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Munich Re Syndicate 0457
Annual Report and Accounts for the year ended
Contents
31 December 2024
1
Directors and Administration
2
Report of the directors of the Managing Agent
3
Statement of Managing Agent’s responsibilities
18
Independent auditor’s report to the members of
Syndicate 0457
19
Statement of profit or loss
23
Balance sheet
–
Assets
25
Balance sheet
–
Liabilities
26
Statement of changes in members’ balances
27
Statement of cash flows
28
Notes to the financial statements
29
Directors and Administration
31 December 2024
2
Managing Agent
‘
MRSL
’
) is the Managing Agent for Munich Re Syndicate 0457
(the ‘Syndicate’)
and is authorised by the Prudential Regulation Authority (
‘
PRA
’
) and
regulated by the Financial Conduct Authority (
‘
FCA
’
) and the Society of
Lloyd’s
(‘Lloyd’s’)
.
Directors
T E Artmann
Chief Executive Officer
S H Herrmann
Non-Executive Director
M C Hewett
Independent Non-Executive Director
G K Hill
Chief Financial Officer
D J R Hoare
Group Chief Underwriting Officer
K E Mitra
Independent Non-Executive Director
T C Morgan
Independent Non-Executive Director
K A Morris
Independent Non-Executive Director
R I White
Independent Non-Executive Chair
Company Secretary
C M Zaremba
Registered Office
1 Fen Court, London, EC3M 5BN
Telephone: 020 7886 3900
E-mail: MRSL-central@munichre.com
Website: www.munichre.com
Registered Number
01328742
Syndicate
Chief Underwriting Officer
D J R Hoare
Bankers
Citibank N.A.
NatWest Group plc
Royal Bank of Canada
CACEIS Investor Services Bank S.A.
Investment Manager
Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft
Registered Auditor
Ernst & Young LLP, 25 Churchill Place, London E14 5EY
Report of the Directors of the Managing Agent
31 December 2024
3
The Directors of the Managing Agent (
‘
the Directors
’
) present their report 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 2008
Regulations’).
Results
The profit for calendar year 2024 is £197.5m (2023: profit of £204.9m). Profits will continue to
be distributed by reference to the results of individual underwriting years of account.
Principal Activity and Review of the Business
During 2024,
the Syndicate’s principal activity remained the transaction of general insurance
and reinsurance business, with a particular focus on the Marine, Engineering and Specialty,
Property, Portfolio Solutions, Green Solutions, Cyber and Liability sectors.
To ensure a one voice approach to market, MRSL was brought under the newly created brand
of Munich Re Specialty in May 2024. The creation of a unified brand represents the ongoing
efforts of the global specialty insurance division to strengthen its leading position compared to
its peers.
The Syndicate’s key financial indicators are as follows:
2024
2023
Gross Written Premium
£1,373.5m
£1,212.6m
Profit for the financial year
£197.5m
£204.9m
Combined Ratio
87.1%
84.6%
The combined ratio is the ratio of claims incurred (net of reinsurance) and operating expenses
(net of reinsurance) to earned premiums (net of reinsurance).
2024 was a successful year once again, both from a financial perspective and for the business
as a whole. Our headcount continued to grow particularly in respect of key functions to support
underwriting, and employees performed well with business as usual. The Syndicate continued
work on our future vision under a long term strategic project which is fully aligned with the
establishment of the GSI (Global Specialty Insurance) unit within Munich Re and
Munich Re’s
priorities.
The Full Year financial result for 2024 has produced a net underwriting profit of £142.7m
(2023: profit of £152.8m).
Top line Gross Written Premium (GWP) has grown by £160.9m, a 13.3% increase on prior
year. The main drivers for growth were Portfolio Solutions, Green Solutions, Property and
Credit.
From an investment performance perspective, it is pleasing to report a continued positive
contribution to the result, driven by higher investment income (interest rate environment) and
reduced volatility from market value adjustments.
Report of the Directors of the Managing Agent
(continued)
31 December 2024
4
Principal Activity and Review of the Business (continued)
The directors are pleased to note in 2024, evidence that underwriters were prepared to let
unprofitable business go. Despite the sustainable market the Directors believe a trading
environment is still profitable.
The 2025 Syndicate business forecast (SBF)
was approved by Lloyd’s with no subjectivities.
In that context the reinstatement of the Syndicate’s “Outperforming” status has been one of
the major achievements in the year.
The Board believe discipline and pro-active cycle management are key for our future success.
It was that attitude which enabled the Syndicate to weather the previous sustainable cycle and
to emerge from it in an even stronger position. The Board sees the great advantage of having
a team of highly experienced Executives, CUO and Senior Underwriters in charge, who have
been through these market cycles more than once.
There are clear signs that the London market will be mainly growing in what is now being
called enhanced underwriting (coverholders, consortia, facilities, portfolio underwriting). Key
drivers for success in this space will be high quality data management, data analytics, system
capabilities, in combination with strong traditional underwriting skills. After having successfully
established Portfolio Solutions in 2023, the Syndicate is in a good position to work on a future
orientated strategy to prepare itself for this development, which might fundamentally change
the way the Syndicate and the market operate.
The following table provides a breakdown of gross written premiums by regulatory class
categories:
2024
%
2023
%
Direct insurance
Marine, Aviation and Transport
20
32
Fire and Other Damage to Property
43
36
Other
25
17
Reinsurance
12
15
Total
100
100
The Syndicate continues to buy an extensive reinsurance programme that is designed to
protect the Syndicate’s largest anticipated exposure from a single risk or multiple loss events.
A year end success in 2024 was the placement of the reinsurance program for 2025 in a timely
fashion.
The structure of the Syndicate’s reinsurance programme varies from year to year depending
on the exposures that the Syndicate writes. The programme is subject to market forces with
respect to market capacity, reinsurance terms and conditions; however, as always, the
reinsurance is placed with the best quality security that is available.
Report of the Directors of the Managing Agent
(continued)
31 December 2024
5
Principal Activity and Review of the Business (continued)
The Syndicate continues
to utilise a mixture of Lloyd’s syndicates, UK authorised reinsurance
companies and international reinsurance companies to ensure comprehensive reinsurance
cover is in place. Some of the international companies are EU authorised insurers.
The following table provides an analysis of paid reinsurance premiums for 2024 and 2023:
2024
%
2023
%
Lloyd's Syndicates
20
18
UK Authorised Companies
20
17
EU Companies
38
40
Other Insurance Companies
22
25
100
100
Principal Risks and Uncertainties
The Board of MRSL (
‘
the Board
’
)
sets risk appetite annually as part of the Syndicate’s
business planning and Solvency Capital Requirement process. Adherence to risk appetite is
reviewed by the Board periodically.
Insurance Risk
Insurance risk, comprising underwriting risk and reserving risk, is the risk of loss arising from
the inherent uncertainties about the occurrence, amount and timing of insurance premiums
and liabilities. The Board manages insurance risk by agreeing its appetite for those risks
annually through the business plan which sets out targets for volumes, pricing, line sizes and
retention by class of business. The Board regularly monitors performance against the business
plan. The Managing Agent uses catastrophe modelling software to model maximum probable
losses from catastrophe exposed business. The Board monitors reserve adequacy. Detailed
independent reviews of underwriting areas are conducted.
Credit Risk
Credit risk relates to the risk of loss if another party fails to perform its financial obligations or
fails to perform them in a timely fashion. Key counterparties include reinsurers, brokers,
insureds, reinsureds, coverholders, International Distribution
Companies (‘IDC’) and
investment counterparties. The Board’s policy is that the Syndicate will only reinsure with
businesses that have been approved for that purpose. An additional policy of the Board is that
all brokers and coverholders must be approved in advance of being permitted to produce
business for the Syndicate. Certain Executive Directors of the Board assess and approve
reinsurers which do not meet minimum credit rating requirements before business is placed
with them and are also responsible for approval and monitoring of the financial strength of
brokers who remain on a risk transfer basis.
Report of the Directors of the Managing Agent
(continued)
31 December 2024
6
Principal Risks and Uncertainties (continued)
Credit Risk (continued)
Credit risk on Syndicate investments is managed by a policy of investing mainly in highly rated
securities. At the year-end 76.9% (2023: 81.5
%) of the Syndicate’s managed “Financial
Investments” were rated AA or higher. The lowest rated security permitted, BBB
-rated per
S&P, accounted for just 7.7% (2023: 8.0
%) of the Syndicate’s managed “Financial
Investments”. Lloyd’s requires managing agents to provide a loan based on the premium
income limit from the SBF
in order to fund Lloyd’s
Brussels
. The Lloyd’s loan accounts for
0.4% (2023: 0.6%) of our holdings and is classed as NR
(‘Not Rated’)
in
the “
Syndicate loans
to central fund
” line.
Group Risk
Group risk is the potential of risk events, of any nature, arising in or from membership of a
corporate group. The Syndicate is an integral part of the Munich Re Specialty Group (
‘
MRSG
’
)
which in turn, is considered a strategic part of Munich Re AG (
‘
Munich Re
’
), based in Munich,
Germany.
Within MRSG, MRSL operates as a standalone legal entity regulated by Lloyd’s, the PRA and
the FCA. MRSL operates and maintains its own Board and governance structure, with defined
terms of reference and clear lines of authority and accountability. Independent effectiveness
reviews of governance are performed on a periodic basis with results reviewed by the Board.
Munich Re, is the ultimate owner of the Managing Agent. Munich Re Capital Limited (
‘MRCL’
)
is the provider of underwriting capacity to the Syndicate. Munich Re provides reinsurance
capacity for a number of classes and whole account protections. Close dialogue exists with
the Integrated Risk Management (‘IRM’) division of Munich Re to discuss any neces
sary risk
matters. Munich ERGO Asset
management GmbH (‘
MEAG
’)
, an asset management company
owned by Munich Re, and the Group Investment Management (‘GIM’) function
of Munich Re
are responsible for the investment and portfolio management of the Syndicate’s investments.
There is a regular flow of information between the Syndicate and Munich Re.
Liquidity Risk
Liquidity risk is the risk that sufficient financial resources are not maintained to meet liabilities
as they fall due under normal or stressed operating conditions. The MRSL CFO and entity
liquidity officer monitors liquidity on a regular basis and has an agreed minimum limit of readily
realisable assets. Liquidity risk is further controlled by permitting investment only in assets that
are highly liquid and marketable. Asset Liability Matching ('ALM') is employed and monitored
to align investment maturities with the timing of expected liabilities.
Market Risk
Market risk is the risk that arises from fluctuations in values of or income from assets, in
interest rates or in exchange rates. The Syndicate settles 81.3% (2023: 76.5%) of its insurance
business in United States dollars, Euros and Canadian dollars, which gives rise to a potential
exposure to currency risk, while a substantial proportion of administrative and personnel
expenses are incurred in Sterling.
Report of the Directors of the Managing Agent
(continued)
31 December 2024
7
Principal Risks and Uncertainties (continued)
Market Risk (continued)
The Syndicate mitigates this by adopting a policy of controlled matching of assets and liabilities
in both currency and duration. The composition of the fixed interest investment portfolio
relative to the Board’s investment mandate
and performance returns are regularly reviewed
and reported to the Board.
Operational Risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes,
people and systems, or from external factors such as those arising from legal and regulatory
requirements and generally accepted standards of corporate behaviour. The Syndicate’s
objective is to manage operational risks to balance financial losses and damage to the
Syndicate’s reputation with processes that are cost effective and efficient. Risks
are managed
through policies and procedures, regular oversight and monitoring, and a structured
programme of independent reviews, adherence to policies and effectiveness of controls by
second and third line of defence functions. The day to day operations of the Syndicate are
provided by MRSG UK Services Limited (“the Service Company”).
Other Key Enterprise Risks
Geopolitical Risks
Geopolitical uncertainty has continued to dominate the risk landscape, the Board is cognisant
and mindful of events which could lead to conflict escalation or economic fragmentation and
consequentially, de-stabilisation of supply chains, financial markets, security dynamics and
political stability.
Against the backdrop of a volatile global geopolitical landscape, the Board continues to closely
monitor its exposures, particularly in respect of lines of business which may be further
impacted by conflicts or market known complexities around coverage. Aggregation of potential
or residual exposures are assessed periodically by the Exposure Management team using a
combination of Lloyd’s Realistic Disaster Scenarios
shaped with extensive underwriting
expertise and protected through a comprehensive reinsurance programme.
The Syndicate’s
underwriting performance and financial position is monitored by the Board and through
established reserving processes. Support continues to be provided by the Compliance
Advisory team with respect to sanctions, with emerging risks informed by Risk-led activities
such as cross-functional emerging risk workshops activity. The risk operational disruption from
potential cyber related activity continues to be monitored by the Munich Re Global Cyber
Defence Centre.
Inflation
The global inflationary position improved during 2024 as previous external shocks that led to
high inflation were abated and monetary easing took effect in advanced economies. Notably,
during Q2 2024, the Bank of England briefly met its target 2% inflation rate.
Report of the Directors of the Managing Agent
(continued)
31 December 2024
8
Principal Risks and Uncertainties (continued)
Inflation (continued)
However, there remain elevated concerns around the impact of inflation rates as inflation
dynamics are different across regions and influenced by various factors such as labour and
energy prices. Global economic volatility driven by geopolitical tensions or economic
fragmentation further fuels inflation uncertainty, as does uncertainty about the intensity and
timing of new trade disputes following the 2024 US presidential election.
The Bank of England expects inflation to rise temporarily to 3.7% in 2025 due to higher energy
prices but then fall back to the 2% target.
Whilst the economic outlook varies for China, the
EU and the US, overall there is an expectation of modest global economic growth, lower
annual average inflation rates, and further monetary easing by major central banks. As the UK
economy is intrinsically linked with the global economy, it remains vulnerable to deterioration
and weakening.
Inflation impacts insurers in a number of ways, including cost of claims, reserving, price
adequacy, investment returns and capital requirements.
Inflation must not only be managed
carefully but carefully factored into decision making.
Social inflation, driven by changing
behaviours, such as greater resort to litigation, must also be considered.
Consideration by MRSL of inflation is summarised below:
The Actuarial Function monitors the impact of inflation on the adequacy of pricing, capital
requirements and claims reserving using a combination of emerging data analysis and
benchmarks, with regular reporting to internal governance groups including the Executive
Committee and the Board. The impact of inflation on investment returns is also monitored.
Internal Model Validation led by the Risk team ensures inflation assumptions used for solvency
capital setting are appropriate.
An Inflation Review Group (
‘
IRG
’
) comprising actuarial, underwriting exposure management
and claims representatives reviews the appropriateness and consistency of inflation
assumptions across the SBF setting, reserving, pricing and capital modelling processes.
During 2024, the IRG utilised a quantitative inflation model to provide a robust process for
reviewing inflation parameter selections for the business.
•
Reserving:
The Reserving Sub Committee monitors the classes that are primarily exposed
to excess claims inflation are Cyber, Liability, Financial Lines and Property. An allowance
for excess claims inflation, including social inflation, has been recognised with
appropriateness and adequacy subject to ongoing monitoring. Economic inflation indices
have been returning to inflation targets, as a result economic inflation is now considered a
less significant risk for the 2024 underwriting year and considered to be implicit in the
reserving loss selections. For 2023 and prior underwriting years, explicit inflation loadings
have continued to run off in line with reserves. However, social inflation remains a key risk
that has been considered in the reserving loss ratio selections. In addition, an analysis to
investigate the impact of inflation on claims severity (average cost per claim) was carried
out using Syndicate claims data for open market business and Lloyd’s benchmark data.
Results and recommendations for additional analysis were reviewed by the Finance Sub
Committee (‘FSC’)
and the MRSL Executive Committee.
Report of the Directors of the Managing Agent
(continued)
31 December 2024
9
Principal Risks and Uncertainties (continued)
Inflation (continued)
•
Pricing: As part of the annual review of pricing models, all pricing models have been
updated to allow underwriters to make the necessary adjustments and loadings for
exposures to inflation as appropriate. This is dependent on the model and line of business.
Generally:
•
For exposure-based lines, e.g., based on sum insured, contract value, turnover, the pricing
models are already linked to claims cost / claims trend components. These models are
subject to regular indexing. For example, where exposure is based on the number of
employees and not on cost, the respective pricing model has a fixed inflation rate added
relative to the principal geography of exposure, which is updated on a regular basis.
•
For experience-based models, an explicit allowance has been made for the US/UK CPI
index with additional allowance by the underwriter as may be appropriate.
In addition, material individual risks with substantial inflation exposures are monitored and
reviewed by the Pricing team. All underwriters are reminded to consider and price for inflation
wherever possible:
•
Investments:
The Syndicate’s investment portfolio is primarily invested in government and
corporate bonds. As inflationary pressures abate, central banks respond by decreasing
interest rates which lead to the increasing value of low yield bonds. The fluctuations in
unrealised/realised investment returns and volatility in performance is being constantly
monitored by the FSC and GIM.
•
Capital: Internal model data, parameters and assumptions are reviewed and updated on
a regular basis to ensure model outputs for capital related decision making are reasonable.
Specifically, for capital adequacy purposes, an explicit modelling allowance for inflation is
made for the risk that future inflation levels differ from business plan and reserving
assumptions. Appropriateness of such assumptions is subject to regular, at least annual,
validation activities.
Regulatory Compliance Risk
MRSL is regulated by the PRA, the
FCA and Lloyd’s. MRSL
continues to monitor regulatory
developments to ensure on-going compliance with regular updates to the Executive
Committee and Board on topics such as the Senior Managers and Certification Regime,
Consumer Duty, Operational Resilience and Solvency II. The Board believes that future
performance should not be materially impacted by these changes.
Senior Managers & Certification Regime
In
the Chancellor’s Mansion House speech, Rachel Reeves, the
Chancellor of the Exchequer,
spoke about the UK’s approach to regulation and
its critical role in economic reform. She
identified that insurance and reinsurance is one of the five priority groups that will be focused
on in the Financial Services Growth and Competitiveness strategy in Spring 2025.
Report of the Directors of the Managing Agent
(continued)
31 December 2024
10
Principal Risks and Uncertainties (continued)
Regulatory Compliance Risk (continued)
Senior Managers & Certification Regime
(continued)
In the context of the chancellors speech, notably on the firms regulatory burdens,
there was
specific mention of the certification regime under the Senior Managers & Certification Regime
“SMCR” as being an area under review with the Treasury, the FCA and the PRA.
As part of
our regular compliance horizon scanning process, MRSL will continue to review applicable
regulatory publications to ensure that the Syndicate satisfies all requirements.
Consumer Duty
Consumer Duty, regulation, effective 31 July 2023, was introduced by the FCA to further
improve the delivery of outcomes for customers across the financial services industry. During
2023, MRSG created a clear plan to meet the new Consumer Duty requirements which was
approved by the Board. All employees must comply with Consumer Duty obligations and
Senior Managers are responsible for Consumer Duty compliance of their respective
department. As part of the annual attestation process, the Board is required to review
compliance on an ongoing basis and approve an assessment of compliance annually. Notable
key actions included:
•
Building on FCA PROD4 Sourcebook compliance by assessing whether the products
provides fair value and reviewing the pricing principles to ensure MRSG delivers good
outcomes for all customer groups.
•
Reviewing and testing customer communications by channel to improve customer
understanding, and to enable customers in making better-
informed decisions.
•
Enhancing the Product Governance Framework and processes to include additional
requirements of the Consumer Duty principles.
•
Working with our partners and brokers to agree clear roles and responsibilities for the
delivery of various Consumer Duty requirements, based on the nature of those
relationships and the products involved.
•
Evolving the Management Information
(‘
MI
’)
and oversight to ensure all parties are meeting
the requirements of the new regulation.
•
Continuing to focus on good customer outcomes and providing value to our customers.
•
Raising Consumer Duty awareness and delivering targeted training to relevant employees
to sharpen our collective focus on delivering good customer outcomes.
•
Nomination of a Board-level Consumer Duty Champion who, along with the Chair and
CEO, is responsible for ensuring Consumer Duty is being discussed regularly and
providing oversight and challenge.
PRA Solvency II Review
In November 2024, the PRA published Policy Statement (PS) 15/24 finalising the PRA’s rules
and policy materials that will replace Solvency II assimilated law which was revoked on 31
December 2024. The
PS15/24
effectively restates the Solvency II rules inherited from the EU
into the PRA Rulebook, adapting them for the UK insurance market. The key changes include:
•
Standard Formula adjustments: Updates rules on the calculation of the solvency capital
requirement (SCR), including risk-specific parameters and deferred tax adjustments.
Report of the Directors of the Managing Agent
(continued)
31 December 2024
11
Principal Risks and Uncertainties (continued)
Regulatory Compliance Risk (continued)
PRA Solvency II Review (continued)
•
Risk Margin updates: Restates methods for risk margin calculations using updated
formulas from UK legislation and provides for simplified methods for calculation.
•
Own Funds reforms: Clarifies the definition and eligibility of restricted own funds and
adjusts their treatment in reconciliation reserves.
The PS15/24 also reiterates the importance of governance provisions of Solvency II including
clarification of key functions, updated requirements for managing conflicts of interest, and
ensuring renumeration policies align with the risk profile of the firm.
The Syndicate will ensure that it continues to meet
Lloyd’s Solvency II requirements given it
is directly regulated by Lloyd’s
. Updates on Solvency II are provided by the Risk and Capital
teams to the Risk & Capital Committee (
‘R&CC’)
, Finance and the FSC.
Lloyd’s Insurance Company S.A. (Lloyd’s Europe)
Lloyd’s established Lloyd’s Insurance Company S.A.
(‘LIC’), a subsidiary in Brussels (Lloyd’s
Europe) to enable its European partners and policyholders to retain access to the underwriting
expertise of the Lloyd’s market via a distribution channel of brokers, coverholders, and
syndicates. Lloyd’s Europe is an ins
urance company authorised and regulated by the National
Bank of Belgium and capitalised under Solvency II rules. The subsidiary is assigned the
equivalent financial ratings as Lloyd’s from A.M Best (A
+), Fitch (AA-
) and Standard & Poor’s
(AA-).
Since 1 January 2019, all new non-life European Economic Area (
‘
EEA
’
) and Monaco direct
insurance policies are written by Lloyd’s Europe and all renewing EEA and Monaco non
-life
direct insurance policies were
transferred to Lloyd’s Europe on their renewal.
Since 1 January 2022, a new Lloyd’s EU operating model was implemented following approval
by Financial Services and Markets Authority (‘FSMA’), the Belgian regulators. MRSL has
adopted the new operating model solution which includes the secondment of Managing Agent
underwriters and deployment of employees
to the LIC UK Branch of Lloyd’s Europe. This
solution provides continued access to EEA business for the Lloyd’s market.
Information Security Risk including Cyber Risk
Cyber threats and, consequentially, cyber risk, continues to trend upwards as cyber-criminals
seek to exploit potential vulnerabilities of businesses. Munich Re remains resilient in extending
and maintaining a secure platform in recognising the continuing threat of phishing attacks,
ransomware and fraud on its business. Security controls are based on Munich Re defined
standards and are continuously improved to keep pace with the evolving cyber threat,
including information security risk assessments of information technology third party vendors,
regular security and social engineering awareness communications, additional security
training and phishing reporting tools.
Report of the Directors of the Managing Agent
(continued)
31 December 2024
12
Principal Risks and Uncertainties (continued)
Information Security Risk including Cyber Risk (continued)
In 2024, whist there has been an increased trend of phishing attempts on both the Munich Re
network and third party vendors, the Board is aware of no breach to date.
In the event of a
breach, there are established security incident response protocols and processes to ensure
the incident is contained, resolved and reported appropriately. With such incidents, response
and monitoring is provided by the MRSG Emergency Management Group, the Munich Re
Security Incident Response Team (SIRT) and information security risk specialists from the
Risk Management and Information Technology Shared Services Organisation (‘IT SSO’).
In addition, cyber threats are constantly monitored by the MR Global Cyber Defence Centre
and threat intelligence is shared with MRSG and MRSL via quarterly IT SSO service review
meetings. Munich Re undertakes a regular programme of patching, vulnerability and
penetration testing of IT systems and appropriate actions are taken to address any
vulnerabilities identified. Security controls are regularly assessed for control design and
performance effectiveness as coordinated by the Munich Re IT & Risk Security team, with the
results reported to Munich Re Integrated Risk Management. The results of these assessments
as well as locally implemented controls are subject to independent review and challenge by
the MRSL Information Security Risk Manager with results reported to MRSL Executive.
Artificial Intelligence (AI)
Munich Re is committed to the responsible use of AI. AI can improve client service, simplify
and automate processes and enhance underwriting. Nevertheless, the use of AI systems
raises potential risks, such as inaccuracy, discrimination, inadequate data security or a lack of
transparency. These risks require responsible management across the entire value chain.
MRSG recognises the increasingly important role of AI across its operations. Therefore, a new
AI Governance Directive, published by Munich Re, setting out the framework for the use of AI
across the Group has been adopted. The AI Governance Framework includes the AI
Governance Directive and Intellectual Property Protection Policy, with roles and
responsibilities for AI and the processes to ensure the implementation of the framework. A
Single Point of Contact for AI has been nominated within the MRSG Operations team, with
the MRSG Risk Management and the Munich Re UK Data Protection Office providing second
line review and challenge to ensure compliance with the AI Governance Framework.
Environmental, Social and Governance (‘ESG’) considerations
Munich Re pursues a sustainability strategy which endeavours to contribute to a sustainable
tomorrow. Economic prosperity, resilience and technological progress are seen as factors that
are intrinsic to the creation of a just and sustainable society. Munich Re’s commitment to acting
responsibly continues to serve as a cornerstone of our value-creation activities. Being part of
Munich Re, MRSL benefits from the
Group’s policies and initiatives to meet its corporate
responsibilities for ESG topics across its insurance business, investment activities and
business operations.
Report of the Directors of the Managing Agent
(continued)
31 December 2024
13
Principal Risks and Uncertainties (continued)
Environmental, Social and Governance (‘ESG’) considerations
(continued)
In addition, the Munich Re Code of Conduct lays out our commitment to sustainability and
human rights, in alignment with the principles of the UN Global Compact. Specifically, Munich
Re is committed to supporting environmental initiatives and has voluntarily signed the
Principles of Sustainable Insurance (‘PSI’) and Principles for Responsible Investment (‘PRI’)
as established by the United Nations Environment Programme (‘UNEP’).
In December 2023, the MRSL Board approved and adopted the MRSG ESG strategy, which
is aligned to that of Munich Re. An updated version of the ESG strategy has been approved
by the MRSL Board in December 2024. The ESG strategy comprises a framework of nine
areas across a range of environmental, social and governance topics that were deemed to be
material to internal and external stakeholders.
The framework is underpinned by the desire to seize profitable business opportunities and
nurture a stimulating and inclusive working environment. Responsibilities for ESG Strategy
development and execution are with the Head of ESG (appointed in 2023) and the newly
formed ESG Team, with cross function collaboration across MRSG and the Syndicate to
ensure integration of ESG activities across the business. A newly established ESG
governance forum with representation from across the business supports those efforts. The
ESG Strategy also continues the Syndicate’s transition towards sustainable insurance and
investment activities. The framework will evolve, subject to regular review, as commitments
are met, and new risks and opportunities are identified.
Climate Change Related Risk
The Managing Agent and the Syndicate stay abreast of climate change developments in their
regulatory environment to ensure requirements are embedded into the appropriate business
strategies and frameworks. These regulatory updates include the Lloyd’s Insuring the
Transition Roadmap 2.0 (October 2024) and PRA updates to its Supervisory Statement (SS).
03/2019 on Managing Financial Risks in relation to Climate Change (Bank of England PRA
Insurance Supervision- 2025 Priorities, Jan 2025).
Following the November 2023 roadmap consultation for Insuring the Transition and its
Fundamental Principles for Underwriting Profitability regarding sustainability, environmental
and social risks, Lloyd’s maintains its expectations of managing agents for implementing a
guiding framework to support the sustainable transition to net zero. With respect to climate
change, the Syndicate will be expected to provide its own assessment of the impact of that
change from a strategic financial, reputational, business development and governance
perspective.
A cross functional team including Risk Management, ESG and Exposure Management
continue to progress the embedding of activities to address the PRA’s expectations on
Managing Financial Risks in relation to Climate Change. This includes embedding the stress
testing of physical risks and of the Syndicate’s investment portfolio, completing litigation risk
and transition risk-assessments.
Report of the Directors of the Managing Agent
(continued)
31 December 2024
14
Principal Risks and Uncertainties (continued)
Climate Change Related Risk (continued)
MRSL has a risk management programme to monitor and manage some elements of climate
change related risks including aggregate exposure management. The Group Chief
Underwriting Officer (‘CUO’) as the senior management function holder is responsible for this
programme with support from the Risk function and ESG team. The Risk & Capital Committee
and the Board are apprised of developments.
Culture including Diversity, Equity & Inclusion (DEI)
Culture, including DEI, continues to feature high on the agenda of boards and regulators.
MRSL, as part of MRSG and the wider network of Munich Re entities in the UK and Ireland
region (UK&I), is active in its response to the challenges of
“c
ulture
”
related topics. Culture is
sponsored by the Board; and ESG is a standing agenda item on Board and Committee
meetings.
Launched in January 2023, our first DEI strategy and governance structure for the UK&I works
to embed DEI principles in the employee experience and to set DEI as a priority for all people
leaders.
MRSG has a DEI steering committee, comprising of the CEOs of our UK&I region businesses,
a DEI team, and a DEI Council and Champions Network, comprised of employees who actively
generate DEI awareness and engagement. MRSL takes into consideration the nuances in
cultures and business operations within UK&I.
Our multi-faceted strategy establishes three pillars to:
•
Attract workforce diversity through inclusive recruitment by creating a debiased and
building a diverse, sustainable, and engaged pipeline of candidates to recruit.
•
Increasing workplace equity through inclusive sponsorship by widening access to
sponsorship ensuring all colleagues, particularly those from marginalized backgrounds,
have access to career sponsors.
•
MRSL positions culture and continuous learning as a core competency with phased and
sustainable learning opportunities.
These three pillars are underpinned by four foundational elements:
•
Data: Our strategy utilises workforce demographic data, obtained through self-
identification, to determine that many diversity dimensions are represented in our
workforce. MRSG continue to focus our efforts on building our data set that will allow us
to identify solutions that consider the unique experiences of each group.
•
Multi-dimensionality and intersectionality: Allows us to see beyond one dimension of
diversity and all possible forms of marginalisation and discrimination.
Report of the Directors of the Managing Agent
(continued)
31 December 2024
15
Principal Risks and Uncertainties (continued)
Culture including Diversity, Equity & Inclusion (DEI) (continued)
•
Active employee engagement:
Our strategy is steered by people leaders to promote
change from the top, and underpinned by engagement.
•
Consistent communications: To inform, educate and support all employees in contributing
to our DEI efforts.
MRSG have continued to deliver against our DEI strategy plans:
•
Delivered mandatory workshops for all new hires, DEI 101, designed to help colleagues
understand the basics of DEI, establish a shared language, and create a foundation for
ongoing conversations around DEI.
•
Introduced our bespoke Inclusive Mindset Framework and delivered learning workshops
to help employees understand and demonstrate Inclusive Mindset as a competency.
•
Undertaken an end-to-end assessment of our recruitment processes, developed and rolled
out a best practice guide to make them inclusive and equitable.
•
Our employee-led DEI Council continues to celebrate different aspects of identity through
speaker sessions, celebration events and awareness-building initiatives hosted for
International Women’s Day, Pride Month, Social Mobility Awareness Day, Black Histor
y
Month and International Day for Persons with Disabilities and other celebrations
throughout the year.
The Board's view is that an informed case exists not only for the commercial benefits of
strategic investment in DEI in the UK&I but also in support of our mission to align our values
and commitment to positive change with commercial success.
The Board believes that
ensuring that all employees are treated fairly, with dignity, and with equal opportunity to
develop, progress, and be rewarded is key to achieving business success.
Directors
The Directors of the Managing Agent who held office during the year ended 31 December
2024 or as at the date of this report were as follows:
T E Artmann
T Coskun (resigned 31 December 2024)
S H Herrmann (Non-Executive)
M C Hewett (Independent Non-Executive)
G K Hill
D J R Hoare
K E Mitra (Independent Non-Executive) (appointed 6 January 2025)
T C Morgan (Independent Non-Executive) (appointed 28 December 2024)
K A Morris (Independent Non-Executive)
R I White (Independent Non-Executive Chair)
Report of the Directors of the Managing Agent
(continued)
31 December 2024
16
Company Secretary
The Company Secretary of the Managing Agent who held office during the year ended 31
December 2024 is as follows:
C M Zaremba
Investments
Investment Policy and Managers
The Managing Agent has mandated GIM to manage all of the Syndicate funds not held in
overseas deposits. GIM is a division of the Munich Re in charge of management of all Group
investments.
GIM mandates MEAG, the in house asset manager of Munich Re, to manage a significant
majority of Syndicate funds according to investment strategy generated from the examination
of the underlying profile of the underwriting liabilities and applying an Asset-Liability Matching
model. In October 2024 GIM additionally mandated an external asset manager Aberdeen Ltd.
to manage the GBP Credit portfolio with a market value of £55m.
During 2024, GIM continued the policy of avoiding excessive trading in the portfolios to better
manage losses realisation. Coupons, maturities and external inflows were reinvested in
accordance with the Asset-Liability Matching policy. Solely the EUR portfolio was actively
managed against a benchmark. In December 2024 the Board authorised GIM to reinstate
active management against a benchmark.
Overall the duration of the managed portfolio at the year-end was 1.71 (1.66 in 2023).
For each of the managed funds the Board has set certain restrictions in terms of sector limits
and individual issuer limit. In addition each portfolio is subject to a minimum average credit
rating.
Investment Performance
The 2024 calendar year investment performance was as follows:
Currency
Fund
Return
%
Benchmark
Return
%
US dollars
4.31
-
Canadian dollars
4.87
-
Sterling (Government)
2.78
-
Sterling (Credit buy-and-maintain)
3.40
-
Euros
3.15
2.84
The combined 2024 calendar year investment performance of the managed portfolio is 4.05%.
(2023: 4.74%)
Report of the Directors of the Managing Agent
(continued)
31 December 2024
17
Future Developments
The decision to exit the Space line of business reflects our strategic focus on optimizing our
portfolio and capital allocation. While this line will no longer be underwritten by the syndicate,
it remains a part of Munich Re offering through other entities, ensuring continuity for our clients
and partners.
Given sustainable market conditions, the Syndicate's continued underwriting discipline and
expertise will support its ability to maintain strong performance.
Syndicate Allocated Capacity and Membership of the Syndicate
The capacity of the Syndicate is based on Gross Net premiums and increased for the 2025
year of account to £1,500m (2024 year of account: £1,400m). All of the capacity of the
Syndicate is provided by MRCL, an indirect subsidiary of Munich Re.
Going Concern
After making enquiries, the Board has a reasonable expectation that continued capital support
will be in place such that the Syndicate is able to write new business in future underwriting
years of account. The Board continues to adopt the going concern basis in preparing the
annual accounts.
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 auditor is 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 auditor is aware of that information.
Auditors
In accordance with section 14(2) of Schedule 1 of the Lloyd’s Regulations 2008, the auditors,
Ernst & Young LLP, will be deemed to be reappointed and therefore continue in office.
Approved by a resolution of the Board of Directors of Munich Re Syndicate Limited and signed
on its behalf.
R I White
D J R Hoare
Independent Non-Executive Chair
Group Chief Underwriting Officer
26
th
February 2025
26
th
February 2025
R I White (Feb 26, 2025 20:44 GMT)
R I White
Statement of Managing Agent’s
responsibilities
31 December 2024
18
The Directors of the Managing Agent are responsible for:
•
Preparing the Syndicate annual accounts in accordance with applicable law and
regulations.
•
Preparation and review of the iXBRL tagging that has been applied to the Syndicate annual
Accounts in accordance with the instructions issued by Lloyd’s, including designing,
implementing and maintaining systems, processes and internal controls to result in tagging
that is free from material non-
compliance with the instructions issued by Lloyd’
s, whether
due to fraud or error.
The 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 United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law). The Syndicate annual accounts are
required by law to give a true and fair view of the state of affairs of the Syndicate as at that
date and of its profit or loss for that year.
In preparing the Syndicate annual accounts, the Managing Agent is required to:
•
Select suitable accounting policies and then apply them consistently;
•
Make judgements and estimates that are reasonable and prudent;
•
State whether applicable UK Accounting Standards have been followed, subject to any
material departures disclosed and explained in the notes to the Syndicate accounts; and
•
Prepare the Syndicate accounts on the basis that the Syndicate will continue to write future
business unless it is inappropriate to presume that the Syndicate will do so.
The Managing Agent is responsible for keeping adequate accounting records which disclose
with reasonable accuracy at any time the financial position of the Syndicate and enable it to
comply with the Insurance Accounts Directive (Lloyd’s Syndicate and Aggre
gate Accounts)
Regulations 2008. It is also responsible for safeguarding the assets of the Syndicate and
hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities. The Managing Agent is responsible for the maintenance and integrity of the
corporate and financial information included on the business’ website. Legislation in the United
Kingdom governing the preparation and dissemination of annual accounts may differ from
legislation in other jurisdictions.
On behalf of the Board
R I White
Independent Non-Executive Chair
26
th
February 2025
R I White (Feb 26, 2025 20:44 GMT)
R I White
Independent auditor’s report to the members of
Syndicate 0457
31 December 2024
19
Opinion
We have audited the syndicate annual accounts of syndicate 0
457 (‘the syndicate’) for the
year ended 31 December 2024 which comprise the Statement of Profit or Loss, the Balance
Sheet, the Statement of Changes in Member’s Balances, the Statement of Cash Flows and
the related notes 1 to 29, including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable law including The
Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008,
United Kingdom Accounting
Standards including FRS 102 “The Financial Reporting Standard
applicable in the UK and Republic of Ireland” and FRS 103 “Insurance Contracts” (United
Kingdom Generally Accepted Accounting Practice), and Section 1 of the Lloyd’s Syndicate
Accounts Instructions V2.0 as modified by the Frequently Asked Questions Version 1.1 issued
by Lloyd’s (the Syndicate Accounts Instructions).
In our opinion, the syndicate annual accounts:
•
give a true and fair view of the syndicate’s affairs as at 31 December 2024 and of its profit
for the year then ended;
•
have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
have been prepared in accordance with the requirements of The Insurance Accounts
Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the
Syndicate Accounts Instructions.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)),
The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations
2008, the Syndicate Accounts Instructions, and other applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities
for the audit of the
syndicate annual accounts section of our report. We are independent of the syndicate in
accordance with the ethical requirements that are relevant to our audit of the syndicate annual
accounts in the UK, including the FRC’s Ethical Standard as applied to other entities of public
interest, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions Relating to Going Concern
In auditing the syndicate annual accounts, we have concluded that the managing agent’s use
of the going concern basis of accounting in the preparation of the syndicate annual accounts
is appropriate.
Based on the work we have performed, we have not identified any material uncertainties
relating to events or conditions that, individually or collectively, may cast significant doubt on
the syndicate’s ability to continue as a going concern for a period of 12 months from when the
syndicate annual accounts are authorised for issue.
Our responsibilities and the responsibilities of the managing agent with respect to going
concern are described in the relevant sections of this report. However, because not all future
events or conditions can be predicted, this statement is not a guarante
e as to the syndicate’s
ability to continue as a going concern.
Independent auditor’s report to the members of
Syndicate 0457 (continued)
31 December 2024
20
Other Information
The other information comprises the information included in the Annual Accounts other than
the syndicate annual accounts and our auditor’s report thereon. The directors of the managing
agent are responsible for the other information contained within the Annual Accounts.
Our opinion on the syndicate annual accounts does not cover the other information and,
except to the extent otherwise explicitly stated in this report, we do not express any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the syndicate annual accounts or our knowledge
obtained in the course of the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the syndicate annual accounts
themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the managing agent’s report for the financial year in which the
syndicate annual accounts are prepared is consistent with the syndicate annual accounts;
and
•
the managing agent’s report has been prepared in accordance with applicable legal
requirements.
Matters
on which we are required to report by exception
In the light of the knowledge and understanding of the syndicate and its environment obtained
in the course of the audit, we have not identified material misstatements in the managing
agent’s report.
We have nothing to report in respect of the following matters where The Insurance Accounts
Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 requires us to report
to
you, if in our opinion:
•
the managing agent in respect of the syndicate has not kept adequate accounting records;
or
•
the syndicate annual accounts are not in agreement with the accounting records; or
•
certain disclosures of the managing agents’ emoluments specified by law are not made;
or
•
we have not received all the information and explanations we require for our audit.
Responsibilities of the Managing Agent
As explained more fully in the Statement of Managing Agent’s Responsibilities set out on page
18, the managing agent is responsible for the preparation of the syndicate annual accounts
and for being satisfied that they give a true and fair view, and for such internal control as the
managing agent determines is necessary to enable the preparation of the syndicate annual
accounts that are free from material misstatement, whether due to fraud or error.
Independent auditor’s report to the members of
Syndicate 0457 (continued)
31 December 2024
21
In preparing the syndicate annual accounts, the managing agent is responsible for assessing
the syndicate’s ability to continue in operation, disclosing, as applicable, matters related to its
ability to continue in operation and using the going concern basis of accounting unless the
managing agent either intends to cease to operate the syndicate, or has no realistic alternative
but to do so.
Auditor’s
Responsibilities for the Audit of the Syndicate Annual Accounts
Our objectives are to obtain reasonable assurance about whether the syndicate annual
accounts as a whole are free from material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these syndicate
annual accounts.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We
design procedures in line with our responsibilities, outlined above, to detect irregularities,
including fraud. The risk of not detecting a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error, as fraud may involve deliberate concealment
by, for example, forgery or intentional misrepresentations, or through collusion.
The extent to which our procedures are capable of detecting irregularities, including fraud, is
detailed below. However, the primary responsibility for the prevention and detection of fraud
rests with both those charged with governance of the managing agent and management.
Our approach was as follows:
•
We obtained a general understanding of the legal and regulatory frameworks that are
applicable to the syndicate and determined that the most significant are direct laws and
regulations related to elements of Lloyd’s Byelaws and Regulations, and the financial
reporting framework (UK GAAP), and requirements referred to by Lloyd’s in the Syndicate
Accounts instructions. Our considerations of other laws and regulations that may have a
material effect on the syndicate annual accounts included permissions and supervisory
requirements of Lloyd’s of London, the Prudential Regulation Authority (‘PRA’) and the
Financial Conduct Authority (‘FCA’).
•
We obtained a general understanding of how the syndicate is complying with those
frameworks by making enquiries of management, internal audit, and those responsible
for legal and compliance matters of the syndicate. In assessing the effectiveness of the
control environment, we also reviewed significant correspondence between the syndicate,
Lloyd’s of London and other UK regulatory bodies; reviewed minutes of the Board and
Risk Committee of the managing agent; and gained an understanding of the managing
agent’s approach to governance.
•
For direct laws and regulations, we considered the extent of compliance with those laws
and regulations as part of our procedures on the related syndicate annual accounts’ items.
•
For both direct and other laws and regulations, our procedures involved: making enquiries
of the directors of the managing agent and senior management for their awareness of any
non-compliance of laws or regulations, enquiring about the policies that have been
established to prevent non-compliance with laws and regulations by officers and
Independent auditor’s report to the members of
Syndicate 0457 (continued)
31 December 2024
22
employees, enquiring about the managing agent’s methods of enforcing and monitoring
compliance with such policies, and inspecting significant correspondence with Lloyd’s, the
FCA and the PRA.
•
The syndicate operates in the insurance industry which is a highly regulated environment.
As such the Senior Statutory Auditor considered the experience and expertise of the
engagement team to ensure that the team had the appropriate competence and
capabilities, which included the use of specialists where appropriate.
•
We assessed the susceptibility of the syndicate’s annual accounts to material
misstatement, including how fraud might occur by considering the controls that the
managing agent has established to address risks identified by the managing agent, or
that otherwise seek to prevent, deter or detect fraud. We also considered areas of
significant judgement, complex transactions, performance targets, economic or external
pressures and the impact these have on the control environment. Where this risk was
considered to be higher, we performed audit procedures to address each identified fraud
risk.
Our procedures included:
•
Reviewing accounting estimates for evidence of management bias. Supported by our
Actuaries we assessed if there were any indicators of management bias in the valuation
of gross incurred but not reported reserves and the recognition of estimated premium
income.
•
Testing the appropriateness of journal entries recorded in the general ledger on a sample
basis.
A further description of our responsibilities for the audit of the financial statements is located
on the Financial Reporting Council’s website at
https://www
.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Other Matter
Our opinion on the syndicate annual accounts does not cover the iXBRL tagging included
within these syndicate annual accounts, and we do not express any form of assurance
conclusion thereon.
Use of our Report
This report is made solely to the syndicate’s members, as a body, in accordance with The
Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008.
Our audit work has been undertaken so that we might state to the syndicate’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the syndicate and the syndicate’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Angus Millar (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
28 February 2025
Statement of Profit or Loss
31 December 2024
23
Technical Account
–
General Business
For the year ended 31 December 2024
Note
2024
2023
£000
£000
Gross premiums written
4
Outwards reinsurance premiums
(175,530 )
(138,268 )
Premiums written, net of reinsurance
Changes in unearned premium
17
Change in the gross provision for unearned premiums
(119,152 )
(91,367 )
Change in the provision for
unearned premiums reinsurers’ share
Net change in provisions for unearned premiums
(109,876 )
(88,828 )
Earned premiums, net of reinsurance
Allocated investment return transferred from the non-technical account
9
Other technical income, net of reinsurance
Claims paid
17
Gross amount
(440,601 )
(411,402 )
Reinsurers’ share
Net claims paid
(369,946 )
(324,099 )
Change in the provision for claims
17
Gross amount
(243,689 )
(87,386 )
Reinsurers’ share
(81,198 )
Net change in provisions for claims
(188,003 )
(168,584 )
Claims incurred, net of reinsurance
(557,949 )
(492,683 )
Net operating expenses
6
(390,279 )
(341,217 )
Balance on the technical account
–
general business
All operations relate to continuing activities.
The notes on pages 29 to 69 form an integral part of these annual accounts.
Statement of Profit or Loss
31 December 2024
24
Non-Technical Account
–
General Business
For the year ended 31 December 2024
Note
2024
2023
£000
£000
Balance on the technical account
–
general business
Investment income
9
Realised gains on investments
9
Unrealised gains on investments
9
Investment expenses and charges
9
(1,056 )
(1,036 )
Total investment return
Allocated investment return transferred to the general business technical
account
(49,522 )
(47,968 )
Loss on foreign exchange
(4,105 )
(5,690 )
Other income
9
Profit for the financial year
All operations relate to continuing activities.
There were no recognised gains and losses in the year other than those reported in the
Statement of Profit or Loss and hence no Statement of Other Comprehensive Income has
been presented.
The notes on pages 29 to 69 form an integral part of these annual accounts.
Balance Sheet - Assets
31 December 2024
25
As at 31 December 2024
Note
2024
2023
£000
£000
Financial investments
11
Deposits with ceding undertakings
Investments
Provision for unearned premiums
Claims outstanding
Reinsurers’ share of technical provisions
17
Debtors arising out of direct insurance operations
12
Debtors arising out of reinsurance operations
13
Other debtors
14
Debtors
Cash at bank and in hand
Other assets
Deferred acquisition costs
15
Other prepayments and accrued income
Prepayments and accrued income
Total assets
The notes on pages 29 to 69 form an integral part of these annual accounts.
Balance Sheet - Liabilities
31 December 2024
26
As at 31 December 2024
The Syndicate annual accounts on pages 23 to 69 were approved by the Board of Munich Re
Syndicate Limited on 26
rd
February 2025 and were signed on its behalf by
R I White
Independent Non-Executive Chair
26
th
February 2025
Note
2024
2023
£000
£000
Members’ balances
Total capital and reserves
Provision for unearned premiums
Claims outstanding
Other technical provisions
Technical provisions
17
Creditors arising out of direct insurance operations
19
Creditors arising out of reinsurance operations
20
Other creditors including taxation and social security
21
Creditors
Accruals and deferred income
15
Total liabilities
Total liabilities, capital and reserves
R I White (Feb 26, 2025 20:44 GMT)
R I White
Statement of Changes in
Members’ Balances
For the year ended 31 December 2024
31 December 2024
27
2024
2023
£000
£000
Members’ balances brought forward at 1 January
Total comprehensive income for the year
Payments of profit to members’ personal reserve funds
(133,597 )
(68,217 )
Net movement on funds in syndicate
(44,700 )
Other
(9,580 )
Members’ balances carried forward at 31
December
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.
The notes on pages 29 to 69 form an integral part of these annual accounts.
Statement of Cash Flows
For the year ended 31 December 2024
31 December 2024
28
Note
2024
2023
£000
£000
Cash flows from operating activities
Profit for the financial year
Adjustments:
Increase in gross technical provisions
(Increase)/decrease
in reinsurers’ share of gross technical provisions
(63,670 )
Increase in debtors
(192,818 )
(138,168 )
Increase in creditors
Investment return
(58,951 )
(57,826 )
Foreign exchange
Net cash flows from operating activities
Cash flows from investing activities
Purchase of debt instruments
(1,387,663 )
(745,946 )
Sale of debt instruments
Investment income received
Other
Net cash flows from investing activities
(295,047 )
(185,353 )
Cash flows from financing activities
Distribution of profit
(133,597 )
(68,217 )
Funds In Syndicate released to members
(44,700 )
Net cash flows from financing activities
(70,597 )
(112,917 )
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Foreign exchange on cash and cash equivalents
(4,785 )
Cash and cash equivalents at the end of the year
22
The notes on pages 29 to 69 form an integral part of these annual accounts.
Notes to the Financial Statements (continued)
31 December 2024
29
1. Basis of Preparation
The Syndicate comprises a single corporate member of Lloyd’s,
MRCL, that underwrites
insurance business in the London Market. The address of the Syndicate’s managing agent
is 1 Fen Court,
London, EC3M 5BN.
The financial statements have been prepared in accordance with the Insurance Accounts
Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008
, applicable
Accounting Standards in the United Kingdom and the Republic of Ireland, including
Financial Reporting Standard 102 (FRS 102), Financial reporting standard 103 (FRS 103)
in relation to insurance contracts, and the Lloyd’s Syndicate Accounts Instructions Version
2.0 as modified by the Frequently Asked Questions Version 1.1 issued by Lloyd’s.
The financial statements have been prepared on the historical cost basis, except for
financial assets categorised as fair value through profit or loss that are measured at fair
value.
The financial statements are pr
esented in Pound Sterling (‘GBP’
), which is the S
yndicate’s
functional currency. All amounts have been rounded to the nearest thousand, unless
otherwise indicated.
Restatement 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 restated to ensure consistency with current year presentation and
compliance with the Lloyd's Syndicate Accounts Instructions. The changes comprise:
a) Reclassification changes
Certain financial statement line items have been reclassified whilst the underlying
amounts remain unchanged.
b) 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.
The reclassification and aggregation changes have been applied retrospectively and had
no impact on previously reported profit, total comprehensive income, total assets, total
liabilities, or total capital and reserves.
Going Concern
The Syndicate has financial resources to meet its financial needs and manage its portfolio
of insurance risk. The Directors have continued to review the business plans, liquidity and
operational resilience of the Syndicate and are satisfied that the Syndicate is well
positioned to manage its business risks in the current economic environment. The
Syndicate 2025 year of account has opened and the Directors have concluded that the
Syndicate has sufficient resources to, and a reasonable expectation that it will, open a
2026 year of account.
Notes to the Financial Statements (continued)
31 December 2024
30
1. Basis of Preparation (continued)
Going Concern (continued)
The Syndicate has sufficient capital for each year of account and there is additional capital
available in the corporate member. There is no intention to cease underwriting or cease
the operations of the Syndicate.
Accordingly, the Directors of the Managing Agent continue to adopt the going concern
basis in preparing the annual report and financial statements.
2. Use of Judgements and Estimates
In preparing these financial statements, the Directors of the Managing Agent have made
judgements, estimates and
assumptions that affect the application of the Syndicate’s
accounting policies and the reported amounts of assets, liabilities, income and expenses.
The following critical judgements have been made in applying the Syndicate’s accounting
policies:
Claims Reserving
The measurement of the provision for claims outstanding involves judgements and
assumptions about the future that have a very significant effect on the amounts
recognised in the financial statements.
The provision for claims outstanding comprises the estimated cost of settling all claims
incurred but unpaid at the balance sheet date, whether reported or not. This is a
judgemental and complex area due to the subjectivity inherent in estimating the impact of
claims events that have occurred but for which the eventual outcome remains uncertain.
In particular, judgement is applied when estimating the value of amounts that should be
provided for claims that have been incurred at the reporting date but have not yet been
reported (‘IBNR’) to the
Syndicate (see note 17).
The amount included in respect of IBNR is based on statistical techniques of estimation
applied by the Syndicate Managing Agent’s in
-house actuaries. The techniques used
generally involve projecting the development of claims over time from past experience,
with adjustment for more recent underwriting, having regard to variations in business
accepted and the underlying terms and conditions. The provision for claims also includes
amounts in respect of internal and external claims handling costs. For the most recent
years, where a high degree of volatility arises from projections, estimates may be based
in part on output from rating and other models of business accepted and assessments of
underwriting conditions.
In arriving at the level of claims provisions a margin is applied over and above the actuarial
best estimate so no adverse run-off deviation is envisaged.
The Syndicate makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual results. The
estimates and assumptions that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial year are
addressed below.
Notes to the Financial Statements (continued)
31 December 2024
31
2.
Use of Judgements and Estimates (continued)
Premium Estimates
Written premiums for closed years of account are based on signings. Written premium
estimates for open years of account are set via the process as described as follows:
Ultimate premium estimates take into account all available information sources including
business plans, underwriter estimate
d premium income (‘EPI’)
and actuarial projections.
For the first few development quarters, the premium estimates are based on business
plans and underwriter estimates as these capture the expert knowledge from the
underwriting department on the business volumes that are expected to be written and the
anticipated premium rates. Thereafter the EPI and/or actuarial projections are used as a
guide for the ultimate premium selections, as these indicators become more reliable once
all underlying policies have been written and more data is available on premium signings
mandates. The gross premium estimate of £552.1m (2023: £427.0m) is included in the
‘
Debtors arising out of direct insurance operations
’
with the RI share of £59.9m (2023:
£38.4m) being included in the
‘Creditors arising out of direct insurance operations’
and
‘Creditors arising out of reinsurance operations’
on the balance sheet (pages 25 and 26
respectively).
Written and earned premium patterns are applied to ultimate premiums. These patterns
are derived utilising policy data from the previous underwriting year to set the current
pattern expectations due to the need to set these patterns at the outset of the underwriting
year. For newer classes, as well as those with more underwriting variability, input is
obtained from the pricing and underwriting experts to assist in the setting of appropriate
premium patterns.
Premiums are recognised as earned on a pro rata basis over the term of the related policy,
except for those contracts where the period of risk differs significantly from the contract
period. In these circumstances, premiums are recognised over the period of risk in
proportion to the amount of insurance protection provided.
3. Significant Accounting Policies
The following principal accounting policies have been applied consistently in dealing with
items which are considered material in relation to the Syndicate’s annual accounts.
(a)
Premiums Written
Gross premiums written reflect direct and inwards reinsurance business written during the
period, gross of commission payable to intermediaries, and exclude any taxes or duties
based on premiums. Premiums written include estimates for ‘pipeline’ premiums
representing amounts due to the Syndicate not yet notified and adjustments to estimates
of premiums written in previous periods.
Estimated premium income in respect of facility contracts, for example binding authorities,
consortium business and lines slips, are deemed to be written in a manner that reflects the
expected profile of the underlying business which has been written. Outwards reinsurance
premiums are accounted for in the same accounting period as the premiums for the related
direct or inwards business being reinsured. The earned proportion of premiums is
recognised as income. Premiums are earned from the date of attachment of risk over the
indemnity period based on the pattern of the risks underwritten.
Notes to the Financial Statements (continued)
31 December 2024
32
3. Significant Accounting Policies (continued)
(b)
Unearned Premiums
The provision for unearned premiums comprises the proportion of gross premiums written
which is estimated to be earned in the following or subsequent financial periods.
Written
premiums are recognised as earned according to the risk profile of the policy. Unearned
premiums represent the proportion of premiums written in the year that relate to unexpired
terms of policies in force at the balance sheet date, calculated on the basis of established
earnings patterns or time apportionment as appropriate.
(c)
Reinsurance
The Syndicate assumes and cedes reinsurance in the normal course of business.
Premiums and claims on reinsurance assumed are recognised in the technical account
along the same basis as direct business, taking into account the product classification.
Reinsurance premiums ceded and reinsurance recoveries on claims incurred are included
in the respective expense and income accounts. Premiums ceded and claims reimbursed
are presented on a gross basis in the technical account and Balance Sheet, as appropriate.
The written and earned patterns for Reinsurance outwards premiums are separated out by
Facultative, Proportional and Excess of Loss reinsurance.
Reinstatement premiums on both inwards and outwards business are accreted to the
technical account on a pro-rata basis over the term of the original policy to which they relate.
(d)
Claims Provisions and Related Recoveries
Claims incurred comprise claims and claims handling expenses (both internal and external)
paid in the year and the movement in provision for outstanding claims and settlement
expenses. The Syndicate does not discount its liability for outstanding claims nor the
reinsurance share of outstanding claims.
Outstanding claims include an allowance for the cost of claims incurred by the balance
sheet date but not reported (
‘
IBNR
’
) until after the year end. The amount of salvage and
subrogation recoveries is separately identified, and where material, reported as an asset.
The liability for outstanding claims is estimated using the input of assessments for individual
cases reported to the Syndicate and widely accepted actuarial techniques for IBNR. The
techniques generally use projections, based on past experience of the development of
claims over time, to form a view on the likely ultimate claims to be experienced and an
estimate of the expected ultimate cost of more complex claims that may be affected by
external factors, for example, court decisions.
The two most critical assumptions with regards to claims provisions are that the past is a
reasonable predictor of the likely level of claims development and that the rating and other
models used for current business are fair reflections of the likely level of ultimate claims to
be incurred.
The Directors of the Managing Agent consider that the provisions for gross claims and
related reinsurance recoveries are fairly stated based on the information currently available
to them. However, the ultimate liability will vary as a result of subsequent information and
events, and this may result in significant adjustments to the amounts provided. Adjustments
to the amounts of claims provisions established in prior years are reflected in the financial
statements for the period in which the adjustments are made. The methods used, and the
estimates made, are reviewed regularly.
Notes to the Financial Statements (continued)
31 December 2024
33
3. Significant accounting policies (continued)
(d)
Claims Provisions and Related Recoveries (continued)
The reinsurers’ share of provisions for claims is based on calculated amounts of
outstanding claims and projections for IBNR, net of estimated irrecoverable amounts,
having regard to the reinsurance programme in place for the class of business, the claims
experience for the year and the current security rating of the reinsurance companies
involved. A number of statistical techniques are used to assist in making these estimates.
Reinsurance assets are assessed for impairment at each balance sheet date. A
reinsurance asset is deemed impaired if there is objective evidence, as a result of an event
that occurred after its initial recognition, that the Syndicate may not recover all amounts
due, and that event has a reliably measurable impact on the amount that the Syndicate will
receive from the reinsurer. Impairment losses are recognised in profit or loss in the period
in which the impairment loss is recognised.
(e)
Liability Adequacy Test Provision
Provision is made for unexpired risks arising from general insurance contracts where the
expected value of 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 deferred acquisition costs). The provision for
unexpired risks is calculated by reference to classes of business which are managed
together.
At 31 December 2024, the Syndicate did not have an unexpired risk provision
(2023: £Nil).
(f)
Acquisition Costs
Costs incurred in acquiring general insurance contracts are deferred. Acquisition costs
include direct costs such as brokerage and commission, and indirect costs such as
administrative expenses connected with the processing of proposals and the issuing of
policies. The deferred acquisition cost asset represents the proportion of acquisition costs
which corresponds to the proportion of gross premiums written that is unearned at the
balance sheet date. In addition to third party brokerage, acquisition costs include IDC costs
and a proportion of Syndicate costs including all box rent, underwriters’ employment costs
and an allocation of accommodation and IT costs.
(g)
Foreign Currencies
The Syndicate’s functional currency is GBP; The Syndicate’s presentational currency is
also GBP this achieves consistency with prior year reporting.
Non-monetary items denominated in foreign currencies that are measured at historic cost
are translated to the functional currency using the exchange rate at the date of the
transaction. For the purposes 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 the insurance
operations of the Syndicate are included in the non-technical account.
Notes to the Financial Statements (continued)
31 December 2024
34
3. Significant Accounting Policies (continued)
(h)
Financial Assets and Liabilities
In applying FRS 102, the Syndicate has chosen to apply the recognition and measurement
provisions of IAS 39 Financial Instruments: Recognition and Measurement (as adopted for
use in the UK)/Chapters 11 and 12 of FRS102.
Classification
The accounting classification of financial assets and liabilities determines the way in which
they are measured and changes in those values are presented in the Statement of profit or
loss. Financial assets and liabilities are classified on their initial recognition.
The initial classification of a financial instrument shall take into account contractual terms
including those relating to future variations. Once the classification of a financial instrument
is determined at initial recognition, reassessment is only required subsequently when there
has been a modification of contractual terms that is relevant to an assessment of the
classification.
Financial assets and financial liabilities at fair value through profit or loss comprise financial
assets and financial liabilities held for trading and those designated as such on initial
recognition. Investments in shares and other variable yield securities, units in unit trusts,
and debt and other fixed income securities are designated as at fair value through profit or
loss on initial recognition, as they are managed on a fair value basis in accordance with the
Syndicate’s investment strategy.
Deposits with credit institutions and debtors are classified as loans and receivables.
Recognition
Financial instruments are recognised when the Syndicate becomes a party to the
contractual provisions of the instrument. Financial assets are derecognised if the
Syndicate‘s contractual rights to the cash flows from the financial assets expire or if the
Syndicate transfers the financial asset to another party without retaining control of
substantially all risks and rewards of the asset. A financial liability is derecognised when its
contractual obligations are discharged, cancelled, or expired.
Regular way purchases and sales of financial assets are recognised and derecognised, as
applicable, on the trade date, i.e. the date that the Syndicate commits itself to purchase or
sell the asset.
Measurement
A financial asset or financial liability is measured initially at fair value plus, for a financial
asset or financial liability not at fair value through profit or loss, transaction costs that are
directly attributable to its acquisition or issue.
Financial assets at fair value through profit or loss are measured at fair value with fair value
changes recognised immediately in profit or loss. Net gains or net losses on financial assets
measured at fair value through profit or loss includes foreign exchange gains/losses arising
on their translation to the functional currency, but excludes interest and dividend income.
Loans and receivables and non-derivative financial liabilities are measured at amortised
cost using the effective interest rate method, except Syndicate Loans to the
Lloyd’s
Europe
which are measured at fair value through profit or loss.
Notes to the Financial Statements (continued)
31 December 2024
35
3. Significant Accounting Policies (continued)
(h)
Financial Assets and Liabilities (continued)
Identification and Measurement of Impairment
At each reporting date the Syndicate assesses whether there is objective evidence that
financial assets not at fair value through profit or loss are impaired. Financial assets are
impaired when objective evidence demonstrates that a loss event has occurred after the
initial recognition of an asset, and that the loss event has an impact on the future cash flows
on the asset that can be estimated reliably.
Objective evidence that financial assets are impaired includes observable data that comes
to the attention of the Syndicate about any significant financial difficulty of the issuer, or
significant changes in the technological, market, economic or legal environment in which
the issuer operates.
An impairment loss in respect of a financial asset measured at amortised cost is calculated
as the difference between its carrying amount, and the present value of the estimated future
cash flows discounted at the asset’s original effective interest rate.
Individually significant
financial assets are tested for impairment on an individual basis. The remaining financial
assets are assessed collectively in groups that share similar credit risk characteristics.
An impairment loss recognised on an amortised cost asset reduces directly the carrying
amount of the impaired asset. All impairment losses are recognised in profit or loss. An
impairment loss is reversed if the reversal can be related objectively to an event occurring
after the impairment loss was recognised. For financial assets measured at amortised cost
the reversal is recognised in profit or loss.
Off-setting
Financial assets and financial liabilities are offset and the net amount presented in the
balance sheet when, and only when, the Syndicate currently has a legal right to set off the
amounts and intends either to settle on a net basis or to realise the asset and settle the
liability simultaneously.
(i)
Investment Return
Investment return comprises investment income and movements in unrealised gains and
losses on financial instruments at fair value through profit or loss, less investment
management expenses, interest expense, realised losses and impairment losses.
Investment income comprises interest income and realised investment gains.
Interest income on financial assets measured at amortised cost is recognised using the
effective interest rate method. For the purpose of separately presenting investment income
and unrealised gains and losses for financial assets at fair value through profit or loss,
interest income is calculated using the effective interest rate method excluding transaction
costs that are expensed when incurred.
For investments at fair value through profit or loss, realised gains and losses represent the
difference between the net proceeds on disposal and the purchase price.
Notes to the Financial Statements (continued)
31 December 2024
36
3. Significant Accounting Policies (continued)
(i)
Investment Return (continued)
Unrealised investment gains and losses represent the difference between the fair value at
the balance sheet date and the fair value at the previous balance sheet date, or purchase
price if acquired during the year. Movements in unrealised investment gains and losses
comprise the increase/decrease in the reporting period in the value of the investments held
at the reporting date and the reversal of unrealised investment gains and losses recognised
in earlier reporting periods in respect of investment disposals of the current period.
Investment return is initially recorded in the non-technical account. The return is transferred
in full to the general business technical account to reflect the investment return on funds
supporting underwriting business.
(j)
Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of
three months or less from the acquisition date that are subject to an insignificant risk of
changes in fair value, and are used by the Syndicate in the management of its short-term
commitments.
(k)
Taxation
Under Schedule 17 of the Finance Act 1997 Syndicates are not required to deduct basic
rate income tax from trading income. In addition, all UK basic rate income tax (currently at
20%) deducted from syndicate investment income is recoverable by Managing Agents and
consequently
the distribution made to members or their members’ agents is gross of tax.
Capital appreciation falls within trading income and is also distributed gross of tax. 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 the member on underwriting
results.
(l)
Pension Costs
MRSL operates in conjunction with other Group companies, a funded contributory defined
benefit scheme. This scheme was closed for new members in 2000. The assets of the
scheme are held separately from those of the Managing Agent, being invested with
Barclays Stockbrokers. Contributions to the scheme are charged to the Statement of Profit
or Loss so as to spread the cost of pensions over employees working lives with the
Managing Agent and are included in net operating costs. The scheme was closed for future
accruals on 31 December 2009. During 2014, all active members from 1 January 2010
onwards were transferred to the defined contribution scheme, and, as an alternative choice
to the defined contribution scheme, the Managing Agent offered a Group Self Invested
Pension Scheme.
Pension contributions relating to Syndicate Managing Agent employees who act on behalf
of the Syndicate are charged to the Syndicate as incurred and included within net operating
expenses.
Notes to the Financial Statements (continued)
31 December 2024
37
3. Significant Accounting Policies (continued)
(l)
Pension Costs (continued)
The most recent triennial valuation (as performed at 31 December 2021) showed that there
was a surplus of 11% in the defined scheme which was equivalent to £19.2m. The main
reason for the change was better than assumed investment returns, offset by the impact of
a change in valuation assumptions.
(m)
Profit Commission
The Managing Agent does not charge any profit commission.
(n)
Deposits with Ceding Undertakings
Deposits with ceding undertakings are funds held by Lloyd’s Europe on behalf of the
Syndicate to settle Part VII claims.
(o)
Deposits Received from Reinsurers
Deposits received from reinsurers includes other amounts received in advance from
reinsurers against future claims under the Syndicate's reinsurance arrangements. These
funds are held at amortised cost in the balance sheet. Currently there are no advanced
funds received in the balance sheet.
(p)
Operating Expenses
Where expenses are incurred by the Service Company for the administration of the
Syndicate, these expenses are apportioned appropriately based on type of expense.
Expenses that are incurred jointly are apportioned between the Service Company and the
Syndicate on bases depending on the amount of work performed, resources used, and the
volume of business transacted.
(q)
Reinsurers’
Commission and Profit Participation
Reinsurers’ commissions and profit participations, which include reinsurance profit
commission and overriding commission, are treated as a contribution to expenses.
(r)
Debtors and Creditors
Insurance debtors and creditors include amounts due to and from agents, brokers and
insurance contract holders. These are classified as debt instruments as they are non-
derivative financial assets with fixed or determinable payments that are not quoted on an
active market. Insurance debtors are measured at amortised cost less any provision for
impairments. Insurance creditors are stated at amortised cost. The Syndicate does not
have any debtors directly with policyholders, all transactions occur via an intermediary.
Reinsurance debtors and creditors include amounts due to and from reinsurers. These are
classified as debt instruments as they are non-derivative financial assets with fixed or
determinable payments that are not quoted on an active market. Reinsurance debtors are
measured at amortised cost less any provision for impairments. Reinsurance creditors are
stated at amortised cost. Reinsurance debtor principally relates to claims recoveries where
the underlying claim has been settled and the recovery is due. Reinsurance creditors are
primarily premiums payable for reinsurance contracts and are recognised as an expense
when due.
Notes to the Financial Statements (continued)
31 December 2024
38
3. Significant Accounting Policies (continued)
(r)
Debtors and Creditors
(continued)
Other debtors principally consist of amounts due from members and sundry debtors and
are carried at amortised cost less any impairment losses. Other creditors principally consist
of amounts due to related syndicates and other related entities, profit commissions payable
and other sundry payables. These are stated at amortised cost determined using the
effective interest rate method.
(s)
Classification of Insurance and Reinsurance Contracts
Insurance and reinsurance contracts are classified as insurance contracts where they
transfer significant insurance risk. If a contract does not transfer significant insurance risk
it is classified as a financial instrument. All of the Syndicates written contracts and
purchased reinsurance contracts transfer significant insurance risk and therefore are
recognised as insurance contracts.
4. Risk and Capital Management
Introduction and Overview
This note presents information about the nature and extent of insurance and financial risks
to which the Syndicate is exposed, the Managing Agent’s objectives, policies and
processes for measuring and managing insurance and financial risks, and for managing
the Syndicate’s capital.
Risk Management Framework
The Board has overall responsibility for the establishment and oversight of the Syndicate’s
risk management framework and to review and monitor the management of the risks to
which the Syndicate is exposed. The Board of Directors sets risk appetite annually as part
of the Syndicate’s business planning and Solvency Capital Requirement process.
Risk appetite is subsequently reviewed by the Managing Agent on a periodic basis. The
R&CC, a sub-
committee of the Managing Agent’s Board, meets throughout the year to
review and challenge risk management and the use of the internal model for capital
calculation purposes.
The Managing Agent is required to comply with the requirements of the PRA, the FCA and
Lloyd’s. Lloyd’s requirements include those imposed on the Lloyd’s market by overseas
regulators, particularly in respect of US Situs business. The Compliance Officer monitors
regulatory developments and assesses the impact on Managing Agent policy. The
principal risks and uncertainties, in addition to the regulatory and compliance risk facing
the Syndicate and consequently MRCL are monitored in line with the six risk groups, of
which Insurance Risk is by far the most significant to the Syndicate.
Insurance Risk
Insurance risk arises from the possibility of an adverse financial result due to actual claims
experience being different from that expected when an insurance product was designed
and priced. The actual performance of insurance contracts is subject to the inherent
uncertainty in the occurrence, timing and amount of the final insurance liabilities.
Notes to the Financial Statements (continued)
31 December 2024
39
4. Risk and Capital Management (continued)
Insurance Risk (continued)
The insurance risk to which the Syndicate is exposed can be separated into underwriting
risk and reserve risk.
i. Underwriting Risk
Underwriting risk is the risk that the insurance premium will not be sufficient to cover future
insurance losses and associated expenses. This includes the risks that the premium is set
too low, provides inappropriate levels of cover, or that the actual frequency or severity of
claims events will be significantly higher than was expected during the underwriting
process.
ii. Reserve Risk
Reserve risk is the risk that the reserves established in respect of insurance claims
incurred are insufficient to settle the claims and associated expenses in full.
Management of Insurance Risk
A key component of the management of underwriting risk for the Syndicate is a disciplined
underwriting strategy that focuses on mitigating risk exposure by seeking to have a diverse
but balanced portfolio of risks across a number of underwriting classes written on a global
basis. A further key component of the management of portfolio volatility is via the IDC
network operating in established broker-based markets around the world. These
companies are focused on writing local market business that would not necessarily be
shown to the London market.
The annual business plan sets out the classes of business, the territories, average line
size and type of assured. These plans are the responsibility of the SBF Governance Sub
Group, approved by the Board and monitored by the FSC.
Contracts can contain a number of features which help to manage the underwriting risk
such as the use of deductibles, or capping the maximum permitted loss, or number of
claims (subject to local regulatory and legislative requirements).
It is the policy of the Managing Agent to purchase appropriate reinsurance to support the
business plan taking into consideration the Board’s risk appetite and risk retention as well
as a review of risk accumulation. With security being of paramount importance, the
Syndicate places as much of the programme as possible with reinsurers of the highest
calibre, subject to availability and market conditions. The key aim of the Non-Proportional
treaty programme is to maintain cover, both for a single catastrophe loss (vertical) or a
sequence of major losses (horizontal). In addition to this the Syndicate purchases
additional quota share reinsurance as part of its risk management strategy where deemed
appropriate as well as an overarching Whole Account Aggregate Excess of Loss purchase
as a capital management tool. The Syndicate also purchases facultative reinsurance
within these retention to protect the volatility of certain accounts.
The claims development table in note 16 shows the actual claims incurred to previous
estimates for the last 10 years.
Notes to the Financial Statements (continued)
31 December 2024
40
4. Risk and Capital Management (continued)
Insurance Risk (continued)
Concentration of Insurance Risk
The following table provides an analysis of the breakdown of its gross written premium.
USA
UK
Canada
Australia
Rest of
the
World
Total
2024
£000
£000
£000
£000
£000
£000
Direct insurance
Marine, Energy, Aviation and
Transport
42,851
6,601
8,155
676
215,481
273,764
Fire and other damage to
property
160,516
65,647
30,599
16,559
313,127
586,448
Third party liability
9,542
15,331
-
184
204,062
229,119
Accident & Health
74
87
-
51
2,686
2,898
Motor
4,192
15
-
-
750
4,957
Miscellaneous
12,594
5,031
82
328
91,319
109,354
Total Direct insurance
229,769
92,712
38,836
17,798
827,425
1,206,540
Reinsurance
37,874
1,724
158
346
126,825
166,927
Total
267,643
94,436
38,994
18,144
954,250
1,373,467
USA
UK
Canada
Australia
Rest of
the
World
Total
2023
£000
£000
£000
£000
£000
£000
Direct insurance
Marine, Energy, Aviation and
Transport
52,424
8,075
9,038
720
252,209
322,466
Fire and other damage to
property
115,500
51,283
21,890
9,955
239,935
438,563
Third party liability
11,614
12,337
-
-
181,286
205,237
Accident & Health
39
53
-
-
1,339
1,431
Motor
1,527
4
-
-
20
1,551
Miscellaneous
9,692
1,493
1,671
133
46,629
59,618
Total Direct insurance
190,796
73,245
32,599
10,808
721,418
1,028,866
Reinsurance
29,843
1,985
338
357
151,204
183,727
Total
220,639
75,230
32,937
11,165
872,622
1,212,593
Sensitivity to Insurance Risk
The liabilities established could be significantly lower or higher than the ultimate cost of
settling the claims arising.
Notes to the Financial Statements (continued)
31 December 2024
41
4.
Risk and Capital Management (continued)
Insurance Risk (continued)
Sensitivity to Insurance Risk (continued)
This level of uncertainty varies between the classes of business and the nature of the risk
being underwritten and can arise from developments in case reserving for large losses
and catastrophes, or from changes in estimates of claims IBNR.
The following table presents the sensitivity of the value of insurance liabilities disclosed in
the accounts to potential movements in the assumptions applied within the technical
provisions. Given the nature of the business underwritten by the Syndicate, the approach
to calculating the technical provisions for each class can vary and as a result the sensitivity
performed is to apply a beneficial and adverse risk margin to the total insurance liability.
The amount disclosed in the table represents the profit or loss impact of an increase or
decrease in the insurance liability as a result of applying the sensitivity. The amount
disclosed for the impact on claims outstanding
–
net of reinsurance represents the impact
on both the profit or loss for the year and member balance.
General insurance business sensitivities as at
31 December 2024
Sensitivity
5.00%
-5.00%
£000
£000
Claims outstanding
–
gross of reinsurance
75,426
(75,426)
Claims outstanding
–
net of reinsurance
58,825
(58,825)
General insurance business sensitivities as at
Sensitivity
5.00%
-5.00%
31 December 2023
£000
£000
Claims outstanding
–
gross of reinsurance
62,561
(62,561)
Claims outstanding
–
net of reinsurance
48,852
(48,852)
The Syndicate uses both its own and commercially available proprietary risk management
software to assess catastrophe exposure. However, there is always a risk that the
assumptions and techniques used in these models are unreliable or that claims arising
from an unmodelled event are greater than those arising from a modelled event.
Financial Risk
The focus of financial risk management for the Syndicate is ensuring that the proceeds
from its financial assets are sufficient to fund the obligations arising from its insurance
contracts. The goal of the investment management process is to optimise the risk adjusted
investment income and risk adjusted total return by investing in a diversified portfolio of
securities, whilst ensuring that the assets and liabilities are managed on a cash flow and
duration matching basis. The main components of Financial Risk are Credit, Liquidity and
Market risks.
Notes to the Financial Statements (continued)
31 December 2024
42
4. Risk and Capital Management (continued)
Financial Risk (continued)
a) Credit Risk
Credit risk is the risk of financial loss to the Syndicate if a counterparty fails to discharge a
contractual obligation.
The Syndicate is exposed to credit risk in respect of the following:
•
Debt securities;
•
Reinsurers’ share of insurance liabilities;
•
Amounts due from intermediaries;
•
Amounts due from reinsurers in respect of settled claims;
•
Cash and cash equivalents; and
•
Other debtors and accrued interest.
The nature of the Syndicate’s exposures to credit risk and its objectives, policies and
processes for managing credit risk have not changed significantly from the prior year.
i. Management of Credit Risk
The Syndicate’s management of credit risk in respect of debt securities is set out in the
investment management agreement. This requires
individual investment portfolios to
maintain an average portfolio quality equivalent to A+ per Standard & Poor’s (‘S&P’). There
are also limits within the mandate to manage the exposure to individual issuers. The
investment manager provides a qualitative analysis, on a quarterly basis, of the lowest rated
security on the portfolio. No securities may be purchased that are rated below BBB-.
The investment management agreement does not permit use of derivatives or securities
lending.
The Syndicate limits the amount of cash and cash equivalents that can be deposited with
a single counterparty. The cash accounts held with Citibank NA, NatWest Group plc,
Caceis, and Royal Bank of Canada are monitored daily and reported on a weekly basis.
Reinsurance is placed with counterparties that have a good credit rating. There is a limited
pool of approved reinsurers and any reinsurance that is placed with reinsurers not within
this pool requires the approval of certain Executive Directors. All reinsurance is subject to
regular internal review.
ii. Exposure to Credit Risk
The following table analyses the credit rating by investment grade of financial investments,
reinsurers’ share of claims outstanding, debtors arising out of direct insurance and
reinsurance operations, cash at bank and in hand, and other debtors and accrued interest.
Notes to the Financial Statements (continued)
31 December 2024
43
4. Risk and Capital Management (continued)
Financial Risk (continued)
a) Credit Risk
ii. Exposure to Credit Risk (continued)
Year 2024
AAA
AA
A
BBB
Other
Not
rated
£000
Total
£000
£000
£000
£000
£000
£000
Debt securities and other
fixed income securities
159,532
1,077,630
248,176
124,097
-
-
1,609,435
Loans and deposits with
credit institutions
19,786
4,116
4,464
3,546
6,385
16,908
55,205
Syndicate loans to central
fund
-
-
-
-
-
6,102
6,102
Deposits with ceding
undertakings
-
-
-
-
-
1,048
1,048
Reinsurers’ share of claims
outstanding
12,754
131,230
187,717
-
-
323
332,024
Debtors arising out of direct
insurance operations
-
-
-
-
-
601,156
601,156
Debtors arising out of
reinsurance operations
-
-
-
-
-
193,776
193,776
Cash at bank and in hand
-
7,028
109,450
-
-
10
116,488
Other debtors
-
-
-
-
-
7,998
7,998
Total
192,072
1,220,004
549,807
127,643
6,385
827,321
2,923,232
Year 2023
AAA
AA
A
BBB
Other
Not
rated
£000
Total
£000
£000
£000
£000
£000
£000
Debt securities and other
fixed income securities
123,693
914,470
115,054
88,517
-
-
1,241,734
Loans and deposits with
credit institutions
20,580
2,869
3,133
2,720
12,836
17,975
60,113
Syndicate loans to central
fund
-
-
-
-
-
7,461
7,461
Deposits with ceding
undertakings
-
-
-
-
-
2,647
2,647
Reinsurers’ share of claims
outstanding
10,340
75,407
187,958
-
-
490
274,195
Debtors arising out of direct
insurance operations
-
-
-
-
-
423,140
423,140
Debtors arising out of
reinsurance operations
-
-
-
-
-
209,497
209,497
Cash at bank and in hand
-
11,767
101,962
-
-
322
114,051
Other debtors
-
-
-
-
-
5,568
5,568
Total
154,613
1,004,513
408,107
91,237
12,836
667,100
2,338,406
Notes to the Financial Statements (continued)
31 December 2024
44
4. Risk and Capital Management (continued)
Financial Risk (continued)
a)
Credit Risk (continued)
iii.
Financial Assets that are past due or impaired
The Syndicate has debtors arising from direct insurance and reinsurance operations that
are past due but not impaired at the reporting date. The Syndicate does not consider these
debtors to be impaired on the basis they are still deemed and confirmed to be collectable.
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:
Neither
past due
nor
impaired
assets
Past due
but not
impaired
assets
Impairment
allowance
Total
2024
£000
£000
£000
£000
Debt securities and other fixed income securities
1,609,435
-
-
1,609,435
Syndicate loans to central fund
6,102
-
-
6,102
Other investments
55,205
-
-
55,205
Deposits with ceding undertakings
1,048
-
-
1,048
Reinsurers' share of claims outstanding
332,024
-
-
332,024
Debtors arising out of direct insurance operations
595,788
5,368
-
601,156
Debtors arising out of reinsurance operations
106,364
87,421
(9)
193,776
Other debtors
7,098
900
-
7,998
Cash at bank and in hand
116,488
-
-
116,488
Total
2,829,552
93,689
(9)
2,923,232
Neither
past due
nor
impaired
assets
Past due
but not
impaired
assets
Impairment
allowance
Total
2023
£000
£000
£000
£000
Debt securities and other fixed income securities
1,241,734
-
-
1,241,734
Loans and deposits with credit institutions
60,113
-
-
60,113
Syndicate loans to central fund
7,461
-
-
7,461
Deposits with ceding undertakings
2,647
-
-
2,647
Reinsurers' share of claims outstanding
274,195
-
-
274,195
Debtors arising out of direct insurance operations
420,786
2,354
-
423,140
Debtors arising out of reinsurance operations
128,595
80,911
(9)
209,497
Other debtors and accrued interest
4,668
900
-
5,568
Cash at bank and in hand
114,051
-
-
114,051
Total
2,254,250
84,165
(9)
2,338,406
Notes to the Financial Statements (continued)
31 December 2024
45
4. Risk and Capital Management (continued)
Financial Risk (continued)
a)
Credit Risk (continued)
iii.
Financial Assets that are past due or impaired
The table below sets out a reconciliation of changes in impairment allowance during the period for
each class of financial asset at the balance sheet date:
01- Jan
New
impairment
charges
added in year
Changes in
impairment
charges
Released
to profit
and loss
account
31
Dec
2024
£000
£000
£000
£000
£000
Debtors arising out of direct insurance
operations
-
-
-
-
-
Debtors arising out of reinsurance
operations
(9)
-
-
-
(9)
Total
(9)
-
-
-
(9)
01- Jan
New
impairment
charges
added in
year
Changes in
impairment
charges
Released
to profit
and loss
account
31
Dec
2023
£000
£000
£000
£000
£000
Debtors arising out of direct insurance
operations
-
-
-
-
-
Debtors arising out of reinsurance operations
(9)
-
-
-
(9)
Total
(9)
-
-
-
(9)
The table below sets out the age analysis of financial assets that are past due but not
impaired at the balance sheet date:
Past due but not impaired
0-3
months
past due
3-6
months
past due
6-12
months
past due
Greater
than 1 year
past due
Total
2024
£000
£000
£000
£000
£000
Debtors arising out of direct insurance
operations
4,960
335
56
17
5,368
Debtors arising out of reinsurance operations
18,640
15,733
16,974
36,074
87,421
Other debtors
-
-
-
900
900
Total
23,600
16,068
17,030
36,991
93,689
Notes to the Financial Statements (continued)
31 December 2024
46
4. Risk and Capital Management (continued)
Financial Risk (continued)
a)
Credit Risk (continued)
iii.
Financial Assets that are past due or impaired
b) Liquidity Risk
Liquidity risk is the risk that the Syndicate will encounter difficulty in meeting obligations
arising from its insurance contracts and financial liabilities. The Syndicate is exposed to
daily calls on its available cash resources mainly from claims arising from insurance
contracts.
In respect of catastrophic events there is also a liquidity risk associated with the timing
differences between gross cash out-flows and expected reinsurance recoveries and an
associated risk of gross funding of US Situs losses.
A liquidity risk policy exists that sets out the assessment and determination of what
constitutes liquidity risk. Compliance with the policy is monitored and exposures and
breaches are reported to the Risk and Capital Committee and FSC.
The nature of the Syndicate’s
exposures to liquidity risk and its objectives, policies and
processes for managing liquidity risk have not changed significantly from the prior year.
i.
Management of Liquidity Risk
The Syndicate’s approach to managing liquidity risk is to ensure, as far as possible, that it
will always have sufficient liquidity to meet its liabilities when they fall due, under both
normal and stressed conditions.
The Syndicate’s approach to managing its liquidity risk is as follows:
•
Forecasts are prepared and revised on a regular basis to predict cash outflows from
insurance contracts over the short, medium and long term;
•
The Syndicate purchases assets with durations not greater than its estimated
insurance contract outflows;
Past due but not impaired
0-3
months
past due
3-6
months
past due
6-12
months
past due
Greater
than 1 year
past due
Total
2023
£000
£000
£000
£000
£000
Debtors arising out of direct insurance
operations
2,188
123
29
14
2,354
Debtors arising out of reinsurance operations
14,658
12,096
23,829
30,328
80,911
Other debtors
-
-
-
900
900
Total
16,846
12,219
23,858
31,242
84,165
Notes to the Financial Statements (continued)
31 December 2024
47
4.
Risk and Capital Management (continued)
Financial Risk (continued)
b) Liquidity Risk (continued)
i.
Management of Liquidity Risk (continued)
•
Assets purchased by the Syndicate are required to satisfy specified marketability
requirements;
•
The Syndicate maintains cash and liquid assets to meet daily calls on its insurance
contracts; and
•
The Syndicate regularly updates its contingency funding plans to ensure that adequate
liquid financial resources are in place to meet obligations as they fall due in the event
of reasonably foreseeable abnormal circumstances.
ii.
Maturity analysis of Syndicate Liabilities
The maturity analysis presented in the table below shows the remaining contractual
maturities for the Syndicate’s insurance contracts and financial instruments. For
insurance and reinsurance contracts, the contractual maturity is the estimated date when
the gross undiscounted contractually required cash flows will occur. For financial liabilities,
it is the earliest date on which the gross undiscounted cash flows (including contractual
interest payments) could be paid assuming conditions are consistent with those at the
reporting date.
The table
below summarises the maturity profile of the Syndicate’s
insurance contracts
and financial liabilities.
Undiscounted net cash flows
Year 2024
No
maturity
stated
0-1 yrs
1-3 yrs
3-5 yrs
>5 yrs
Total
£000
£000
£000
£000
£000
£000
Claims outstanding
-
503,998
643,386
217,378
143,763
1,508,525
Deposits received from
reinsurers
-
-
-
-
-
-
Creditors
-
380,058
63
-
-
380,121
Other technical provisions
540
-
-
-
-
540
Total
540
884,056
643,449
217,378
143,763
1,889,186
Undiscounted net cash flows
Year 2023
No
maturity
stated
0-1 yrs
1-3 yrs
3-5 yrs
>5 yrs
Total
£000
£000
£000
£000
£000
£000
Claims outstanding
-
545,910
470,586
152,524
82,206
1,251,226
Deposits received from
reinsurers
-
-
-
-
-
-
Creditors
-
258,629
9
-
-
258,638
Other technical provisions
595
-
-
-
-
595
Total
595
804,539
470,595
152,524
82,206
1,510,459
Notes to the Financial Statements (continued)
31 December 2024
48
4. Risk and Capital Management (continued)
Financial Risk (continued)
c) Market Risk
Market risk is the risk that the fair value or future cash flows of a financial instrument or
insurance contract will fluctuate because of changes in market prices. Market risk
comprise three types of risk: interest rate risk, currency risk and other price risk.
The objective of market risk management is to manage and control market risk exposures
within acceptable parameters, while optimising the return on risk. The nature of the
Syndicate exposures to market risk and its objectives, policies and processes for
managing market risk have not changed significantly from the prior year.
i.
Management of Market Risks
For each of the major components of market risk the Syndicate has policies and
procedures in place which detail how each risk should be managed and monitored. The
management of each of these major components of major risk and the exposure of the
Syndicate at the reporting date to each major risk are addressed below.
For assets backing outstanding claims provisions, market risk is managed by matching
the duration and profile of the assets to the technical provisions they are backing, referred
to as Asset-Liability Matching. This helps manage market risk to the extent that changes
in the values of assets are matched by a corresponding movement in the values of the
technical provisions
ii.
Interest Rate Risk
Interest rate risk is the risk that the fair value and/or future cash flows of a financial
instrument will fluctuate because of changes in interest rates.
The Syndicate is exposed to interest rate risk through its investment portfolio and cash
and cash equivalents.
The risk of changes in the fair value of these assets is managed by primarily investing in
short-duration financial investments and cash and cash equivalents. GIM monitors the
duration of these assets on a regular basis, targeting an investment portfolio duration that,
in the event of changes in interest rates, always maintains the internal capital
requirements.
iii. Currency Risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in foreign exchange rates.
The Syndicate’s functional currency is
GBP and its exposure to foreign exchange risk
arises primarily with respect to transactions in United States dollars. The Syndicate seeks
to mitigate the risk by matching the estimated foreign currency denominated liabilities with
assets denominated in the same currency.
The amount in “Other” in the current year
is a
mixture of South African Rand and Swiss Franc relating to overseas deposits held with
Lloyd’s
.
Notes to the Financial Statements (continued)
31 December 2024
49
4.
Risk and Capital Management (continued)
Financial Risk (continued)
c) Market Risk (continued)
iii. Currency Risk (continued)
The table below summarises the exposure of the total assets and liabilities to foreign
currency exchange risk at the reporting date, as follows:
Sterling
US dollar
Euro
Canadian
dollar
Australian
dollar
Japanese
Yen
Other
Total
2024
£000
£000
£000
£000
£000
£000
£000
£000
Investments
467,806
926,503
126,171
115,919
12,937
-
22,454
1,671,790
Reinsurers'
share of
technical
provisions
42,473
312,574
23,757
4,920
-
-
-
383,724
Debtors
128,182
560,328
67,231
47,189
-
-
-
802,930
Other assets
19,177
87,292
5,515
4,501
1
-
2
116,488
Prepayments
and accrued
income
(56,823)
289,511
(312)
(24,123)
-
-
-
208,253
Total assets
600,815
2,176,208
222,362
148,406
12,938
-
22,456
3,183,185
Technical
provisions
387,778
1,630,498
165,156
103,031
-
-
-
2,286,463
Creditors
223,822
137,392
13,932
4,975
-
-
-
380,121
Accruals and
deferred income
100
2,070
112
4
-
-
-
2,286
Total liabilities
611,700
1,769,960
179,200
108,010
-
-
-
2,668,870
Total Capital
and reserves
(10,885)
406,248
43,162
40,396
12,938
-
22,456
514,315
Sterling
US
dollar
Euro
Canadian
dollar
Australian
dollar
Japanese
Yen
Other
Total
2023
£000
£000
£000
£000
£000
£000
£000
£000
Investments
202,698
900,264
91,121
87,372
8,315
-
22,185
1,311,955
Reinsurers' share of
technical provisions
50,923
239,533
21,877
4,768
-
-
-
317,101
Debtors
109,540
460,964
40,918
26,783
-
-
-
638,205
Other assets
14,329
87,190
3,415
8,797
5
-
315
114,051
Prepayments and
accrued income
44,127
142,018
7,414
(18,737)
-
-
-
174,822
Total assets
421,617
1,829,969
164,745
108,983
8,320
-
22,500
2,556,134
Technical
provisions
378,756
1,338,295
115,281
78,589
-
-
-
1,910,921
Creditors
130,991
112,669
11,495
3,483
-
-
-
258,638
Accruals and
deferred income
177
1,864
114
9
-
-
-
2,164
Total liabilities
509,924
1,452,828
126,890
82,081
-
-
-
2,171,723
Total Capital and
reserves
(88,307)
377,141
37,855
26,902
8,320
-
22,500
384,411
Notes to the Financial Statements (continued)
31 December 2024
50
4. Risk and Capital Management (continued)
Financial Risk (continued)
c) Market Risk (continued)
iv. Sensitivity Analysis to Market Risks
The sensitivity analysis below shows the impact of a 50 basis point movement in interest
rates with all other variables held constant, showing the impact on the result before tax due
to changes in fair value of financial assets and liabilities (whose fair values are recorded in
the profit or loss account).
The impact of the reasonably possible changes in the interest rate on Members’ balances
would be the same, since the Syndicate recognises all changes in recognised assets and
liabilities in profit or loss.
The currency analysis
below shows the impact on the Syndicate’s net assets of a 10%
appreciation or depreciation in all non-Sterling currencies relative to Sterling, at the balance
sheet date.
Capital Management
a) Capital F
ramework at Lloyd’s
The Society of Lloyd’s (Lloyd’s) is a regulated undertaking and subject to the supervision
of the PRA under the Financial Services and Markets Act 2000 and in accordance with the
Solvency II Framework.
Within this supervisory framework, Lloyd’s applies capital requirements at member level
and centrally to ensure that Lloyd’s complies with Solvency II, and beyond that to meet its
own financial strength, licence and ratings objectives.
2024
2024
2023
2023
Impact on
results before
tax
Impact on
members’
balances
Impact on
results before
tax
Impact on
members’
balances
£000
£000
£000
£000
Interest rate risk
+ 50 basis points shift in yield curves
(13,800)
(13,800)
(10,400)
(10,400)
- 50 basis points shift in yield curves
13,800
13,800
10,400
10,400
2024
2024
2023
2023
Impact on
results before
tax
Impact on
members’
balances
Impact on
results before
tax
Impact on
members’
balances
£000
£000
£000
£000
currency risk
10% appreciation
52,520
52,520
47,272
47,272
10% depreciation
(52,520)
(52,520)
(47,272)
(47,272)
Notes to the Financial Statements (continued)
31 December 2024
51
4. Risk and Capital Management (continued)
Capital management (continued)
a) Capital F
ramework at Lloyd’s (continued)
Although, as described below, the Lloyd’s capital setting processes use a capital
requirement set at the Syndicate level as a starting point, the requirement to meet
Solvency II and Lloyd’s capital requirements apply at the overall and member level only,
not at Syndicate level. Accordingly the capital requirement in respect of the Syndicate is
not disclosed in these financial statements.
b)
Lloyd’s
Capital Setting Process
In order to meet Lloyd’s requirements, each syndicate is required to
calculate its Solvency
Capital Requirement (SCR) for the prospective underwriting year. This amount must be
sufficient to cover a 1 in 200 year loss, reflecting uncertainty in the ultimate run-off of
underwriting liabilities (SCR ‘to ultimate’). The syndic
ate 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.
Over and above this, Lloyd’s applies a capital uplift to the member’s capital requirement,
known as the Economic Capital Assessment (ECA). The purpose of this uplift, which is a
Lloyd’s not a Solvency II requirement, is to meet Lloyd’s financial strength,
licence and
ratings objectives. The capital uplift applied for 2024 was 35% (2023: 35%) of the
member’s SCR ‘to ultimate’.
c) 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
or
‘FAL’
), or held within and managed within
a syndicate (Funds in Syndicate or
‘FIS’
and/or
as the member’s share of the members’
balances on each syndicate on which it participates.
With the exception of the FIS balance held, all the assets less liabilities of the Syndicate,
as represented in the members’ balances reported on the balance
sheet on page 27,
represent resources available to meet members’ and Lloyd’s capital requirements.
Using its detailed measurement of risk exposures, the Syndicate allocates capital to
support the business according to the risk appetite and expected returns. The Managing
Agent regularly reviews and enhances its risk management processes and their enabling
governance structures to ensure that the managing agent can demonstrate continuous
compliance with regulatory and Lloyd’s requirements. The Syndicate has complied with all
capital requirements during the year ended 31 December 2024.
Notes to the Financial Statements (continued)
31 December 2024
52
5. Analysis of Underwriting Result
An analysis of the underwriting result before investment return is set out below:
2024
Gross
premiums
written
Gross
premiums
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
£000
Underwriting
result
£000
£000
£000
£000
£000
Direct insurance
Accident & Health
2,898
2,516
(465)
(781)
(224)
1,046
Motor (other
classes)
4,957
3,648
(2,718)
(1,280)
(3)
(353)
Marine, Energy,
Aviation and
Transport
273,764
272,672
(165,754)
(90,425)
1,713
18,206
Fire and Other
Damage to
Property
586,448
511,682
(199,748)
(165,269)
(63,295)
83,370
Third party liability
229,119
201,616
(105,518)
(58,434)
(13,744)
23,920
Miscellaneous
109,354
79,169
(37,529)
(25,020)
(7,633)
8,987
Total direct
insurance
1,206,540
1,071,303
(511,732)
(341,209)
(83,186)
135,176
Reinsurance
acceptances
166,927
183,012
(172,558)
(46,247)
43,273
7,480
Total
1,373,467
1,254,315
(684,290)
(387,456)
(39,913)
142,656
The below facilitates
the classification of the above segments into the Lloyd’s aggregate
classes of business:
2024
Gross
premiums
written
Gross
premium
s earned
Gross
claims
incurred
Gross
operating
expenses
Reinsuran
ce balance
£000
Underwriti
ng result
£000
£000
£000
£000
£000
Additional
analysis
Fire and damage
to property of
which is:
Specialities
586,448
511,682
(208,626)
(165,269)
(45,259)
92,528
Energy
-
-
8,878
-
(18,036)
(9,158)
Third party liability
of which is:
Energy
-
-
-
-
-
-
Notes to the Financial Statements (continued)
31 December 2024
53
5. Analysis of Underwriting Result (continued)
The below facilitates
the classification of the above segments into the Lloyd’s aggregate
classes of business:
2023
Gross
premiums
written
Gross
premiums
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsurance
balance
Underwriting
result
£000
£000
£000
£000
£000
£000
Additional analysis
Fire and damage to
property of which is:
Specialities
435,494
334,009
(133,406)
(117,029)
(69,399)
14,175
Energy
3,069
3,133
(694)
(704)
(1,065)
670
Third party liability of
which is:
Energy
-
-
190
-
-
190
All premiums are written through the
Lloyd’s platform.
Brokerage and commission on direct business written was £283.8m (2023: £244.4m).
No gains or losses were recognised in profit or loss during the year on buying reinsurance
(2023: £nil).
2023
Gross
premiums
written
Gross
premiums
earned
Gross
claims
incurred
Gross
operating
expenses
Reinsuranc
e balance
Underwriting
result
£000
£000
£000
£000
£000
£000
Direct insurance
Accident and health
1,431
2,162
441
(525)
2,138
4,216
Motor (other
classes)
1,551
886
(1,886)
(441)
(5)
(1,446)
Marine, Energy,
Aviation and
Transport
322,466
314,156
(140,381)
(101,361)
(21,663)
50,751
Fire and other
damage to property
438,563
337,142
(134,100)
(117,780)
(70,417)
14,845
Third party liability
205,237
207,717
(77,775)
(62,211)
(13,852)
53,879
Miscellaneous
59,618
48,203
(20,689)
(15,025)
(4,328)
8,161
Total direct
insurance
1,028,866
910,266
(374,390)
(297,343)
(108,127)
130,406
Reinsurance
acceptances
183,727
210,960
(124,398)
(50,143)
(15,228)
21,191
Total
1,212,593
1,121,226
(498,788)
(347,486)
(123,355)
151,597
Notes to the Financial Statements (continued)
31 December 2024
54
5. Analysis of Underwriting Result (continued)
The gross premiums written for direct insurance by underwriting location of risk is
presented in the table below:
2024
2023
£000
£000
United Kingdom
1,206,540
1,028,866
Total gross premiums written
1,206,540
1,028,866
6.
Net Operating Expenses
2024
2023
£000
£000
Acquisition costs
364,703
325,838
Change in deferred acquisition costs
(33,716)
(30,191)
Administrative expenses
47,782
38,175
Members’ standard personal expenses
14,873
13,664
Reinsurance commissions and profit participation
(3,363)
(6,269)
Net operating expenses
390,279
341,217
Total commissions for direct insurance business for the year amounted to:
2024
2023
£000
£000
Total commission for direct insurance business
283,843
244,392
Administrative expenses include:
2024
2023
£000
£000
Auditors’ remuneration:
451
420
fees payable to the Syndicate’s auditor for the audit of these financial
statements
257
219
fees payable to the Syndicate’s auditor and its associates in respect of
other services pursuant to legislation
194
201
Impairment losses on debtors:
-
-
arising out of direct insurance operations
-
-
arising out of reinsurance operations
-
-
Notes to the Financial Statements (continued)
31 December 2024
55
7. Key Management Personnel Compensation
The Directors of Munich Re Syndicate Limited received the following aggregate
remuneration charged to the Syndicate:
2024
2023
£000
£000
Directors’ emoluments
3,580
1,887
Fees
18
20
The active underwriter received the following remuneration charged as a Syndicate
expense and included within the D
irectors’ emoluments above:
2024
2023
£000
£000
Emoluments
1,542
355
8. Staff Numbers and Costs
All employees are employed by the Service Company. The Syndicate and Managing Agent
have no employees. The average number of employees employed by the Service
Company but working for the Syndicate during the year was as follows:
Number of employees
2024
2023
Administration and finance
66
88
Underwriting
101
80
Claims
30
20
Total
197
188
The following amounts were recharged to the Syndicate by the Service Company in
respect of salary costs:
2024
2023
£000
£000
Wages and salaries
29,391
23,410
Social security costs
4,073
2,534
Other pension costs
2,492
1,492
Total
35,956
27,436
Notes to the Financial Statements (continued)
31 December 2024
56
9. Investment Return
2024
2023
£000
£000
Interest and similar income
From financial instruments designated at fair value through profit or
loss
Interest and similar income
32,517
20,569
Interest on cash at bank
1,918
1,408
Other income from investments
From financial instruments designated at fair value through profit or
loss
Gains on the realisation of investments
6,408
6,848
Losses on the realisation of investments
(127)
(593)
Unrealised gains on investments
13,640
20,772
Unrealised losses on investments
(3,778)
-
Investment management expenses
(1,056)
(1,036)
Total investment return
49,522
47,968
Transferred to the technical account from the non-technical account
49,522
47,968
Investment return on Funds in Syndicate
9,429
9,858
Investment return not affiliated to the FIS was wholly allocated to the technical account.
10. Distribution
The gross distribution payable to the member was £122.1m (2023: payable of £133.6m).
£63m of the FIS was injected during the year (2023: release of £44.7m). Income relating to
these funds retained has been included within the Statement of Profit or Loss (Non-
Technical Account).
11. Financial Investments
Carrying value
Cost
2024
2023
2024
2023
£000
£000
£000
£000
Debt securities and other fixed income
securities
1,609,435
1,241,734
1,604,659
1,265,765
Syndicate loans to central fund
6,102
7,461
7,178
8,777
Loans and deposits with credit institutions
55,205
60,113
55,205
60,113
Total financial investments
1,670,742
1,309,308
1,667,042
1,334,655
Notes to the Financial Statements (continued)
31 December 2024
57
11. Financial Investments (continued)
The amount ascribable to listed investments is 96.3% (2023: 94.8%) of the total market
value of investments.
Included within the fair value of financial investments is accrued income of £14.3m (2023:
£7.7m).
Loans and deposits with credit institutions include overseas deposits totalling £55.2m
(2023: £60.4m), which are held at fair value. Of this, £13.6m (2023: £14.1m) represent
short-term deposits and are presented under Cash and cash equivalents in Note 22.
The table below presents an analysis of financial investments by their measurement
classification.
2024
2023
£000
£000
Financial assets measured at fair value
through profit or loss
1,670,742
1,309,308
Total financial investments
1,670,742
1,309,308
As the Syndicate is fully aligned, the Syndicate holds the capital supporting its
underwriting in its
Syndicate’s premium trust funds. These funds are known as F
unds in
Syndicate (FIS). At 31 December 2024 the following amount was held as FIS:
2024
2023
£000
£000
Funds in Syndicate (FIS)
278,225
202,417
Total funds in syndicate
278,225
202,417
Valuation Hierarchy
The Syndicate classifies its financial instruments held at fair value in its balance sheet
using a fair value hierarchy based on the inputs used in the valuation techniques as
follows:
•
Level 1
–
financial assets that are measured by reference to published quotes in an
active market. A financial instrument is regarded as quoted in an active market if
quoted prices are readily and regularly available from an exchange, dealer, broker,
industry group, pricing service or regulatory agency and those prices represent actual
and regularly occurring market transactions on an arm’s length basis.
•
Level 2
–
financial assets measured using a valuation technique based on
assumptions that are supported by prices from observable current market transactions.
For example, assets for which pricing is obtained via pricing services but where prices
have not been determined in an active market, financial assets with fair values based
on broker quotes, investments in private equity funds with fair values obtained via fund
managers and assets that are valued using the Syndicate’s own models whereby the
significant inputs into the assumptions are market observable.
Notes to the Financial Statements (continued)
31 December 2024
58
11. Financial Investments (continued)
Valuation Hierarchy (continued)
•
Level 3
–
financial assets measured using a valuation technique (model) based on
assumptions that are neither supported by prices from observable current market
transactions in the same instrument nor are they based on available market data.
Therefore, unobservable inputs reflect the Syndicate's own assumptions about the
assumptions that market participants would use in pricing the asset or liability
(including assumptions about risk). These inputs are developed based on the best
information available, which might include the Syndicate’s own data.
Given the uncertainty regarding repayment of the Lloyd's loan, a discount for lack of
marketability of between 10% and 20% was considered and a 15% fair value adjustment
was applied (2023: 15%).
No further Level 3 disclosure is provided on the grounds of materiality.
The table below analyses financial instruments held at fair value in the Syndicate’s balance
sheet at the reporting date by its level in the fair value hierarchy.
2024
Level 1
Level 2
Level 3
Total
£000
£000
£000
£000
Debt securities and other fixed income
securities
-
1,609,435
-
1,609,435
Syndicate loans to central fund
-
-
6,102
6,102
Loans and deposits with credit institutions
13,657
41,548
-
55,205
Total financial investments
13,657
1,650,983
6,102
1,670,742
2023
Level 1
Level 2
Level 3
Total
£000
£000
£000
£000
Debt securities and other fixed income
securities
-
1,241,734
-
1,241,734
Syndicate loans to central fund
-
-
7,461
7,461
Loans and deposits with credit institutions
14,326
45,787
-
60,113
Total financial investments
14,326
1,287,521
7,461
1,309,308
Information on the methods and assumptions used to determine fair values for each major
category of financial instrument measured at fair value is provided below.
Notes to the Financial Statements (continued)
31 December 2024
59
11. Financial Investments (continued)
Valuation Hierarchy (continued)
Debt securities are generally valued using prices provided by external pricing vendors.
Pricing vendors will often determine prices by consolidating prices of recent trades for
identical or similar securities obtained from a panel of market makers into a composite
price. The pricing service may make adjustments for the elapsed time from a trade date
to the valuation date to take into account available market information. Lacking recently
reported trades, pricing vendors will use modelling techniques to determine a security
price.
Corporate bonds, including asset backed securities, that are not listed on a recognised
exchange or are traded in an established over the counter market are also mainly valued
using composite prices. Where prices are based on multiple quotes and those quotes are
based on actual recent transactions in the same instrument the securities are classified
as level 2, otherwise they are classified as level 3 in the fair value hierarchy.
GIM analyses
the prices obtained from pricing vendors to ensure that they are reasonable
and produce a reasonable estimate of fair value. Management considers both qualitative
and quantitative factors as part of this analysis. Examples of analytical procedures
performed include reference to recent transactional activity for similar securities, review
of pricing statistics and trends and consideration of recent relevant market events.
At the reporting date Level 1 and Level 2 financial assets and liabilities were valued using
valuation techniques based on observable market data. All of the investments categorised
as Level 3 are fair valued based on the inputs to the valuation technique used.
12. Debtors Arising out of Direct Insurance Operations
2024
2023
£000
£000
Due within one year
601,109
423,083
Due after one year
47
57
Total
601,156
423,140
13. Debtors Arising out of Reinsurance Operations
2024
2023
£000
£000
Due within one year
157,702
179,114
Due after one year
36,074
30,383
Total
193,776
209,497
Notes to the Financial Statements (continued)
31 December 2024
60
14. Other Debtors
2024
2023
£000
£000
Other related party balances (non-syndicate)
3,099
4,546
Amounts due from members
61
-
Other
4,838
1,022
Total
7,998
5,568
15. Deferred Acquisition Costs
The table below shows changes in deferred acquisition costs assets from the beginning of
the period to the end of the period.
2024
2023
Gross
Reinsurance
Net
Gross
Reinsurance
Net
£000
£000
£000
£000
£000
£000
Balance at 1
January
174,822
(2,164)
172,658
150,878
(3,563)
147,315
Incurred
deferred
acquisition
costs
364,703
(3,363)
361,340
325,838
(6,269)
319,569
Amortised
deferred
acquisition
costs
(330,987)
3,267
(327,720)
(295,647)
7,492
(288,155)
Foreign
exchange
movements
(451)
(26)
(477)
(6,247)
176
(6,071)
Balance at 31
December
208,087
(2,286)
205,801
174,822
(2,164)
172,658
16. Claims Development
The following tables illustrate the development of the estimates of earned ultimate
cumulative claims incurred, including claims notified and IBNR, for each successive
underwriting year, illustrating how amounts estimated have changed from the first
estimates made.
As these tables are on an underwriting year basis, there is an apparent large increase from
amounts reported for the end of the underwriting year to one year later as a large
proportion of premiums are earned in the year of account’s second year of development.
Balances have been translated at exchange rates prevailing at 31 December 2024 in all
cases.
Notes to the Financial Statements (continued)
31 December 2024
61
16. Claims Development (continued)
Gross:
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Total
Pure underwriting year
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
Estimate of gross claims
At end of underwriting year
162,811
131,532
174,956
166,281
159,984
207,250
237,607
305,340
261,793
398,581
One year later
303,779
277,060
305,419
360,139
499,809
469,605
542,189
607,217
548,908
Two years later
266,183
250,694
276,273
380,661
468,827
449,215
529,751
573,319
Three years later
240,065
231,790
256,105
356,336
449,409
413,513
552,253
Four years later
236,102
219,207
246,100
349,116
439,788
432,213
Five years later
224,494
211,987
241,075
350,153
448,437
Six years later
218,194
208,801
240,681
351,639
Seven years later
214,073
201,453
236,814
Eight years later
212,320
200,154
Nine years later
211,844
Estimate of gross claims reserve
211,844
200,154
236,814
351,639
448,437
432,213
552,253
573,319
548,908
398,581
3,954,162
Provision in respect of prior years
41,200
Less gross claims paid
(207,454)
(195,633)
(221,279)
(321,857)
(409,650)
(323,467)
(312,810)
(286,071)
(176,054)
(32,562)
(2,486,837)
Gross claims reserve
4,390
4,521
15,535
29,782
38,787
108,746
239,443
287,248
372,854
366,019
1,508,525
Notes to the Financial Statements (continued)
31 December 2024
62
16. Claims Development (continued)
Net:
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Total
Pure underwriting year
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
Estimate of net claims
At end of underwriting year
98,547
83,434
83,433
99,446
111,678
162,473
185,898
235,661
244,739
299,082
One year later
201,734
176,517
193,157
237,936
301,082
338,817
399,212
512,530
511,014
Two years later
195,628
177,401
194,239
264,238
272,016
322,129
397,677
487,060
Three years later
178,155
170,373
184,496
250,669
266,059
309,124
403,218
Four years later
176,988
162,396
177,862
251,383
258,348
327,671
Five years later
168,501
156,221
174,417
249,136
264,625
Six years later
163,129
155,173
174,494
250,115
Seven years later
159,574
150,098
173,205
Eight years later
158,351
148,999
Nine years later
158,030
Estimate of net claims reserve
158,030
148,999
173,205
250,115
264,625
327,671
403,218
487,060
511,014
299,082
3,023,019
Provision in respect of prior years
27,754
Less net claims paid
(154,944)
(153,043)
(152,281)
(228,382)
(239,473)
(254,384)
(246,725)
(247,810)
(166,382)
(30,848)
(1,874,272)
Net claims reserve
3,086
(4,044)
20,924
21,733
25,152
73,287
156,493
239,250
344,632
268,234
1,176,501
Notes to the Financial Statements (continued)
31 December 2024
63
17. Technical Provisions
The table below shows changes in the insurance contract liabilities and assets from the
beginning of the period to the end of the period.
2024
2023
Gross
provisions
Reinsurance
assets
Net
Gross
provisions
Reinsurance
assets
Net
£000
£000
£000
£000
£000
£000
Claims outstanding
Balance at 1 January
1,251,226
(274,195)
977,031
1,221,125
(371,604)
849,521
Claims paid during the
year
(440,601)
70,655
(369,946)
(411,402)
87,303
(324,099)
Expected cost of
current year claims
384,647
(97,356)
287,291
318,268
(33,137)
285,131
Change in estimates of
prior year provisions
299,643
(28,985)
270,658
180,520
27,032
207,552
Foreign exchange
movements
13,610
(2,143)
11,467
(57,285)
16,211
(41,074)
Balance at 31
December
1,508,525
(332,024)
1,176,501
1,251,226
(274,195)
977,031
2024
2023
Gross
provisions
Reinsurance
assets
Net
Gross
provisions
Reinsurance
assets
Net
£000
£000
£000
£000
£000
£000
Unearned
premiums
Balance at 1 January
659,100
(42,906)
616,194
594,026
(42,949)
551,077
Premiums written
during the year
1,373,467
(175,530)
1,197,937
1,212,594
(138,268)
1,074,326
Premiums earned
during the year
(1,254,315)
166,254
(1,088,061)
(1,121,226)
135,729
(985,497)
Foreign exchange
movements
(854)
482
(372)
(26,294)
2,582
(23,712)
Balance at 31
December
777,398
(51,700)
725,698
659,100
(42,906)
616,194
Refer to Note 4 for the sensitivity analysis performed over the value of insurance liabilities,
disclosed in the accounts, to potential movements in the assumptions applied within the
technical provisions.
Notes to the Financial Statements (continued)
31 December 2024
64
18. Discounted Claims
No claims provisions are discounted.
19. Creditors Arising out of Direct Insurance Operations
2024
2023
£000
£000
Due within one year
96,858
67,267
Due after one year
9
-
Total
96,867
67,267
20. Creditors Arising out of Reinsurance Operations
2024
2023
£000
£000
Due within one year
118,011
101,320
Due after one year
55
9
Total
118,066
101,329
21. Other Creditors
2024
2023
£000
£000
Other related party balances (non-syndicates)
164,247
89,278
Other liabilities
941
764
Total
165,188
90,042
22. Cash and Cash Equivalents
2024
2023
£000
£000
Cash at bank and in hand
116,488
114,051
Deposits with credit institutions
13,578
14,163
Total cash and cash equivalents
130,066
128,214
Only Financial Investments comprising of call deposits with maturities of three months or
less from the acquisition date that are used by the Syndicate in the management of its
short-term commitments are included in cash and cash equivalents.
Deposits with credit institutions comprise of overseas deposits classified as cash and cash
equivalents.
Notes to the Financial Statements (continued)
31 December 2024
65
22. Cash and Cash Equivalents (continued)
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:
2024
2023
£000
£000
Cash at bank and in hand
52,964
50,458
Total cash and cash equivalents not available for use by the
syndicate
52,964
50,458
23. Analysis of Net Debt
At 1
January
Cash
flows
Acquired
Fair value
and
exchange
movements
Non-cash
changes
At 31
December
2024
2024
Cash and cash
equivalents
128,214
1,813
-
39
-
130,066
Total
128,214
1,813
-
39
-
130,066
24
.
Related Parties
These disclosure requirements are in addition to the requirement to disclose key
management personnel compensation. This disclosure is given in note 7.
Munich Ergo Asset Management GmbH (‘MEAG’)
MEAG is Munich Re’s asset management company.
The Syndicate paid a total of £1.1m
(2023: £0.9m) for asset management and accounting services in 2024. There were no
outstanding balances with the Syndicate at the year-end (2023: £nil).
Munich Re
Capital Limited (‘MRCL’)
MRCL is the corporate member of the Syndicate. MRCL’s immediate parent company is
MRSG. Apart from members balances, there were no outstanding balances with the
Syndicate at the year end.
T E Artmann and D J R Hoare are directors of MRCL.
Munich Re Capital Limited (‘MRCL
2
’)
MRCL2 is the corporate member to Syndicate 6107 and wholly owned by MRSG. At year
end the outstanding net balance due to the Syndicate was £nil (2023: £nil).
Notes to the Financial Statements (continued)
31 December 2024
66
24. Related Parties (continued)
Munich Re Risk Solutions Ireland Limited (‘MRRSI’)
MRRSI is a wholly owned subsidiary of MRSG which was set up for the Syndicate to enable
it to have continued access to EEA business via the Lloyd’s
Europe platform following
Brexit. As of 31 December 2024, MRRSI has written £2.3m of reinsurance contracts (2023:
£2.2m). There were no outstanding balances with the Syndicate at the year-end.
T Coskun was a director of MRRSI during the 2024 year.
Munich Re Specialty Group N.A Inc.
(‘
MRSGNA
’)
MRSGNA is a directly wholly owned company by MRSG and produces Marine and Cyber
business from the USA for the Syndicate under a binding authority. Business produced by
MRSGNA amounts to approximately 7.3% (2023: 9.4%) of the estimated earned premium
(gross of reinsurance) of the Syndicate in 2024. The outstanding net balances at year end
were £0m due to the Syndicate (2023: £64.9m due to the Syndicate).
T E Artmann is a director of MRSGNA.
Munich Re Specialty Insurance (UK) Limited (‘MRSI’)
MRSI is an IDC, wholly owned by MRSG and predominantly produces UK provincial
Marine and Property business for the Syndicate under a binding authority.
On December 31, 2011, the Syndicate issued a subordinated loan of £0.2m to MRSI. In
January 2022, a £0.7m subordinated loan previously provided to GJW was transferred to
MRSI to ensure regulatory compliance. The loan accrues interest at the Secured Overnight
Financing Rate (SOFR) plus 1% and is repayable no earlier than two years from issuance
or upon written notification from the borrower to both the Lender and the FCA. As of year-
end, the net outstanding balance was £5.0m due to the Syndicate (2023: £3.3m due to the
Syndicate).
T E Artmann, T Coskun, G K Hill and D J Hoare were directors of MRSI in 2024.
Munich Re Syndicate Limited (‘MRSL’)
During the year, the Syndicate has paid fees to MRSL, the Managing Agent of the
Syndicate, amounting to £2.3m (2023
: £1.8m). MRSL’s immediate parent company is
MRSG. The outstanding net balance at year end was £158.8m due from the Syndicate
(2023: £87.9m due from the Syndicate).
The Managing Agent has paid £63.0m (2023: £49.7m) in shared service recharges for the
ordinary day to day running costs related to the Syndicate.
Notes to the Financial Statements (continued)
31 December 2024
67
24. Related Parties (continued)
Munich Re
Syndicate Labuan Limited (‘MRSLAB’)
MRSLAB is a non-profit making IDC owned by MRSG and produces Specialty business
from Malaysia exclusively for the Syndicate under a binding authority. Business produced
by MRSLAB amounts to approximately 0.4% (2023: 0.2%) of the estimated earned
premium (gross of reinsurance) of the Syndicate in 2024. The outstanding net balance at
year end was £0.2m due from the Syndicate (2023: £2.9m due to the Syndicate).
There were no directors in common between the Managing Agent and MRSLAB for 2024.
Munich Re Syndicate Singapore Pte Limited (‘MRSS’)
MRSS is a non-profit making IDC owned by MRSG and predominantly produces Marine
and Green Solutions business from S.E. Asia exclusively for the Syndicate under a binding
authority. Business produced by MRSS amounts to approximately 4.2% (2023: 4.3%) of
the estimated earned premium (gross of reinsurance) of the Syndicate in 2024. The
outstanding net balance at the year end was £3.1m due to the Syndicate (2023: £20.3m
due to the Syndicate).
T E Artmann is a director of MRSS.
Münchener
Rückversicherungs
–
Gesellschaft
Aktiengesellschaft in
München
(‘Munich Re’)
Munich Re Syndicate Limited is wholly owned by Munich Re Specialty Group Ltd (MRSG),
which is wholly owned by Munich Re. The Syndicate placed a total of £17.9m (2023:
£14.9m) outwards reinsurance premium with its ultimate parent undertaking under 35
different contracts for the 2024 year of account (2023: 38). These contracts provided the
Syndicate with cover according to terms in the normal course of business.
There were no outstanding balances with the Syndicate at the year-end (2023: £nil).
MRSG UK
Services Limited (’MRSGUKS’)
MRSGUKS is a wholly owned subsidiary of MRSG, which is the sole employer within the
UK subgroup. There were no outstanding balances with the Syndicate at the year-end.
T E Artmann is a director of MRSGUKS.
Roanoke
International Brokers Limited (‘RIBL’)
RIBL is an insurance broker wholly owned by MRSG. RIBL conducts business both with
the Syndicate and third parties. The gross brokerage income generated by RIBL in the
year ended 31 December 2024 was £6.0m (2023: £6.5m). A high percentage of this
brokerage is from the placement of business through IDCs. There were no outstanding
balances with the Syndicate at the year-end.
There were no directors in common between the Managing Agent and RIBL for 2024.
Notes to the Financial Statements (continued)
31 December 2024
68
24. Related Parties (continued)
Roanoke International Brokers (MENA) Limited (‘RIBML’)
RIBML is an insurance broker in the Middle East which is wholly owned by MRSG.
Business produced by RIBML amounts to approximately 0.0% (2023: 0.0%) of the
estimated earned premium (gross of reinsurance) of the Syndicate in 2024 where the gross
brokerage income generated by RIBML in the year ended 31 December 2024 was £2.0m
(2023: £0.7m). The outstanding net balance at year end with the Syndicate was £nil (2023:
£0.7m due from the Syndicate).
There were no directors in common between the Managing Agent and RIBML for 2024.
25. Off-Balance Sheet Items
There are no off-balance sheet items for Syndicate 0457.
26.
Post Balance Sheet Events
A cash distribution of £122.1m to members will be proposed in relation to the 2022 year
of account (2023: £133.6m distribution in relation to the 2021 year of account).
27. Contingencies and Commitments
Syndicate 0457 does not have any contingent liabilities or commitments.
28.
Foreign Exchange Rates
The following foreign currency exchange rates have been used for principal foreign
currency transactions:
2024
2023
Start-of-
period
Year-end
Average
Start-of-
period
Year-end
Average
rate
rate
rate
rate
rate
rate
Sterling
Euro
US dollar
Canadian dollar
Australian dollar
Japanese Yen
Notes to the Financial Statements (continued)
31 December 2024
69
29. Funds at Lloyds
(‘FAL’)
Every member is required to hold capital at Lloyd’s, which is held in trust and known as
FAL. These assets are in the form of letters of credit from Munich Re. These funds are
intended primarily to cover circumstances where Syndicate assets prove insufficient to
meet participating members’ underwriting liabilities.
The level of FAL that Lloyd’s requires a member to maintain is determined by Lloyd’s,
based on PRA requirements and resource criteria. FAL is determined by a number of
factors including the nature and amount of risk in respect of business that has been
underwritten by the member and the assessment of the reserving risk in respect of
business that has been underwritten. Since FAL is not under the management of the
Managing Agent, no amount has been shown in these financial statements by way of such
capital r
esources. However, the Managing Agent is able to make a call on the members’
FAL to meet liquidity requirements or to settle losses.