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AXIS Syndicate 1686

Syndicate Annual Reports and Accounts

for the year ended 31 December 2024

PAGE

DIRECTORS AND ADMINISTRATION

2

ACTIVE UNDERWRITER'S REPORT

3

MANAGING AGENT'S REPORT

4 - 8

STATEMENT OF MANAGING AGENT'S RESPONSIBILITIES

9

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SYNDICATE 1686

10 - 12

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

13 - 14

STATEMENT OF CHANGES IN MEMBERS' BALANCES

14

BALANCE SHEET - ASSETS

15

BALANCE SHEET - LIABILITIES

16

STATEMENT OF CASH FLOWS

17

NOTES TO THE FINANCIAL STATEMENTS

18 - 42

AXIS SYNDICATE 1686

CONTENTS

________________________________________________________________________________________________________

_____________________________________________________________________________________________________1

MANAGING AGENT

DIRECTORS

Stephen Cane (Chairman)*

* Independent

Tadeusz Dziurman*

Non-Executive

Mark Gregory (resigned 31 December 2024)

Fintan Mullarkey (resigned 12 September 2024)

James Mollett

Alistair Robson (resigned 30 June 2024)

Elanor Hardwick*

Ann Haugh (resigned 31 December 2024)

John Owen (appointed 14 February 2024)

Axel Theis* (appointed 8 February 2024)

Toby Read (appointed 16 July 2024)

COMPANY SECRETARY

Leena Modi

MANAGING AGENT'S REGISTERED OFFICE

52 Lime Street

London

EC3M 7AF

United Kingdom

MANAGING AGENT'S REGISTERED NUMBER

08702952

ACTIVE UNDERWRITER

Toby Read

SOLICITORS

Willkie Farr & Gallagher (UK) LLP

27th Floor, Citypoint

1 Ropemaker Street

London

EC2Y 9AW

United Kingdom

AUDITOR

Deloitte LLP

2 New Street Square

London

EC4A 3HQ

United Kingdom

PRINCIPAL BANKERS

Citibank NA

RBC Dexia

Citigroup Centre

Investor Services

33 Canada Square

155 Wellington Street W

Canary Wharf

Toronto, Ontario

London, E14 5LB

M5V 3K7

United Kingdom

Canada

AXIS SYNDICATE 1686

DIRECTORS AND ADMINISTRATION

________________________________________________________________________________________________________

_____________________________________________________________________________________________________2

Syndicate 1686 (the “Syndicate”) is a Lloyd’s Syndicate of AXIS Capital Holdings Limited (“ACHL”), the Bermuda based

holding company for the AXIS group of companies (“AXIS”). The Syndicate is managed by AXIS Managing Agency

Limited (“AMAL”). ACHL is the Syndicate’s sole capital provider with 100% ownership of AXIS Corporate Capital UK

Limited (“ACCUKL”) and AXIS Corporate Capital UK II Limited (“ACCUKIIL”) through other, wholly owned, legal

entities. The Syndicate commenced underwriting for contracts incepting from 1 January 2014 onwards.

For the financial year ended 31 December 2024, the Syndicate achieved gross premiums written of USD 1,966.9m,

representing growth of 12% over 2023. This growth was driven by positive rate change on renewal contracts across most

classes of business and strong new business particularly in Property, Construction, Credit and Political Risks.

The

Syndicate maintains a broad and diversified portfolio of business, with over 25 individual classes of business. The Syndicate

maintains leadership positions in a number of classes including Marine, Cyber, Professional Lines and Political Risks.

Financial year 2024 reaffirmed the significant progress made towards the Syndicate’s long-term goal of sustainable top

quartile underwriting performance at Lloyd's. In 2024 the Syndicate produced an underwriting profit of USD 174.6m (2023:

profit of USD 153.0m).

The Syndicate's Net Combined Ratio for the year is 87.8%, which is a 0.3pt deterioration over

2023.

This performance is despite significant global challenges with the (re)insurance industry affected by macroeconomic

impacts of high inflation and volatile interest rates, continuing geopolitical turmoil in Russia/Ukraine and the Israel/Hamas

conflict and another year of above average losses arising from natural catastrophes.

The Syndicate’s underlying

performance, which is measured excluding the impact of losses arising from natural catastrophes, has remained robust,

further evidencing the success of its multi-year performance improvement plan and repositioning of the portfolio.

As anticipated, risk adjusted rate change has levelled off and begun to deteriorate during 2024 after a number of years of

compounding rate improvement.

Overall risk adjusted rate change for the Syndicate was -0.9% against a plan of -1.5% but

with accelerating rate pressure in a number of lines, in particular Cyber, Professional Lines and towards the end of the year,

Property.

After many years of rate improvements, the Syndicate portfolio is considered to be broadly price adequate across

almost all lines and the focus is now on cycle management to balance rate against trend and maintain underwriting

profitability.

Performance management of the Syndicate is continuously practised given the dynamic nature of the insurance market.

Disciplined remediation decisions, together with growth in target business lines has delivered consistent profitable net

combined ratios. I remain confident that this continued focus on underwriting excellence, selected growth in attractive

classes of business and investments in our talent, data and analytics, the Syndicate is on track to deliver sustained profitable

underwriting performance into 2025 and beyond.

Toby Read

Active Underwriter

Date: 5 March 2025

AXIS SYNDICATE 1686

ACTIVE UNDERWRITER'S REPORT

___________________________________________________________________________________________________

_____________________________________________________________________________________________________3

The directors of the Managing Agent, AMAL, present their annual report for the Syndicate 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 ("Lloyd's Regulations

2008") and in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting

Standards FRS 102 “The Financial Reporting Standards applicable in the UK and Ireland” and FRS 103 “Insurance

Contracts”) and applicable law.

This annual report is also prepared in accordance with the Lloyd’s Syndicate Accounts Instructions Version 2.0 as modified

by the Frequently Asked Questions Version 1.1 issued by Lloyd’s.

This annual report has been iXBRL tagged in accordance with the Lloyd's XBRL taxonomy Version 2.0, as issued by

Lloyd's.

RESULTS

The results of the Syndicate are set out on pages 13 and 14.

PRINCIPAL ACTIVITY AND REVIEW OF THE BUSINESS

The Syndicate’s principal activity is the underwriting of direct insurance and reinsurance business in the Lloyd’s market.

The Syndicate predominately writes marine, property, terrorism, professional lines, casualty, accident and health, political

risk and reinsurance.

Gross written premium income by class of business for the calendar year was as follows:

2024

2023

USD '000

USD '000

Marine and Aviation

393,846

341,347

Property

477,527

391,878

Terrorism

48,922

49,707

Professional Lines

419,456

473,358

Casualty

134,330

112,857

Accident & Health

98,743

84,290

Political Risk

159,429

148,638

Reinsurance

156,110

117,430

Broker Facilities

78,510

40,486

1,966,873

1,759,991

AXIS SYNDICATE 1686

MANAGING AGENT'S REPORT

______________________________________________________________________________________________________

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PRINCIPAL ACTIVITY AND REVIEW OF THE BUSINESS (continued)

The Syndicate's key financial performance indicators during the year were as follows:

2024

2023

Change

USD '000

USD '000

%

Gross written premium

1,966,873

1,759,991

11.8 %

Net written premium

1,570,196

1,345,052

16.7 %

Net earned premium

1,420,864

1,224,391

16.0 %

Other technical income, net of reinsurance

904

316

186.1 %

Net claims

(667,372)

(574,832)

16.1 %

Acquisition costs

(428,110)

(356,526)

20.1 %

Operating costs

(151,680)

(140,318)

8.1 %

Net technical result (excl. investment return)

174,606

153,031

14.1 %

Net loss ratio

47.0 %

46.9 %

Net acquisition ratio

30.1 %

29.1 %

Net expense ratio

10.7 %

11.5 %

Combined ratio

87.8 %

87.5 %

The forecast return on capacity at 31 December 2024 for the three years of account is as follows:

2024

2023

2022

YOA

YOA

YOA

Open

Open

Closed

Capacity (USD '000)

1,877,817

1,627,441

1,377,066

Forecast result (USD '000)

240,594

207,903

73,562

Return on capacity %

12.8%

12.8%

5.3%

Climate Change

AXIS remains focused on addressing the impact of climate change. AXIS has a Climate Change Working Group, which

includes AMAL representation, to ensure that the potential risks from climate change are identified and then managed as

part of the Enterprise Risk Management framework.

Additionally AXIS has developed a plan to ensure that the exposures

in its managed syndicate are systematically assessed and monitored as appropriate, reviewing its underwriting strategy and

potential impact in light of climate related risks as detailed in note 20 on page 29.

AXIS continues to assess and understand its impact as a company and as a business on the climate.

AXIS’ policy limiting

thermal coal and oil sands underwriting and investment came into effect on 1 January 2020. Further details on the group

wide energy and carbon reduction initiative have been documented in the Corporate Citizenship section of the AXIS Capital

Holdings annual report which can be obtained from the AXIS website.

The Managing Agent is required to address the energy reporting requirements in relation to streamlined energy and carbon

reporting. These reporting requirements for AMAL are consolidated within the streamlined energy and carbon reporting

section of the AXIS Specialty UK Holdings Limited annual accounts.

Energy Transition Syndicate 2050

In 2024 AXIS established a new Syndicate dedicated to providing insurance solutions that support the global energy

transition to net zero.

AXIS Energy Transition Syndicate 2050 commenced underwriting on 1 April 2024 and provides a

range of specialty insurance coverages to companies, organisations and countries solely related to assets or activities that are

playing a contributory role in the global transition away from carbon based technologies.

The syndicate is managed by

AMAL.

AXIS SYNDICATE 1686

MANAGING AGENT'S REPORT

______________________________________________________________________________________________________

_____________________________________________________________________________________________________5

FUTURE DEVELOPMENTS

Both ACCUKL and ACCUKIIL participated on the 2022, 2023 and 2024 years of account of Syndicate 1686.

In 2025 the

participation will change and the 2025 year of account will be wholly aligned to ACCUKIIL.

The Syndicate will distribute profits in respect of the 2022 year of account to ACCUKL and ACCUKIIL in June 2025.

In December 2024, AXIS announced that it will enter into a loss portfolio transfer reinsurance agreement with Cavello Bay

Reinsurance, a wholly owned subsidiary of

Enstar Group Limited, covering a portfolio of reinsurance segment business.

The transaction is predominantly related to 2021 and prior underwriting years.

The transaction will take effect in the 2025

calendar year once regulatory approval is granted and so there is no impact for 2024 reporting.

PRINCIPAL RISKS AND UNCERTAINTIES

The Syndicate's principal risks are insurance, credit, market, liquidity and operational risks that arise as a result of doing

business.

Insurance risk

Insurance risk is the inherent uncertainty as to the occurrence, amount and timing of insurance liabilities transferred to the

Syndicate through the underwriting process. Insurance risk is managed through rigorous protocols, including peer review

and underwriting guidelines, which provide a framework for consistent pricing and risk analysis while ensuring alignment

to the risk appetite. The approved business plan sets out targets for volumes, pricing, line sizes and retention by class of

business.

The AMAL Board then monitors performance against the business plan throughout the year. The Managing Agent also

mitigates Insurance risk through the purchase of reinsurance.

Within insurance risk, the Syndicate recognises the following further sub categories of this risk:

1.

Natural peril catastrophe risk, including climate change impacts

2.

Man-made catastrophe risk

3.

Reserving risk

4.

Claims handling risk

5.

Pricing risk

For further details on these risks refer to note 20.

Credit risk

The key aspect of credit risk is the risk of default by one or more of the Syndicate’s reinsurers or intermediaries such as

brokers and coverholders. The AMAL Board’s policy is that the Syndicate will only reinsure with approved reinsurers,

supported by collateralisation where required. The AXIS Reinsurance Security Committee monitors reinsurer ratings and is

required to approve all new reinsurers before business is placed with them.

Credit risk arising from insureds and

intermediaries is managed through controls over debtor balances and ageing.

Market risk

Market risk is the risk that financial instruments may be negatively impacted by movements in financial market prices or

rates such as equity prices, interest rates, credit spreads and foreign exchange rates. Fluctuations in market rates primarily

affect the investment portfolio. Through asset and liability management, the Managing Agent aims to ensure that risks

influence both the economic value of investments and underwriting liabilities in the same way, thus mitigating the effect of

market fluctuations.

Liquidity risk

Liquidity risk is the risk that the Syndicate may not have sufficient financial resources to meet its obligations when they fall

due, or would have to incur excessive costs to do so. The Managing Agent aims to ensure that the Syndicate maintains

adequate liquidity to meet its liquidity needs under both normal and stressed conditions such as following a catastrophic

event. The Managing Agent manages liquidity through risk limits which define the minimum percentage of the Syndicate’s

cash and investments to mature within a defined time frame, in addition to undertaking stress testing to ensure that the

Syndicate would be able to withstand extreme loss events and still remain liquid. AXIS Specialty Finance Plc provides a

credit facility to the Syndicate to ensure that it can meet liquidity requirements even under extreme circumstances.

The

Syndicate also provides an inter-syndicate loan facility to Syndicate 2050 to ensure that it can meet liquidity requirements.

AXIS SYNDICATE 1686

MANAGING AGENT'S REPORT

______________________________________________________________________________________________________

_____________________________________________________________________________________________________6

PRINCIPAL RISKS AND UNCERTAINTIES (continued)

Operational risk

Operational risk represents the risk of loss as a result of inadequate processes, system failures, human error or external

events, including but not limited to direct or indirect financial loss, reputational damage, customer dissatisfaction, legal and

regulatory penalties or impacts from third parties including coverholders or third-party administrators (TPA). Transaction

type operational risks are managed through the application of process controls throughout the business which are reviewed

on a regular basis. In testing these controls, AXIS undertakes regular underwriting and claim peer audits, supplemented by

the work of the internal audit team. A risk register, capturing all known significant operational risks faced by the Syndicate

and the associated risk assessments, is periodically reviewed by the Risk Committee of the Board.

The Managing Agent also considers regulatory risk.

Regulatory risk represents the risk arising from failure to comply with

legal, statutory or regulatory obligations, including applicable laws, rules, and codes of conduct applicable to business

activities. The Managing Agent is required to comply with the requirements of the Financial Conduct Authority (FCA),

Prudential Regulatory Authority (PRA) and Lloyd’s. Lloyd’s requirements include those imposed on the Lloyd’s market by

overseas regulators, particularly in respect of US situs business.

The Managing Agent has a Compliance Officer who monitors business activity and regulatory developments and assesses

any effects on the Syndicate.

The Syndicate has no appetite for failing to treat customers fairly. The Syndicate manages and

monitors its conduct risk through a suite of risk indicators and reporting metrics as part of its documented conduct risk

framework.

For a more detailed analysis of the insurance and financial risks faced by the Syndicate and how these risks are managed

refer to note 20.

CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect

the amounts reported for assets and liabilities as at the statement of financial position date and the amounts reported for

revenues and expenses during the year.

Management considers the following areas to be those where judgements, estimates and assumptions have had the most

significant effect on the amounts recognised in the annual accounts.

Insurance contract technical provisions

Estimates need to be made both for the expected ultimate cost of claims reported at the reporting date and for the expected

ultimate cost of claims incurred but not reported ("IBNR"), at the reporting date. A variety of actuarial methods are utilised

in estimating the ultimate costs of claims and claims expenses, including the expected loss ratio, Bornhuetter-Ferguson and

chain ladder methods. Shorter tailed lines for example property are more volatile and experience indication is generally

adopted for all underwriting years including the current year, with more weight given to experience based methods. In

contrast for the longer tailed lines, the initial expected loss ratio is generally recommended for the most recent underwriting

years unless there has been materially outsized loss experience compared to expectations greater than the normal volatility

that would be associated with the early stage of development.

In these cases, weighting an experience-based indication is an

option or using a blend of case handler method and the loss ratio.

The provision for claims outstanding is assessed on an individual case basis and is based on the estimated ultimate cost of

each claim notified but not settled by the statement of financial position date. The IBNR provision and related handling

costs are considered for each class of business by using a range of standard actuarial techniques and include an implicit

allowance for claims which are incurred but not reported as well as deteriorations of claims currently incurred. The methods

used, and the estimates made, are reviewed regularly.

The two main critical assumptions with regards to claims provisions are 1) it is assumed unless there is information to the

contrary past development is a reasonable predictor of future claims development and 2) the rating and other models used

are fair reflections of the underlying business. The directors consider 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.

Further information is provided in note 20 (c).

AXIS SYNDICATE 1686

MANAGING AGENT'S REPORT

______________________________________________________________________________________________________

_____________________________________________________________________________________________________7

CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

(continued)

Estimates of premiums

Written premiums are recorded in accordance with the terms of the underlying policies and earned over the policy period.

Estimated premium income in respect of facility contracts includes an estimate of the underlying business attaching to each

facility at the statement of financial position date. Of the total gross written premiums of USD 1,966.9m, 43.1% (2023:

USD 1,760.0m, 42.2%) is written under delegated authorities where premiums are declared in to the Syndicate in arrears

thus requiring an estimate of any material undeclared premium be made.

The main assumption underlying these estimates

is that past premium development can be used to project future premium development. The directors consider whether the

estimates of future premium are fairly stated on the basis of the information available currently to them. However, the

ultimate receivable will vary as a result of subsequent information or events and this may result in significant adjustments.

Profit commissions

Insurance profit commissions are made up of accruals on open market and delegated portfolios.

Included in the Syndicate’s

profit commission accrual balance is an estimation of profit commission payable.

The calculation uses an estimate for the

future profitability of the delegated agreements based on the expected loss ratio of the contracts.

The expected loss ratio can

vary over time and as such, commission payable may vary as the contracts develop.

DIRECTORS

Details of the directors of the Managing Agent that served during the year and up to the date of signing of the Syndicate

annual accounts are provided on page 2.

GOING CONCERN

As detailed in note 24: Funds at Lloyd's, the Syndicate's Economic Capital Assessment ("ECA") is supported by Funds at

Lloyd's ("FAL") primarily provided by affiliate companies, AXIS Specialty Limited ("ASL") and ACCUKIIL own funds.

These funds are intended primarily to cover circumstances where Syndicate assets prove insufficient to meet participating

members' underwriting liabilities. The Managing Agent is able to make a call on the members' FAL to meet liquidity

requirements or to settle losses if required.

The directors have a reasonable expectation that the Syndicate has adequate resources to continue in operational existence

for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the annual financial statements.

Further details regarding the adoption of the going concern basis can be found in note 1.

DISCLOSURE OF INFORMATION TO THE AUDITOR

So far as each person who was a director of the Managing Agent at the date of approving the report is aware, there is no

relevant audit information, being information needed by the Syndicate auditor in connection with the auditor's report, of

which the auditor are unaware. Each director has taken all the steps that he or she ought to have taken as a director to

become aware of any relevant audit information and to establish that the Syndicate's auditor are aware of that information.

EVENTS SINCE FINANCIAL YEAR END

There have been no significant events affecting the Syndicate since the financial year end other than those highlighted in the

future developments section.

INDEPENDENT AUDITOR

Deloitte LLP acted as the Syndicate’s auditor during the year under review. Pursuant to Section 14(2) of Schedule 1 of the

Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, the auditor will be deemed

reappointed and Deloitte LLP will therefore continue in office.

SYNDICATE ANNUAL GENERAL MEETING

In accordance with the Syndicate Meetings (Amendment No 1) Byelaw (No 18 of 2000) the Managing Agent does not

propose holding an annual meeting this year. Objections to this proposal or the intention to reappoint the auditor for a

further 12 months can be made by Syndicate members within 21 days of the issue of these financial statements.

On behalf of the Board

Leena Modi

Company Secretary

Date: 5 March 2025

AXIS SYNDICATE 1686

MANAGING AGENT'S REPORT

______________________________________________________________________________________________________

_____________________________________________________________________________________________________8

The directors of the Managing Agent are responsible for preparing the Syndicate annual accounts in accordance with

applicable law and regulations.

The Insurance Accounts Directive (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) including FRS 102, the Financial Reporting

Standard applicable in the UK and Republic of Ireland and FRS 103 "Insurance Contracts", and applicable laws. The

Managing Agent is also required to prepare the Syndicate annual accounts in accordance with the Lloyd’s Syndicate

Accounts Instructions Version 2.0 as modified by the Frequently Asked Questions Version 1.1 issued by Lloyd’s.

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, subject to changes arising on the adoption of

new accounting standards in the year;

•

make judgements and estimates that are reasonable and prudent;

•

state whether applicable accounting standards have been followed, subject to any material departures disclosed and

explained in the Syndicate annual accounts; and

•

prepare the Syndicate annual 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 directors of the Managing Agent are responsible for keeping adequate accounting records which disclose with

reasonable accuracy at any time the financial position of the Syndicate and enable it to comply with the Insurance Accounts

Directive (Lloyd's Syndicate and Aggregate Accounts) Regulations 2008. They are also responsible for the system of

internal control, for safeguarding the assets of the Syndicate and hence for taking reasonable steps for the prevention and

detection of fraud and other irregularities.

The directors of the Managing Agent are responsible for the preparation and review of the iXBRL tagging that has been

applied to the Syndicate Accounts in accordance with the instructions issued by Lloyd’s, including designing, implementing

and maintaining systems, processes and internal controls to result in tagging that is free from material non-compliance with

the instructions issued by Lloyd’s, whether due to fraud or error.

The directors of the Managing Agent are responsible for the maintenance and integrity of the corporate and financial

information included on the holding company's website. Legislation in the United Kingdom governing the preparation and

dissemination of annual accounts may differ from legislation in other jurisdictions.

AXIS SYNDICATE 1686

STATEMENT OF MANAGING AGENT'S RESPONSIBILITIES

________________________________________________________________________________________________________

_____________________________________________________________________________________________________9

Report on the audit of the syndicate annual financial statements

Opinion

In our opinion the syndicate annual financial statements of Syndicate 1686 (the ‘syndicate’):

•

give a true and fair view of the state of the syndicate’s affairs as at 31 December 2024 and of its profit for the year

then ended;

•

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice,

including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic

of Ireland”; and

•

have been prepared in accordance with the requirements of The Insurance Accounts Directive (Lloyd’s Syndicate

and Aggregate Accounts) Regulations 2008 and sections 1 and 5 of the Syndicate Accounts Instructions Version

2.0

as modified by the Frequently Asked Questions Version 1.1 issued by Lloyd’s (the “Lloyd’s Syndicate

Accounts Instructions”).

We have audited the syndicate annual financial statements which comprise:

•

the profit or loss account and other comprehensive income;

•

the balance sheet;

•

the statement of changes in members’ balances;

•

the statement of cash flows;

•

the related notes 1 to 29.

The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom

Accounting Standards, including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK

and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)), applicable law and the

Syndicate Accounts Instructions. Our responsibilities under those standards are further described in the auditor's

responsibilities for the audit of the syndicate annual financial statements 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 financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical

Standard, 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 financial statements, we have concluded that the managing agent’s use of the going concern basis of

accounting in the preparation of the financial statements 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 in operations for a period

of at least twelve months from when the syndicate financial statements 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.

Other information

The other information comprises the information included in the syndicate annual reports and accounts, other than the

syndicate annual financial statements and our auditor’s report thereon. The managing agent is responsible for the other

information contained within the syndicate annual reports and accounts . Our opinion on the syndicate annual financial

statements does not cover the other information and, except to the extent otherwise explicitly stated in our 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 financial statements 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 themselves. If, based on the

work we have performed, we conclude that there is a material misstatement of this other information, we are required to

report that fact.

We have nothing to report in this regard.

Responsibilities of managing agent

As explained more fully in the managing agent’s responsibilities statement, the managing agent is responsible for the

preparation of the syndicate annual financial statements and for being satisfied that they give a true and fair view, and for

AXIS SYNDICATE 1686

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SYNDICATE 1686

________________________________________________________________________________________________________

_____________________________________________________________________________________________________10

such internal control as the managing agent determines is necessary to enable the preparation of syndicate annual financial

statements that are free from material misstatement, whether due to fraud or error.

In preparing the syndicate annual financial statements, the managing agent is responsible for assessing the syndicate’s

ability to continue in operation, disclosing, as applicable, matters related to the syndicate’s ability to continue in operation

and to use the going concern basis of accounting unless the managing agent intends to cease the syndicate’s operations, or

has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the syndicate annual financial statements

Our objectives are to obtain reasonable assurance about whether the syndicate annual financial statements 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 financial statements.

A further description of our responsibilities for the audit of the syndicate annual financial statements is located on the FRC’s

website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Extent to which 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 material misstatements in respect of irregularities, including fraud. The extent

to which our procedures are capable of detecting irregularities, including fraud is detailed below.

We considered the nature of the syndicate and its control environment, and reviewed the syndicate’s documentation of their

policies and procedures relating to fraud and compliance with laws and regulations. We also enquired of management and

those charged with governance about their own identification and assessment of the risks of irregularities.

We obtained an understanding of the legal and regulatory frameworks that the syndicate operates in, and identified the key

laws and regulations that:

•

had a direct effect on the determination of material amounts and disclosures in the financial statements. These

included the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the

Lloyd’s Syndicate Accounting Byelaw (no. 8 of 2005), the Lloyd’s Syndicate Accounts Instructions; and

•

do not have a direct effect on the financial statements but compliance with which may be fundamental to the

syndicate’s ability to operate or to avoid a material penalty. These included the requirements of Solvency II.

We discussed among the audit engagement team including relevant internal specialists such as actuarial and IT specialists

regarding the opportunities and incentives that may exist within the organisation for fraud and how and where fraud might

occur in the financial statements.

As a result of performing the above, we identified the greatest potential for fraud in the following areas, and our procedures

performed to address them are described below:

◦

Valuation of certain IBNR technical provisions classes, including long tail classes, incorporates assumptions and

methodologies requiring significant management judgement and therefore there is potential for management bias

.

There is also a risk of overriding controls by making late adjustments to the technical provisions.

In response to these risks, we performed the following:

◦

Engaged our actuarial specialists to:

▪

Assess the appropriateness of the methodology and assumptions used by the syndicate’s actuarial

function;

▪

Carry out an independent reserve estimations for selected classes of business;

▪

Perform benchmarking analysis for the development patterns for selected classes of business; and

▪

Support our audit of the catastrophe reserves, by examining management’s reserving exercise with a

specific focus on significant new catastrophes in the year and performing benchmarking analysis over

reserving for known significant market-wide catastrophe losses over more recent years of account.

In support of the above work, we also tested the relevant controls around the data, models and assumptions used to

determine the syndicate’s reserves and tested the integrity of the data used in the actuarial calculations by agreeing

it to the underlying syndicate records.

◦

Estimation of pipeline premiums requires significant management judgement and therefore there is potential for

management bias through manipulation of core assumptions. In response, our testing included:

▪

Testing the relevant controls over the calculation and judgements made in determining the estimate;

▪

Reviewing the evidence and support used by management in making the estimate, ensuring this remains

relevant to the nature of the estimate;

AXIS SYNDICATE 1686

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SYNDICATE 1686

________________________________________________________________________________________________________

_____________________________________________________________________________________________________11

Financial

year ended

Financial

year ended

31 December

31 December

2024

2023

Notes

USD '000

USD '000

Gross premiums written

3

1,966,873

1,759,991

Outward reinsurance premiums

(396,677)

(414,939)

Premiums written, net of reinsurance

1,570,196

1,345,052

Changes in unearned premium

Change in the gross provision for unearned premiums

4

(149,025)

(171,454)

Change in the provision for unearned premiums, reinsurers’ share

4

(307)

50,793

Net change in provisions for unearned premiums

(149,332)

(120,661)

Earned premiums, net of reinsurance

1,420,864

1,224,391

Allocated investment return transferred from the non-technical account

9

58,290

103,334

Other technical income, net of reinsurance

904

316

1,480,058

1,328,041

Claims paid

Gross amount

4

(679,601)

(668,316)

Reinsurers’ share

4

206,536

211,881

Net claims paid

(473,065)

(456,435)

Change in the provision for claims

Gross amount

4

(195,093)

(106,052)

Reinsurers’ share

4

786

(12,345)

Net change in provisions for claims

(194,307)

(118,397)

Claims incurred, net of reinsurance

(667,372)

(574,832)

Net operating expenses

5

(579,790)

(496,844)

Balance on the technical account - general business

232,896

256,365

AXIS SYNDICATE 1686

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME:

TECHNICAL ACCOUNT - GENERAL BUSINESS

FOR THE YEAR ENDED 31 DECEMBER 2024

________________________________________________________________________________________________________

_____________________________________________________________________________________________________13

Financial

year ended

Financial

year ended

31 December

31 December

2024

2023

Notes

USD '000

USD '000

Restated

Balance on the technical account - general business

232,896

256,365

Investment income

9

82,252

60,552

Realised gains/(losses) on investments

9

(5,451)

(19,913)

Unrealised gains/(losses) on investments

9

(16,491)

64,629

Investment expenses and charges

9

(2,020)

(1,934)

Total investment return

58,290

103,334

Allocated investment return transferred to the general business technical

account

(58,290)

(103,334)

232,896

256,365

Gain/(loss) on foreign exchange

24,386

(18,198)

PROFIT FOR THE FINANCIAL YEAR

257,282

238,167

All amounts arise from continuing activities.

There were no recognised gains or losses other than those included in the statement of comprehensive income.

There is no

other comprehensive income as the Syndicate's functional and presentational currency is the US Dollar (USD).

The accompanying notes from page 18 to 42 form an integral part of these financial statements.

STATEMENT OF CHANGES IN MEMBERS' BALANCES

Financial

year ended

Financial

year ended

31 December

31 December

2024

2023

USD '000

USD '000

Members' balances brought forward at 1 January

97,290

28,154

Total comprehensive income/(loss) for the year

257,282

238,167

Losses collected in relation to distribution on closure of underwriting year

—

—

Payments of profit to members' personal reserve funds

(91,336)

(165,650)

Other

626

(3,381)

Members' balances carried forward at 31 December

263,862

97,290

AXIS SYNDICATE 1686

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME:

NON - TECHNICAL ACCOUNT -

GENERAL BUSINESS

FOR THE YEAR ENDED 31 DECEMBER 2024

________________________________________________________________________________________________________

_____________________________________________________________________________________________________14

2024

2023

Notes

USD '000

USD '000

ASSETS

Investments

Financial investments

11

2,187,993

1,831,513

Deposits with ceding undertakings

11

2,000

4,389

2,189,993

1,835,902

Reinsurers' share of technical provisions

Provision for unearned premiums

4

255,294

257,742

Claims outstanding

4

712,220

715,248

967,514

972,990

Debtors

Debtors arising out of direct insurance operations

12

533,518

550,508

Debtors arising out of reinsurance operations

13

263,906

271,798

Other debtors

14

10,000

—

807,424

822,306

Other assets

Cash at bank and in hand

15

8,526

21,672

8,526

21,672

Prepayments and accrued income

Accrued interest and rent

17,428

11,424

Deferred acquisition costs

4

241,482

216,189

Other prepayments and accrued income

19,866

12,486

278,776

240,099

TOTAL ASSETS

4,252,233

3,892,969

AXIS SYNDICATE 1686

BALANCE SHEET - ASSETS

AS AT 31 DECEMBER 2024

________________________________________________________________________________________________________

_____________________________________________________________________________________________________15

2024

2023

Notes

USD '000

USD '000

MEMBERS' BALANCE

Total capital and reserves

Members' balances

263,862

97,290

263,862

97,290

LIABILITIES

Technical provisions

Provision for unearned premiums

4

1,124,944

1,005,032

Claims outstanding

4

2,413,842

2,262,518

3,538,786

3,267,550

Creditors

Creditors arising out of direct insurance operations

17

67,679

49,591

Creditors arising out of reinsurance operations

18

275,256

387,884

Other creditors including taxation and social security

19

58,138

44,848

401,073

482,323

Accruals and deferred income

48,512

45,806

TOTAL LIABILITIES

3,988,371

3,795,680

TOTAL LIABILITIES, CAPITAL AND RESERVES

4,252,233

3,892,969

The Syndicate financial statements were approved by the Board of AXIS Managing Agency Limited on 26 February 2025

and were signed on its behalf by:

___________________________________

James Mollett

Finance Director

5 March 2025

AXIS SYNDICATE 1686

BALANCE SHEET - LIABILITIES

AS AT 31 DECEMBER 2024

________________________________________________________________________________________________________

_____________________________________________________________________________________________________16

2024

2023

USD'000

USD'000

Restated

Profit for the financial year

257,282

238,167

Adjustments:

Increase in gross technical provisions

271,237

334,970

(Increase) / decrease in reinsurers' share of gross technical provisions

5,475

(52,085)

(Increase) / decrease in debtors

14,882

(82,243)

(Decrease) / increase in creditors

(81,250)

4,026

Movement in other assets/liabilities

(11,097)

(78,673)

Investment return

(58,290)

(103,334)

Foreign exchange

22,805

(3,856)

Other

626

(3,381)

Net cash flows from operating activities

421,670

253,591

Cash flows from investing activities

Purchase of equity and debt instruments

(1,813,575)

(1,212,122)

Sale of equity and debt instruments

1,354,138

1,150,454

Investment income received

79,619

67,278

Other

2,389

(1,410)

Net cash flows from investing activities

(377,429)

4,200

Cash flows from financing activities

Distribution of profit

(91,337)

(165,650)

Net cash flows from financing activities

(91,337)

(165,650)

Net increase / (decrease) in cash and cash equivalents

(47,096)

92,141

Cash and cash equivalents at the beginning of the year

180,590

84,593

Foreign exchange on cash and cash equivalents

(22,805)

3,857

Cash and Cash equivalents at the end of the year

15

110,689

180,591

AXIS SYNDICATE 1686

STATEMENT OF CASH FLOWS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

________________________________________________________________________________________________________

_____________________________________________________________________________________________________17

1.

BASIS OF PREPARATION

Statement of compliance

The annual report and accounts have been prepared on a going concern basis and in compliance with the Insurance

Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and FRS 102 “The Financial Reporting

Standard applicable in the UK and Republic of Ireland” (FRS 102) and FRS 103 "Insurance Contracts" (FRS 103), being

applicable UK GAAP accounting standards, and in accordance with the provisions of Schedule 3 of the Large and Medium-

sized Companies and Groups (Accounts and Reports) Regulations relating to insurance companies and the Lloyd’s

Syndicate Accounts Instructions Version 2.0 as modified by the Frequently Asked Questions Version 1.1 issued by Lloyd’s.

This annual report has been iXBRL tagged in accordance with the Lloyd's XBRL taxonomy Version 2.0, as issued by

Lloyd's.

The annual report and accounts are prepared under the historical cost convention except for certain financial instruments

which are measured at fair value. The annual report and accounts are prepared in USD which is the functional and

presentational currency of the Syndicate. The annual report and accounts are presented in thousands of US Dollars (USD

'000) unless otherwise stated.

The directors regard AXIS Capital Holdings Limited, a company incorporated in Bermuda, as the ultimate parent of

Syndicate 1686.

Going concern

The Syndicate's business activities, performance and position along with the objectives, policies and processes for managing

its principal risks and uncertainties are set out in the Managing Agent’s Report on pages 4-8. As detailed in note 24, the

Syndicate's ECA is supported by FAL primarily provided by affiliate companies, ASL and ACCUKIIL own funds. There is

no material uncertainty regarding the Syndicate’s ability to meet its liabilities as they fall due. The directors believe that the

Syndicate is well positioned to manage its business risks successfully in the current economic environment.

The directors

have continued to review the business plans, liquidity and operational resilience of the Syndicate.

As such, the directors

have a reasonable expectation that the Syndicate has adequate resources to continue in operational existence for the

foreseeable future and continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Restatement of 2023 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. The principal

change is the reclassification of the total investment return in the Statement of Profit or Loss, non-technical account.

This

does not affect the comparative balances in note 9.

In addition to this, note 7 now discloses the portion of key management

personnel's remuneration charged to the Syndicate.

Previously, the total remuneration was shown with no allocation

between their services as executives of group companies and their services as directors of AMAL.

b) Aggregation changes

To align with Lloyd's reporting requirements whilst maintaining FRS 102 compliance, certain items have been

disaggregated within the financial statements and related notes. This includes the Statement of Cash Flows where foreign

income taxes are now presented in other cashflows from operating activities.

Previously they were presented within foreign

exchange.

In note 4, the presentation of unearned premiums and claims outstanding are now shown on a disaggregated

basis.

In note 5, members standard personal expenses is now presented separately from administrative expenses.

In note

20, risk management, the presentation of total assets and liabilities are now shown on a disaggregated basis.

These changes

have been made to align with the Lloyd's Syndicate Accounts Instructions.

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________18

2.

SUMMARY OF ACCOUNTING POLICIES

Technical result

The technical result is determined on an annual basis whereby the incurred cost of claims, commission and related expenses

are charged against the earned proportion of premiums, net of reinsurance and related investment income as follows:

Premiums and acquisition costs

Premiums written are recorded in accordance with the terms of the underlying policies. Premiums are earned over the period

during which the Syndicate is exposed to the underlying risk which is generally one to two years with the exception of

multi-year contracts. Unearned premiums represent the portion of premiums written which is applicable to the unexpired

risks under contracts in force.

Acquisition costs vary with and are directly related to the acquisition of insurance contracts and consist primarily of fees and

commissions paid to brokers. Deferred acquisition costs represent the proportion of acquisition costs which will be

expensed in subsequent accounting periods; the deferral is calculated in the same manner as the unearned premiums

provision. Certain reinsurance commissions and profit participations are also included within expenses for the acquisition of

insurance contracts and are deferred in line with unearned premium.

Under FRS 103, unearned premiums and deferred acquisition costs are monetary assets. These are therefore valued at the

closing exchange rate at the balance sheet date and any foreign currency gains or losses are recognised in the Statement of

Comprehensive Income: Non-technical account.

Reinsurance

In the normal course of business, the Syndicate purchases reinsurance protection to limit its ultimate losses from

catastrophic events and to reduce its loss aggregation risk.

Reinsurance premiums ceded are expensed over the reinsurance

coverage period, the only exception to this being the loss portfolio reinsurance agreement, entered into on 1 December

2022, which was fully expensed in the 2022 period as it related to existing losses. Unearned reinsurance premiums represent

the portion of premiums ceded applicable to the unexpired term of the contracts in force.

The Syndicate also participates in a number of group-purchased global reinsurance treaties for certain risks. The premiums

paid to our reinsurers (i.e. outward reinsurance premiums) are expensed over the coverage period. The reinsurers' share of

provision for unearned premiums represents the portion of premiums ceded applicable to the unexpired term of the contract

in force. Outstanding reinsurance commitments relating to subsequent instalments are disclosed in note 26.

Reinsurance recoverables are presented net of a reserve for uncollectible reinsurance. Risk attaching contracts cover claims

that relate to underlying policies written during the terms of such contracts. Loss occurring contracts cover all claims that

occur during the life of the reinsurance contract.

The method for determining the reinsurance recoverable on unpaid losses

and loss expenses involves actuarial estimates and assumptions. Unpaid losses and loss expenses include an amount

determined from individual case estimates and loss reports, and an amount based on past experience, for losses incurred but

not reported. Based on reinsurance coverage, the Syndicate determines the amount of recoverables for unpaid losses and

loss expenses.

Reinsurance commission

Reinsurance commission income is earned over the period in which the related premiums are expensed.

Critical accounting estimates and judgments and key sources of estimation uncertainty

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect

the amounts reported for assets and liabilities as at the statement of financial position date and the amounts reported for

revenues and expenses during the year. Management have not identified any critical accounting judgements.

The estimates and associated assumptions are based on historical experience and other factors that are considered to be

relevant. Actual results may differ from those estimates. Estimates and judgments are reviewed on an ongoing basis.

Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only

that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The key areas of uncertainty which require the use of estimates and judgements are the calculation of claims provisions and

estimates of premium as detailed on page 8 within the Managing Agent's report and on page 31 within the reserving risk

section of note 20.

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________19

2.

SUMMARY OF ACCOUNTING POLICIES (continued)

Claims incurred

Reserves for losses and loss expenses represent an estimate of the unpaid portion of the ultimate liability for losses and loss

expenses for insured events that have occurred at or before the balance sheet date. The balance reflects both claims that have

been reported (“case reserves”) and IBNR. These amounts are reduced for estimated amounts of salvage and subrogation

recoveries.

Reserves for losses and loss expenses are reviewed on a quarterly basis. Case reserves are primarily established based on

amounts reported from insureds, reassured and/or brokers. Management estimates IBNR after reviewing detailed actuarial

analyses and applying informed judgement regarding qualitative factors that may not be fully captured in the actuarial

estimates. A variety of actuarial methods are utilised in this process, including the Expected Loss Ratio, Bornhuetter-

Ferguson and chain ladder methods. The Syndicate estimate is highly dependent on management's critical judgement as to

which method(s) are most appropriate for a particular accident year and class of business. The Syndicate's historical claims

data is often supplemented with industry benchmarks when applying these methodologies.

At each reporting date, liability adequacy tests are performed at a year of account level and reviewed to ensure the adequacy

of the liabilities from insurance and reinsurance contracts net of deferred acquisition costs. In performing these tests, current

best estimates are used of future contractual cash flows, claims handling and administrative expenses as well as investment

income from the assets backing such liabilities.

This analysis is performed for AXIS as a whole and looks at insurance and

reinsurance by class of business and entity to determine whether there is a deficiency. A provision is established for any

deficiency for losses arising from liability adequacy tests (unexpired risk provision).

Any adjustments to previous reserves for losses and loss expenses estimates are recognised in the period they are

determined. While management believes that reserves for losses and loss expenses are adequate, this estimate requires a

significant judgement and new information, events or circumstances may result in ultimate losses that are materially greater

or less than provided for in the balance sheet.

Financial instruments

Financial instruments are measured in accordance with FRS 102 section 11 and section 12.

Financial assets are measured at fair value with fair value changes recognised immediately in the profit and loss account.

For this purpose, listed investments are stated at bid-market value and deposits with credit institutions and overseas deposits

are stated at cost. Unlisted investments for which a market exists are stated at the average price at which they were traded on

the balance sheet date or the last trading day before that date.

The Syndicate uses the following hierarchy for determining the fair value of financial instruments by valuation technique:

•

Level 1: the quoted (unadjusted) prices in active markets for identical assets or liabilities that the Syndicate can

access at the measurement date

•

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are

observable, either directly or indirectly

•

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based

on observable market data

Investment return comprises all investment income, realised investment gains and losses and movements in unrealised gains

and losses, net of investment expenses, charges and interest.

Realised and unrealised gains and losses arising from changes in the fair value of investments are presented in the Statement

of Profit and Loss in the period in which they arise. Investment income includes interest income on fixed income securities

and dividend income on equity securities. Dividend and interest income is recognised when earned. Investment management

and other related expenses are shown separately to the net change in fair value. These expenses are recognised when

incurred.

Allocation of investment return transferred from the non-technical to the technical account

Investment income is initially recorded in the non-technical income statement. The income is transferred in full to the

general business technical account to reflect the investment return on funds supporting underwriting business.

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________20

2.

SUMMARY OF ACCOUNTING POLICIES (continued)

Taxation

Under Schedule 19 of the Finance Act 1993 Managing Agents are not required to deduct basic rate income tax from

Syndicate trading income. In addition, all UK basic rate income tax (currently at 25%, 2023: 25%) 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.

Foreign exchange

The Syndicate's functional currency and presentational currency is the US Dollar (USD).

Monetary assets and liabilities denominated in foreign currencies are converted into the functional currency at the prevailing

rate of exchange ruling at the balance sheet date and revenues and costs are converted at the rate prevailing at the date of

transaction. Non-monetary assets and liabilities denominated in foreign currencies have been recorded at historical rates.

Profits and losses arising from foreign currency transactions and on settlement of accounts receivable and payable in foreign

currencies are dealt with through the Statement of Comprehensive Incomes: Non-technical account.

Pension

The staff utilised by the Syndicate are employed by an affiliate entity which operates a defined contribution scheme.

Pension costs relating to staff performing duties are charged to the Syndicate and included within net operating expenses.

Syndicate operating expenses

Costs incurred by the Managing Agent exclusively for the Syndicate are charged to the Syndicate on an accrual basis.

Expenses which are incurred jointly for the Managing Agent and the Syndicate are apportioned between the Managing

Agent and the Syndicate depending on the amount of work performed, resources used and volume of business transacted.

In 2024, the Managing Agent charged a Managing Agent fee of 0.025% (2023: 0.025%) of Syndicate capacity.

Deposits with ceding undertakings

Deposits with ceding undertakings are funds held by Lloyd's Europe on behalf of the Syndicate to settle Part VII claims.

These funds are held at amortised cost in the balance sheet.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and investments 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.

3.

ANALYSIS OF UNDERWRITING RESULT

An analysis of the underwriting result before investment return is set out below:

Gross

Gross

Gross

Gross

premiums

premiums

claims

operating Reinsurance Underwriting

written

earned

incurred

Expenses

balance

result

2024

2024

2024

2024

2024

2024

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

Direct insurance:

Accident and health

82,463

73,299

(39,100)

(1,949)

(31,363)

887

Marine, aviation and transport

289,046

265,609

(86,836)

(30,608)

(97,602)

50,563

Fire and other damage to property

467,674

415,209 (167,020)

(79,910)

(110,668)

57,612

Third party liability

538,883

536,468 (275,663) (176,783)

(78,100)

5,922

Miscellaneous

56,757

49,515

(24,365)

(4,749)

(13,182)

7,219

Total direct insurance

1,434,823 1,340,100 (592,984) (293,999)

(330,914)

122,203

Reinsurance acceptances

532,050

477,748 (281,710) (342,041)

141,251

(4,751)

Total

1,966,873 1,817,848 (874,694) (636,040)

(189,662)

117,452

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________21

3.

ANALYSIS OF UNDERWRITING RESULT (continued)

The table is below is included to facilitate the classification of the above segments into the Lloyd's aggregate classes of

business for Lloyd's reporting purposes.

Gross

Gross

Gross

Gross

premiums

premiums

claims

operating Reinsurance Underwriting

written

earned

incurred

Expenses

balance

result

2024

2024

2024

2024

2024

2024

Additional analysis

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

Fire and damage to property of

which is:

Specialities

38,222

40,530

(11,863)

(14,433)

(7,180)

7,054

Energy

13,933

17,712

(5,564)

(3,921)

(1,761)

6,466

Third party liability of which is:

Energy

—

—

—

—

—

—

Gross

Gross

Gross

Gross

Premiums

Premiums

Claims

Operating Reinsurance

Written

Earned

Incurred

Expenses

Balance

Total

2023

2023

2023

2023

2023

2023

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

Direct insurance:

Accident and health

75,605

76,060

(47,190)

(31,463)

(692)

(3,285)

Marine, aviation and transport

249,300

223,524

(121,681)

(82,510)

(7,134)

12,200

Fire and other damage to property

380,911

319,773

(150,732)

(104,695)

(36,853)

27,493

Third party liability

561,962

525,992

(271,404)

(182,508)

(56,085)

15,996

Miscellaneous

49,533

38,446

(15,864)

(10,376)

(8,437)

3,768

Total direct insurance

1,317,311 1,183,795

(606,871)

(411,552)

(109,201)

56,172

Reinsurance acceptances

442,680

404,742

(167,497)

(139,252)

(55,409)

42,584

Total

1,759,991 1,588,537

(774,368)

(550,804)

(164,610)

98,756

Gross

Gross

Gross

Gross

premiums

premiums

claims

operating Reinsurance Underwriting

written

earned

incurred

Expenses

balance

result

2023

2023

2023

2023

2023

2023

Additional analysis

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

Fire and damage to property of

which is:

Specialities

40,039

36,033

(10,180)

(11,868)

(4,529)

9,456

Energy

16,632

13,758

(8,678)

(3,507)

(551)

1,022

Third party liability of which is:

Energy

—

—

—

—

—

—

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________22

3.

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

USD'000

USD'000

United Kingdom

1,966,873

1,759,991

European Union Member States

—

—

US

—

—

Rest of the world

—

—

Total gross premiums written

1,966,873

1,759,991

4.

INSURANCE ASSETS AND LIABILITIES

Technical provisions

2024

2023

Gross

Reinsurance

Gross

Reinsurance

provisions

assets

Net

provisions

assets

Net

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

Unearned premiums

Restated

Restated

Restated

Balance at 1 January

1,005,032

(257,742)

747,290

818,943

(205,235)

613,708

Premiums written during the year

1,966,873

(396,677)

1,570,196

1,759,991

(414,939) 1,345,052

Premiums earned during the year

(1,817,848)

396,984 (1,420,864)

(1,588,537)

364,146 (1,224,391)

Foreign exchange movements

(29,113)

2,141

(26,972)

14,635

(1,714)

12,921

Balance at 31 December

1,124,944

(255,294)

869,650

1,005,032

(257,742)

747,290

2024

2023

Gross

Reinsurance

Gross

Reinsurance

provisions

assets

Net

provisions

assets

Net

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

Claims outstanding

Restated

Restated

Restated

Balance at 1 January

2,262,518

(715,248) 1,547,270

2,113,637

(715,669) 1,397,968

Claims paid during the year

(679,601)

206,536

(473,065)

(668,315)

211,881

(456,434)

Expected cost of current year claims

1,030,425

(275,717)

754,708

896,616

(267,141)

629,475

Change in estimates of prior year

provisions

(155,731)

68,395

(87,336)

(122,248)

67,605

(54,643)

Foreign exchange movements

(43,769)

3,814

(39,955)

42,828

(11,924)

30,905

Balance at 31 December

2,413,842

(712,220) 1,701,622

2,262,518

(715,248) 1,547,270

The Syndicate has applied a similar approach at the current year end to that applied at the previous year end in establishing

the technical provisions for claims outstanding reserves and the reinsurers' share thereof. Included within claims notified of

USD 1,701.6m (2023: USD 1,547.3m) is a decrease in claims notified relating to 2023 and prior years of account of USD

87.5m (2023: decrease in claims notified relating to 2022 and prior years of account of USD 54.6m).

2024

2023

Gross

Reinsurance

Gross

Reinsurance

assets

liabilities

Net

assets

liabilities

Net

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

Deferred acquisition costs

Balance at 1 January

216,189

(41,111)

175,078

174,261

(30,807)

143,454

Incurred deferred acquisition costs

515,021

(61,733)

453,288

448,759

(64,023)

384,734

Amortised deferred acquisition costs

(485,264)

57,159

(428,106)

(410,485)

53,968 (356,516)

Foreign exchange movements

(4,462)

424

(4,038)

3,655

(249)

3,406

Balance at 31 December

241,482

(45,261)

196,221

216,189

(41,111)

175,078

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________23

5.

NET OPERATING EXPENSES

2024

2023

USD'000

USD'000

Restated

Acquisition costs

515,021

448,759

Change in deferred acquisition costs

(29,756)

(38,273)

Administrative expenses

139,384

128,317

Members' standard personal expenses

12,295

12,001

Reinsurance commissions and profit participation

(57,154)

(53,960)

Net operating expenses

579,790

496,844

Members' standard personal expenses include Lloyd's subscriptions, Central Fund contributions and Managing Agent's fees.

Included in administrative expenses are salary costs for services to the Syndicate provided by employees of AXIS group

companies.

Total commissions for direct insurance business for the year amounted to:

2024

2023

USD'000

USD'000

Total commission for direct insurance business

371,417

307,827

This includes acquisitions, renewals, collections service companies and portfolio management commissions.

6.

AUDITOR'S REMUNERATION

Administrative expenses in note 5 include:

2024

2023

Auditors' remuneration

USD'000

USD'000

Fees payable to the Syndicate's auditor for the audit of these financial

statements

659

671

Fees payable to the Syndicate's auditor and its associates in respect of

other services pursuant to legislation

127

108

786

779

Fees payable to Deloitte LLP for the audit of the annual accounts of AXIS Managing Agency Limited are USD 28.9k

(2023: USD 31.9k).

Fees payable for audit-related assurance services provided to the Managing Agent are USD 15.7k

(2023: 15.7k). There were no other fees payable for the provision of other non-audit services.

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________24

7.

KEY MANAGEMENT PERSONNEL COMPENSATION

The directors of the Managing Agency are employed by related group Companies. The directors of AMAL received the

following aggregate remuneration charged to the Syndicate.

2024

2023

USD'000

USD'000

Restated

Directors' emoluments

3,588

2,615

Fees

344

218

The Active Underwriter received the following aggregate remuneration during the year charged to the Syndicate.

2024

2023

USD'000

USD'000

Restated

Emoluments

207

206

8.

STAFF NUMBERS AND COSTS

The Syndicate and AMAL have no employees.

Staff are employed by AXIS service companies.

The number of staff

below, analysed by category, represents the total number of staff available to the managing agency in order to service all of

its Lloyd's business including Syndicate 1686.

2024

2023

USD'000

USD'000

Administration and finance

312

303

Underwriting

205

213

Claims

53

54

Investments

—

—

Total

570

570

Administration and Finance includes all ancillary support staff including Operations, Finance, Actuarial, Legal and Risk.

The following amounts were recharges by AXIS service companies to the Syndicate in respect of payroll costs.

2024

2023

USD'000

USD'000

Wages and salaries

87,884

81,690

Social security costs

11,707

10,742

Other pension costs

7,630

7,832

Other long term incentive costs

428

502

Total

107,649

100,766

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________25

9.

INVESTMENT RETURN

2024

2023

Interest and similar income

USD'000

USD'000

From financial instruments designated at fair value through profit or loss

Interest and similar income

82,252

60,552

Other income from investments

From financial instruments designated at fair value through profit or loss

Gains on the realisation of investments

18,568

12,235

Losses on the realisation of investments

(24,019)

(32,148)

Unrealised gains on investments

7,530

64,234

Unrealised losses on the investments

(24,021)

395

Investment management expenses

(2,020)

(1,934)

Total investment return

58,290

103,334

Transferred to the technical account from the non-technical account

58,290

103,334

10.

DISTRIBUTION AND OPEN YEARS OF ACCOUNT

A distribution to members of USD 73.6m will be proposed in relation to the 2022 closing year of account (2023: USD

91.3m distribution in relation to the 2021 closing year of account).

11.

FINANCIAL INVESTMENTS

Carrying value

Cost

2024

2023

2024

2023

USD'000

USD'000

USD'000

USD'000

Shares and other variable yield securities and units in

unit trusts

102,163

158,919

99,599

160,209

Debt securities and other fixed income securities

1,876,771

1,438,662

1,532,546

1,469,438

Loans and deposits with credit institutions

209,059

233,932

209,059

233,932

Other investments

2,000

4,389

2,000

4,389

Total financial investments

2,189,993

1,835,902

1,843,204

1,867,968

Amounts included within shares and other variable securities include collective investment schemes/unit trusts where funds

are invested in a single entity which invests in other underlying investments. These are treated as cash instruments with the

carrying value and purchase price being the same.

The table below presents an analysis of financial investments by their

measurement classification.

2024

2023

USD'000

USD'000

Financial assets measured at fair value through profit or loss

2,189,993

1,835,902

Financial assets measured at fair value as available for sale

—

—

Financial assets measured at amortised cost

—

—

Total financial investments

2,189,993

1,835,902

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________26

11.

FINANCIAL INVESTMENTS (continued)

The following table shows financial investments recorded at fair value analysed between the three levels in the fair value

hierarchy.

The table excludes deposits with ceding undertakings which are valued as level 3.

Level 1

Level 2

Level 3

Total

USD'000

USD'000

USD'000

USD'000

As at 31 December 2024

Shares and other variable yield securities and units in

unit trusts

—

87,252

14,911

102,163

Debt securities and other fixed income securities

—

1,876,771

—

1,876,771

Loans and deposits with credit institutions

5,486

203,573

—

209,059

Total financial investments

5,486

2,167,596

14,911

2,187,993

Level 1

Level 2

Level 3

Total

USD'000

USD'000

USD'000

USD'000

As at 31 December 2023

Shares and other variable yield securities and units in

unit trusts

—

139,978

18,941

158,919

Debt securities and other fixed income securities

—

1,438,662

—

1,438,662

Loans and deposits with credit institutions

48,459

185,473

—

233,932

Total financial investments

48,459

1,764,113

18,941

1,831,513

Included in the level 1 category are 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 syndicate, pricing service or regulatory agency and those prices represent actual and

regularly occurring market transactions on an arm's length basis.

Included in the level 2 category are 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.

Included in the level 3 category are financial instruments measured at fair value.

The loan to Lloyd's Central fund has been

classified as a level 3 asset stated at fair value.

The fair valuation for the loan is derived based on a valuation model.

12.

DEBTORS ARISING OUT OF DIRECT INSURANCE OPERATIONS

2024

2023

USD'000

USD'000

Due within one year

533,518

550,508

Due after one year

—

—

Total

533,518

550,508

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________27

13.

DEBTORS ARISING OUT OF REINSURANCE OPERATIONS

2024

2023

USD'000

USD'000

Due within one year

263,906

271,798

Due after one year

—

—

Total

263,906

271,798

14.

OTHER DEBTORS

2024

2023

USD'000

USD'000

Inter-syndicate loan

10,000

—

Total

10,000

—

15.

CASH AND CASH EQUIVALENTS

2024

2023

USD'000

USD'000

Cash at bank and in hand

8,526

21,672

Deposits with credit institutions

102,163

158,919

Total cash and cash equivalents

110,689

180,591

Only financial investments with maturities of three months or less that are used by the Syndicate in the management of its

short-term commitments are included in cash at bank and in hand.

16.

ANALYSIS OF NET DEBT

At 1

Fair value

At 31

January

Cash

and exchange

Non-cash

December

2024

flows

Acquired

movements

changes

2024

Cash and cash equivalents

180,591

(47,096)

—

(22,806)

—

110,689

Other

—

—

—

—

—

—

Total

180,591

(47,096)

—

(22,806)

—

110,689

17.

CREDITORS ARISING OUT OF DIRECT INSURANCE OPERATIONS

2024

2023

USD'000

USD'000

Due within one year

67,679

49,591

Due after one year

—

—

67,679

49,591

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________28

18.

CREDITORS ARISING OUT OF REINSURANCE OPERATIONS

2024

2023

USD'000

USD'000

Due within one year

275,256

387,884

Due after one year

—

—

275,256

387,884

19.

OTHER CREDITORS

2024

2023

USD'000

USD'000

Other related party balances (non-syndicates)

58,138

44,848

Other liabilities

—

—

58,138

44,848

Other related party balances relates to amounts payable to AXIS group companies.

At 31 December 2024, the Syndicate

had a USD 390.0m (2023: USD 390.0m) flexible facility agreement with AXIS Specialty Finance Plc to ensure that it can

meet liquidity requirements even in the most extreme circumstances. The outstanding loan balance is disclosed under other

liabilities and this is nil as at 31 December 2024 (2023: USD nil). Any loans drawn and outstanding under the facility would

be repayable on demand.

20.

RISK MANAGEMENT

a) Governance framework

The risk and financial management framework aims to balance the risk to members' capital from events that might

otherwise prevent the Syndicate from meeting its policyholder obligations, with the returns to its members. The directors

recognise the critical importance of having efficient and effective risk management systems in place.

The Managing Agent utilises the group risk management function for the Syndicate with a dedicated Chief Risk Officer

(CRO) and clear terms of reference from the Managing Agency Board, its committees and sub committees, including the

oversight and reporting of agreed service level risk management activities. AMAL supplements this with a clear

organisational structure with documented delegated authorities and responsibilities from the main Managing Agency Board

to the Syndicate which performs the underwriting activities. Lastly, the policy framework sets its standards, risk

management and control and business conduct.

The Board Risk Committee approves the risk management policies and meets regularly to approve any commercial,

regulatory and organisational requirements of such policies. These policies define the identification of risk and its

interpretation to ensure the appropriate quality and diversification of assets, align underwriting and reinsurance strategy to

the Syndicate goals, and specify reporting requirements. The AMAL Board places significant emphasis on the assessment

and documentation of risks and controls, including the articulation of the Syndicate's risk appetite.

b)

Capital management objectives, policies and approach

Capital framework at Lloyd's

The Society of Lloyd's ("Lloyd's") is a regulated undertaking and subject to the supervision of the Prudential Regulatory

Authority ("PRA") under the Financial Services and Markets Act 2000.

Within the supervisory framework, Lloyd's applies

capital requirements at member level and centrally to ensure that Lloyd's com

plies with Solvency II Insurance Capital

Requirements ("Solvency II"), and beyond that to meet its own financial strength, license and ratings objectives.

Although

Lloyd's capital setting processes use a capital requirement set at Syndicate level as a starting point, the requirement to meet

Solvency II and Lloyd's capital requirements apply at overall and member level only respectively, not at Syndicate level.

Accordingly, the capital requirement in respect of the Syndicate is not disclosed in these annual report and accounts.

In order to meet Lloyd's requirements, each Syndicate is required to calculate its Solvency Capital Requirement ("SCR") for

the prospective underwriting year. This amount must be sufficient to cover a 1 in 200 year loss, reflecting uncertainty in the

ultimate run-off of underwriting liabilities (SCR 'to ultimate'). The Syndicate must also calculate its SCR at the same

confidence level but reflecting uncertainty over a one year time horizon ("one year SCR") for Lloyd's to use in meeting

Solvency II requirements. The SCRs of each Syndicate are subject to review by Lloyd's and approval by the Lloyd's Capital

and Planning Group.

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________29

20.

RISK MANAGEMENT (continued)

b)

Capital management objectives, policies and approach (continued)

Capital framework at Lloyd's (continued)

A Syndicate may be comprised of one or more underwriting members of Lloyd's. Each member is liable for its own share of

underwriting liabilities on the Syndicate on which it is participating but not other members' shares. Accordingly, the capital

requirement that Lloyd's sets for each member operates on a similar basis. Each member's SCR shall thus be determined by

the sum of the members' share of the Syndicate SCR 'to ultimate'. Where a member participates on more than one Syndicate,

a credit for diversification is provided to reflect the spread of risk, but consistent with determining an SCR which reflects

the capital requirement to cover a 1 in 200 year loss 'to ultimate' for that member. Over and above this, Lloyd's applies a

capital uplift to the members' 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, license and ratings objectives.

The capital uplift applied for 2025 is 35% (2024: 35%) of the member's SCR to ultimate.

Provision of capital by members

Each member may provide capital to meet its ECA either by assets held in trust by Lloyd's specifically for that member

(Funds at Lloyd's) assets held within and managed within a Syndicate (Funds in Syndicate) or as the member's share of the

members' balances on each Syndicate on which it participates. The Syndicate's ECA is supported by FAL primarily

provided by ASL and ACCUKIIL own funds.

c) Insurance risk management

Insurance risk is the inherent uncertainty as to the occurrence, amount and timing of insurance liabilities transferred to the

Syndicate through the underwriting process.

The insurance risk category encompasses underwriting risks in all lines of business including marine & political risks,

renewable energy, property, professional & casualty, cyber and accident and health classes of insurance business and the

professional, property, marine and aviation classes of reinsurance business.

The following sections set the key sub categories of insurance risk recognised by the Syndicate and how they are managed:

Natural peril catastrophe risk

Natural catastrophes such as earthquakes, storms and floods represent a challenge for risk management due to their

accumulation potential and volatility. In managing natural catastrophe risk, the internal risk tolerance framework for the

Syndicate aims to limit the impact to its capital position from an aggregation of natural peril catastrophe events. The Board-

approved risk limit for natural catastrophes sets out the maximum acceptable losses for the Syndicate calibrated to a 1 in

200 year event. There have been no breaches of the Syndicate’s natural catastrophe risk limit during the year.

The Syndicate is potentially exposed to physical risks from climate change, primarily through our underwriting of property

(re)insurance covering weather-related perils. Climate change may expose the Syndicate to an increased frequency and / or

severity of weather losses. There is a risk that the Syndicate pricing of these perils or the management of the associated

aggregations does not appropriately allow for changes in climate. Over the longer term, climate change may have an impact

on the economic viability of these lines of business if suitable adjustment in price and coverage cannot be achieved. The

Syndicate may also be exposed to losses stemming from climate-related litigation in liability lines, should the insured face

such litigation. AXIS has in place a Climate Change Working Group, which includes AMAL representation, to ensure that

the potential risks from climate change are identified and then managed. Additionally, AMAL also has in place a Climate

Change Risk Appetite Statement to ensure that associated risks are managed in line with the Syndicate's standard risk

management framework. The Syndicate will continue to assess all climate change related threats and opportunities,

reviewing and adjusting existing risk appetites to ensure they remain appropriate, reflecting the most recent scientific

consensus and the Company’s strategic agenda on climate change.

Man-made catastrophe risk

Similar to the management of natural peril catastrophe exposures an analytical approach is taken for the management of

man-made catastrophes. Man-made catastrophes include such risks as train collisions, aeroplane crashes, cyber risks or

terrorism. For these risks vendor models (where available) are used with bespoke modelling, scenario analysis, underwriting

judgment and expertise. Limits are set and monitored in respect of key accumulations from man-made perils.

As an example of this approach, an assessment of terrorism risk is based on a mixture of qualitative and quantitative data

(e.g. for estimating property damage, business interruption, mortality and morbidity subsequent to an attack of a predefined

magnitude), which is used to control, limit and manage aggregate terrorism exposure. Commercially available vendor

modelling and bespoke modelling tools are used to measure accumulations around potential terrorism accumulation zones

on a deterministic and probabilistic basis. The results of modelling are supplemented with underwriting judgment.

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________30

20.

RISK MANAGEMENT (continued)

c) Insurance risk management (continued)

Claims handling risk

In accepting risk, the Syndicate is committing to the payment of claims and therefore these risks must be understood and

controlled. The Claims teams include a diverse group of experienced professionals, including claims adjusters and legal

professionals. The Syndicate also uses approved external service providers, such as independent adjusters and appraisers,

surveyors, accountants, investigators and specialist legal firms, as appropriate. The Syndicate maintains claims handling

guidelines and claims reporting control and escalation procedures in the claims departments. Large claims matters are

reviewed during claims meetings.

Reserving risk

The estimation of reserves is subject to uncertainty due to the fact that the settlement of claims that have arisen before the

balance sheet date is dependent on future events and developments. Unforeseen loss trends resulting from court rulings,

changes in the law, differences in loss adjustment practice, medical and long-term care, and economic factors such as

inflation can have a considerable impact on run-off results.

The reserves for losses and claims settlement costs are

calculated in accordance with actuarial practice based on substantiated assumptions, methods and assessments. The

assumptions are regularly reviewed and updated including adjusting current and projected inflation rates to reflect prevailing

views. Application of group-wide reserving policy and standards of practice ensures a substantially reliable and consistent

procedure.

AMAL engage a Signing Actuary to provide an annual Statement of Actuarial Opinion ('SAO') on the

Syndicate's worldwide technical provisions, both gross and net of reinsurance and for each open year of account.

Pricing risk

Premiums for (re)insurance contracts are intended to cover expected claim costs, acquisition costs, operating costs, and an

adequate level of profit margin commensurate to the risk being assumed. Premium amount is typically agreed upfront,

whereas the claim cost materialises over an extended period, especially for liability lines. Social, economic, and legal

environment may evolve differently over that period compared to the original expectation. Additionally, inherent variability

in claim counts and amounts could result in higher overall claim costs than expected in a given year. These factors could

lead to a shortfall in premiums charged at the time of underwriting the policy. Premium risk can increase in times of

heightened uncertainty in claim cost trends and at times when demand-supply imbalance results in competitive pricing.

The Syndicate mitigates premium risk in its portfolio through four main levers. Firstly, a vigilant and cautious approach is

taken on claims cost trends, and these assumptions are reviewed regularly and frequently. Secondly, in some of the contracts

loss and / or exposure adjustment features that flex premium and / or acquisition costs are included in response to higher

than expected exposures and / or claim costs.

Thirdly, underwriting action and reinsurance protection are employed to

minimise volatility in claims experience by managing aggregation of limits and by maintaining balance between portfolio

margin and limits deployed. Most importantly, active cycle management is exercised whereby the Syndicate grows the

portfolio at times when pricing is in surplus and shrinks the portfolio at times when pricing is in deficit.

Sensitivity analysis of the reserves for unpaid losses and loss expenses

Expected loss ratios are a key assumption in the estimate of ultimate losses for business at an early stage of development.

All else remaining equal, a higher expected loss ratio would result in a higher ultimate loss estimate. Assumed loss

development patterns are another significant assumption in estimating the loss reserves.

The following analysis is

performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the

impact on gross and net claims outstanding, profit and members' balances.

The risk variable for the analysis below is a five

percent increase or decrease in the Syndicate's reserves and the subsequent impact on the members' balance.

General insurance business sensitivities as at 31 December 2024

+5.0%

-5.0%

USD'000

USD'000

Claims outstanding - gross of reinsurance

120,692

(120,692)

Claims outstanding - net of reinsurance

85,081

(85,081)

General insurance business sensitivities as at 31 December 2023

+5.0%

-5.0%

USD'000

USD'000

Claims outstanding - gross of reinsurance

113,126

(113,126)

Claims outstanding - net of reinsurance

77,364

(77,364)

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________31

20.

RISK MANAGEMENT (continued)

c) Insurance risk management (continued)

Claims development table

The tables below show the Syndicate's cumulative incurred claims development, including both claims notified and incurred but

not reported for each underwriting year, together with the cumulative payments to date on a gross and net of reinsurance basis at

the balance sheet date.

Pure

Underwriting

Year

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Total

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

Estimate of gross claims:

At end of

underwriting year

50,779

382,436 703,946 577,802 327,896 314,747 331,648 323,196 294,543 337,307

One year later

97,342 1,032,390 1,262,180 1,188,643 851,258 711,504 723,113 729,729 751,746

Two years later

122,465 1,092,775 1,321,753 1,415,103 853,999 747,624 752,000 771,604

Three years later

118,170 1,079,828 1,358,886 1,474,053 816,335 754,239 724,887

Four years later

109,502 1,095,840 1,426,863 1,497,727 839,998 744,833

Five years later

112,877 1,133,004 1,386,405 1,508,176 862,049

Six years later

107,814 1,134,551 1,391,945 1,507,135

Seven years later

106,331 1,172,105 1,414,865

Eight years later

111,617 1,159,940

Nine years later

111,477

Estimate of gross

claims reserve

111,477 1,159,940 1,414,865 1,507,135 862,049 744,833 724,887 771,604 751,746 337,307 8,385,843

Provision in respect

of prior years

2,430

Less gross claims

paid

(102,973)

(1,038,861)

(1,292,401)

(1,342,681)

(688,790) (553,778) (448,122) (319,573) (157,002) (30,250) (5,974,431)

Gross Claims

Reserve

8,504

121,079 122,464 164,454 173,259 191,055 276,765 452,031 594,744 307,057 2,413,842

Pure

Underwriting

Year

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Total

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000 USD'000

USD'000

Estimate of net claims:

At end of

underwriting year

One year later

34,251 274,526 362,411 293,588 246,766 219,288 258,852 259,052 225,341 268,254

Two years later

65,216 655,855 749,655 628,935 637,435 499,265 552,709 571,252 570,879

Three years later

75,083 754,330 764,733 678,813 621,719 519,974 577,461 598,966

Four years later

70,961 747,312 771,601 725,738 581,144 524,790 550,596

Five years later

67,853 753,250 792,939 706,180 596,218 516,056

Six years later

71,680 781,211 760,779 702,768 611,713

Seven years later

68,152 746,654 763,190 717,092

Eight year later

66,966 775,827 766,389

Nine year later

65,291 763,840

Estimate of net

claims reserve

65,484 763,840 766,389 717,092 611,713 516,056 550,596 598,966 570,879 268,254 5,429,269

Provision in respect

of prior years

198

Less net claims

paid

(64,087) (688,666) (670,404) (661,056) (504,355) (376,677) (344,926) (256,888) (134,220) (26,566) (3,727,845)

Net Claims

Reserve

1,397

75,174

95,985

56,036 107,358 139,379 205,670 342,078 436,659 241,688 1,701,622

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________32

20.

RISK MANAGEMENT (continued)

c) Insurance risk management

(continued)

Claims development table (continued)

The uncertainty associated with the ultimate claims experience of an underwriting year is greatest when the underwriting year is at

an early stage of development and the margin for future experience potentially being more adverse than assumed is at its highest.

As claims develop, and the ultimate cost of the claims becomes more certain, the relative level of margin should decrease. Due,

however, to the uncertainty inherent in the claims estimation process, initial reserves may not always be sufficient. The Syndicate

has translated estimated outstanding claims at a consistent rate of exchange as determined at the balance sheet date.

d)

Financial risk

The Syndicate monitors and manages the financial risks relating to the operations of the Syndicate encompassing credit risk,

liquidity risk, market risk, currency risk and interest rate risk.

i)

Credit risk

Credit risk represents the risk of incurring financial loss due to the diminished creditworthiness (eroding credit rating and,

ultimately, default) of our third party counterparties. The key areas of exposure to credit risk for the Syndicate are from its

reinsurance program and amounts due from policyholders and intermediaries.

It should be noted that credit risk in relation to the Syndicate’s investment portfolio is addressed under the market risk framework,

along with the other risks relating to the investment portfolio. The Syndicate’s investment policy prevents material investment in

other counterparties (e.g. reinsurers) to avoid concentrations of risk.

Risk from the underwriting of credit (re)insurance products is addressed through the underwriting risk framework described above.

Checks are in place to limit any concentrations of risk between (re)insurance, investments and other counterparty exposures.

The

following sections discuss specific components of credit risk.

Reinsurance recoverable assets

Within the reinsurance purchasing activities the Syndicate is exposed to the credit risk of a reinsurer failing to meet its obligations

under the reinsurance contracts. To help mitigate this, all reinsurance purchasing is subject to financial security requirements

specified by the Reinsurance Security Committee. The Reinsurance Security Committee maintains a list of approved reinsurers,

performs credit risk assessments for potential new reinsurers, regularly monitors approved reinsurers with consideration for events

which may have a material impact on their creditworthiness, recommends counterparty tolerance levels for different types of ceded

business and monitors concentrations of credit risk. This assessment considers a wide range of individual attributes, including a

review of the counterparty’s financial strength, industry position and other qualitative factors.

Premium receivables

The largest credit risk exposure to receivables is from brokers and other intermediaries; the risk arises where they collect premiums

from customers or pay claims to customers on behalf of the Syndicate. There are policies and standards in place to manage and

monitor credit risk from intermediaries with a focus on day-to-day monitoring of the largest positions.The tables below show the

maximum exposure to credit risk (including an analysis of financial assets exposed to credit risk) for the components of the

statement of financial position. The maximum exposure is shown gross, before the effect of mitigation through collateral

agreements.

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________33

20.

RISK MANAGEMENT (continued)

d)

Financial risk (continued)

i)

Credit risk (continued)

The Syndicate has debtors arising from direct insurance and reinsurance operations that are past due but not impaired at the

reporting date.

An analysis of the carrying amounts of past due or impaired debtors is presented below.

2024

USD'000

Neither past

Past due

Gross value

due nor

but not

of impaired

impaired assets

impaired assets

assets

Total

Shares and other variable yield securities and units in

unit trusts

102,163

—

—

102,163

Debt securities and other fixed income securities

1,876,771

—

—

1,876,771

Loans and deposits with credit institutions

209,059

—

—

209,059

Reinsurers' share of claims outstanding

712,220

—

—

712,220

Debtors arising out of direct insurance operations

394,959

138,559

—

533,518

Debtors arising out of reinsurance operations

84,473

16,197

—

100,670

Other debtors and accrued interest

707,306

—

—

707,306

Cash at bank and in hand

8,526

—

—

8,526

Deposits with ceding undertakings

2,000

—

—

2,000

Total

4,097,477

154,756

—

4,252,233

2023

USD'000

Neither past

Past due

Gross value

due nor

but not

of impaired

impaired assets

impaired assets

assets

Total

Shares and other variable yield securities and units in

unit trusts

158,919

—

—

158,919

Debt securities and other fixed income securities

1,438,662

—

—

1,438,662

Loans and deposits with credit institutions

233,932

—

—

233,932

Reinsurers' share of claims outstanding

715,248

—

—

715,248

Debtors arising out of direct insurance operations

416,788

133,720

—

550,508

Debtors arising out of reinsurance operations

125,111

23,504

—

148,615

Other debtors and accrued interest

621,024

—

—

621,024

Cash at bank and in hand

21,672

—

—

21,672

Deposits with ceding undertakings

4,389

—

—

4,389

Total

3,735,745

157,224

—

3,892,969

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________34

20.

RISK MANAGEMENT (continued)

d)

Financial risk (continued)

i)

Credit risk (continued)

The table below sets out the age analysis of financial assets that are past due but not impaired at the balance sheet date.

2024

USD'000

Greater

0-3 months

3-6 months

6-12 months

than 1 year

past due

past due

past due

past due

Total

Shares and other variable yield securities and

units in unit trusts

—

—

—

—

—

Debt securities and other fixed income securities

—

—

—

—

—

Loans and deposits with credit institutions

—

—

—

—

—

Reinsurers' share of claims outstanding

—

—

—

—

—

Debtors arising out of direct insurance operations

98,108

19,177

10,394

10,880

138,559

Debtors arising out of reinsurance operations

4,128

10,521

1,548

—

16,197

Other debtors and accrued interest

—

—

—

—

—

Cash at bank and in hand

—

—

—

—

—

Deposits with ceding undertakings

—

—

—

—

—

Total

102,236

29,698

11,942

10,880

154,756

2023

USD'000

Greater

0-3 months

past due

6-12 months

than 1 year

past due

past due

past due

Total

Shares and other variable yield securities and

units in unit trusts

—

—

—

—

—

Debt securities and other fixed income securities

—

—

—

—

—

Loans and deposits with credit institutions

—

—

—

—

—

Reinsurers' share of claims outstanding

—

—

—

—

—

Debtors arising out of direct insurance operations

86,763

29,272

11,276

6,409

133,720

Debtors arising out of reinsurance operations

21,231

625

1,648

—

23,504

Other debtors and accrued interest

—

—

—

—

—

Cash at bank and in hand

—

—

—

—

—

Deposits with ceding undertakings

—

—

—

—

—

Total

107,994

29,897

12,924

6,409

157,224

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________35

20.

RISK MANAGEMENT (continued)

d)

Financial risk (continued)

i)

Credit risk (continued)

The table below provides information regarding the credit risk exposure of the Syndicate at 31 December 2024 by classifying

assets according to independent credit ratings of the counterparties. AAA is the highest possible rating. Assets that fall outside the

range of AAA to BBB are classified as speculative grade and have not been rated. Debtors, other than amounts due from reinsurers,

have been excluded from the table as these are not rated.

2024

USD'000

Not

AAA

AA

A

BBB

Other

rated

Total

Shares and other variable yield securities

and units in unit trusts

—

—

87,251

—

—

14,912 102,163

Debt securities and other fixed income

securities

246,603 790,335 348,729 246,187 234,314

10,603 1,876,771

Loans and deposits with credit institutions

99,220

27,820

19,193

13,103

6,923

42,800 209,059

Reinsurers' share of claims outstanding

24,785 335,185 247,646

1,428

— 103,176 712,220

Debtors arising out of reinsurance

operations

2,394

55,088

22,646

764

—

3,582

84,474

Cash at bank and in hand

—

—

8,526

—

—

—

8,526

Deposits with ceding undertakings

—

—

2,000

—

—

—

2,000

Other debtors and accrued interest

—

—

—

—

—

27,428

27,428

Total

373,002 1,208,428 735,991 261,482 241,237 202,501 3,022,641

2023

USD'000

Not

AAA

AA

A

BBB

Other

rated

Total

Shares and other variable yield securities

and units in unit trusts

41,680

1,379

96,919

—

—

18,941 158,919

Debt securities and other fixed income

securities

226,203 593,182 278,083 203,431 127,034

10,729 1,438,662

Loans and deposits with credit institutions

102,846

32,752

14,472

14,063

7,689

62,110 233,932

Reinsurers' share of claims outstanding

21,314 330,483 305,914

1,202

—

56,335 715,248

Debtors arising out of reinsurance

operations

14,285

57,020

48,311

832

—

4,663 125,111

Cash at bank and in hand

—

—

21,672

—

—

—

21,672

Deposits with ceding undertakings

—

—

4,389

—

—

—

4,389

Other debtors and accrued interest

—

—

—

—

—

11,424

11,424

Total

406,328 1,014,816 769,760 219,528 134,723 164,202 2,709,357

It is the Syndicate's policy to maintain accurate and consistent risk ratings across its credit portfolio. This enables management to

focus on the applicable risks and the comparison of credit exposures across all lines of business.

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________36

20.

RISK MANAGEMENT (continued)

d)

Financial risk (continued)

ii)

Liquidity risk

Liquidity risk is the risk that there would not be sufficient liquid financial resources to meet liabilities or payment obligations when

they fall due, or the Syndicate would have to incur excessive costs to do so. As an insurer, the core business generates liquidity

primarily through premium receipts and investment income. Exposure to liquidity risk stems mainly from the need to cover

potential extreme loss events. To manage this risk, a range of liquidity policies and measures are in place including maintaining

cash and cash equivalents and high quality, liquid investment portfolios to meet expected outflows, as well as those that could

result from a range of potential stress events. The Managing Agency further undertakes stress testing to ensure that the Syndicate

would be able to withstand extreme loss events and still remain liquid. In addition, AXIS Specialty Finance Plc provides a USD

390.0m credit facility (2023: USD 390.0m) to the Syndicate to ensure that it can meet liquidity requirements even in extreme

circumstances.

The Syndicate also provides a USD 150.0m (2023: nil) inter-syndicate loan agreement to AXIS Syndicate 2050 to

ensure that it can meet liquidity requirements.

The table below summarises the maturity profile of the Syndicate's financial and insurance liabilities based on remaining

undiscounted contractual obligations or expected future undiscounted cashflows, including interest payable. Repayments which are

subject to notice are treated as if notice were to be given immediately.

2024

USD'000

More than 5

Undiscounted net cash flows

0-1 year

1-3 years

3-5 years

years

Total

Claims outstanding

874,781

841,663

345,983

351,415

2,413,842

Creditors

401,073

—

—

—

401,073

Total

1,275,854

841,663

345,983

351,415

2,814,915

2023

USD'000

More than 5

Undiscounted net cash flows

0-1 year

1-3 years

3-5 years

years

Total

Claims outstanding

901,915

819,594

323,668

217,341

2,262,518

Creditors

482,323

—

—

—

482,323

Total

1,384,238

819,594

323,668

217,341

2,744,841

iii)

Market risk

Market risk is the risk that financial instruments may be negatively impacted by movements in financial market prices or rates such

as equity prices, interest rates, credit spreads and foreign exchange rates. Fluctuations in market rates primarily affect the

investment portfolio. Credit risk associated with investments is also managed in the market risk framework.

Through asset and liability management, the Syndicate aims to ensure that risks influence both the economic value of investments

and underwriting liabilities in the same way, thus mitigating the effect of market fluctuations. For example, important features of

liabilities are reflected, such as maturity patterns and currency structures, on the asset side of the balance sheet by acquiring

investments with similar characteristics.

Asset-liability management is supplemented with various internal policies and limits. As part of the strategic asset allocation

process, different asset strategies are simulated and stressed in order to assess an appropriate portfolio (given return objectives and

risk constraints). The management of asset classes is centralised to control aggregation of risk, and provide a consistent approach to

constructing portfolios as well as the selection process of external asset managers. Limits are set on the concentration of

investments by single issuers and certain asset classes and on the level of illiquid investments. Further, the Syndicate's investment

guidelines do not permit the use of leverage in any of the fixed maturity portfolios.

Investment portfolios are stress tested using historical and hypothetical scenarios to analyse the impact of unusual market

conditions and to ensure potential investment losses remain within risk appetite.

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________37

20.

RISK MANAGEMENT (continued)

d)

Financial risk (continued)

iii)

Market risk (continued)

The table below summarises the exposure of the financial assets and liabilities to foreign currency exchange risk at the reporting

date, as follows:

2024

USD'000

Canadian Australian

Japanese

Sterling

US dollar

Euro

dollar

dollar

Yen

Other

Total

Investments

202,824 1,500,554

107,331

220,600

112,531

—

46,153 2,189,993

Reinsurers' share of technical

provisions

93,053

822,873

28,764

14,110

7,674

85

955

967,514

Debtors

115,858

470,347

108,605

36,633

52,518

935

22,528

807,424

Other assets

—

697

1,738

—

3,554

499

2,038

8,526

Prepayments and accrued

income

40,646

186,480

12,918

13,536

17,841

658

6,697

278,776

Total Assets

452,381 2,980,951

259,356

284,879

194,118

2,177

78,371 4,252,233

Technical provisions

(492,704) (2,179,153) (236,285)

(203,730)

(287,792)

(13,510) (125,612) (3,538,786)

Provisions for other risks

—

—

—

—

—

—

—

—

Deposits received from

reinsurers

—

—

—

—

—

—

—

—

Creditors

(15,234) (371,601)

(12,551)

(3,589)

1,837

(22)

87 (401,073)

Accruals and deferred income

(1,787)

(41,515)

(4,702)

(502)

7

—

(13)

(48,512)

Total Liabilities

(509,725) (2,592,269) (253,538)

(207,821)

(285,948)

(13,532) (125,538) (3,988,371)

Total capital and reserves

(57,344)

388,682

5,818

77,058

(91,830)

(11,355) (47,167)

263,862

2023

USD'000

Restated

Canadian Australian Japanese

Sterling

US dollar

Euro

dollar

dollar

Yen

Other

Total

Investments

155,553 1,189,610

77,087

244,218

102,481

—

66,953 1,835,902

Reinsurers' share of technical

provisions

101,638

816,290

35,064

10,181

8,515

179

1,123

972,990

Debtors

115,028

529,337

64,186

39,616

50,731

3,188

20,220

822,306

Other assets

—

281

1,855

—

9,658

642

9,236

21,672

Prepayments and accrued

income

30,085

146,675

21,119

14,706

19,528

805

7,181

240,099

Total Assets

402,304 2,682,193

199,311

308,721

190,913

4,814 104,713 3,892,969

Technical provisions

(505,521) (1,942,130) (228,888) (195,595)

(243,418)

(19,024) (132,974) (3,267,550)

Provisions for other risks

—

—

—

—

—

—

—

—

Deposits received from

reinsurers

—

—

—

—

—

—

—

—

Creditors

(6,712) (451,538)

(12,900)

(5,250)

(6,503)

554

26 (482,323)

Accruals and deferred income

(1,919)

(38,740)

(4,477)

(526)

(142)

—

(2)

(45,806)

Total Liabilities

(514,152) (2,432,408) (246,265) (201,371)

(250,063)

(18,470) (132,950) (3,795,679)

Total capital and reserves

(111,848)

249,785

(46,954)

107,350

(59,150) (13,656) (28,237)

97,290

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________38

20.

RISK MANAGEMENT (continued)

d)

Financial risk (continued)

iii)

Market risk (continued)

The Syndicate regularly reviews its currency position taking into consideration the underlying currency of the Syndicate's

obligations and invests its assets proportionately across these currencies so as to protect the solvency of the Syndicate, against

variation in foreign exchange rates.

The Syndicate's underwriting capacity is supported by FAL held by its members – which includes the funding of underwriting

deficits. When each year of account closes, the Syndicate calls on members to fund losses or distributes profits as applicable.

Sensitivity to changes in foreign exchange rates

The table below gives an indication of the impact on profit of a percentage change in the relative strength of the US Dollar against

the value of Sterling, Canadian Dollar, Euro, Australian Dollar and Japanese Yen simultaneously. The analysis is based on the

information at the financial year end.

iv)

Currency risk

Impact on profit and members' balance

2024

2023

USD'000

USD'000

US Dollar Weakens

10% against other currencies

(7,765)

(11,244)

20% against other currencies

(15,531)

(22,488)

US Dollar Strengthens

10% against other currencies

7,765

11,244

20% against other currencies

15,531

22,488

v)

Interest rate risk

Insurance liabilities are not discounted and therefore not exposed to interest rate risk.

USD'000

2024

2024

2023

2023

Impact on

Impact on

Impact on

Impact on

results

members'

results

members'

before tax

balances

before tax

balances

Interest rate risk

+ 50 basis points shift in yield curves

(29,680)

(29,680)

(24,086)

(24,086)

- 50 basis points shift in yield curves

29,680

29,680

24,086

24,086

The method used for deriving sensitivity information and significant variables did not change from the previous period.

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________39

21.

REINSURANCE ASSETS

The Syndicate purchases reinsurance to reduce the risk of exposure to loss. Purchased reinsurance cover generally can be

categorised as: facultative, excess of loss and quota share. Facultative covers are typically individual risk purchases. Excess of loss

covers provide a contractually set amount of cover after an excess point has been reached. This excess point can be based on the

size of an industry loss or a fixed monetary amount. Generally, these covers are purchased on a package policy basis, and they may

provide cover for a number of lines of business within one contract. Quota share covers provide a proportional amount of coverage

from the first dollar of loss.

All of these reinsurance covers provide for recovery of a portion of losses and loss reserves from reinsurers. Under its reinsurance

security policy, the Syndicate predominantly cedes business with reinsurers rated A- or better by Standard & Poors and/or AM

Best. The Syndicate remains liable to the extent that reinsurers do not meet their obligations under these agreements either due to

solvency issues, contractual disputes or some other reason. Included within reinsurance losses recoverable as at 31 December 2024

were amounts of USD 31.2m (2023: USD 35.2m ) recoverable from a group company. Included within the provision for unearned

premiums ceded as at 31 December 2024 is an amount of USD 11.4m (2023: USD 0.3m) ceded to a group company.

In 2024 an internal quota share agreement was entered into by the Syndicate to cede energy transition related credit insurance,

political risk and capital risk solutions project finance business from Syndicate 1686 to Syndicate 2050.

This agreement applies to

policies written or renewed during the term commencing 1 April 2024 and expiring 31 December 2024.

The agreement will

automatically renew for subsequent annual periods on 1 January.

22.

RELATED PARTIES

AMAL has operated as the Managing Agent for the Syndicate since 4 August 2017.

Since this date AMAL has been a wholly

owned subsidiary of AXIS Specialty UK Holdings Limited.

In 2023, the Managing Agent, AMAL, charged the Syndicate a

management fee of USD 0.5m (2023: USD 0.4 m) based on 0.025%

(2023: 0.025%) of the Syndicate's capacity.

Harrington Re Ltd. (“Harrington Re”), a direct, wholly-owned subsidiary of Harrington Reinsurance Holdings Limited

(“Harrington”), is a Class 4 Bermuda based reinsurance company jointly sponsored by AXIS Capital and The Blackstone Group

L.P. Harrington and Harrington Re commenced operations during 2016. AXIS Ventures Limited, a subsidiary of AXIS Capital,

owns 22% of the common equity of Harrington and has the ability to exercise significant influence over Harrington Re and

therefore it is considered a related party. In the normal course of business, the Syndicate enters into certain reinsurance transactions

with Harrington Re.

These are in line with comparable market terms and conditions.

During the year ended 31 December 2024, the Syndicate recognised the following amounts in relation to transactions with

Harrington Re:

2024

2023

USD'000

USD'000

Outwards reinsurance premiums

(17,207) (16,256)

Change in the provision for unearned premiums - reinsurers' share

589

4,231

Change in the provision for claims - reinsurers' share

2,736

3,000

Acquisition costs

3,229

3,254

Change in deferred acquisition costs

(219)

(934)

At 31 December 2024, the following balances were outstanding in relation to transactions with Harrington Re:

2024

2023

USD'000

USD'000

Reinsurers' share of technical provisions

30,344

22,466

Deferred acquisition costs

(2,492)

(2,273)

Creditors arising out of direct insurance operations

(9,867) (12,293)

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________40

22.

RELATED PARTIES (continued)

In 2023 AXIS partnered with Stone Point Capital to launch Monarch Point Re, a newly created collateralised reinsurer. On 22

September 2023, the Syndicate entered into an agreement, with an effective date of 1 January 2023, to retrocede a diversified

portfolio of casualty reinsurance business to Monarch Point Re Limited ("Monarch Point Re").

Monarch Point Re are a

collateralised reinsurer, structured as a Bermuda Monetary Authority collateralised insurer.

In the normal course of business, the

Syndicate enters into certain reinsurance transactions with Monarch Point Re.

These are in line with comparable market terms and

conditions.

During the year ended 31 December 2024, the Syndicate recognised the following amounts in relation to transactions with

Monarch Point Re:

2024

2023

USD'000

USD'000

Outwards reinsurance premiums

(20,615) (15,877)

Change in the provision for unearned premiums - reinsurers' share

2,725

13,156

Other technical income, net of reinsurance

788

160

Claims paid, reinsurers' share

330

(254)

Change in the provision for claims, reinsurers' share

901

179

Reinsurance commissions

3,520

546

At 31 December 2024, the following balances were outstanding in relation to transactions with Monarch Point Re:

2024

2023

USD'000

USD'000

Reinsurers' share of technical provisions

16,612

14,044

Debtors arising out of reinsurance operations

258

24

Creditors arising out of reinsurance operations

2,568

2,141

This transaction was conducted at market rates consistent with negotiated arms-length contracts.

23.

DISCLOSURE OF INTERESTS

Managing Agent's interest

During 2024 AMAL was the Managing Agent for AXIS Syndicate 1686. The financial statements of the Managing Agent can be

obtained by application to the Registered Office (see page 2).

24.

FUNDS AT LLOYD'S

Every member is required to hold capital at Lloyd's which is held in trust and known as FAL. These funds are intended primarily to

cover circumstances where Syndicate assets prove insufficient to meet participating members' underwriting liabilities.

The level of FAL that Lloyd's requires a member to maintain is determined by Lloyd's based on PRA requirements and rating

criteria. FAL has regard to a number of factors including the nature and amount of risk to be underwritten by the member and the

assessment of the reserving risk in respect of business that has been underwritten. Since FAL is not under the management of the

Managing Agent, no amount has been shown in these annual accounts in respect of such capital resources. However, the Managing

Agent is able to make a call on the members' FAL to meet Syndicate liquidity requirements or to settle losses as required.

25.

OFF BALANCE SHEET ITEMS

The Syndicate has not been party to any arrangement which is not reflected in its statement of financial position, where material

risks and benefits arise for the Syndicate.

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________41

26.

COMMITMENTS AND CONTINGENCIES

Reinsurance purchase commitments

During 2024, the Syndicate participated in a number of group-purchased global reinsurance policies on the Marine, Terrorism and

Property lines of business. Deposit reinsurance premiums are typically contractually due on a quarterly basis in advance. At 31

December 2024, the Syndicate has an outstanding reinsurance purchase commitment of USD 12.3m (2023: USD 7.5m).

27.

POST BALANCE SHEET EVENTS

The Syndicate conducts a review of events subsequent to the balance sheet date through to the date the financial statements are

signed to determine whether there are such events requiring recognition or disclosure in the financial statements.

In December 2024, AXIS announced that it will enter into a loss portfolio transfer reinsurance agreement with Cavello Bay

Reinsurance, a wholly owned subsidiary of Enstar Group Limited, covering a portfolio of reinsurance segment business.

The

transaction is predominantly related to 2021 and prior underwriting years.

The transaction will take effect in the 2025 calendar

year once regulatory approval is granted and so there is no impact for 2024 reporting.

An estimate of the financial effect of this

agreement cannot be made at this stage.

28.

FOREIGN EXCHANGE RATES

The following currency exchange rates have been used for principal foreign currency transactions:

2024

2023

Start of

End of

Average

Start of

End of

Average

period rate

period rate

Rate

period rate

period rate

Rate

Sterling

0.78

0.80

0.78

0.83

0.78

0.81

US dollar

1.00

1.00

1.00

1.00

1.00

1.00

Euro

—

—

—

—

—

—

Canadian dollar

—

—

—

—

—

—

Australian dollar

—

—

—

—

—

—

Japanese Yen

—

—

—

—

—

—

29.

APPROVAL OF ANNUAL REPORT AND ACCOUNTS

The annual report and accounts were approved by the Board of Directors on 26 February 2025.

AXIS SYNDICATE 1686

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2024

_________________________________________________________________________________________________

_____________________________________________________________________________________________________42