
contracts, having due regard for collectability.
Claims provisions are subject to regular review, both within the
Syndicate and externally. Management discuss and challenge
the actuarial best estimate and booked claims provisions at
the quarterly Reserving Committee, whose membership
includes Directors of the managing agent. External actuaries
are also engaged to calculate an independent best estimate
of the ultimate cost of claims at 31 December annually and
present a statement of actuarial opinion (SAO) against which
the Syndicate’s best estimate is assessed.
The Syndicate tests the adequacy of its unearned premium
liability by comparing current estimates of future claims and
claims handling expenses attributable to the unexpired periods
of policies at the balance sheet date which to the unearned
premium liability net of acquisition costs. As set out in note
2(e), any deficiency is recognised in the income statement.
The related deferred acquisition costs are first written down
and any additional liability required is then recognised as an
unexpired risk reserve (URR).
3(b) Premium recognition
The gross premiums written are initially based on estimated
premium income (EPI) of each contract. EPI estimates are
based on information provided by brokers and coverholders,
past underwriting experience, the contractual terms of the
policy and prevailing market conditions. The EPI estimates are
reviewed on a regular basis, and premiums are adjusted over
time as needed to match the actual signed premium.
Gross premiums written under binding authorities are booked
as the underlying contracts incept. The Syndicate allocates
the expected premium receipts to each period of gross
premiums written on the basis of the passage of time. But
if the expected pattern of release of risk during the coverage
period differs significantly from the passage of time, for
example a group of contracts that is exposed to large
natural catastrophe risk concentrated in the first or
second half of the year, then the allocation is made
on the basis of the expected timing of claims incurred.
At a portfolio level this is considered to provide a reasonable
estimate for the full year of the pattern of risk over the
coverage period.
Gross premiums written includes an estimation for
reinstatement premiums which is determined based
on incurred losses held in the technical provisions.
3(c) Fair value of financial instruments
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques.
HSL uses judgement to select a variety of methods and make
assumptions that are mainly based on market conditions
existing at the end of each reporting period. See note 4
for discussion of the related risks. See note 9 for an analysis
of the measurement attributes of the financial instruments.
4 Management of risk
The Syndicate’s overall appetite for accepting and managing
varying classes of risk is defined by the HSL Board. The HSL
Board has developed a governance framework and has
Hiscox Syndicate 3624
Report and Accounts 2024
20
Hiscox Syndicate 3624
Notes to the accounts
4 Management of risk
continued
set risk management policies and procedures which include
risk identification, risk management and mitigation and risk
reporting. The objective of these policies and procedures
is to protect the Syndicate’s members, policyholders and
other stakeholders from negative events that could hinder
the Syndicate’s delivery of its contractual obligations and its
achievement of sustainable profitable economic and
social performance.
The HSL Board exercises oversight of the development
and operational implementation of its risk management
policies and procedures through the HSL Risk Committee.
Ongoing compliance is monitored through an internal audit
function, shared with other Hiscox Ltd subsidiaries, which
has operational independence, a charter and clear upwards
reporting structures back into the HSL Audit Committee
and HSL Board.
The Syndicate is fundamentally driven by a desire to
originate, retain and service insurance contracts to maturity.
The Syndicate’s cash flows are funded mainly through advance
premium collections and the timing of such premium inflows
is reasonably predictable.
In addition, the majority of material cash outflows are typically
triggered by the occurrence of insured events, although the
timing, frequency and severity of claims can fluctuate.
The principal sources of risk relevant to the Syndicate’s
operations and its annual accounts fall into five broad categories:
climate risk, insurance risk, financial risk, regulatory risk and
operational risk.
Climate risk
Climate risk relates to the range of complex physical,
transition and liability risks arising from climate change.
This includes the risk of higher claims as a result of more
frequent and more intense natural catastrophes; the financial
risks which could arise from the transition to a lower-carbon
economy; and the risk that those who have suffered loss
from climate change might then seek to recover those losses
from others who they believe may have been responsible.
Climate-related risk is not considered a standalone risk,
but a cross-cutting risk with potential to amplify each existing
risk type. A transition plan is being developed which will
consider in more detail the transition risk associated with
our portfolios.
By design, the established and embedded HSL risk
management framework provides a controlled and consistent
system for the identification, measurement, mitigation,
monitoring and reporting of risks (both current and emerging)
and so is structured in a way that allows us to continually
and consistently manage the various impacts of climate
risk on the risk profile. This is supported by a Group wide
sustainability strategy and equally robust processes and
policies that address climate-related underwriting risks,
such as the Group’s environmental, social and governance
(ESG) exclusions policy which applies to HSL and represents
a commitment to reduce steadily and eliminate by 2030 both
underwriting and investment exposure to coal-fired power
plants and coal mines; Arctic energy exploration, beginning
with the Arctic National Wildlife Refuge; oil sands; and
controversial weapons such as landmines.
We also consider the training and development requirements
of those with oversight responsibilities and accountability for
climate matters to ensure we have appropriate awareness and
expertise to drive progress. In 2024 this included a Board level
training session which aimed to enhance the Board’s awareness
and knowledge of ESG factors within underwriting risk.
More information can be in located in our Task Force on
Climate-related Financial Disclosure (TCFD) report in the
ultimate Group Annual Report and Accounts of Hiscox Ltd.
Insurance risk
The predominant risk to which the Syndicate is exposed is
insurance risk which is assumed through the underwriting
process. Insurance risk can be subcategorised into:
(i) underwriting risk, including the risk of insurance losses and
the insurance cycle and competition; and (ii) reserving risk.
(i) Underwriting risk
Underwriting risk is defined as the risk that insurance
premiums will not be sufficient to cover future insurance
losses and associated expenses. Underwriting risk also
encompasses people, process and system risks directly
related to underwriting.
The HSL Board sets the Syndicate’s underwriting strategy and
risk appetite, seeking to benefit from identified opportunities
in light of other relevant anticipated market conditions.
Specific underwriting objectives such as aggregation limits,
reinsurance protection thresholds, geographical disaster event
risk exposures and line of business diversification parameters
are prepared and reviewed by the HSL management team in
order to translate the HSL Board’s summarised underwriting
strategy into specific measurable actions and targets. These
actions and targets are reviewed and approved in advance
of each underwriting year.
The HSL Board continually reviews its underwriting strategy
throughout each underwriting year in light of evolving market
pricing, loss conditions and as opportunities present themselves.
The Syndicate’s underwriters and HSL management consider
underwriting risk at an individual contract level, and also from a
portfolio perspective where the risks assumed in similar classes
of policies are aggregated and the exposure evaluated in light
of historical portfolio experience and prospective factors. To
assist with the process of pricing and managing underwriting
risk, the Syndicate routinely performs a wide range of activities
including the following:
s
regularly updating the Syndicate’s risk models;
s
documenting, monitoring and reporting against the
Syndicate’s strategy to manage risk;
s
developing systems that facilitate the identification of
emerging issues promptly;
s
utilising sophisticated computer modelling tools to
simulate catastrophes and measure the resultant
potential losses before and after reinsurance;
s
monitoring legal developments and amending the
wording of policies when necessary;
s
regular monitoring of risk exposures across individual
underwriting portfolios and known accumulations of risk;
s
examining the aggregated exposures in advance of
underwriting further large risks; and
s
developing processes that continually factor market
intelligence into the pricing process.
Hiscox Syndicate 3624
Report and Accounts 2024
21
Hiscox Syndicate 3624
Notes to the accounts
4 Management of risk
(i) Underwriting risk
continued
The delegation of underwriting authority to specific individuals,
both internally and externally, is subject to regular reviews.
All underwriting staff and binding agencies are set strict
parameters in relation to the levels and types of business
they can underwrite, based on individual levels of experience
and competence. These parameters cover areas such as
maximum sums insured per insurance contract, maximum
gross premiums written and maximum aggregated exposures
per geographical zone and risk class. All delegations are strictly
controlled through these underwriting guidelines and limits
and extensive monitoring, review and auditing of the agencies.
The Syndicate compiles estimates of losses arising from
realistic disaster events using statistical models, alongside
input from its underwriters.
They also represent areas of potentially significant exposure
for the Syndicate. In addition to understanding the loss the
Syndicate may suffer from an event, it is important to ensure
that the risk models used are calibrated to the risks faced today.
This includes recognising and forecasting inflationary trends,
updating trends in claims payments, and capturing climate
change-related impacts. HSL has a climate risk framework,
which is used to assess where research resources should be
focused, and models updated, and as a result improves not
only the Syndicate’s understanding of the potential impact of
a changing climate but also the Syndicate’s ability to respond.
The selection of extreme loss scenario events is adjusted
each year and they are not therefore necessarily directly
comparable from one year to the next. The events are
extreme, and unprecedented, and as such estimates
may prove inadequate as a result of incorrect assumptions,
model deficiencies, or losses from unmodelled risks. This
means that should a realistic disaster actually occur, the
Syndicate’s final ultimate losses could materially differ from
those estimates modelled by management. The Syndicate’s
insurance contracts include provisions to contain losses, such
as the ability to impose deductibles and demand reinstatement
premiums in certain cases.
In addition, in order to manage the Syndicate’s exposure to
repeated loss events, relevant policies frequently contain
payment limits to cap the maximum amount payable from
these insured events over the contract period. In the case
of climate-exposed risks specifically, the vast majority of
underwriting contracts written are annual in nature and
thus can be revised frequently. This flexibility is a key
tool for managing the multi-decade challenge of climate
risks holistically.
The Syndicate also manages underwriting risk by purchasing
reinsurance. Reinsurance protection, such as excess of loss
cover, is purchased to mitigate the effect of catastrophes and
unexpected concentrations of risk. The scope and type of
reinsurance protection purchased may change depending on
the extent and competitiveness of cover available in the market.
The specific insurance risks accepted by the Syndicate are
primarily specialty lines, including Hiscox USA’s errors and
omissions account, written through Hiscox USA’s service
company, Hiscox Inc..
This business is written on a surplus lines basis. It also
underwrites smaller volumes of casualty and media,
entertainment and events where access to Lloyd’s licensing is
required. The Syndicate also considers climate change to be
a cross-cutting risk with potential to impact each existing risk
type, rather than a standalone risk. These specific categories
are defined for risk review purposes only, as each contains
risks specific to the nature of the cover provided. The following
describes the policies/procedures used to identify and measure
the risks associated with each individual category of business.
Casualty risks
The casualty underwriting strategy attempts to ensure that
the underwritten risks are well diversified in terms of type
and amount of potential hazard, industry and geography.
However, the Syndicate’s exposure is more focused towards
professional, general, and technological risks. Claims typically
arise from incidents such as errors and omissions attributed
to the insured, professional negligence and general liability
losses which can be property damage or bodily injury in nature.
The provision of insurance to cover allegations made against
individuals acting in the course of fiduciary or managerial
responsibilities, including directors and officers’ insurance,
is one example of a casualty insurance risk.
The Syndicate’s casualty insurance contracts mainly
experience low-severity attritional losses. By nature, some
casualty losses may take longer to settle than other categories
of business. In addition, there is increased potential for
accumulation in casualty risk due to the growing complexity
of business, technological advances, and greater
interconnectivity and interdependency across the world
due to globalisation.
The Syndicate’s pricing strategy for casualty insurance
policies is typically based on historical claim frequencies and
average claim severities, adjusted for inflation and extrapolated
forwards to incorporate projected changes in claims patterns.
In determining the price of each policy, an allowance is also
made for acquisition and administration expenses, reinsurance
costs, investment returns and the Syndicates’s cost of capital.
The market for cyber insurance is still a relatively immature
one, complicated by the fast-moving nature of the threat, as
the world becomes even more connected. The risks associated
with cyber insurance are multiplying in both diversity and scale,
with associated financial and reputational consequences of
failing to prepare for them. The Syndicate has focused its cyber
expertise on prevention, in addition to the more traditional
recovery product.
(ii) Reserving risk
Reserving risk is defined as the risk that reserves set in
respect of insurance claim losses are ultimately insufficient
to fully settle these claims and associated expenses.
This definition also applies to reserves which have been
set previously.
The
Syndicate’s procedures for estimating the outstanding
costs of settling insured losses at the balance sheet date,
including claims incurred but not yet reported, are detailed
in note 3(a).
The Syndicate’s provision estimates are subject to regular and
rigorous review by senior management from all areas of the
Hiscox Syndicate 3624
Report and Accounts 2024
22
Hiscox Syndicate 3624
Report and Accounts 2024
4 Management of risk
(ii) Reserving risk
continued
business including independent actuaries. The final provision
is approved by the HSL Board.
Similar to the underwriting risk detailed above, the
Syndicate’s reserve risks are well diversified. Short-tailed
claims are normally notified and settled within 12-to-24
months of the insured event occurring. Those claims taking the
longest time to develop and settle typically relate to casualty
risks, where legal complexities occasionally develop regarding
the insured’s alleged omissions or negligence. The length of
time required to obtain definitive legal judgments and make
eventual settlements exposes the Syndicate to a degree of
reserving risk in an inflationary environment.
The final quantum for casualty claims may not be
established for many years after the event. A significant
proportion of the casualty insurance amounts reserved
on the balance sheet may not be expected to settle within
24 months of the balance sheet date. Consequently, our
approach is not to recognise favourable experience in the
early years of development in the reserving process when
setting the booked reserve.
In addressing the impact of inflation HSL focuses on:
s
regular case reserve reviews to ensure adequacy;
s
uplifts to incurred but not reported (IBNR) reserves
to allow for current and future expectations of high
inflation rates;
s
assessment of rate increases against future inflation
to assess loss ratio impacts.
The Syndicate maintains explicit reserve uplifts to allow for
the impact of high inflation in recent years. Loss ratios are
closely monitored to ensure they include an appropriate
allowance for future inflation.
Booked reserves include a net margin of $33.1 million
(2023: $33.3 million), representing 6.7% (2023: 6.6%) of net
booked reserves. This is the margin above the best estimate
to help mitigate the uncertainty within the reserve estimates.
As the best estimate matures and becomes more certain,
the management margin is gradually released in line with
the reserving policy.
The liabilities established could be significantly lower or
higher than the ultimate cost of settling the claims arising.
This level of uncertainty varies between the classes of business
and the nature of the risk being underwritten and can arise
from developments in case reserving for large losses and
catastrophes, or from changes in estimates of claims IBNR.
The table below (a) presents the sensitivity of the value of
insurance liabilities disclosed in the accounts to potential
movements in the assumptions applied within the technical
provisions. Given the nature of the business underwritten
by the Syndicate, the approach to calculating the technical
provisions for each class can vary and as a result the sensitivity
performed is to apply a beneficial and adverse risk margin
to the total insurance liability.
Financial risk
The Syndicate is exposed to financial risk through its
ownership of financial instruments including financial
liabilities. The Syndicate invests in financial assets in
order to fund obligations arising from its insurance
contracts and financial liabilities.
The key financial risk for the Syndicate is that the proceeds
from its financial assets and investment result generated
thereon are not sufficient to fund the obligations. The most
important variables that could result in such an outcome
relate to the interest rate risk, credit risk, liquidity risk and
currency risk.
The Syndicate’s policies and procedures for managing
exposure to these specific categories of risk are detailed
as follows.
(a) Reliability of fair values
The Syndicate has elected to carry all financial investments
at fair value through profit or loss as they are managed
and evaluated on a fair value basis in accordance with
a documented strategy.
All of the financial investments held by the Syndicate are
available to trade in markets and the Syndicate therefore
seeks to determine fair value by reference to published prices
or as derived by pricing vendors using observable quotations
in the most active financial markets in which the assets trade.
The fair value of financial assets is measured primarily with
reference to their closing market prices at the balance sheet
date. The ability to obtain quoted bid-market prices
may be reduced in periods of diminished liquidity.
In addition, those quoted prices that may be
available may represent an unrealistic proportion of
market holdings or individual trade sizes that could not
be readily available to the Syndicate. In such instances
fair values may be determined or partially supplemented
using other observable market inputs such as prices
provided by market makers such as dealers and brokers
and prices achieved in the most recent regular transaction
of identical or closely-related instruments occurring before
General insurance business sensitivities as at 31 December 2024
2.5%
$000
(2.5)%
$000
5%
$000
(5)%
$000
Claims outstanding – gross of reinsurance
19,023
(19,023)
38,046
(38,046)
Claims outstanding – net of reinsurance
11,956
(11,956)
23,912
(23,912)
General insurance business sensitivities as at 31 December 2023
2.5%
$000
(2.5)%
$000
5%
$000
(5)%
$000
Claims outstanding – gross of reinsurance
22,069
(22,069)
44,137
(44,137)
Claims outstanding – net of reinsurance
11,807
(11,807)
23,614
(23,614)
Table a)
Hiscox Syndicate 3624
Notes to the accounts
23
Hiscox Syndicate 3624
Notes to the accounts
Hiscox Syndicate 3624
Report and Accounts 2024
4 Management of risk
(a) Reliability of fair values
continued
the balance sheet date but updated for relevant perceived
changes in market conditions.
At 31 December 2024, the Syndicate held mortgage
backed fixed income securities in its investment portfolio.
Together with the Syndicate’s investment managers,
management continues to monitor the potential for any
adverse development associated with this investment
exposure through the analysis of relevant factors such
as credit ratings, collateral, subordination levels and
default rates in relation to the securities held.
The Syndicate did not experience any material defaults on
debt securities during the year.
Valuation of these securities will continue to be impacted
by external market factors including default rates, rating
agency actions, and liquidity. The Syndicate will make
adjustments to the investment portfolio as appropriate as
part of its overall portfolio strategy, but its ability to mitigate
its risk by selling or hedging its exposures may be limited by
the market environment. The Syndicate’s future results may
be impacted, both positively and negatively, by the valuation
adjustments applied to these securities.
(b) Interest rate risk
Debt and fixed income investments represent a significant
proportion of the Syndicate’s assets and the HSL Board
continually monitors investment strategy to minimise the
risk of a fall in the portfolio’s market value which could
affect the amount of business that the Syndicate is able
to underwrite or its ability to settle claims as they fall due.
The fair value of the Syndicate’s investment portfolio of debt
and fixed income securities is normally inversely correlated
to movements in market interest rates. If market interest rates
rise, the fair value of the Syndicate’s debt and fixed income
investments would tend to fall and vice-versa if credit spreads
remained constant. The Syndicate may also, from time to time,
enter into interest rate future contracts in order to minimise the
interest rate risk.
The fair value of debt and fixed income assets in the Syndicate’s
balance sheet at 31 December is analysed below:
Table b)
31 December
2024
% weighting
31 December
2023
% weighting
Government issued bonds
and instruments
22
20
Government supported*
–
–
Mortgage backed instruments – agency
–
1
Corporate bonds
78
79
*Includes supranational debt and agency debt.
The sensitivity analysis for interest rate risk illustrates how
changes in the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market
interest rates at the reporting date. The impact of an increase
or decrease of 50 basis points in interest yields is shown in
the table below. Insurance contract liabilities are not directly
sensitive to the level of market interest rates, as they are
undiscounted and contractually non-interest-bearing.
Table c)
Interest rate risk
2024
impact on
profit
$000
2024
impact on
members’
balance
$000
2023
impact on
profit
$000
2023
impact on
members’
balance
$000
Plus 50 basis points
shift in yield curves
(6,663)
(6,663)
(7,057)
(7,057)
Minus 50 basis points
shift in yield curves
6,663
6,663
7,057
7,057
(c) Credit risk
The Syndicate has exposure to credit risk, which is the risk that
a counterparty will suffer a deterioration in actual or perceived
financial strength and be unable to pay amounts in full when
due, or that for any other reason they renege on a contract
or alter the terms of an agreement.
The concentrations of credit risk exposures held by insurers
may be expected to be greater than those associated with
other industries, due to the specific nature of reinsurance
markets and the extent of investments held in financial markets.
In both markets, the Syndicate interacts with a number of
counterparties who are engaged in similar activities with
similar customer profiles, and often in the same geographical
areas and industry sectors. Consequently, as many of these
counterparties are themselves exposed to similar economic
characteristics, one single localised or macroeconomic change
could severely disrupt the ability of a significant number of
counterparties to meet the Syndicate’s agreed contractual
terms and conditions.
Key areas of exposure to credit risk include:
s
reinsurers’ share of insurance liabilities;
s
amounts due from reinsurers in respect of claims
already paid;
s
amounts due from insurance contract holders;
s
amounts due from insurance intermediaries; and
s
counterparty risk with respect to cash and cash
equivalents, and investments and other deposits
including deposits and derivative transactions.
The Syndicate’s maximum exposure to credit risk is
represented by the carrying values of monetary assets
and reinsurance assets included in the balance sheet at
any given point in time. The Syndicate does not use credit
derivatives or other products to mitigate maximum credit
risk exposures on reinsurance assets, but collateral may
be requested to be held against these assets. The Syndicate
structures the levels of credit risk accepted by placing limits
on their exposure to a single counterparty, or groups of
counterparties, and having regard to geographical locations.
Such risks are subject to an annual or more frequent review.
There is no significant concentration of credit risk with respect
to loans and receivables, as the Syndicate has a large number
of internationally dispersed debtors with unrelated operations.
Reinsurance is used to contain insurance risk. This does not,
however, discharge the Syndicate’s liability as primary insurer.
If a reinsurer fails to pay a claim for any reason, the Syndicate
remains liable for the payment to the policyholder. The
creditworthiness of reinsurers is therefore continually
reviewed throughout the year.
24
Hiscox Syndicate 3624
Report and Accounts 2024
4 Management of risk
(c) Credit risk
continued
The managing agent assesses the creditworthiness of all reinsurers by reviewing credit grades provided by rating agencies
and other publicly available financial information detailing their financial strength and performance, as well as detailed analysis
from a dedicated in-house security consultant. The financial analysis of reinsurers produces an assessment categorised by S&P’s
rating (or equivalent when not available from S&P). Despite the rigorous nature of this assessment exercise, and the resultant
restricted range of reinsurance counterparties with acceptable strength and credit credentials that emerges there from, some
degree of credit risk concentration remains inevitable.
While the rating agencies provide strong analysis on the financials and governance of a reinsurance security, the HSL Board
also takes account of qualitative factors. The HSL Board considers the reputation of its reinsurance partners and also receives
details of recent payment history and the status of any ongoing negotiations between other Hiscox entities and these third parties.
The final score that a security receives will determine how much reinsurance credit risk the Syndicate is willing to have with
that security based on the exposure guidelines.
This information is used to update the reinsurance purchasing strategy. Individual operating units maintain records of the
payment history for significant brokers and contract holders with whom they conduct regular business. The exposure to individual
counterparties is also managed by other mechanisms, such as the right of offset, where counterparties are both debtors and
creditors of the Syndicate, and obtaining collateral from unrated counterparties.
Management information reports detail provisions for impairment on loans and receivables and subsequent write-off.
Exposures to individual intermediaries and groups of intermediaries are collected within the ongoing monitoring of the controls
associated with regulatory solvency. The Syndicate also mitigates counterparty credit risk by concentrating debt and fixed income
investments in a portfolio of typically high-quality corporate and government bonds.
An analysis of the Syndicate’s major exposures to counterparty credit risk excluding direct policyholder debtors, based on S&P
or equivalent rating at 31 December, is presented in the table below:
Table d)
At 31 December 2024
AAA
$000
AA
$000
A
$000
BBB
$000
Other
$000
Not rated
$000
Total
$000
Debt securities and other fixed income securities
4,711 172,929 244,428 204,473
4,113
4,895 635,549
Shares and other variable yield securities
and units in unit trusts
54,580
3,151
20
–
–
–
57,751
Syndicate loans to central fund
–
–
4,489
–
–
–
4,489
Derivative assets
–
–
–
–
–
–
–
Loans and deposits with credit institutions
–
–
–
–
–
–
–
Deposits with ceding undertakings
–
–
501
–
–
–
501
Reinsurers’ share of claims outstanding
–
65,953 216,720
–
–
–
282,673
Debtors arising out of direct insurance operations
–
–
–
–
–
23,450
23,450
Debtors arising out of reinsurance operations
–
832
12,773
–
–
–
13,605
Cash at bank and in hand
–
–
7,765
–
–
–
7,765
Other debtors and accrued interest
–
–
10,250
–
–
–
10,250
Total
59,291
242,865
496,946
204,473
4,113
28,345 1,036,033
At 31 December 2023*
AAA
$000
AA
$000
A
$000
BBB
$000
Other
$000
Not rated
$000
Total
$000
Debt securities and other fixed income securities
5,668
178,341
217,241
239,863
3,771
5,512
650,396
Shares and other variable yield securities
and units in unit trusts
32,759
4,804
212
–
–
–
37,775
Syndicate loans to central fund
–
–
5,690
–
–
–
5,690
Derivative assets
–
–
–
–
–
–
–
Loans and deposits with credit institutions
–
–
–
–
–
–
–
Deposits with ceding undertakings
–
–
1,019
–
–
–
1,019
Reinsurers’ share of claims outstanding
–
81,054 329,405
–
–
–
410,459
Debtors arising out of direct insurance operations
–
–
–
–
–
32,118
32,118
Debtors arising out of reinsurance operations
–
3,419
6,866
–
–
–
10,285
Cash at bank and in hand
–
–
4,470
–
–
–
4,470
Other debtors and accrued interest
–
–
9,087
–
–
–
9,087
Total
38,427
267,618
573,990
239,863
3,771
37,630 1,161,299
Hiscox Syndicate 3624
Notes to the accounts
*Represented to align with current period presentation – see note 1.
25
Hiscox Syndicate 3624
Report and Accounts 2024
Hiscox Syndicate 3624
Notes to the accounts
4 Management of risk
(c) Credit risk
continued
Within the financial investments, which include debt securities and other fixed income securities, shares and other variable
yield securities and units in unit trusts,deposits with credit institutions, syndicate loans to central fund and cash equivalent
assets, there are exposures to a range of government borrowers, on either a direct or guaranteed basis, and banking institutions.
The Syndicate, together with its investment managers, closely manages its geographical exposures across government issued
and supported debt.
At 31 December 2024 and 2023, the Syndicate held no material debt or fixed income assets that were past due or impaired
beyond their reported fair values. For the current year and prior year, the Syndicate did not experience any material defaults
on debt securities.
(d) Financial assets that are past due and impaired
The Syndicate has no debtors that are impaired at the reporting date. These debtors have been individually assessed for
impairment by considering information such as the occurrence of significant changes in the counterparty’s financial position,
patterns of historical payment information and disputes with counterparties. An analysis of the carrying amounts of past due
or impaired debtors is presented in the table below:
Table e)
At 31 December 2024
Neither past due
nor impaired assets
$000
Past due but not
impaired assets
$000
Gross value of
impaired assets
$000
Impairment
allowance
$000
Total
$000
Debt securities and other fixed income securities
635,549
–
–
–
635,549
Shares and other variable yield securities
and units in unit trusts
57,751
–
–
–
57,751
Syndicate loans to central fund
4,489
–
–
–
4,489
Derivative assets
–
–
–
–
–
Loans and deposits with credit institutions
–
–
–
–
–
Deposits with ceding undertakings
501
–
–
–
501
Reinsurers' share of claims outstanding
282,673
–
–
–
282,673
Debtors arising out of direct insurance operations
23,450
–
–
–
23,450
Debtors arising out of reinsurance operations
13,605
–
–
–
13,605
Cash at bank and in hand
7,765
–
–
–
7,765
Other debtors and accrued interest
10,250
–
–
–
10,250
Total
1,036,033
–
–
– 1,036,033
At 31 December 2023*
Neither past due
nor impaired assets
$000
Past due but not
impaired assets
$000
Gross value of
impaired assets
$000
Impairment
allowance
$000
Total
$000
Debt securities and other fixed income securities
650,396
–
–
–
650,396
Shares and other variable yield securities
and units in unit trusts
37,775
–
–
–
37,775
Syndicate loans to central fund
5,690
–
–
–
5,690
Derivative assets
–
–
–
–
–
Loans and deposits with credit institutions
–
–
–
–
–
Deposits with ceding undertakings
1,019
–
–
–
1,019
Reinsurers' share of claims outstanding
410,459
–
–
–
410,459
Debtors arising out of direct insurance operations
32,118
–
–
–
32,118
Debtors arising out of reinsurance operations
10,285
–
–
–
10,285
Cash at bank and in hand
4,470
–
–
–
4,470
Other debtors and accrued interest
9,087
–
–
–
9,087
Total
1,161,299
–
–
– 1,161,299
*Represented to align with current period presentation – see note 1.
26
Hiscox Syndicate 3624
Report and Accounts 2024
4 Management of risk
continued
(e) Liquidity risk
The Syndicate is exposed to daily calls on its available cash resources, mainly from claims arising from insurance and reinsurance
contracts. Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. The HSL Board
sets limits on the minimum level of cash and maturing funds available to meet such calls and on the minimum level of borrowing
facilities that should be in place to cover unexpected levels of claims and other cash demands.
A significant proportion of the Syndicate’s investments is in highly-liquid assets which could be converted to cash in a prompt
fashion and at minimal expense. The deposits with credit institutions largely comprise short-dated certificates for which an
active market exists and which the Syndicate can easily access.
The main focus of the investment portfolio is on high-quality, short-duration debt and fixed income securities, and cash.
There are no significant holdings of investments with specific repricing dates. Not withstanding the regular interest receipts
and also the Syndicate’s ability to liquidate these securities and the majority of its other financial instrument assets for cash
in a prompt and reasonable manner, the contractual maturity profile of the financial assets and financial liabilities at
31 December was as follows:
Table f)
At 31 December 2024
Less than
one year
$000
Between
one and
three years
$000
Between
three and
five years
$000
Over
five years
$000
Total
$000
Investments
145,245
325,597
221,896
5,552
698,290
Reinsurers’ share of claims outstanding
124,355
101,234
29,686
27,398
282,673
Debtors
38,538
2,682
–
–
41,220
Cash at bank and in hand
7,765
–
–
–
7,765
Accrued interest
6,085
–
–
–
6,085
Other prepayments and accrued income
4
–
–
–
4
Claims outstanding
(313,332)
(295,961)
(100,526)
(51,093)
(760,912)
Creditors
(36,025)
(78,260)
(17,179)
–
(131,464)
Derivative liabilities
–
–
–
–
–
Accruals and deferred income
(326)
–
–
–
(326)
Total
(27,691)
55,292
133,877
(18,143)
143,335
At 31 December 2023*
Less than
one year
$000
Between
one and
three years
$000
Between
three and
five years
$000
Over
five years
$000
Total
$000
Investments
149,988
302,511
230,650
11,731
694,880
Reinsurers’ share of claims outstanding
156,187
136,650
49,564
68,058
410,459
Debtors
41,550
3,730
–
–
45,280
Cash at bank and in hand
4,470
–
–
–
4,470
Accrued interest
6,210
–
–
–
6,210
Other prepayments and accrued income
4
–
–
–
4
Claims outstanding
(380,685)
(311,839)
(91,196)
(99,022)
(882,742)
Creditors
(38,411)
(148,320)
(45,050)
–
(231,781)
Derivative liabilities
(136)
–
–
–
(136)
Accruals and deferred income
(333)
–
–
–
(333)
Total
(61,156)
(17,268)
143,968
(19,233)
46,311
The available headroom of working capital is monitored through the use of a detailed Syndicate cash flow forecast which is
reviewed by management quarterly, or more frequently, as required.
A significant proportion of the financial investments are in highly liquid assets which could be converted to cash in a prompt
fashion and at minimal expense to settle Syndicate liabilities as they fall due. The Directors have a reasonable expectation
that the Syndicate has adequate resources to continue in operation for the foreseeable future. Average contractual maturity
analysed by denominated currency of investments was as follows:
Table g)
At 31 December 2024
2024
years
2023
years
Sterling
0.2
0.4
US Dollar
2.5
2.6
Euro
–
–
Canadian Dollar
2.0
2.2
Hiscox Syndicate 3624
Notes to the accounts
*Represented to align with current period presentation – see note 1.
27
Hiscox Syndicate 3624
Report and Accounts 2024
4 Management of risk
continued
(f) Currency risk
The majority of the Syndicate’s gross premiums written is in US Dollars, consequently movements in Sterling, Euro and
Canadian Dollar against US Dollar exchange rate may have a material effect on its financial performance and position.
The Syndicate’s financial assets are denominated in the same currencies as its insurance liabilities, in order to reduce currency
exchange volatility from the balance sheet. This profit and loss is distributed or collected in accordance with Lloyd’s rules using
US Dollars. The currency profile of the Syndicate’s financial assets and financial liabilities is as follows:
Table h)
At 31 December 2024
US Dollar
$000
Sterling
$000
Euro
$000
Canadian
Dollar
$000
Total
$000
Investments
671,131
17,722
4,055
5,382
698,290
Reinsurers share of technical provisions
261,044
24,637
(1,386)
2,225
286,520
Debtors
33,750
8,496
(1,026)
–
41,220
Other assets
23,194
(24,844)
17,591
(8,176)
7,765
Prepayments and accrued income
44,331
1,519
52
20
45,922
Total assets
1,033,450
27,530
19,286
(549)
1,079,717
Technical provisions
(830,245)
(32,097)
(7,802)
(2,409)
(872,553)
Creditors
(140,760)
16,840
(10,171)
2,627
(131,464)
Accruals and deferred income
(85)
(225)
(16)
–
(326)
Total liabilities
(971,090)
(15,482)
(17,989)
218
(1,004,343)
Members’ balances
62,360
12,048
1,297
(331)
75,374
At 31 December 2023*
US Dollar
$000
Sterling
$000
Euro
$000
Canadian
Dollar
$000
Total
$000
Investments
661,327
19,589
4,288
9,676
694,880
Reinsurers share of technical provisions
379,888
25,423
7,534
2,106
414,951
Debtors
37,823
8,072
(617)
2
45,280
Other assets
27,089
(29,044)
18,253
(11,828)
4,470
Prepayments and accrued income
45,628
1,634
47
41
47,350
Total assets
1,151,755
25,674
29,505
(3)
1,206,931
Technical provisions
(947,841)
(30,915)
(17,507)
(2,270)
(998,533)
Creditors
(237,459)
15,449
(12,320)
2,413
(231,917)
Accruals and deferred income
(95)
(237)
(1)
–
(333)
Total liabilities
(1,185,395)
(15,703)
(29,828)
143
(1,230,783)
Members’ balances
(33,640)
9,971
(323)
140
(23,852)
Sensitivity analysis
The Syndicate performs sensitivity analysis based on a 10% strengthening or weakening of the US Dollar against Sterling,
Euro and the Canadian Dollar. This analysis assumes that all other variables, in particular interest rates, remain constant
and that the underlying valuation of assets and liabilities in their base currency is unchanged. During the year, the Syndicate
transacted in a number of over-the-counter forward currency derivative contracts. The impact of these contracts on the sensitivity
analysis is negligible. The impact of a 10% increase or decrease against the following currencies is shown in the table below:
Table i)
Currency risk
2024
impact on
profit
$000
2024
impact on
members’
balance
$000
2023
impact on
profit
$000
2023
impact on
members’
balance
$000
Ten percent increase in US Dollar/Sterling exchange rate
(1,205)
1,205
(997)
997
Ten percent decrease in US Dollar/Sterling exchange rate
1,205
(1,205)
997
(997)
Ten percent increase in US Dollar/Euro exchange rate
(130)
130
32
(32)
Ten percent decrease in US Dollar/Euro exchange rate
130
(130)
(32)
32
Ten percent increase in US Dollar/Canadian Dollar exchange rate
33
(33)
(14)
14
Ten percent decrease in US Dollar/Canadian Dollar exchange rate
(33)
33
14
(14)
Hiscox Syndicate 3624
Notes to the accounts
*Represented to align with current period presentation – see note 1.
28
Hiscox Syndicate 3624
Report and Accounts 2024
4 Management of risk
continued
Regulatory risk
The managing agent is required to comply with the requirements of the Prudential Regulation Authority, Financial Conduct Authority
and Lloyd’s. Lloyd’s requirements include those imposed on the Lloyd’s market by overseas regulators, particularly in respect of
US situs business. Regulatory risk is the risk of loss owing to a breach of regulatory requirements or failure to respond to regulatory
change. HSL devotes considerable resources to meet its regulatory obligations, including compliance, risk management and
internal audit functions.
Operational risk
The Syndicate is exposed to the risk of direct or indirect loss resulting from internal processes, people or systems, or from
external events. This includes cyber security risk as well as major IT, systems or service failures. HSL actively monitors and
controls its operational risks. HSL demonstrated continued resilience, underscoring the benefits of its business model,
disciplined risk management and ongoing investment in technology and infrastructure.
The Syndicate has implemented several operational risk management processes, which include enhancing its defences and
response to information security and cyber threats. The Syndicate regularly reassesses its information security standards and
methodologies to ensure appropriate governance and, consistency in its approach. In 2024, HSL introduced a new risk system
which enables more robust reporting and analysis of operational risk events, driving greater insight and lessons learnt.
Our suppliers are often crucial to our business enabling the delivery of high quality service to our customers. We have an
established supplier code of conduct which sets out the standards we expect our suppliers to operate to. Due diligence is carried
out not only as part of an initial sourcing exercise but refreshed on an annual basis. We are investing in supply chain management
tools and processes which help us better manage risk, including being part of the Financial Services Qualification Scheme,
utilising ESG ratings and verification tooling.
Capital management
The Syndicate’s objectives in managing its capital are to:
s
satisfy the requirements of its policyholders and regulators; and
s
allocate capital efficiently to support strategic objectives.
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 and in accordance with Solvency II legislation. Within this supervisory
framework, Lloyd’s applies capital requirements at member level and centrally to ensure that Lloyd’s complies with Solvency II,
and beyond that to meet its own financial strength, licence and ratings objectives. Although, as described below, Lloyd’s capital
setting processes use a capital requirement set at syndicate level as a starting point, the requirement to meet Solvency II and
Lloyd’s capital requirements applies at overall and member level respectively, not at syndicate level. Accordingly, the capital
requirement is not disclosed in these annual accounts.
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 one-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(s) on which it participates 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 one-in-200-year loss ‘to ultimate’ for that member. Over and above this, Lloyd’s applies a capital uplift
to the member’s SCR requirement, and the resulting capital is known as the economic capital assessment (ECA). The purpose
of this uplift, which is a Lloyd’s not a Solvency II requirement, is to meet Lloyd’s financial strength, licence and ratings objectives.
The capital uplift applied for 2024 was 35% of the member’s SCR ‘to ultimate’.
Provision of capital by members
Each member may provide capital to meet its ECA either by assets held in trust by Lloyd’s specifically for that member (funds
at Lloyd’s), held within and managed within a syndicate (funds in syndicate) or as the member’s share of the members’ balances
on each syndicate on which it participates. The level of FAL/FIS that Lloyd’s requires a member to maintain is determined by
Lloyd’s based on PRA requirements and resource criteria. This capital requirement is based on 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. Resources available to meet members’ and Lloyd’s capital requirements are separately identified
in the statement of changes in members’ balances. Lloyd’s also retains the right to request a callable contribution of up to 5%
of capacity from the Syndicate.
Hiscox Syndicate 3624
Notes to the accounts
29
Hiscox Syndicate 3624
Report and Accounts 2024
5 Segmental analysis
An analysis of the underwriting result before investment return is set out below:
2024
Gross
written
premium
$000
Gross
premium
earned
$000
Gross claims
incurred
$000
Net operating
expenses
$000
Reinsurance
balance
$000
Underwriting
result
$000
Accident and health
–
–
86
(2)
(86)
(2)
Motor – third-party liability
(98)
(98)
(320)
(4)
349
(73)
Motor – other classes
–
–
1,188
(70)
(1,183)
(65)
Marine aviation and transport
12
12
(1,896)
(127)
1,517
(494)
Fire and other damage to property
2,378
2,633
2,387
(1,296)
(1,852)
1,872
Third-party liability
226,450
230,158
(121,985)
(93,027)
4,835
19,981
Credit and suretyship
2,113
1,955
4,952
(711)
(5,106)
1,090
Total direct insurance
230,855
234,660
(115,588)
(95,237)
(1,526)
22,309
Reinsurance
3,294
3,207
5,097
(600)
(6,076)
1,628
Total
234,149
237,867
(110,491)
(95,837)
(7,602)
23,937
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
written
premium
$000
Gross
premium
earned
$000
Gross claims
incurred
$000
Net operating
expenses
$000
Reinsurance
balance
$000
Underwriting
result
$000
Fire and other damage to property of which is:
Specialities
90
90
1,368
(69)
(851)
538
Energy
–
–
–
–
–
–
Third-party liability of which is:
Energy
–
–
–
–
–
–
2023
Gross
written
premium
$000
Gross
premium
earned
$000
Gross claims
incurred
$000
Net operating
expenses
$000
Reinsurance
balance
$000
Underwriting
result
$000
Accident and health
–
–
(220)
(1)
(180)
(401)
Motor – third-party liability
238
238
(274)
323
(4)
283
Motor – other classes
–
–
3,250
(76)
(3,976)
(802)
Marine aviation and transport
(210)
(210)
(253)
(151)
(1,227)
(1,841)
Fire and other damage to property
5,875
8,014
(6,909)
(3,647)
1,183
(1,359)
Third-party liability
235,695
241,750
(161,316)
(101,120)
925
(19,761)
Credit and suretyship
648
604
(11,728)
(713)
12,076
239
Total direct insurance
242,246
250,396
(177,450)
(105,385)
8,797
(23,642)
Reinsurance
4,209
4,393
(25,970)
(1,765)
21,898
(1,444)
Total
246,455
254,789
(203,420)
(107,150)
30,695
(25,086)
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
written
premium
$000
Gross
premium
earned
$000
Gross claims
incurred
$000
Net operating
expenses
$000
Reinsurance
balance
$000
Underwriting
result
$000
Fire and other damage to property of which is:
Specialities
291
1,002
(6,774)
(173)
2,334
(3,611)
Energy
–
–
–
–
–
–
Third-party liability of which is:
Energy
–
–
–
–
–
–
Hiscox Syndicate 3624
Notes to the accounts
30
Hiscox Syndicate 3624
Report and Accounts 2024
Hiscox Syndicate 3624
Notes to the accounts
5 Segmental analysis
continued
All premiums were concluded in the UK. The geographical analysis of direct insurance gross written premiums written by
destination, as a proxy for risk location, is as follows:
2024
$000
2023
$000
United Kingdom
20,753
24,225
European Union member states
891
–
United States
207,785
218,021
Rest of the world
1,426
–
Total
230,855
242,246
6 Net operating expenses
2024
$000
2023
$000
Acquisition costs
84,137
88,339
Change in deferred acquisition costs
1,208
3,441
Administrative expenses
9,266
15,444
Members' standard personal expenses
1,861
1,958
Reinsurers’ commissions and profit participations
(635)
(2,032)
Total
95,837
107,150
Brokerage and commissions on direct business written was $81.2 million (2023: $85.3 million). Administrative expenses include
fees payable to the auditors and its associates (exclusive of VAT).
2024
$000
2023
$000
Auditors’ remuneration
Fees payable to the Syndicate’s auditors for the audit of these annual accounts
300
279
Fees payable to the Syndicate’s auditors and its associates in respect of other
services pursuant to legislation
132
63
Total
432
342
31
Hiscox Syndicate 3624
Report and Accounts 2024
7 Staff costs
The Syndicate and its managing agent have no employees. Staff are employed by Hiscox Underwriting Group Services
Limited (HUGS). The average number of persons employed by HUGS, but working for the Syndicate during the year, analysed
by category, was as follows:
2024
2023
Administration and finance
28
24
Underwriting
11
11
Claims
5
5
Investments
–
–
Total
44
40
The Syndicate did not directly incur staff costs during the year (2023: nil). The following salary and related costs were recharged
during the year:
2024
$000
2023
$000
Wages and salaries
3,434
4,438
Social security costs
404
426
Other pension costs
394
477
Total
4,232
5,341
The Directors of Hiscox Syndicates Limited received the following aggregate remuneration charged to the Syndicate and included
within net operating expenses:
2024
$000
2023
$000
Directors’ emoluments
264
313
The active underwriter’s received the following remuneration charged as a Syndicate expense.
2024
$000
2023
$000
Underwriter’s emoluments
9
9
8 Investment return
2024
$000
2023
$000
Interest and similar income
From financial instruments designated at fair value through profit or loss:
Interest income on financial assets
28,893
22,688
Other income from investments
From financial instruments designated at fair value through profit or loss:
Gains on realisation of investments
2,101
1,159
Losses on the realisation of investments
(3,130)
(15,176)
Unrealised gains on investments
11,218
30,323
Unrealised losses on the investments
(3,524)
(712)
Investment management expenses
(558)
(576)
Total investment return
35,000
37,706
Transferred to the technical account from the non-technical account
(35,000)
(37,706)
Hiscox Syndicate 3624
Notes to the accounts
32
Hiscox Syndicate 3624
Report and Accounts 2024
Hiscox Syndicate 3624
Notes to the accounts
2024
$000
2023
$000
Average amount of Syndicate funds available for investment during the year:
Sterling
12,826
13,169
Euro
4,820
5,688
US Dollar
685,480
663,728
Canadian Dollar
8,557
13,234
Total Syndicate funds available for investment
711,683
695,819
2024
%
2023
%
Annual investment yield
Sterling
6.5
3.3
Euro
3.6
3.1
US Dollar
4.9
5.5
Canadian Dollar
6.1
4.9
Total annual investment yield percentage
5.0
5.5
Syndicate funds include investments and cash. Annual investment yield excludes investment management charges.
9 Financial investments
2024
carrying value
$000
2024
cost
$000
2023
carrying value
$000
2023
cost
$000
Debt securities and other fixed income securities
635,549
633,482
650,396
649,983
Shares and other variable yield securities
and units in unit trusts
57,751
57,751
37,775
37,775
Syndicate loans to central fund
4,489
4,653
5,690
6,077
Derivative assets
–
–
–
–
Loans and deposits with credit institutions
–
–
–
–
Total financial investments
697,789
695,886
693,861
693,835
No financial assets in the current or prior financial year were classified as ‘held for trading’ under FRS 102. The table below
presents an analysis of financial investments by their measurement classification.
2024
$000
2023
$000
Financial assets measured at fair value through profit or loss
697,789
693,861
Financial assets measured at amortised cost
–
–
Total financial investments
697,789
693,861
Other financial assets under FRS 102 are cash at bank and in hand, direct insurance and reinsurance debtors, other debtors and
accrued income, which are classified as debtors.
Fair value hierarchy
The Syndicate has classified its financial investments using the fair value hierarchy in accordance with the FRS 102.
The levels within the fair value hierarchy are defined as follows:
s
level 1 – the unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the
measurement date;
s
level 2 – inputs other than quoted prices included within level 1 that are observable (i.e. developed using market data) for
the asset or liability, either directly or indirectly; and
s
level 3 – inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.
8 Investment return
continued
The tables below present the average amounts of funds in the year per currency and the average investment return yields in the year.
*Represented to align with current period presentation – see note 1.
*Represented to align with current period presentation – see note 1.
*
*
*
33
Hiscox Syndicate 3624
Report and Accounts 2024
9 Financial investments
continued
2024
Level 1
$000
Level 2
$000
Level 3
$000
Assets held at
amortised cost
$000
Total
$000
Debt securities and other fixed income securities
51,966
583,583
–
–
635,549
Shares and other variable yield securities
and units in unit trusts
57,751
–
–
–
57,751
Syndicate loans to central fund
–
–
4,489
–
4,489
Derivative assets
–
–
–
–
–
Loans and deposits with credit institutions
–
–
–
–
–
Total financial investments
109,717
583,583
4,489
–
697,789
Derivative liabilities
–
–
–
–
–
Total
109,717
583,583
4,489
–
697,789
2023*
Level 1
$000
Level 2
$000
Level 3
$000
Assets held at
amortised cost
$000
Total
$000
Debt securities and other fixed income securities
171,000
479,396
–
–
650,396
Shares and other variable yield securities
and units in unit trusts
37,775
–
–
–
37,775
Syndicate loans to central fund
–
–
5,690
–
5,690
Derivative assets
–
–
–
–
–
Loans and deposits with credit institutions
–
–
–
–
–
Total financial investments
208,775
479,396
5,690
–
693,861
Derivative liabilities
–
(136)
–
–
(136)
Total
208,775
479,260
5,690
–
693,725
The following table sets forth a reconciliation of opening and closing balances for financial instruments classified under level 3 of
the fair value hierarchy:
2024
$000
2023
$000
Balance at 1 January
5,690
5,133
Fair value gains through profit and loss
220
243
Foreign exchange (loss)/gain
(85)
314
Purchases
–
–
Settlements
(1,336)
–
Balance at 31 December
4,489
5,690
Unrealised gains in the year on securities held at the end of the year
220
243
The Syndicate measures the fair value of its financial assets based on prices provided by custodians who obtain market data from
numerous independent pricing services. The pricing services used by the custodian obtain actual transaction prices for securities
that have quoted prices in active markets. For those securities which are not actively traded, the pricing service uses common
market valuation pricing models. Observable inputs used in common market valuation pricing models include, but are not limited
to, broker quotes, credit ratings, interest rates and yield curves, prepayment speeds, default rates and other such inputs which
are available from market sources.
2024
Gross contract
notional amount
$000
Fair value
of assets
$000
Fair value
of liabilities
$000
Net balance
sheet position
liability
$000
Foreign exchange forward contracts
–
–
–
–
2023
Gross contract
notional amount
$000
Fair value
of assets
$000
Fair value
of liabilities
$000
Net balance
sheet position
liability
$000
Foreign exchange forward contracts
9,592
–
(136)
(136)
Foreign exchange forwards
During 2023, the Syndicate entered into a series of conventional forward contracts in order to avoid exchange volatility on Sterling
and Euro denominated monetary assets. The contracts required the Syndicate to forward sell a fixed amount of Sterling and Euros
for US Dollars at pre-agreed exchange rates.
The investment return in 2024 and 2023 on these foreign exchange forwards is disclosed in note 8.
Hiscox Syndicate 3624
Notes to the accounts
*Represented to align with current period presentation – see note 1.
34
Hiscox Syndicate 3624
Report and Accounts 2024
Hiscox Syndicate 3624
Notes to the accounts
10 Technical provisions
2024
Gross
provisions
$000
Reinsurance
assets
$000
Net
$000
Claims outstanding:
Balance at 1 January
882,742
(410,459)
472,283
Over/under-provision in respect of prior claims and claim adjustment expenses
(11,536)
2,272
(9,264)
Expected cost of current year claims
122,027
(4,045)
117,982
Claims paid for claims settled in year
(230,908)
128,820
(102,088)
Effect of movements in exchange rates
(1,413)
739
(674)
Balance at 31 December
760,912
(282,673)
478,239
Claims reported and claims adjustment expenses
303,779
(122,826)
180,953
Claims incurred but not reported
457,133
(159,847)
297,286
Balance at 31 December
760,912
(282,673)
478,239
Unearned premiums:
Balance at 1 January
115,791
(4,492)
111,299
Premiums written during the year
234,149
(8,743)
225,406
Premiums earned during the year
(237,867)
9,375
(228,492)
Effect of movements in exchange rates
(432)
13
(419)
Balance at 31 December
111,641
(3,847)
107,794
Deferred acquisition costs:
Balance at 1 January
41,136
(278)
40,858
Acquisition costs written
82,106
(604)
81,502
Acquisition costs earned
(83,314)
635
(82,679)
Effect of movements in exchange rates
(95)
5
(90)
Balance at 31 December
39,833
(242)
39,591
2023
Gross
provisions
$000
Reinsurance
assets
$000
Net
$000
Claims outstanding:
Balance at 1 January
915,470
(473,751)
441,719
Over/under-provision in respect of prior claims and claim adjustment expenses
67,322
(75,897)
(8,575)
Expected cost of current year claims
136,098
(4,248)
131,850
Claims paid for claims settled in year
(238,282)
145,430
(92,852)
Effect of movements in exchange rates
2,134
(1,993)
141
Balance at 31 December
882,742
(410,459)
472,283
Claims reported and claims adjustment expenses
325,190
(186,992)
138,198
Claims incurred but not reported
557,552
(223,467)
334,085
Balance at 31 December
882,742
(410,459)
472,283
Unearned premiums:
Balance at 1 January
123,030
(5,198)
117,832
Premiums written during the year
246,455
(48,725)
197,730
Premiums earned during the year
(254,789)
49,450
(205,339)
Effect of movements in exchange rates
1,095
(19)
1,076
Balance at 31 December
115,791
(4,492)
111,299
Deferred acquisition costs:
Balance at 1 January
44,257
(340)
43,917
Acquisition costs written
86,455
(1,990)
84,465
Acquisition costs earned
(89,896)
2,032
(87,864)
Effect of movements in exchange rates
320
20
340
Balance at 31 December
41,136
(278)
40,858
35
Hiscox Syndicate 3624
Report and Accounts 2024
11 Debtors arising out of direct insurance operations
2024
$000
2023
$000
Due within one year
21,196
28,560
Due after one year
2,254
3,558
Total
23,450
32,118
12 Debtors arising out of reinsurance operations
2024
$000
2023
$000
Due within one year
13,177
10,113
Due after one year
428
172
Total
13,605
10,285
13 Other debtors
2024
$000
2023
$000
Inter syndicate balances
–
–
Amounts owed from fellow subsidiary of managing agent
3,164
255
Other
1,001
2,622
Total
4,165
2,877
Hiscox Syndicate 3624
Notes to the accounts
36
Hiscox Syndicate 3624
Report and Accounts 2024
Hiscox Syndicate 3624
Notes to the accounts
14 Claims development tables
The claims development tables below have been calculated by converting estimated claims and cumulative payments in Canadian
Dollars, Sterling and Euros to US Dollars at the closing rate of exchange at 31 December 2024. The table is produced on a year of
account basis. Some business is not off-risk after the first 12 months, therefore we would anticipate cumulative claims to increase
in the second year as this business is earned.
Pure underwriting year
Gross of reinsurance
2015
$000
2016
$000
2017
$000
2018
$000
2019
$000
2020
$000
2021
$000
2022
$000
2023
$000
2024
$000
Estimate of
cumulative claims:
At end of
underwriting
year one
157,996
205,208
186,764
165,471
129,890
150,407
85,259
70,532
67,052
60,428
One year later
353,091
489,865
344,806
307,494
343,833
264,151
177,009
140,760
128,618
Two years later
342,457
458,046
349,437
320,713
305,820
285,751
173,858
140,784
Three years later
377,590
508,086
381,909
346,604
339,807
288,838
163,139
Four years later
406,953
561,848
383,491
370,339
363,504
279,494
Five years later
430,253
551,351
397,335
388,442
380,392
Six years later
424,639
548,725
404,194
389,442
Seven years later
421,860
562,646
412,136
Eight years later
435,556
554,543
Nine years later
435,846
Cumulative
payments
(399,293) (498,426)
(341,563) (328,233)
(297,836)
(175,920)
(91,165)
(40,304)
(22,962)
(1,638)
Estimated balance
to pay
36,553
56,117
70,573
61,209
82,556
103,574
71,974
100,480
105,656
58,790
Provision in
respect of
prior years
13,430
Total gross provision
included in the balance sheet
760,912
Pure underwriting year
Net of reinsurance
2015
$000
2016
$000
2017
$000
2018
$000
2019
$000
2020
$000
2021
$000
2022
$000
2023
$000
2024
$000
Estimate of
cumulative claims:
At end of
underwriting
year one
122,196
161,146
159,607
132,089
117,515
138,615
79,311
67,805
65,385
59,338
One year later
263,156
374,419
298,360
252,552
281,706
238,526
166,079
135,134
124,713
Two years later
252,737
343,263
307,012
267,884
54,651
263,054
155,805
135,778
Three years later
273,858
376,764
338,249
146,121
50,810
264,251
146,343
Four years later
290,971
420,175
235,489
129,546
48,109
256,495
Five years later
309,507
342,180
229,167
130,282
53,794
Six years later
262,047
333,150
229,844
126,345
Seven years later
254,808
333,983
234,672
Eight years later
255,168
337,510
Nine years later
255,813
Cumulative
payments
(255,141)
(317,130) (208,901)
(117,342)
(53,737) (154,410)
(76,577)
(38,486)
(21,361)
(1,585)
Estimated balance
to pay
672
20,380
25,771
9,003
57
102,085
69,766
97,292
103,352
57,753
Provision in
respect of
prior years
(7,892)
Total net provision
included in the balance sheet
478,239
Prior-year development has been further explained under the ‘results’ section of the report of the Directors of the managing agent.
37
Hiscox Syndicate 3624
Report and Accounts 2024
15 Creditors arising out of direct insurance operations
2024
$000
2023
$000
Due within one year
19,915
22,776
Due after one year
–
–
Total
19,915
22,776
16 Creditors arising out of reinsurance operations
2024
$000
2023
$000
Due within one year
12,037
12,079
Due after one year
95,438
193,371
Total
107,475
205,450
17 Other creditors
2024
$000
2023
$000
Inter syndicate balances
–
–
Amounts owed from fellow subsidiary of managing agent
1,442
1,446
Derivative liabilities
–
136
Other
2,632
2,109
Total
4,074
3,691
18 Accruals and deferred income
2024
$000
2023
$000
Reinsurers share of deferred acquisition costs
242
278
Accrued expenses
84
55
Total
326
333
19 Cash and cash equivalents
2024
$000
2023
$000
Cash at bank and in hand
7,765
4,470
Short term debt instruments presented within other financial investments
57,751
37,775
Total cash and cash equivalents
65,516
42,245
Only deposits 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.
Included within cash and cash equivalents are the following amounts which are not available for use by the Syndicate because
they are held in regulated bank accounts in overseas jurisdictions.
2024
$000
2023
$000
Cash at bank and in hand
2,230
2,159
Short term debt instruments presented within other financial investments
19
39
Total cash and cash equivalents
2,249
2,198
Hiscox Syndicate 3624
Notes to the accounts
*
*
*Represented to align with current period presentation – see note 1.
*Represented to align with current period presentation – see note 1.
38
Hiscox Syndicate 3624
Report and Accounts 2024
Hiscox Syndicate 3624
Notes to the accounts
20 Related parties
Related companies
Hiscox Syndicates Limited (HSL) manages Syndicate 3624 as well as Syndicate 0033 and Syndicate 6104. Syndicate 0033
provides some reinsurance to Syndicate 3624 on an arm’s-length basis.
HSL is a wholly owned indirect subsidiary of Hiscox Ltd which is incorporated in Bermuda and listed on the London
Stock Exchange.
Hiscox Dedicated Corporate Member Limited, a wholly owned indirect subsidiary of Hiscox Ltd, is a corporate member within
the Hiscox Group which owns the entire capacity of all pure underwriting years of Syndicate 3624.
Hiscox Underwriting Group Services Limited, a wholly owned indirect subsidiary of Hiscox Ltd, is an employment service
company which employs all UK-based staff engaged in Syndicate 3624 activities including underwriters, claims handlers,
reinsurance staff and administrative staff. Hiscox Underwriting Group Services Limited charges a fee for the provision of
these staff to Syndicate 3624 on a no profit/no loss basis.
Hiscox Insurance Company (Bermuda) Limited, a wholly owned direct subsidiary of Hiscox Ltd, is a Class 4 insurer in Bermuda
authorised by the Bermuda Monetary Authority. It supplies some risk modelling services to HSL.
Hiscox Underwriting Ltd, a wholly owned indirect subsidiary of Hiscox Ltd, is an FCA authorised non-life insurance intermediary
and Lloyd’s Service Company. It places business with Syndicate 3624. It is not obliged to place business with any particular
carrier and these arrangements are subject to review by Hiscox Underwriting Ltd.
Hiscox Inc., a wholly owned indirect subsidiary of Hiscox Ltd, is a US authorised non-life insurance intermediary and Lloyd’s
Service Company. It places business with Syndicate 3624. It is not obliged to place business with any particular carrier and
these arrangements are subject to review by Hiscox Inc..
Hiscox Insurance Services Inc., a wholly owned indirect subsidiary of Hiscox Ltd, is a US authorised non-life insurance
intermediary and Lloyd’s Service Company. It places business with Syndicate 3624. It is not obliged to place business
with any particular carrier and these arrangements are subject to review by Hiscox Insurance Services Inc..
Hiscox Agencies Limited, a wholly owned indirect subsidiary of Hiscox Ltd, is authorised non-life insurance intermediary and
Lloyd’s Service Company. It places business with Syndicate 3624. It is not obliged to place business with any particular carrier
and these arrangements are subject to review by Hiscox Agencies Limited.
Hiscox Assure SAS is a regulated French insurance intermediary subject to the supervision of the French Prudential Supervisory
Authority ACPR (Autorité de contrôle prudentiel et de résolution) and Lloyd’s Coverholder. Hiscox Assure SAS is duly authorised
to conduct insurance intermediation activities in other Member States of the European Union and the European Economic Area.
It places business with Syndicate 3624. It is not obliged to place business with any particular carrier and these arrangements are
subject to review by Hiscox Assure SAS.
Hiscox Ltd indirectly owns a 32.27% holding in White Oak Underwriting Agency Limited, a FCA authorised non-life insurance
intermediary, which previously placed business with Syndicate 3624. White Oak Underwriting Agency Limited is not obliged
to place business with any particular carrier and these arrangements are subject to review from time to time by White Oak
Underwriting Agency Limited.
Underwriting divisions
Hiscox Ltd and its subsidiaries organises its core underwriting activities into a number of underwriting divisions. Some of
these divisions underwrite for multiple entities which are partly or wholly owned by Hiscox Ltd including Syndicate 3624, and
some also underwrite for entities not partly nor wholly owned by Hiscox Ltd. This integrated approach is aimed at maximising
business opportunities by using combined knowledge to develop new products and markets. There are certain predetermined
mechanisms for allocating certain types of insurance risks to these carriers which take into account the licences, capacity at
Lloyd’s, available capital, business plans and reinsurance programmes of each carrier. These arrangements are structured to
take full and proper account of the duties owed to the members of Syndicate 3624 and to manage appropriately any potential
conflicts of interest.
39
Hiscox Syndicate 3624
Report and Accounts 2024
Hiscox Syndicate 3624
Notes to the accounts
20 Related parties
Underwriting divisions
continued
The following balance sheet amounts were outstanding at year-end with related parties:
Balance sheet net assets and (liabilities) outstanding
2024
$000
2023
$000
Hiscox Agencies Limited
(2,604)
(4,966)
Hiscox Inc.
4,935
12,147
Hiscox Underwriting Ltd
3,368
4,265
Other
(549)
435
The following amounts reflected in the profit and loss were transacted with related parties:
Net expenses reflected in the profit and loss
2024
$000
2023
$000
Hiscox Inc.
(77,843)
(81,936)
Hiscox Underwriting Group Services Limited
(10,786)
(11,053)
Hiscox Underwriting Ltd
(2,994)
(3,183)
Other
(755)
(735)
Hiscox Syndicates Limited charges no managing agent fees or profit commission to Syndicate 3624 (2023: nil).
Hiscox Underwriting Group Services Limited charges administrative services to the Syndicate on a no profit/no loss basis.
21 Foreign exchange rates
The following currency exchange rates have been used for principal foreign currency transactions:
2024
start of period rate
2024
end of period rate
2024
average rate
2023
start of period rate
2023
end of period rate
2023
average rate
US Dollar
Sterling
Euro
Canadian Dollar
22 Syndicate structure
The managing agent of the Syndicate is Hiscox Syndicates Limited whose immediate parent undertaking is Hiscox Holdings
Limited, a company registered in England and Wales. The ultimate parent undertaking of the largest and smallest group of
companies for which Group accounts are drawn up is Hiscox Ltd, Bermuda. Copies of Hiscox Ltd Report and Accounts can
be obtained from Chesney House, 96 Pitts Bay Road, Pembroke HM 08, Bermuda.
Hiscox
22 Bishopsgate
London EC2N 4BQ
United Kingdom
T +44 (0)20 7448 6000
E enquiry@hiscox.com
www.hiscoxgroup.com
Hiscox Syndicates Limited is authorised by the
Prudential Regulation Authority and regulated by
the Financial Conduct Authority and Prudential
Regulation Authority.
22995 02/25