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Annual Accounts
Syndicate 0218
Contents
Directors and administration
.............................................................................................................................
3
........
Annual Report
and Accounts
2024 Financial Year
......................................................................................
4
........
Report of the managing agent
..........................................................................................................................
5
........
Statement of managing agent’s responsibilities
.............................................................................................
10
.......
Independent auditors’ report to the members of Syndicate 218
.................................................................
11
........
Statement of profit or loss and comprehensive income – technical account for general business
.......
15
.......
Statement of profit or loss and comprehensive income – non-technical account
....................................
16
.......
Balance sheet – assets
........................................................................................................................................
17
.......
Balance sheet – liabilities
....................................................................................................................................
18
.......
Statement of changes in members’ balances
.................................................................................................
19
.......
Cash flow statement
...........................................................................................................................................
20
......
Notes to the accounts
.........................................................................................................................................
21
.......
Underwriting Accounts
2022 Closed
Year of Account
...............................................................................
57
......
Reports & Accounts
Syndicate 218
2
Directors and administration
MANAGING AGENT
Managing agent
Directors
Francois-Xavier B Boisseau (Chairman)
Peter A Bilsby
Charlotte Constable
Michele J Faull
Martin Hall
David J Harris (resigned 31 October 2024)
Richard A Hextall (appointed 9 February 2024)
John G Holland
David E Morris
Nathan R Ott
Heather I Thomas
Christopher Watson
Company secretary
Renuka S Fernando (resigned 19 July 2024)
Managing agent’s registered office
30 Fenchurch Street
London
EC3M 3BD
Managing agent’s company number
00426475
SYNDICATE
Active underwriter
Martin Hall
Bankers
National Westminster Bank Plc
Citibank NA
Royal Bank of Canada Dexia
Investment managers
Conning Asset Management Limited
Independent Auditors
PricewaterhouseCoopers LLP
Reports & Accounts
Syndicate 218
3
Annual Report
and Accounts
2024 Financial Year
Report of the managing agent
IQUW Syndicate Management Limited (the “Managing Agent”), the managing agent of Syndicate 218 (the
“Syndicate” or “ERS”), presents its report for the year ended 31 December 2024 which has been prepared
under the regulations outlined in note 2 of the annual accounts.
Separate underwriting year accounts for the 2022 year of account which closed at 31 December 2024 are
included following these accounts from page 57.
Principal activities
The principal activities of the Syndicate remain a specialist motor-only, broker-only insurer, focused on
delivering sustainable profits. The Syndicate offers a broad range of specialist motor insurance products to
commercial market and personal lines segments principally in the United Kingdom. It operates under a
strong brand, ERS, and is the largest specialist motor insurer in Lloyd’s and the only motor-focused Lloyd’s
syndicate.
The four key elements of the Syndicate’s strategy are as follows:
•
ERS is deliberately different. It focuses on drivers whose needs are different or more intricate, or who
have a passion for their vehicle or who depend upon it for their livelihood;
•
ERS has strong broker relationships and is committed to distribution partnerships with specialist
brokers. Their knowledge and understanding of their customers and market together with ERS’s
underwriting and claims capabilities continue to foster mutual and sustainable relationships;
•
ERS continues to enhance its capabilities and will adopt technology where it improves the customers’
experience, the efficacy of underwriting judgement, the efficiency of the insurance process, and the
settlement of claims; and
•
ERS remains committed to being a sustainable business whose consistent underwriting approach
provides to brokers, and to their customers, protection in what continues to be a volatile market. ERS
benefits from the Lloyd’s credit ratings, namely an A+ (Superior) rating from A.M. Best, AA- (Strong)
rating from Standard & Poor’s, AA- (Very strong) rating from Kroll Bond Rating Agency, AA- (Very
strong) rating from Fitch Ratings.
Review of the business
The Syndicate’s key financial performance indicators during the year were as follows:
Financial Year
£'000
2024
2023
2022
2021
Gross premium written
490,052
412,568
359,396
319,212
Net premiums written
434,717
349,530
316,658
279,905
Net earned premium
409,303
330,876
294,455
282,396
Investment Income
24,375
25,887
(5,793)
2,237
Profit/(loss) for financial year
70,165
8,364
(7,914)
4,301
Claims ratio*
57.0%
72.1%
67.8%
65.8%
Commission ratio**
13.3%
13.9%
13.8%
13.8%
Expense ratio***
16.4%
18.1%
18.2%
18.4%
Combined operating ratio****
86.7%
104.1%
99.8%
98.0%
Profit Commission
7,920
4,112
3,294
3,404
* (Claims incurred, net of Reinsurance / Net Earned Premium)
** (Acquisition cost, net of Reinsurance / Net Earned Premium)
*** (Administrative expenses / Net Earned Premium)
**** (Claims ratio + Commission ratio + Expense ratio)
Report of the managing agent
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
5
The Syndicate's result for the calendar year 2024 was a profit of £70.2m (2023: £8.4m profit). The results
have been driven by improvements in the loss ratio as the business increased rates, experienced a reduction
in claims frequency, and by the addition of attractive new business in further specialist segments. In
addition, investments in digital trading over recent years have meant the business growth was achieved with
marginal additional costs improving the expense ratio.
Total gross premium written for the calendar year was £490.1m (2023: £412.6m). The Syndicate continued to
target pricing discipline, so the Syndicate remains adequately funded to cover claims trends. Premium rates
increased in all classes greater than the underlying rise in claims inflation.
Claims inflation returned to levels closer to historic long-term trends. The value of used cars began to
reduce after rapid increases over recent years. This had the same effect on the cost of third-party damage
payments. There continues to be a reduction in small injury claims resulting from the whiplash reforms, but,
increases in tariffs in this area are expected and there remains inflationary pressure on large injury claims
settlements.
During 2024, whilst traffic levels remained relatively constant compared to the previous period, the
Syndicate has observed a reduction in claims frequency by improving business mix and further observed
trends. These have been reported across the industry with no single factor being the sole driver of this
trend.
Business operations have continued to perform well. The Syndicate maintained high standards of customer
and broker service supported by a Trust Pilot score of 4.7.
The strategy of the Syndicate remains consistent in targeting specialist segments of the motor market,
predominately in the UK where there are lower levels of competition and where our propositions are
designed to cater for the requirements of customers in these sectors. All business is traded via brokers and
intermediaries and not direct to policyholders.
ERS focuses on drivers and businesses whose needs are different or more intricate, and who have a passion
for their vehicle, or who depend upon it for their livelihood. Target markets include agriculture, commercial
fleets, passenger transport, modified commercial and private vehicles, prestige, enthusiast and classic cars,
non-standard personal risks and vehicle breakdown. ERS also supports changes in mobility in the market.
Private car markets observed rating increases which accelerated in the second half of 2023. The trend
continued into 2024 at levels not seen for more than 20 years. The Syndicate continues to target non-
standard segments of this market for customers who find obtaining insurance a challenge through direct
markets. The Syndicate also commenced underwriting the Police Mutual account in 2024, which provides a
proposition to serving and retired police employees. The account has been successfully onboarded with
premium and loss ratios achieving expectations.
Enthusiast and classic cars markets also observed rating increases higher than previous years as several
competitors struggled to retain capacity. This provided opportunities to grow in these specialist segments.
The Syndicate's Prestige product targeting high net worth customers and their vehicles had another strong
trading year as a positive underwriting service and claims reputation with brokers cemented our top 3
market position.
Agriculture, Commercial and Fleet markets continued to focus on maintaining their pricing discipline and
extending the distribution of the product to a greater number of brokers. The taxi market was slower to
react fully to claims inflation. There was an adverse effect on conversion and retention rates as ERS
increased rates. Nevertheless, this segment provided a solid profit contribution.
As part of the Managing Agent's strategy, a new class of business was launched in Motor Innovation to cater
for future mobility needs which, includes products for on demand insurance, embedded insurance, a
connected vehicle proposition. ERS is also supporting the transition to semi-autonomous and autonomous
vehicles.
The net claims ratio for the year was 57.0% (2023: 72.1%). This significant year-on-year reduction is
attributed to three primary factors: an overall decrease in actuarial estimates due to favourable settlements,
Report of the managing agent (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
6
significant prior year releases and a positive change in the Ogden discount rate. The movement in reserves
positively impacted the result on the reinsurance structured deal calculation, which subsequently increased
the net earned premium, further reducing the net claims ratio.
Higher amounts of premium written and the increase in digital trading resulted in the expense ratio
(excluding profit commission) decreasing to 16.4% (2023: 18.1%).
The 2022 year of account has closed with a profit of £12.6m (2023: 2021 year of account closed with a
profit
of £16.4m), representing a profit on underwriting capacity of 2.6%. The underwriting accounts for 2022
closed year are on page 57.
2025 and the future
The Managing Agent sees an opportunity for continued profitability in 2025,
albeit at a more moderate
level than in 2024, but expects pressure on premium as a result of the improved market results in 2024. The
changes to the Ogden discount rate will have a positive impact on the cost of reinsurance.
There is an expectation of continued flattening of the inflationary pressures on claims, but uncertainty exists
within the UK and Global economies. The Syndicate has a great deal of rigour around its claims inflation
assumptions and will continue to maintain its underwriting and pricing discipline.
The Syndicate is well reserved, has a strong reinsurance programme, and has a robust investment portfolio
providing strong investment returns. With yields now higher for bonds, the business should benefit from
increased investment returns.
Outwards Reinsurance
Within the programme, the Syndicate purchased a multi-year structured excess of loss ("XoL") reinsurance
contract covering losses up to specified thresholds attached to premium written between 2020 - 2025.
These contracts differ from traditional reinsurance contracts as a margin percentage of reinsurance
premium is payable quarterly to reinsurers and the Syndicate retains the remaining reinsurance premium on
which to draw down from for future recoveries.
A comprehensive layered schedule of traditional reinsurance contracts cover losses exceeding £1.0m for
remaining thresholds to unlimited on underwriting years 2020 – 2024 with the Syndicate retaining 20% on
the first layer £4.0m xs £1.0m. The 2025 programme protects against losses above £2.0m with the Syndicate
retaining 25% of the £3.0m xs £2.0m layer. This first layer is placed with a variety of traditional, single & multi
year structured XoL contracts.
Investment report
The start of 2024 was marked by ongoing high levels of inflation resulting in interest rates continuing to
remain elevated and markets pricing in an environment of higher for longer interest rates that risked putting
pressure on economic growth and increasing the likelihood of a recession. This resulted in bond yields
remaining elevated during the first half of the year, which weighed on fixed income returns. However,
receding inflation levels allowed for markets to price for an easing of central bank monetary policy, resulting
in the Bank of England initiating its first of two quarter percentage point cuts in interest rates at the start of
the second half of the year.
There continues to be economic uncertainty in the UK, particularly affecting the prospects for growth and
inflation.
The return on investment for the Syndicate was £24.4
m
(
2023
: £25.9
m return) equating to a return of 4.8%
(2023: 6.1%
). The Syndicate’s invested assets totalled £502.9
m
(
2023
: £427.8
m
).
Capital
For the 2024 year of account, £380.6m (79.3%) of the capital to support the Syndicate’s underwriting is
provided by IQUW Corporate Member Limited (“IQUW CML”). The remaining £99.4m (20.7%) of the
Syndicate’s capacity was provided by non-aligned members. The non-aligned members have taken 20.7% of
capacity on the 2025 year of account.
Report of the managing agent (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
7
Year of Account
£’000
2025
2024
2023
2022
2021
2020
Syndicate Capacity
505,000
480,000
479,525
479,737
479,890
480,000
IQUW CML Participation
400,453
380,628
380,170
376,972
373,722
373,722
IQUW CML Participation
79.3%
79.3%
79.3%
78.6%
77.9%
77.9%
Each member is required to provide capital sufficient to meet its Economic Capital Assessment (“ECA”).
Lloyd’s rules require each member to hold sufficient capital across the member’s interests at Lloyd’s in
aggregate, rather than at a syndicate level. A member’s capital can be held through a combination of three
options. First, capital may be held in trust by Lloyd’s, called Funds at Lloyd’s (“FAL”). Second, it may be held
within and managed as syndicate funds, called Funds in Syndicate (“FIS”). Third, it may be held as a
member’s share of the members’ balances on each syndicate in which the member participates. As a result,
because the capital requirement applies at an overall member level, the capital requirement in respect of
the Syndicate is not disclosed in these financial statements.
Syndicate capital is determined through the submission to and agreement by Lloyd’s of an ultimate
solvency capital requirement (“SCR”), which is subject to an uplift determined by the Franchise Board to
arrive at the capital required by Lloyd’s. The Managing Agent uses its own internal capital model to measure
the Syndicate’s SCR, based on a rigorous process of risk identification and quantification, which is reflected
in the Managing Agent’s Own Risk and Solvency Assessment (“ORSA”). The model is based on regulatory
requirements and has been approved by Lloyd’s.
Climate change and environmental matters
IQUW Holdings Bermuda Limited and its subsidiaries (“the IQUW Group”) are committed to considering
sustainability in its business decisions, to intelligently using data and automation to enhance the
management of risks from climate change, and to supporting its customers in the move towards a low
carbon economy.
The IQUW Group’s (re)insurance products actively support climate change resilience, protecting society
from the physical risks of climate change through underwriting classes of business that help rebuild
infrastructure and communities after natural disasters. We provide insurance for alternative fuel vehicles,
supporting the UK’s ambition for all new cars to be zero-emission by 2035.
The Syndicate imposes guidelines on its external investment managers in relation to the constituents of the
investment portfolios and acceptable asset classes. The performance of the investment managers is
regularly reviewed to confirm adherence to these guidelines along with any appropriate assessment and
change to the investment strategy going forward.
Principal risks and uncertainties
A description of the principal risks and uncertainties facing the Syndicate and how it manages those risks is
set out in note 6 to the financial statements. In particular, the Syndicate is exposed to Insurance Risk,
Financial Risk, and Operational Risk.
Report of the managing agent (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
8
Directors’ interests and interests in other group companies
The directors of the Managing Agent who were in office during the year and up to the date of signing the
financial statements were:
Francois-Xavier B Boisseau
Independent Non-Executive Chairman
Peter A Bilsby
Chief Executive Officer
Charlotte Constable
Chief Financial Officer
Michele J Faull
Independent Non-Executive Director
Martin Hall
Active Underwriter Syndicate 218
David J Harris
Independent Non-Executive Director (resigned 31 October
2024)
Richard A Hextall
Group Chief Financial Officer (appointed Non-Executive
Director 9 February 2024 )
John G Holland
Group Chief Risk Officer
David E Morris
Group Director of Underwriting
Nathan R Ott
Non-Executive Director
Heather I Thomas
Independent Non-Executive Director
Christopher E Watson
Non-Executive Director
A number of the directors hold shares in the ultimate parent company. Shares are not held in any other
group company.
Disclosure of information to the auditors
The directors of the Managing Agent who held office at the date of approval of the Report of the Managing
Agent confirm that, so far as each of them is aware, there is no relevant audit information of which the
Syndicate’s auditors are unaware, and each director has taken all the steps that they ought to have taken as
a director in order to make themselves aware of any relevant audit information and to establish that the
Syndicate’s auditors are aware of that information.
Syndicate auditors
The Syndicate’s auditors, PricewaterhouseCoopers LLP, are deemed reappointed under the provisions of
The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008.
Annual general meeting (“AGM”)
Notice is hereby given that the Managing Agent does not propose holding a Syndicate AGM this year
unless objections to this proposal or the intention to reappoint the auditors are received from Syndicate
members by 30 April 2025.
On behalf of the Board:
Peter Bilsby
Director
5 March 2025
Report of the managing agent (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
9
Statement of managing agent’s responsibilities
The managing agent is responsible for preparing the managing agent’s report and the 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 annual accounts for each financial year. Under that law, the managing agent
is required to prepare the syndicate accounts in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law). Under The Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, the managing agent
must not approve the annual accounts unless it is satisfied that they give a true and fair view of the state of
affairs of the Syndicate and of the profit or loss of the Syndicate for that period.
In preparing these syndicate annual accounts, the managing agent is required to:
•
select suitable accounting policies and then apply them consistently;
•
make judgements and accounting estimates that are reasonable and prudent;
•
state whether applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the Syndicate annual accounts; and
•
prepare the syndicate annual accounts on a going concern basis unless it is inappropriate to presume
that the Syndicate will continue in business.
The managing agent is responsible for keeping adequate accounting records that are sufficient to show and
explain the Syndicate’s transactions and disclose with reasonable accuracy at any time the financial position
of the Syndicate and to enable it to ensure that the syndicate annual accounts comply with The Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008. It is also responsible for
safeguarding the assets of the Syndicate and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The managing agent is responsible for the maintenance and integrity of the business's website. Legislation
in the UK governing the preparation and dissemination of syndicate annual accounts may differ from
legislation in other jurisdictions.
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.
Statement of managing agent’s responsibilities
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
10
Independent auditors’ report to the members of Syndicate 218
Report on the audit of the syndicate annual accounts
Opinion
In our opinion, 218’s syndicate annual accounts:
•
give a true and fair view of the state of the syndicate’s affairs as at 31 December 2024 and of its
profit and cash flows for the year then ended;
•
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting
Standard applicable in the UK and Republic of Ireland”, and applicable law); and
•
have been prepared in accordance with the requirements of The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the requirements within the
Lloyd’s Syndicate Accounts Instructions version 2.0 as modified by the Frequently Asked Questions
issued by Lloyd’s version 1.1 (“the Lloyd’s Syndicate Instructions”).
We have audited the syndicate annual accounts included within the Annual Accounts (the “Annual Report”),
which comprise: the Balance sheet - assets and Balance sheet - liabilities as at 31 December 2024; the
Statement of profit or loss and comprehensive income – technical account for general business; Statement
of profit or loss and comprehensive income – non-technical account, the Cash flow statement, and the
Statement of changes in members’ balances for the year then ended; and the notes to the syndicate annual
accounts , which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”), The
Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008, the Lloyd’s
Syndicate Instructions and other applicable law. Our responsibilities under ISAs (UK) are further described
in the Auditors’ responsibilities for the audit of the syndicate annual accounts section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We remained independent of the syndicate in accordance with the ethical requirements that are relevant to
our audit of the syndicate annual accounts in the UK, which includes the FRC’s Ethical Standard, as
applicable to other entities of public interest, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical
Standard were not provided.
Other than those disclosed in note 9, we have provided no non-audit services to the syndicate in the period
under audit.
Conclusions relating to going concern
Based on the work we have performed, we have not identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast significant doubt on the syndicate’s ability to
continue as a going concern for a period of at least twelve months from when the syndicate annual accounts
are authorised for issue.
In auditing the syndicate annual accounts, we have concluded that the Managing Agent’s use of the going
concern basis of accounting in the preparation of the syndicate annual accounts is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as
to the syndicate's ability to continue as a going concern.
Independent auditors’ report to the members of Syndicate 218
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
11
Our responsibilities and the responsibilities of the Managing Agent with respect to going concern are
described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the syndicate annual
accounts and our auditors’ report thereon. The Managing Agent is responsible for the other information.
Our opinion on the syndicate annual accounts does not cover the other information and, accordingly, we do
not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of
assurance thereon.
In connection with our audit of the syndicate annual accounts, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
syndicate annual accounts or our knowledge obtained in the audit, or otherwise appears to be materially
misstated. If we identify an apparent material inconsistency or material misstatement, we are required to
perform procedures to conclude whether there is a material misstatement of the syndicate annual accounts
or a material misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report based on these responsibilities.
With respect to the Report of the managing agent (the “Managing Agent’s Report”), we also considered
whether the disclosures required by The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate
Accounts) Regulations 2008 have been included.
Based on our work undertaken in the course of the audit, The Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008 requires us also to report certain opinions and
matters as described below.
Managing Agent’s Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the
Managing Agent’s Report for the year ended 31 December 2024 is consistent with the syndicate annual
accounts and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the syndicate and its environment obtained in the course of
the audit, we did not identify any material misstatements in the Managing Agent’s Report.
Responsibilities for the syndicate annual accounts and the audit
Responsibilities of the Managing Agent for the syndicate annual accounts
As explained more fully in the Statement of managing agent’s Responsibilities, the Managing Agent is
responsible for the preparation of the syndicate annual accounts in accordance with the applicable
framework and for being satisfied that they give a true and fair view. The Managing Agent is also responsible
for such internal control as they determine is necessary to enable the preparation of syndicate annual
accounts that are free from material misstatement, whether due to fraud or error.
In preparing the syndicate annual accounts, the Managing Agent is responsible for assessing the syndicate’s
ability to continue as a going concern, disclosing as applicable, matters related to going concern and using
the going concern basis of accounting unless it is intended for the syndicate to cease operations, or it has
no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the syndicate annual accounts
Our objectives are to obtain reasonable assurance about whether the syndicate annual accounts as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
syndicate annual accounts.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
Independent auditors’ report to the members of Syndicate 218 (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
12
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud, is detailed below.
Based on our understanding of the syndicate and industry, we identified that the principal risks of non-
compliance with laws and regulations related to breaches of regulatory principles, such as those governed
by the Prudential Regulation Authority and the Financial Conduct Authority, and those regulations set by
the Council of Lloyd’s, and we considered the extent to which non-compliance might have a material effect
on the syndicate annual accounts. We also considered those laws and regulations that have a direct impact
on the syndicate annual accounts such as The Insurance Accounts Directive (Lloyd’s Syndicate and
Aggregate Accounts) Regulations 2008 and the Lloyd’s Syndicate Instructions. We evaluated
management’s incentives and opportunities for fraudulent manipulation of the syndicate annual accounts
(including the risk of override of controls), and determined that the principal risks were related to
management bias in accounting estimates and the posting of inappropriate journals. Audit procedures
performed by the engagement team included:
•
Discussions with the Audit Committee, management, internal audit, and the syndicate’s compliance
function, including consideration of known or suspected instances of non-compliance with laws and
regulation and fraud;
•
Assessment of any matters reported on the Managing Agent’s whistleblowing helpline and
management’s investigation of such matters;
•
Reviewing relevant meeting minutes including those of the Board, the Audit Committee, the Risk
Management Committee, the Reserving Committee, and correspondence with regulatory
authorities, including Lloyd’s of London, the Financial Conduct Authority and the Prudential
Regulatory Authority;
•
Reviewing, and challenging where appropriate, the assumptions and judgements made by
management in their significant accounting estimates, in particular in relation to the estimation of
claims outstanding, with a focus on the incurred but not reported (“IBNR”) claims;
•
Designing audit procedures to incorporate unpredictability around the nature, timing or extent of
our testing; and
•
Identifying and testing journal entries based on selected fraud risk criteria, in particular journal
entries posted with unusual account combinations.
There are inherent limitations in the audit procedures described above. We are less likely to become aware
of instances of non-compliance with laws and regulations that are not closely related to events and
transactions reflected in the syndicate annual accounts. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through
collusion.
A further description of our responsibilities for the audit of the syndicate annual accounts is located on the
FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the syndicate’s members as a body in
accordance with part 2 of The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts)
Regulations 2008 and for no other purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
Independent auditors’ report to the members of Syndicate 218 (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
13
Independent auditors’ report to the members of Syndicate 218 (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
14
Other required reporting
Under The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 we
are required to report to you if, in our opinion:
•
we have not obtained all the information and explanations we require for our audit; or
•
adequate accounting records have not been kept by the Managing Agent in respect of the
syndicate; or
•
certain disclosures of Managing Agent remuneration specified by law are not made; or
•
the syndicate annual accounts are not in agreement with the accounting records.
We have no exceptions to report arising from this responsibility.
Other matter
We draw attention to the fact that this report may be included within a document to which iXBRL tagging
has been applied. This auditors’ report provides no assurance over whether the iXBRL tagging has been
applied in accordance with section 2 of the Lloyd’s Syndicate Instructions 2.0.
Sean Forster (Senior statutory auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
5 March 2025
Statement of profit or loss and comprehensive income –
technical account for general business
For the year ended 31 December 2024
Note
2024
£000
2023
£000
Earned premium, net of reinsurance
Gross premium written
7
Outward reinsurance premium
(55,335 )
(63,038 )
Premium written, net of reinsurance
Change in the provision for unearned premium:
Gross amount
13
(22,740 )
(29,465 )
Reinsurers’ share
13
(2,674 )
Change in the net provision for unearned premium
(25,414 )
(18,654 )
Earned premium, net of reinsurance
Allocated investment return transferred from the non-technical
account
8
Claims incurred, net of reinsurance
Claims paid:
Gross amount
13
(261,864 )
(251,691 )
Reinsurers’ share
13
Net claims paid
(242,333 )
(227,108 )
Change in the provision for claims:
Gross amount
13
Reinsurers’ share
13
(38,906 )
(29,995 )
Change in the net provision for claims
(11,613 )
Claims incurred, net of reinsurance
(233,254 )
(238,721 )
Net operating expenses
9
(129,514 )
(109,584 )
Balance on the technical account for general business
All amounts relate to continuing operations.
The notes on pages 21 to 56 form an integral part of these annual accounts.
Statement of profit or loss and comprehensive income – technical account for general business
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
15
Statement of profit or loss and comprehensive income – non-
technical account
For the year ended 31 December 2024
Note
2024
£000
2023
Restated*
£000
Balance on the technical account for general business
Investment return
Investment income*
Realised gains/(losses) on investments*
(1,895 )
Unrealised gains on investments
Investment expenses and charges
(740 )
(709 )
Total investment return
Allocated investment return transferred to technical account for
general business
8
(24,375 )
(25,887 )
Loss on foreign exchange
12
(745 )
(94 )
Profit for the financial year
Total comprehensive income for the year
*Restated, for more information about the financial effect of the restatements please refer to note 4.
There are no differences between the profit for the financial year stated above and their historical cost
equivalents in the statement of profit or loss and comprehensive income for the financial year.
The notes on pages 21 to 56 form an integral part of these annual accounts.
Statement of profit or loss and comprehensive income – non-technical account
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
16
Balance sheet – assets
At 31 December 2024
Note
2024
£000
2023
Restated*
£000
Investments
Financial investments*
11
Deposits with ceding undertakings
Reinsurers’ share of technical provisions
Provision for unearned premium
13
Claims outstanding
13
Debtors
Debtors arising out of direct insurance operations
16
Debtors arising out of reinsurance operations
17
Other debtors
18
Other assets
Cash at bank and in hand*
19
Other*
11
Prepayments and accrued income
Accrued interest and rent
Deferred acquisition costs
15
Other prepayments and accrued income*
21
Total assets
*Restated, for more information about the financial effect of the restatements please refer to note 4.
The notes on pages 21 to 56 form an integral part of these annual accounts.
Balance sheet – assets
At 31 December 2024
Reports & Accounts
Syndicate 218
17
Balance sheet – liabilities
At 31 December 2024
Note
2024
£000
2023
£000
Members’ balances
(23,224 )
Total capital and reserves
(23,224 )
Provision for unearned premium
13
Claims outstanding
13
Technical provisions
Creditors arising out of direct insurance operations
22
Creditors arising out of reinsurance operations
23
Other creditors including taxation and social security
24
Creditors
Accruals and deferred income
Total liabilities
Total liabilities, capital and reserves
The notes on pages 21 to 56 form an integral part of these annual accounts.
The Syndicate annual accounts on pages 15 to 56 were approved by the Board on 27 February 2025 and
signed on behalf of the Syndicate’s Managing Agent by:
Charlotte Constable
Director
5 March 2025
Balance sheet – liabilities
At 31 December 2024
Reports & Accounts
Syndicate 218
18
Statement of changes in members’ balances
For the year ended 31 December 2024
2024
£000
2023
£000
Members’ balances brought forward at 1 January
(23,224 )
Total comprehensive income for the year
2021 year of account
(16,003)
—
2020 year of account
—
(34,608)
Payment of the result from members’ personal reserve funds:
(22,925 )
Members’ agents’ fees paid in year
(356 )
(299 )
Members’ balances carried forward at 31 December
(23,224 )
Members participate in syndicates by reference to years of account and their ultimate result. Assets and
liabilities are assessed with reference to policies incepting in that year of account.
The notes on pages 21 to 56 form an integral part of these annual accounts.
Statement of changes in members’ balances
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
19
Cash flow statement
For the year ended 31 December 2024
Note
2024
£000
2023
Restated*
£000
Cash flows from operating activities
Profit for the financial year
Adjustments:
(Decrease)/increase in gross technical provisions
(25,244 )
Increase in reinsurers’ share of gross technical provisions
Decrease in debtors
(41,709 )
(19,037 )
Increase in creditors
Movement in other assets/liabilities
Investment return
8
(24,375 )
(25,887 )
Net cash inflow from operating activities*
Cash flows from investing activities
Purchase of equity and debt instruments*
(527,173 )
(200,466 )
Sale of equity and debt instruments*
Investment income received*
Other
(293 )
Net cash (used in) generated in investing activities*
(49,914 )
Cash flows from financing activities
Distribution of profit
(16,003 )
(34,607 )
Other (members' agent fees)
(356 )
(299 )
Net cash used in financing activities
(16,359 )
(34,906 )
Net (decrease) / increase in cash at bank and in hand*
(17,320 )
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year*
19
*Restated, for more information about the financial effect of the restatements please refer to note 4.
The notes on pages
21 to 56 form an integral part of these annual accounts.
Cash flow statement
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
20
Notes to the accounts
1.
General information
Syndicate 218 (the "Syndicate") comprises a group of members of the Society of Lloyd's that underwrites
insurance business in the London Market. The address of the Syndicate’s managing agent IQUW Syndicate
Management Limited (the "Managing Agent") is 30 Fenchurch Street, London, EC3M 3BD. The principal
activity of the Syndicate is to underwrite a range of specialist motor insurance business at Lloyd’s, and it is
regarded as a specialist provider of motor solutions in several niche areas.
2.
Statement of compliance and basis of preparation
The financial statements have been prepared in accordance with the Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008, and applicable Accounting Standards in the United
Kingdom and the Republic of Ireland, including Financial Reporting Standard 102 (FRS 102). FRS 102
requires the application of Financial Reporting Standard 103 (FRS 103) in relation to insurance contracts,
and the Lloyd’s Syndicate Accounts Instructions Version 2.0 as modified by the Frequently Asked
Questions Version 1.1 issued by Lloyd’s.
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 have been included within notes 6, 7, 8, 11, 13, 15, 19, 20 and 28 and comprise:
a) Reclassification changes - Certain financial statement line items have been reclassified whilst the
underlying amounts remain unchanged. This includes the 2023 overseas deposits of £0.1m, previously
shown as a separate balance sheet item, to form part of other assets. The comparative balances in the
affected notes 6 and 11 have also been represented to align with the current period presentation.
b) Aggregation changes - To align with Lloyd's reporting requirements whilst maintaining FRS 102
compliance, certain items have been aggregated or disaggregated within the financial statements and
related notes. This includes the 2023 investment income £25.9m, which has been reclassified to separate
out realised gains/losses on investments in the statement of profit or loss and comprehensive income - non-
technical.
The reclassification and aggregation changes have been applied retrospectively and had no impact on
previously reported profit or (loss), total comprehensive income/(loss), total assets, total liabilities, or total
capital and reserves. Refer to note 4 for all other restatements.
Going concern
The Syndicate has financial resources to meet its financial needs and manages its portfolio of insurance risk.
The directors have continued to review the business plans, liquidity and operational resilience of the
Syndicate and are satisfied that the Syndicate is well positioned to manage its business risks in the current
economic environment. The Syndicate 2025 year of account has opened and the directors have concluded
that the Syndicate has sufficient resources to, and a reasonable expectation that it will, open a 2026 year of
account. The Syndicate has sufficient capital for each year of account in its Funds at Lloyd’s ("FAL"). There is
no intention to cease underwriting or cease the operations of the Syndicate.
Accordingly, the directors of the Managing Agent continue to adopt the going concern basis in preparing
the annual report and financial statements.
Notes to the accounts
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
21
3.
Summary of significant accounting policies
The principal accounting policies applied in the preparation of these annual accounts are set out below.
These policies have been consistently applied to all years presented, unless otherwise stated.
(i)
Gross premium written
Gross premium written comprises premium on contracts incepted during the financial year as well as
adjustments made in the year to premium written in prior accounting periods. Premium is shown gross of
brokerage payable and exclude taxes and duties levied on it.
Premium written includes an estimate of gross premium written during the year. For certain contracts,
premium is initially recognised based on estimates of ultimate premium. This occurs where pricing is based
on variables, which are not known with certainty at the point of binding the policy. In determining the
estimated premium, use is made of information provided by brokers and coverholders, past underwriting
experience, the contractual terms of the policy, and prevailing market conditions.
Subsequently,
adjustments to those estimates arise as updated information relating to those pricing variables becomes
available, for example due to declarations obtained on binding authority contracts, reinstatement premium
on reinsurance contracts, or other policy amendments. Such adjustments are recorded in the period in
which they are determined, and impact both gross premium written in the income statements and premium
received from insureds and cedants recorded on the balance sheet.
(ii)
Unearned premium
Written premium is recognised as earned according to the risk profile of the policy. The provision for gross
unearned premium in addition to the unearned premium held within reinsurers’ share of technical
provisions comprises the proportion of gross and outwards reinsurance premium written, which is estimated
to be earned in the following or subsequent financial years, computed using the daily pro-rata method
weighted by the risk profile of the underlying policies.
(iii)
Reinsurance premium ceded
Outwards reinsurance premium comprises premium on contracts incepted during the financial year.
Outwards reinsurance premium is also disclosed gross of commissions and profit participations recoverable
from reinsurers. Written outwards reinsurance premium is recognised as earned according to the coverage
period and in line with the risk profile to which the inwards business being protected relates.
Reinsurance structured contracts within the main motor programme are administered differently from
traditional excess of loss ("XoL") contracts. In these structured contracts, a margin is paid to reinsurers, while
the remaining funds are retained by the reinsured for reinsurance recoveries as claims are settled. These
contracts feature a profit commission due back to the reinsured, calculated based on the underwriting
result minus the margin, plus interest credit as specified within each contract. However, if losses exceed
expectations, this could result in increased costs. Reserving judgement is applied to calculate incurred but
not reported ("IBNR") claims, determining the ultimate reinsurance split by contract and layer. Profit
commission is recognised and booked on an earned basis within the reinsurance premium and earned line.
(iv)
Investment return
Investment return comprises interest, realised and unrealised gains and losses on assets held at fair value
through profit or loss. Fair value realised gains and losses are calculated as the difference between net sales
proceeds and fair value at acquisition. Fair value unrealised gains and losses are calculated as the difference
between the current fair value at the balance sheet date and the fair value at acquisition or at previous
remeasurement date, adjusted for by excluding previously recognised unrealised gains and losses of those
financial assets disposed of in the accounting period.
The returns on pooled investments arising in each calendar year are apportioned to years of account open
during the calendar year in proportion to average funds available for investment on each year of account.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
22
Investment return is initially recorded in the statement of comprehensive income non-technical account. A
transfer is made from the statement of comprehensive income non-technical account to the statement of
comprehensive income-technical account for general business. Investment return has been wholly
allocated to the technical account as all investments relate to underwriting activities.
(v)
Operating expenses
Where expenses are incurred by or on behalf of the Managing Agent for the administration of the
Syndicate, these expenses are apportioned appropriately based on type of expense. Expenses that are
incurred jointly are apportioned between the Managing Agent and the Syndicate on bases depending on
the amount of work performed, resources used, and the volume of business transacted. Syndicate operating
expenses are allocated to the year of account for which they are incurred.
(vi)
Taxation
Under Schedule 19 of the Finance Act 1993, managing agents are not required to deduct basic rate income
tax from trading income. In addition, all UK basic rate income tax deducted from Syndicate investment
income is recoverable by managing agents and consequently the distribution made to members or their
agents is gross of tax. Capital appreciation falls within trading income and is also distributed gross of tax.
No provision has been made for any United States Federal income tax payable on underwriting results or
investment earnings. Any payments on account made by the Syndicate during the year are included in the
balance sheet under the heading ‘Members’ balances’. No provision has been made for any overseas tax
payable by members on underwriting results.
(vii)
Foreign currency
The functional currency of the Syndicate is Sterling which is the currency of the primary economic
environment in which the Syndicate operates.
Transactions denominated in foreign currencies are translated into Sterling at the rates of exchange ruling
at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the re-translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the statement of profit or loss and comprehensive
income non-technical account for the period.
(viii)
Financial instruments
The Managing Agent has chosen to adopt Sections 11 and 12 of FRS 102 in respect of financial instruments.
Financial instruments are recognised in the balance sheet at such time as the Syndicate becomes a party to
the contractual provisions of the financial instrument. A financial asset is derecognised when the contractual
rights to receive cash flows from the financial assets expire, or where the financial assets have been
transferred, together with substantially all the risks and rewards of ownership. Financial liabilities are
derecognised if the Syndicate’s obligations specified in the contract expire, are discharged or cancelled.
Financial assets
The Syndicate has classified these assets into the following categories: financial assets at fair value through
profit or loss, and loans and receivables. Syndicate loans to the central fund are measured at fair value
through profit and loss.
Financial investments
Financial investment assets are designated at fair value through profit or loss on initial recognition where it
is the Syndicate’s strategy to manage those financial investments on a fair value basis. Internal reporting and
performance measurement of these assets are also on a fair value basis. Note 11 sets out the amount of each
class of financial asset that has been designated at fair value through profit or loss.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
23
Investments carried at fair value through profit or loss are initially recognised at fair value with any
associated transaction costs being expensed through the statement of comprehensive income – non-
technical account.
If the market for an investment is not active, the valuation is based upon the net asset values of underlying
holdings, which are independently sourced. The fair value of listed equity and debt securities is determined
by reference to their quoted bid price at the balance sheet date.
Fair values for unlisted debt securities are estimated at the present value of their future cash flows,
discounted at the market rate of interest at the reporting date.
The fair value of forward exchange contracts is based on their listed market price, if available. If a listed
market price is not available, then fair value is estimated by discounting the difference between the
contractual forward price and the current forward price for the residual maturity of the contract using a risk
free interest rate (based on government bonds).
Loans and receivables
Loans and receivables are recognised at amortised cost, being the fair value of consideration paid plus
incremental direct transaction costs less any provision for impairments.
(ix)
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly
liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts,
when applicable, are shown within current borrowings in liabilities. For the purpose of the cash flow
statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
(x)
Deferred acquisition costs
The costs of acquiring new business, which are incurred during the financial year, but where the benefit of
such costs will be obtained in subsequent accounting periods, are deferred, and recognised as an asset to
the extent that they are recoverable out of margins in future matching revenues. All other costs are
expensed when they are incurred.
In respect of insurance contracts, acquisition costs comprise direct and indirect costs incurred in writing
new contracts. Deferred acquisition costs are amortised over the life of the policy in line with the
recognition of earned premium.
All deferred acquisition costs are tested for recoverability at each reporting date. The carrying values are
adjusted to recoverable amounts and any resulting impairment losses are charged through the profit and
loss account.
(xi)
Claims provision and related recoveries
Gross claims incurred comprise the estimated cost of all claims occurring during the year, whether reported
or not, including related direct and indirect claims handling costs and adjustments to claims incurred from
previous years.
The provision for claims outstanding is assessed on an individual case basis; and is based on the estimated
ultimate cost of all claims notified but not settled by the balance sheet date, together with a provision for
related claims handling costs. The provision also includes an estimated cost of claims IBNR at the balance
sheet date based on statistical methods.
These methods generally involve projecting from past experience the development of claims over time to
form a view of the likely ultimate claims to be experienced for more recent underwriting, having regard to
variations in the business accepted and the underlying terms and conditions. For the most recent years,
where a high degree of volatility arises from projections, estimates may be based in part on output from
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
24
premium rating and other pricing models of business accepted, together with assessments of underwriting
conditions.
The reinsurers’ share of provision for claims is based on the amount of outstanding claims and projections
for IBNR, net of estimated irrecoverable amounts, having regard to the reinsurance programme in place for
the class of business, the claims experience for the year and the current rating of the reinsurance companies
involved. Several statistical methods are used to assist in making these estimates.
The two most critical assumptions with regards to claims provisions are that the past is a reasonable
predictor of the likely level of future claims development, and that the premium rating and other pricing
models used for current business are fair reflections of the likely level of ultimate claims to be incurred.
The directors consider that the provision for gross claims and related reinsurance recoveries is fairly stated
based on the information currently available to them. However, the ultimate liability will vary because of
subsequent information and future events and this may result in significant adjustments to the amounts
provided. Adjustments to the amounts of claims provisions established in prior years are reflected in the
annual accounts for the period in which the adjustments are made. The methods used, and the estimates
made, are reviewed regularly.
(xii)
Discounted claims provision
Large loss injury awards comprise either a lump-sum payment, which is calculated as the present value of
the claimant’s loss and expense, or as a structured settlement, typically under a Periodic Payment Order
(“PPO”) awarded by the courts or agreed with the claimant.
With respect to PPOs, due to the long delay between the inception date of the policy and the final
settlement of the claim, the outstanding claims provisions are discounted to take account of the expected
future investment income on the assets held to cover the payments (see note 5 for further details).
(xiii)
Unexpired risks provision
A provision for unexpired risks is made where claims, related claims handling costs and other related
expenses arising after the end of the financial year in respect of contracts concluded before that date are
expected to exceed the unearned premiums on these contracts, after the deduction of any deferred
acquisition costs.
The provision for unexpired risks is calculated by reference to classes of business that are managed
together. No account is taken of the relevant investment return arising from investments supporting the
unexpired premiums and unexpired risk provisions.
(xiv)
Pension costs
IQUW Administration Services Limited (“IQUW ASL”) employs all UK based employees and operates a
defined contribution scheme. Pension contributions relating to staff recharged to the Syndicate via IQUW
Syndicate Services Limited (“IQUW SSL”) and to the Syndicate and are included within net operating
expenses.
(xv)
Profit commission
The profit commission calculation is subject to a two-year deficit clause. This means that any reporting year
of account losses can be offset against open year of account profits for a maximum of two years for the
purpose of calculating the profit commission.
(xvi)
Deposit components of reinsurance contracts
Where a deposit component exists in a reinsurance contract, it is not unbundled and is recorded as part of
the reinsurance assets. Any interest payable on the deposit component is accrued annually at the effective
interest rate.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
25
(xvii)
Reinsurance assets and liabilities
Amounts due to and from reinsurers are accounted for in a manner consistent with the insured policies and
in accordance with the relevant reinsurance contract. Reinsurance assets are assessed for impairment at
each balance sheet date. A reinsurance asset is deemed impaired if there is objective evidence, because of
an event that occurred after its initial recognition, that the Syndicate may not recover all amounts due, and
that the event has a reliably measurable impact on the amounts that the Syndicate will receive from the
reinsurer. Objective factors that are considered when determining whether a reinsurance asset or group of
reinsurance assets may be impaired include, but are not limited to the following:
•
negative rating agency announcements of reinsurers;
•
significant reported financial difficulties of reinsurers;
•
actual breaches of credit terms such as persistent late payment or actual default; and
•
adverse economic or regulatory conditions that may restrict future cash flows and asset
recoverability.
Impairment losses on reinsurance assets are recognised in the profit and loss account.
(xviii)
Bad debt
The bad debt provision is calculated for debtors over 90 days outside credit terms using an agreed sliding
scale percentage. In addition to the general provision, a top-up is made by way of a specific provision where
specific information is available to suggest a debtor may be unable or unwilling to settle its debt to the
Syndicate. The provision is calculated on a case-by-case basis.
Bad debt provisions are recognised in the
profit and loss account.
4.
Restatements due to reclassification of financial investments
The tables below outlines the restatements made in line with FRS102, section 10, to the prior year primary
statements.
2023
Reported
£'000
US
Treasury
Bonds
£'000
Exchange
-traded
funds
£'000
Money
Market
Funds
£'000
Accrued
Income
£'000
Overseas
Deposits
£'000
2023
Restated
£'000
Increase/
(Decrease)
£'000
Balance sheet -
asset restated
Financial
investments
424,009
3,206
—
4,796
(4,095)
(144) 427,772
3,763
Debt securities
and other fixed
income
377,271
3,206
(13,086)
—
(4,095)
— 363,296
(13,975)
Participation in
investment pools
—
—
13,086
4,796
—
—
17,882
17,882
Other (Overseas
deposits as
investments)
144
—
—
—
—
(144)
—
(144)
Cash at bank and
in hand
47,308
(3,206)
— (4,796)
—
—
39,306
(8,002)
Other
prepayments and
accrued income
9,322
—
—
—
4,095
—
13,417
4,095
Other (Overseas
deposits as other
assets)
2
—
—
—
—
144
146
144
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
26
2023
Reported
£'000
US
Treasury
Bonds
£'000
Exchange
-traded
funds
£'000
Money
Market
Funds
£'000
Accrued
Income
£'000
Overseas
Deposits
£'000
2023
Restated
£'000
Increase/
(Decrease)
£'000
Cashflow -
restated
Net cash flows
from operating
activities
19,369
—
—
—
(3,004)
—
16,365
(3,004)
(Increase)/
decrease in
debtors
(16,033)
—
—
—
(3,004)
— (19,037)
(3,004)
Net cash flows
from investing
activities
25,078
(3,206)
13,086
—
3,004
146
38,108
13,030
Purchase of equity
and debt
instruments
(197,252)
(3,206)
—
—
—
—
(200,458)
(3,206)
Sale of equity and
debt instruments
211,128
—
13,086
—
889
146 225,249
14,121
Investment
income received
11,493
—
—
—
2,115
—
13,608
2,115
Other
(291)
—
—
—
—
—
(291)
—
Cash and Cash
Equivalents
47,308
(3,206)
13,086
—
—
146
57,334
10,026
Cash at bank and
in hand
47,308
(3,206)
—
(4,796)
—
— 39,306
(8,002)
Short term
deposits with
credit institutions
—
—
13,086
4,796
—
146
18,028
18,028
The restatements of the balance sheet – assets and cash flow statement were made to correctly classify and
align the treatment in the prior year of certain financial instruments across the IQUW group. Money market
funds and certain liquid investments were reclassified from cash at bank and in hand to financial
instruments. Accrued interest was reclassified from financial instruments to other prepayments and accrued
income and overseas deposits were reclassified from financial instruments to other. These restatements do
not impact the total assets.
The above restatements are reflected on the balances sheet and cash flow statement and referred to on
notes 6, 11 and 19.
In addition notes 6.2(a)(ii) and 11 have been restated to reflect the revised credit rating and classification.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
27
5.
Judgements and key sources of estimation uncertainty
In the application of the accounting policies, which are described in note 3, the directors are required to
make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as
at the balance sheet date and the amounts reported for revenues and expenses during the year.
The following judgements, estimations and assumptions have had the most significant effect on amounts
recognised in the financial statements.
Valuation of general insurance contract liabilities
The estimation of the ultimate liability arising from claims made under insurance contracts is the Syndicate’s
most critical accounting estimate. The carrying amount of the liability is disclosed in note 13. For general
insurance contracts, estimates are made for the expected ultimate cost of claims notified as at the balance
sheet date and the cost of claims incurred but not yet reported. It can take a significant period before the
ultimate cost of claims can be established with certainty, and the final outcome may be better or worse than
that provided. The estimation of these claims is based on historical experience projected forward. The
Syndicate’s estimate of claims and of related claims handling costs is mainly achieved through the
application of several commonly accepted actuarial projection methodologies based on the estimation of
the following:
•
Paid claims development, where payments to date are extrapolated based on observed development
of earlier years;
•
estimates based on a projection of claims numbers and average burning cost, which is calculated by
dividing incurred claims by exposure;
•
incurred claims development, where incurred claims to date for each year are extrapolated based on
observed development of earlier years; and
•
expected ultimate loss ratios expected ultimate loss ratios and burn costs, which are estimated using
an average of (developed) years, the averaging period varies depending on reserving peril and class,
but is based on historic claims trends and risk characteristics;
•
quarterly underwriter updates on expected premium and associated rating assumptions; and
•
claims inflation assumptions are derived at a granular level, based on the economic drivers behind the
components of a claim. These components are built up to an overall view of inflation by reserving peril.
The Syndicate uses several statistical methods to incorporate the assumptions made to estimate the
ultimate cost of claims. The Syndicate has not applied these methods mechanically. The final selections are
not necessarily the result of a single method, and in some cases are selected using a weighted average of
different methods. In 2023, inflationary impacts continued to be over and above experience seen in historic
data for damage and injury claims. An excess inflation approach was undertaken, where an uplift was
applied based on internal and external data based on second hand parts/car prices on damage claims and
case estimates uplift based on rising care costs for large injury claims. The assumptions underlying the
ultimate costs were compared to actual claims experience and included in projection models.
The estimation of the ultimate cost of bodily injury claims is a complex process that cannot be performed
using conventional actuarial techniques alone. The cost of bodily injury claims, especially for the more
serious injuries, often involves a legal process where compensation awards are made by the courts. The
outcomes in these cases are hard to predict as case law evolves. The process is further complicated by the
imposition of PPO settlements by the court or requested by the claimant. PPO settlements have an
annuity-type structure, typically paid annually over the claimant’s life span. PPO liabilities are analysed
separately. For each claim that has settled as a PPO, the future costs are projected based on a medical
expert’s assessment of life expectancy, adjusted for wage inflation and investment return. The wage
inflation assumption is 3.0% (2023: 3.0%) based on publicly available information, such as the Annual Survey
of Hours and Earning by the Office for National Statistics. The investment assumption is 3.0% (2023: 3.0%)
based on the current yields to maturity of appropriately matched assets held in the investment portfolio.
The claims provisions are initially calculated gross of any reinsurance recoveries. A separate estimate is
made of the amounts recoverable from all the Syndicate’s reinsurance arrangements, having due regard to
collectability. Claims provisions are subject to regular review, both within the Syndicate and externally.
Reports & Accounts
Syndicate 218
28
The Syndicate’s management discusses and challenges the actuarial best estimate and selected booked
claims provisions at the quarterly Management Agent's Reserve Committee (“RC”) and also at the Audit
Committee (“AC”), the membership of which comprises exclusively non-executive directors with significant
insurance experience. External actuaries are also engaged to calculate an independent best estimate of the
ultimate cost of claims at 31 December and present a Statement of Actuarial Opinion (“SAO”) against which
the Syndicate’s booked reserves are assessed.
6.
Risk management
The Syndicate’s overall appetite for accepting and managing varying classes of risk is defined by the
Managing Agent’s Board (the “Board”). The Board has developed a governance framework and has set risk
management policies and procedures which include risk identification, risk assessment, risk response, risk
monitoring, and risk reporting. The objective of these policies and procedures is to protect the Syndicate’s
members, policyholders and other stakeholders from negative events that could hinder the Syndicate’s
delivery of its contractual obligations and its achievement of sustainable profitable performance.
The Board exercises oversight of the development and operational implementation of its risk management
policies and procedures through the Managing Agent’s Risk and Compliance Committee (“RCC”). Ongoing
compliance is monitored through the Internal Audit function, which is shared with the other entities in the
IQUW group, and which has operational independence, a charter and clear upwards reporting structures
back into the AC and the Board. The Risk Management Function (“RMF”) under the stewardship of the
Chief Risk Officer (“CRO”), coordinates the risk management policies and procedures and supports the
Board and the RCC. The Executive Committee operates regular oversight of the RMF activities and
outcomes.
The Board’s risk appetites and tolerances consider risk capacity, Solvency UK adequacy, prevailing
regulatory and legislative adherence, and the fair treatment and protection of customer and stakeholder
interests. Risk metrics and measures of the business are monitored against the risk appetites and reported
to the RCC and Board quarterly.
The Board is ultimately responsible for ensuring that the RMF is in place and adhered to. Responsibilities
are then delegated through the Three Lines of Defence Model across the IQUW group, summarised as
follows:
•
Line 1: Business units operating within a framework of internal controls underpinned by policies,
procedures, and senior management oversight with direct responsibility for risk management and
controls;
•
Line 2: Risk Management and Compliance functions ensure that the RMF is effective, and that the
Syndicate operates within its legal and regulatory boundaries. Employees in Line 2 coordinate, facilitate
and oversee the effectiveness and integrity of the RMF. As a key input to decision making, the RMF
focusses on assuring the Board that the risk profile is in line with expectations, escalating all material
risk and capital issues to the Board, and providing input to, challenge and oversight of Line 1 decision
making; and
•
Line 3: Internal Audit provides independent assurance to the Board via the AC as to the effectiveness
of the internal control environment. Employees in Line 3 provide independent assurance and challenge
across all business functions in respect of the integrity and effectiveness of the RMF.
The principal sources of risk relevant to the Syndicate fall into three broad categories: 6.1 Insurance Risk, 6.2
Financial Risk, and 6.3 Operational Risk.
6.1 Insurance risk
The predominant risk to which the Syndicate is exposed is insurance risk, which is assumed through the
underwriting process. Insurance risk is defined as the risk of fluctuations in the frequency, severity and
timing of insured events and claims settlements relative to expectation. Insurance risk can be
subcategorised into: (a) underwriting risk, including the risk arising from risk selection and pricing, systemic
insurance losses, and the insurance cycle and competition; and (b) reserving risk, being the risk that
provisions held to cover insurance claim losses turn out to be insufficient.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
29
6.1 (a) Underwriting risk
Underwriting risk is defined as the risk that insurance premium will not be sufficient to cover future
insurance claims and associated expenses. Underwriting risk also encompasses people, process and system
risks directly related to underwriting.
The Board sets the Syndicate’s underwriting strategy and risk appetite, seeking to benefit from identified
opportunities considering other relevant anticipated market conditions.
The Syndicate aims to manage underwriting risk:
•
to achieve acceptable profits and return on equity by ensuring that insurance risks are carefully
selected in accordance with the underwriting strategy and risk appetite tolerances, underwritten in
accordance with risk strategy and priced to reflect the underlying risk; and
•
to mitigate insurance risk using optimal reinsurance arrangements.
6.1 (a) (i) Underwriting strategy
The Syndicate provides specialist motor insurance to personal and commercial customers, principally in the
UK. The offering focuses on drivers whose needs are different or more intricate, and who have a passion for
their vehicle or who depend upon it for their livelihood. Target markets include agricultural, commercial,
larger commercial fleets, private collections, enthusiast and classic cars, non-standard retail, and vehicle
breakdown risks. The underwriting strategy aims to write for profit rather than volumes.
The objective is for underwritten risks to be diversified in terms of type and amount of risk, industry/
demographic profiles and geography, and to contain only risks which meet the approved underwriting
criteria. The underwriting strategy is focused on a sophisticated data driven approach to pricing and
underwriting. Adherence to the business plan and the pricing of products is reviewed on a regular basis.
Specific underwriting objectives are prepared and reviewed by the Managing Agent to translate the
underwriting strategy into specific measurable actions and targets. These are reviewed and approved in
advance of the underwriting year. Performance against these actions and targets is monitored continually
and reported quarterly to the Board.
The Syndicate considers underwriting risk at an individual contract level for material policies and from a
portfolio perspective where the risks assumed in similar classes of policies are aggregated and the exposure
evaluated considering historical portfolio experience and prospective factors.
Policies are predominantly annual contracts, giving the opportunity to reprice based on latest account
experience and external conditions as well as individual risk performance. Unlike many other insurance
classes, motor pricing is very closely linked to the individual risk. Experience has shown that the
underwriting of many uncorrelated individual risks reduces the variability of the expected outcome. The
Syndicate’s underwriting strategy seeks to accept a large population of individual risks within each product
class to limit the variability of expected outcomes.
The delegation of underwriting authority to specific individuals is subject to regular review. All underwriting
staff are set strict parameters in relation to the levels and types of business they can underwrite, based on
individual levels of experience and competence.
6.1 (a) (ii)
Sensitivity to insurance risk
The liabilities established could be significantly lower or higher than the ultimate cost of settling the claims
arising. This level of uncertainty varies between the classes of business and the nature of the risk being
underwritten and can arise from developments in case reserving for large losses and catastrophes, or from
changes in estimates of claims IBNR.
The following table presents the sensitivity of the value of insurance liabilities disclosed in the accounts to
potential movements in the assumptions applied within the technical provisions. Given the nature of the
business underwritten by the Syndicate, the approach to calculating the technical provisions for each class
can vary and as a result the sensitivity performed is to apply a beneficial and adverse risk margin to the total
insurance liability.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
30
General insurance business sensitivities as of
December 31 2024
Sensitivity
+2.5% £000
-2.5% £000
+5.0% £000
-5.0% £000
Claims outstanding - gross of reinsurance
616,300
586,236
631,332
571,205
Claims outstanding - net of reinsurance
381,625
363,010
390,933
353,702
General insurance business sensitivities as of
December 31 2023
Sensitivity
+2.5% £000
-2.5% £000
+5.0% £000
-5.0% £000
Claims outstanding - gross of reinsurance
665,485
633,022
681,716
616,791
Claims outstanding - net of reinsurance
390,932
371,862
400,467
362,327
6.1 (a) (iii) Claims management
Liabilities arising from motor insurance contracts cover both property and liability indemnities. The
overriding objective of claims handling is to ensure all claims are properly scrutinised and paid where they
are valid. The scrutiny of claims is facilitated by using various technical aids, such as weather validation and
fraud databases, and by using claims specialists.
6.1 (a) (iv) Outwards reinsurances
The Syndicate mitigates underwriting risk by purchasing reinsurance. Reinsurance protection, such as XoL
cover, is purchased to manage the effect of individual large losses, especially injury awards where the cost of
care required can be significant, and of catastrophes or unexpected concentrations of risk.
The Syndicate purchases motor XoL reinsurance contracts to reduce the impact of individual large claims
and the accumulation of claims from a single event. The XoL cover which has been purchased limits the
claims arising from any one event up to £1.0m for policies incepting since 2020.
All purchases of reinsurance are approved, in advance, by the Board.
Although the Syndicate has reinsurance arrangements in place to reduce its insurance risk, these
arrangements do not relieve it of its ultimate liability to policyholders and as such, the Syndicate is exposed
to credit risk to the extent that any reinsurer is unable to meet its obligations assumed under such
reinsurance arrangements. The Syndicate’s exposure to this credit risk is discussed in note 6.2(a)(ii).
6.1 (b) Reserving risk
Reserving risk is defined as the risk that reserves set in respect of insurance claim losses are ultimately
insufficient to fully settle these claims and associated expenses. The Syndicate’s procedures for estimating
the outstanding costs of settling insured losses at the balance sheet date, including claims incurred but not
yet reported, are detailed in note 5.
The Syndicate aims to manage reserving risk:
•
to minimise reserve volatility through robust reserving and application of actuarial modelling
approaches; and
•
to monitor reserve adequacy and performance on an ongoing basis.
The Syndicate undertakes both an internal and external actuarial review of the claims provisions,
independent of the underwriting teams. The SAO on claims reserve adequacy, required by Lloyd’s, is
provided by an independent external actuarial firm.
The Syndicate’s estimates are subject to regular and rigorous review by senior management from all areas of
the business including independent actuaries. The final provision is approved by the Managing Agent’s
Board.
Booked reserves include a net margin of
£
18.6m
(
2023
: £9.0m). This is the margin above the best estimate
to mitigate the uncertainty within the reserve estimates. As the best estimate matures and becomes more
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
31
certain, the management margin is gradually released in line with the reserving policy. The increase in the
year reflects a prudent approach following updates to the assumptions within the reserving model, allowing
for a reduced number of modelled cases.
6.1 (b) (i) Sources of uncertainty in the estimation of future claim payments
Claims on motor insurance contracts are payable on a loss-occurrence basis. The Syndicate is liable for all
insured events that occur during the term of the contract, even if the loss is reported after the end of the
contract term. Policyholders will tend to report a claim relatively soon after a road traffic accident, but it may
take longer for claims from third parties to be reported. An element of the claims provision therefore relates
to claims which are IBNR. The Syndicate pays on these contracts the monetary awards agreed or awarded
for property damage and bodily injury suffered by third parties involved in road traffic accidents with our
policyholders, as well as any property damage suffered by our policyholders (in line with the Road Traffic
Act 1988). Bodily injury awards are typically settled over a longer period than property damage claims. Such
bodily injury awards cover compensation for temporary or permanent disability together with the lost
earnings and rehabilitation expenses that the injured party suffers because of the accident. Recurring
annual payments are indexed in line with inflation, to cover the costs of care until the end of the claimant’s
life.
T
he estimated cost of claims includes direct expenses to be incurred in settling claims, net of any expected
subrogation and/or salvage value and other recoveries. All reasonable steps are taken to ensure that
appropriate information regarding claims exposures is available. However, given the uncertainty in
establishing claims provisions, it is likely that the final outcome will prove to be different from the original
liability established. The liability for these contracts comprises a provision for IBNR, a provision for reported
claims not yet paid, and a provision for unexpired risks at the end of the reporting period. The estimation of
IBNR is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims
already notified. In estimating the liability of the cost of reported claims not yet paid, any information
available from loss adjusters and information on the cost of settling claims with similar characteristics in
previous periods is considered. Large claims are assessed on a case-by-case basis and projected separately
to allow for the possible distortive effect of the development and incidence on the rest of the portfolio.
Consideration is given to the operational and systems changes that occur within the business, which would
distort the information of how claims have developed and settled across different periods of time.
Where possible, multiple statistical methods are used to estimate the required level of claims provisions.
This provides a greater understanding of the trends inherent in the claims experience being projected. The
claims projections deriving from the various methodologies also assist in estimating the range of possible
outcomes. The most appropriate estimation method is selected considering the characteristics of the risk
and the extent of the development each year.
In December 2024, the Ogden Discount Rate was announced at 0.5% effective January 2025. This
prescribes the discount rate to be applied in the calculation of bodily injury claims. The best estimate
reserves have been adjusted to reflect the move to the 0.5% rate.
The following key areas of uncertainties have been identified:
•
injury inflation:
third party injury claims are impacted by increasing care costs due to a severe lack
of supply availability to meet demand. Other external factors could continue to increase claim severities for
both injury and damage claims, such as exchange rates and availability of core resources;
•
propensities for PPOs: While theoretically the propensity for PPO payments could increase based
upon the new Ogden discount rate, the claimant’s individual circumstances appear to be the predominant
driver of the likelihood of a PPO.
The calculation of claims provisions is performed internally on a best estimate basis, meaning that the
provisions are intended to represent the probability-weighted average of all possible payment outcomes,
and a net margin of £18.6m (2023: £9.0m) is added to help mitigate the uncertainty within the reserve
estimates. Independent calculations are performed by an external actuary, who also provides the Lloyd’s
SAO.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
32
6.1 (b) (ii) Development of claims provision
Historical claims development information is disclosed to illustrate the uncertainty inherent in the
estimation of future claims payments. The tables below show the estimated ultimate cumulative claims,
being incurred claims plus IBNR and claims handling costs, for each successive underwriting year at each
balance sheet date.
The Syndicate seeks to set robust reserves and to minimise volatility in those reserves over time to mitigate
the risk that reserves will be insufficient to meet future claims payments and related expenses. The tables
below show the development of the estimated ultimate claims costs over an extended period to provide an
illustration of the Syndicate’s ability to accurately estimate the ultimate level of claims.
While the information in the tables below provides a historical perspective on the adequacy of unpaid
claims estimates established in previous years, readers of these financial statements are cautioned against
extrapolating past redundancies or deficiencies to current unpaid loss provisions. The Managing Agent
management believes the booked reserves are adequate at the balance sheet date.
Analysis of claims development – gross of reinsurance
Underwriting year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Total
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
At end of reporting
year
133,019 159,975 147,904
113,131 132,267
118,082
139,655
144,253
146,536
160,648 1,395,470
One year later
309,218 358,417 250,072 232,080
234,850
242,602
254,768
280,140 272,238
2,434,385
Two years later
311,413 352,039 224,343
230,564
227,297
215,931
232,687 250,024
2,044,298
Three years later
288,019 335,510 224,131
214,577
231,945
203,733 209,955
1,707,870
Four years later
291,889 325,330 239,483
216,092
224,213
197,721
1,494,728
Five years later
294,244 320,679 235,429
207,962 211,952
1,270,266
Six years later
280,846 323,995 221,135
199,162
1,025,138
Seven years later
283,367 318,399 220,185
821,951
Eight years later
279,652 319,280
598,932
Nine years later
279,138
279,138
Ten years or more later
—
Current estimate of
cumulative claims
279,138 319,280 220,185
199,162 211,952
197,721 209,955 250,024 272,238
160,648
2,320,303
Provision in respect of
prior years
84,139
Less gross claims paid
(269,368)
(299,493)
(209,380)
(195,200) (183,171) (146,299) (144,683) (163,807)
(143,015)
(48,758) (1,803,174)
Total gross provision
included in the
balance sheet
9,770
19,787 10,805
3,962 28,781
51,422
65,272
86,217
129,223
111,890
601,268
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
33
Analysis of claims development – net of reinsurance
Underwriting year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Total
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
Estimate of ultimate net claims costs:
At end of reporting year
124,964 140,356 110,306
83,694
90,453
63,756
96,702 116,434 130,876 144,420
1,101,961
One year later
275,436 269,444 203,447 182,831 176,346 146,164 190,770 240,066 234,964
1,919,468
Two years later
262,315 280,598 203,937
191,798 179,952 137,030 184,885 231,642
1,672,157
Three years later
260,774 277,845
206,452
187,956 174,602 132,647 180,106
1,420,382
Four years later
264,160 276,443
207,221
190,397 170,364 129,759
1,238,344
Five years later
265,115 274,898
203,591
183,612 164,273
1,091,489
Six years later
263,038 272,529
198,956
180,817
915,340
Seven years later
262,560 269,633
197,134
729,327
Eight years later
261,496 268,523
530,019
Nine years later
260,904
260,904
Ten years or more later
—
Current estimate of
cumulative claims
260,904 268,523
197,134 180,817 164,273 129,759 180,106 231,642 234,964 144,420
1,992,542
Provision in respect of
prior years
21,549
Less net claims paid
(254,641) (265,604) (194,151) (174,981) (145,315) (112,038)
(141,511) (163,567) (142,754)
(47,212)
(1,641,774)
Total net provision
included in the
balance sheet
6,263
2,919
2,983
5,836
18,958
17,721
38,595
68,075
92,210
97,208
372,317
*The initial estimate of gross and net provision at the end of the reporting year is on an earned basis.
The Syndicate has taken advantage of the exemption in FRS 103 paragraph 6.3 not to disclose information
about claims development that occurred before the beginning of the earliest period for which the managing
agent presents full comparative information that complies with FRS 103.
6.1 (b) (iii) Sensitivity analysis of reserve estimates
Assumptions about future developments, outcomes or events underpin the setting of the Syndicate’s
booked reserves. The sources of estimation uncertainty are discussed in note 6.1(b)(i). Sensitivity analysis of
the key assumptions provides an illustration of the inherent uncertainty in the reserves as shown below.
The expected loss ratio is the ratio of expected claims to premium:
•
propensity for PPOs – a 5 percentage point decrease/increase in the propensity for claims to settle as a
PPO would result in a £0.5m decrease/increase to the net reserves;
•
inflation in future care costs - a 1 percentage point decrease/increase in long term rate of wage inflation
underlying PPO claims would result in a £1.7m decrease/increase to the net reserves;
•
inflation in repair costs – a 5 percentage point decrease/increase in damage severity in the current year
would result in a £3.7m decrease/increase to the net reserves;
•
current underwriting year loss ratio – a 1 percentage reduction/improvement in the loss ratio for the
current underwriting year would result in a +/-£4.1m decrease/increase to the net reserves; and
•
previous two underwriting years’ loss ratios – a 1 percentage reduction/improvement in the loss ratios
for each of the last two underwriting years would result in a +/-£6.7m decrease/increase to net reserves.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
34
6.2 Financial risk
The Syndicate is exposed to financial risk through its ownership of financial instruments including financial
liabilities. The Syndicate invests in financial assets to fund obligations arising from its insurance contracts
and other liabilities.
The key financial risk for the Syndicate is that the proceeds from its financial assets and investment result
generated therefrom are not sufficient to fund the obligations. The most important variables that could
result in such an outcome relate to (a) credit risk, (b) market risk, and (c) liquidity risk.
6.2 (a) Credit risk
Credit risk is the risk of loss arising from the failure of a counterparty to fulfil its payment obligations,
including failing to perform them in a timely manner. The primary sources of credit risk for the Syndicate are:
•
brokers and intermediaries – the risk of delayed payment or inability to settle outstanding funds owed
to the business by all counterparties;
•
reinsurers – the risk that reinsurance counterparties fail to meet their financial obligations to the
business; and
•
investments – the risk of an issuer default which results in the Syndicate losing all or part of the value of
a financial instrument.
The Syndicate has a relatively low appetite for credit risk, as its principal business is to accept insurance risk.
This approach is intended to protect the Syndicate’s capital from erosion from credit risk so that it can meet
its insurance liabilities. The Syndicate structures the acceptable levels of credit risk by placing limits on its
exposure to singular and group counterparties, to geographical and industry segments and by reviewing the
creditworthiness of reinsurers through credit ratings provided by rating agencies and other publicly
available financial information detailing their financial strength and performance. Risk limits are subject to
regular review. The Syndicate also mitigates credit risk through the requirement for certain counterparties
to hold high-credit quality collateral in segregated accounts.
The credit control function monitors the ageing and collectability of debtor balances, with credit evaluations
performed on all relevant counterparties.
6.2 (a)(i) Investments
The Syndicate is exposed to counterparty risk with respect to cash and cash equivalents, investments and
other deposits.
The Syndicate mitigates counterparty credit risk by ensuring appropriate diversification of total invested
assets across high-quality instruments. Investments are to be fully admissible for Lloyd’s/Prudential
Regulation Authority ("PRA") solvency purposes, primarily only in liquid securities and with counterparties
that have a credit rating equal to investment grade or better.
The Syndicate imposes guidelines on its external investment managers in relation to the constituents of the
investment portfolios. These guidelines specify the acceptable asset classes, duration, and credit ratings.
The performance of the investment managers is regularly reviewed to confirm adherence to these
guidelines.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
35
6.2 (a) (ii) Analysis of counterparty credit risk
The following table summarises the Syndicate’s significant credit risk for impacted assets:
2024
AAA
AA
A
BBB
Other **
Not
Rated
Total
£000
£000
£000
£000
£000
£000
£000
Shares and other
variable yield securities
and units in unit trusts
—
—
—
—
43,981
199
44,180
Debt securities and
other fixed income
securities
81,750
37,031
151,745
165,075
—
—
435,601
Participation in
investment pools
4,100
—
—
—
—
14,600
18,700
Derivative assets
—
—
—
—
—
10
10
Syndicate loans to
central fund
—
4,391
—
—
—
—
4,391
Deposits with ceding
undertakings
—
—
602
—
—
—
602
Total Investments
85,850
41,422
152,347
165,075
43,981
14,809 503,484
Reinsurers' share of
claims outstanding
23,189
10,199
192,115
—
—
3,448
228,951
Insurance debtors
44,259
1,212
5,911
23,423
10,854
274
85,933
Reinsurance debtors
5,261
155
7,445
2,198
1,019
2,382
18,460
Cash at bank and in
hand
4,578
636
15,955
—
—
—
21,169
Other
1
144
—
—
—
—
145
Other debtors and
accrued interest
907
244
2,422
1,991
—
9,889
15,453
Total
164,045
54,012
376,195
192,687
55,854
30,802
873,595
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
36
2023 Restated*
AAA
AA
A
BBB
Other**
Not
Rated
Total
£000
£000
£000
£000
£000
£000
£000
Shares and other
variable yield securities
and units in unit trusts*
—
—
—
—
40,993
199
41,192
Debt securities and
other fixed income
securities*
50,635
46,610
174,663
91,388
—
—
363,296
Participation in
investment pools*
4,796
13,086
—
—
—
—
17,882
Derivative assets
—
—
—
—
—
—
—
Syndicate loans to
central fund
—
—
5,402
—
—
—
5,402
Deposits with ceding
undertakings
—
—
606
—
—
—
606
Total Investments
55,431
59,696
180,671
91,388
40,993
199
428,378
Reinsurers' share of
claims outstanding
—
85,427
177,742
—
—
4,687
267,856
Insurance debtors
40,456
2,853
4,646
7,294
16,500
922
72,671
Reinsurance debtors
4,183
2,605
3,529
754
1,706
171
12,948
Cash at bank and in
hand*
3,967
944
29,937
—
—
4,458
39,306
Other*
2
144
—
—
—
—
146
Other debtors and
accrued interest
389
274
1,995
1,111
88
9,643
13,500
Total
104,428
151,943 398,520
100,547
59,287
20,080 834,805
*Restated to correctly reclassify money market funds and exchange-traded funds to participation in
investment pools, while also reclassifying accrued income from investments to prepayments and accrued
income. This change does not affect the net assets or result for the financial year of the Syndicate for
either period presented. Further details on note 4.
**Shares and other variable yield securities and units in unit trusts rated other include £43.9m (2023:
£40.9m) of investments in the Octagon Senior Secured Credit Fund. The fund seeks to generate high
current income consistent with capital preservation and low duration by investing primarily in broadly
syndicated floating rate US bank loans.
The values classed as other are the Syndicates Lloyds Canadian Trust Fund and Canadian Margin Fund.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
37
The tables below provide an analysis of the maximum credit risk exposure to these assets, together with the
extent to which they are due, past due and impaired. An assessment is performed on all assets, based on the
ageing maturity of these assets, which may result in an impairment charge in the statement of profit or loss
and comprehensive income if the Syndicate considers this to be appropriate.
2024
Neither past
due nor
impaired assets
Past due but
not impaired
assets
Gross value of
impaired assets
Impairment
allowance
Total
£000
£000
£000
£000
£000
Shares and other
variable yield
securities and
units in unit trusts
44,180
—
—
—
44,180
Debt securities
and other fixed
income securities
435,601
—
—
—
435,601
Participation in
investment pools
18,700
—
—
—
18,700
Derivative assets
10
—
—
—
10
Syndicate loans
to central fund
4,391
—
—
—
4,391
Deposits with
ceding
undertakings
602
—
—
—
602
Other
investments
145
—
—
—
145
Reinsurer' share
of claims
outstanding
229,954
—
—
(1,003)
228,951
Insurance debtors
67,503
19,398
—
(968)
85,933
Reinsurance
debtors
18,382
222
—
(144)
18,460
Other debtors
and accrued
interest
141,157
—
—
—
141,157
Cash at bank and
in hand
21,169
—
—
—
21,169
Total
981,794
19,620
—
(2,115)
999,299
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
38
2023 Restated*
Neither past
due nor
impaired assets
Past due but
not impaired
assets
Gross value of
impaired assets
Impairment
allowance
Total
£000
£000
£000
£000
£000
Shares and other
variable yield
securities and
units in unit
trusts*
41,192
—
—
—
41,192
Debt securities*
363,296
—
—
—
363,296
Participation in
investment pools*
17,882
—
—
—
17,882
Derivative assets
—
—
—
—
—
Syndicate loans
to central fund
5,402
—
—
—
5,402
Deposits with
ceding
undertakings
606
—
—
—
606
Other
investments*
146
—
—
—
146
Reinsurer' share
of claims
outstanding
268,983
—
—
(1,127)
267,856
Insurance debtors
61,527
12,251
—
(1,107)
72,671
Reinsurance
debtors
12,788
223
—
(63)
12,948
Other debtors
and accrued
interest
123,267
—
—
—
123,267
Cash at bank and
in hand*
39,306
—
—
—
39,306
Total
934,395
12,474
—
(2,297)
944,572
*Restated to correctly reclassify money market funds and exchange-traded funds to participation in
investment pools, while also reclassifying accrued income from investments to prepayments and accrued
income. This change does not affect the net assets or result for the financial year of the Syndicate for
either period presented. Further details on note 4.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
39
The table below sets out a reconciliation of changes in impairment allowance during the financial year for
each class of financial asset at the balance sheet date:
2024
1 Jan
New
impairment
charges
added in
year
Changes in
impairment
charges
Released
to income
statement
Foreign
exchange
Others
31 Dec
£000
£000
£000
£000
£000
£000
£000
Financial
investments
—
—
—
—
—
—
—
Reinsurer' share
of claims
outstanding
1,127
—
(124)
(124)
—
—
1,003
Insurance debtors
1,107
—
(139)
(139)
—
—
968
Reinsurance
debtors
63
81
—
81
—
—
144
Other debtors
and accrued
interest
—
—
—
—
—
—
—
Cash at bank and
in hand
—
—
—
—
—
—
—
Total
2,297
81
(263)
(182)
—
—
2,115
2023
1 Jan
New
impairment
charges
added in
year
Changes in
impairment
charges
Released
to income
statement
Foreign
exchange
Others
31 Dec
£000
£000
£000
£000
£000
£000
£000
Financial
investments
—
—
—
—
—
—
—
Reinsurer' share
of claims
outstanding
1,285
—
(158)
(158)
—
—
1,127
Insurance debtors
676
431
—
431
—
—
1,107
Reinsurance
debtors
24
39
—
39
—
—
63
Other debtors
and accrued
interest
—
—
—
—
—
—
—
Cash at bank and
in hand
—
—
—
—
—
—
—
Total
1,985
470
(158)
312
—
—
2,297
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
40
The table below sets out the age analysis of financial assets that are past due but not impaired at the
balance sheet date:
2024
0-3 months
past due
3-6 months
past due
6-12 months
past due
Greater
than 1 year
past due
Total
£000
£000
£000
£000
£000
Insurance debtors
14,971
2,261
1,450
716
19,398
Reinsurance debtors
—
23
—
199
222
Total
14,971
2,284
1,450
915
19,620
2023
0-3 months
past due
3-6 months
past due
6-12 months
past due
Greater
than 1 year
past due
Total
£000
£000
£000
£000
£000
Insurance debtors
10,725
940
277
309
12,251
Reinsurance debtors
—
—
—
223
223
Total
10,725
940
277
532
12,474
6.2 (b) Market risk
Market risk is the risk of a variation in the value of financial institution deposits and financial investments,
relative to the variation in the value of liabilities due to market movements. Market risk arises where the
value of assets less liabilities changes because of movements in foreign exchange rates, interest rates,
inflation rates and/or market prices.
The Syndicate engages external investment managers to actively manage the market risk associated with
financial investments. Detailed guidelines imposed on the investment managers are in place and the Board
and its Investment Committee regularly monitor performance and risk metrics.
6.2 (b)(i) Foreign currency risk
The Syndicate is exposed to changes in the value of assets and liabilities due to movements in foreign
exchange rates. The Syndicate deals in five main currencies, Sterling (GBP), Canadian dollar (CAD), Euros
(EUR), Australian dollar (AUD) and US dollar (USD). Transactions in all other currencies are converted to
Sterling on initial recognition.
Although over 96%
(2023: 97%) of the insurance premium is GBP-denominated, the Syndicate has some
exposure to non-GBP denominated insurance claims from its legacy run-off portfolios. The foreign
exchange rate exposure is closely monitored from a liquidity and asset-liability matching standpoint.
The investment managers invest part of the GBP-denominated premium trust fund in non-GBP
denominated investments which are fully hedged back to GBP using derivatives, thereby mitigating the
foreign exchange rate risk.
The following table summarises the carrying value of total assets and total liabilities categorised by currency:
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
41
GBP
USD
EUR
CAD
AUD
Other
Total
At 31 December 2024
£000
£000
£000
£000
£000
£000
£000
Financial investments
453,119
25,631
24,132
—
—
— 502,882
Reinsurers' share of
technical provisions
258,665
—
—
83
—
—
258,748
Insurance and reinsurance
receivables
96,158
—
6,462
18
1,755
—
104,393
Other assets
116,042
317
680
781
3
—
117,823
Prepayments and accrued
income
15,453
—
—
—
—
—
15,453
Total assets
939,437
25,948
31,274
882
1,758
— 999,299
Technical provisions
(836,122)
(40)
(6)
(83)
(15)
— (836,266)
Insurance, reinsurance
and other payables
(59,376)
—
(1,641)
—
(1,242)
—
(62,259)
Other creditors
(67,349)
—
(555)
—
—
—
(67,904)
Accruals and deferred
income
(2,288)
—
—
—
—
—
(2,288)
Total liabilities less
members Balance
(965,135)
(40)
(2,202)
(83)
(1,257)
— (968,717)
Total capital and
reserves
25,698 (25,908) (29,072)
(799)
(501)
— (30,582)
GBP
USD
EUR
CAD
AUD
Other
Total
At 31 December 2023
Restated*
£000
£000
£000
£000
£000
£000
£000
Financial investments*
388,990
18,890
19,892
—
—
—
427,772
Reinsurers' share of
technical provisions
302,600
—
—
97
—
—
302,697
Insurance and reinsurance
receivables
77,055
—
7,095
12
1,457
—
85,619
Other assets
112,288
311
1,527
796
62
—
114,984
Prepayments and accrued
income*
13,500
—
—
—
—
—
13,500
Total assets
894,433
19,201
28,514
905
1,519
— 944,572
Technical provisions
(860,231)
(35)
(866)
(100)
(279)
—
(861,511)
Insurance, reinsurance
and other payables
(57,544)
—
(1,239)
—
(472)
—
(59,255)
Other creditors
(39,959)
—
—
—
—
(39,959)
Accruals and deferred
income
(7,071)
—
—
—
—
—
(7,071)
Total liabilities
(964,805)
(35)
(2,105)
(100)
(751)
— (967,796)
Total capital and
reserves
70,372
(19,166) (26,409)
(805)
(768)
—
23,224
*For an explanation of these restatements, please refer to note 4.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
42
6.2 (b) (ii) Interest rate risk
Most of the Syndicate’s investments comprise debt securities and other fixed income securities. The fair
value of these securities is normally inversely correlated to interest rate movements. If interest rates fall, the
fair value of the Syndicate’s securities would tend to rise and vice versa if credit spreads remain constant.
Fixed income assets are predominantly invested in high quality corporate, government, supranational and
asset backed securities. The investments typically have relatively short durations and terms to maturity.
The fair values of the Syndicate’s debt and fixed income securities are stated in note 11.
6.2 (b) (iii) Sensitivity analysis on market risk
The sensitivity analysis for interest rate risk and market price risk in the table below illustrates how changes
in the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates or market prices at the reporting date.
2024 Impact on
results before
tax
£000
2024 Impact
on members'
balances
£000
2023 Impact
on results
before tax
£000
2023 Impact
on members'
balances
£000
Interest rate risk
50 basis points increase in yield curve
(5,048)
(5,048)
(2,542)
(2,542)
50 basis points decrease in yield curve
5,047
5,047
2,543
2,543
Price risk
5% increase in stock market prices
2,209
2,209
709
709
5% decrease in stock market prices
(2,209)
(2,209)
(709)
(709)
With the exception of PPOs, insurance contract liabilities are not directly sensitive to the level of market
interest rates as they are undiscounted and contractually non-interest bearing.
6.2 (c) Liquidity risk
Liquidity risk arises where cash may not be available at a reasonable cost to pay obligations when due . The
Syndicate is exposed to daily cash outflows on its available cash resources, mostly for the settlement of
claims arising from insurance contracts. Limits on the minimum level of cash and maturing funds available to
meet such outflows are set to cover unexpected levels of claims and other cash demands. A sizeable
proportion of the Syndicate’s investments is in highly liquid assets that can be converted to cash at short
notice without any significant capital loss or material expense. These funds are monitored by management
daily.
Undiscounted net cash flows
At 31
December
2024
Carrying
amount
£000
No stated
maturity
£000
0-1 year
£000
1-3 years
£000
3-5 years
£000
> 5 years
£000
Total
£000
Gross claims
outstanding
601,268
—
155,993
158,591
74,749
211,935
601,268
Creditors
130,163
—
130,163
—
—
—
130,163
Other credit
balances
2,288
—
2,288
—
—
—
2,288
Total
733,719
—
288,444
158,591
74,749
211,935
733,719
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
43
Undiscounted net cash flows
At 31
December
2023
Carrying
amount
£000
No stated
maturity
£000
0-1 year
£000
1-3 years
£000
3-5 years
£000
> 5 years
£000
Total
£000
Gross claims
outstanding
649,253
—
166,383
171,268
81,238
230,364
649,253
Creditors
99,214
—
99,214
—
—
—
99,214
Other credit
balances
7,071
—
7,071
—
—
—
7,071
Total
755,538
—
272,668
171,268
81,238 230,364 755,538
6.2 (c) (i) Lloyd's capital setting process
In order to meet Lloyd’s requirements, each syndicate is required to calculate its Solvency Capital
Requirement (SCR) for the prospective underwriting year. This amount must be sufficient to cover a 1 in
200 year loss, reflecting uncertainty in the ultimate run
-
off of underwriting liabilities (SCR ‘to ultimate’). The
Syndicate must also calculate its SCR at the same confidence level but reflecting uncertainty over a one
year time horizon (one year SCR) for Lloyd’s to use in meeting Solvency II requirements. The SCRs of each
Syndicate are subject to review by Lloyd’s and approval by the Lloyd’s Capital and Planning Group.
A syndicate may be comprised of one or more underwriting members of Lloyd’s. Each member is liable for
its own share of underwriting liabilities on the syndicates on which it is participating but not other members’
shares. Accordingly, the capital requirements that Lloyd’s sets for each member operate on a similar basis.
Each member’s SCR shall thus be determined by the sum of the member’s share of the Syndicate SCR ‘to
ultimate’. Where a member participates on more than one syndicate, a credit for diversification is provided
to reflect the spread of risk, but consistent with determining an SCR which reflects the capital requirement
to cover a 1 in 200 loss ‘to ultimate’ for that member. Over and above this, Lloyd’s applies a capital uplift to
the member’s capital requirement, known as the Economic Capital Assessment (ECA). The purpose of this
uplift, which is a Lloyd’s not a Solvency UK requirement, is to meet Lloyd’s financial strength, licence and
ratings objectives. The capital uplift applied for 2024 was 35% (2023: 35%) of the member’s SCR ‘to
ultimate’.
6.3 Operational risk
Operational risk is the risk of loss from people, processes or systems, or external events with origins outside
the scope of other risk categories. The Managing Agent actively monitors and controls its operational risks.
The nature of the risk means that it can impact all areas of the business. Examples of key operational risks
for the Syndicate include IT performance and stability, cyber security, data integrity and the delivery of
major projects.
Key activities to manage operational risk across the Syndicate include:
•
quarterly assessment of the risk register across all areas of the business to identify instances where
the risk profile has increased, and/or areas where additional mitigation may be necessary to control
the risk within tolerance;
•
the Operational Committee reviewing key activities across the business, with governance, reporting
and escalation paths for operational risk;
•
independent second line and third line reviews of key controls designed to mitigate operational risk;
•
risk culture and management training to ensure continued awareness of operational risk for all
employees: and
•
disaster recovery planning, with effective communication programmes in place utilising Everbridge
and scenario testing across the business
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
44
6.3 (a) Regulatory risk
Regulatory risk is the failure to identify or advise the business of legal and regulatory requirements and to
ensure appropriate implementation and adherence. Given the nature and size of the Syndicate’s customer
base, a key area of focus for the Compliance function during 2024 was the embedding of controls and
processes associated with FCA’s rules on Consumer Duty.
6.3 (b) Third-party risk
The company recognises the evolving risks associated with third-party relationships, particularly in the areas
of cyber security, operational resilience, technology reliance, and data protection. These risks are
heightened by increasing regulatory scrutiny, the complexity of supply chains, and the ever-present threat
of cyberattacks. The potential impact of third-party incidents could include financial loss, regulatory
penalties, operational disruptions, and reputational damage.
To mitigate these risks, the company has made significant investments over the past year to enhance its IT
infrastructure and cyber resilience. Key initiatives include a significant upgrade of the infrastructure to
improve resilience, implementing advanced threat detection and response systems, advanced security and
protection across the laptop estate, and strengthening data protection measures. Additionally, the company
has improved third-party risk management practices, including enhanced due diligence, regular audits of
third-party providers, and robust incident response planning. These efforts are aimed at ensuring continued
operational integrity and safeguarding stakeholder interests in a rapidly changing risk landscape.
6.3 (c) Climate change risk
The Syndicate’s underwriting performance is not materially exposed to the physical risk of climate change.
The frequency or severity of road traffic accidents or other motor insurance loss events are not likely to be
impacted by a rise in global temperatures, although poor weather may lead to more hazardous driving
conditions.
7.
Segmental analysis
An analysis of the technical account balance before investment return is set out below:
For the year ended 31
December 2024
Gross
premium
written
£000
Gross
premium
earned
£000
Gross
claims
incurred
£000
Gross
operating
expenses
£000
Reinsurance
balance
£000
Total
£000
Direct insurance
Accident and health
—
—
208
—
—
208
Motor (third party
liability)
137,925
279,823
(91,434)
(78,698)
(65,288)
44,403
Motor (other classes)
329,030
168,044
(112,817)
(48,872)
(11,482)
(5,127)
Fire and other damage
to property
—
—
46
—
—
46
Miscellaneous
4,911
5,048
(3,849)
(2,130)
60
(871)
Total Direct
471,866
452,915
(207,846)
(129,700)
(76,710)
38,659
Reinsurance accepted
18,186
14,397
(6,033)
5
(493)
7,876
Total
490,052
467,312
(213,879)
(129,695)
(77,203)
46,535
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
45
For the year ended 31
December 2023
Gross
premium
written
£000
Gross
premium
earned
£000
Gross
claims
incurred
£000
Gross
operating
expenses
£000
Reinsurance
balance
£000
Total
£000
Direct insurance
Accident and health
—
—
(82)
—
—
(82)
Motor (third party
liability)*
182,177
172,705
(103,109)
(49,816)
(27,333)
(7,553)
Motor (other classes)*
211,736
200,727
(119,838)
(57,898)
(31,769)
(8,778)
Fire and other damage
to property
—
—
(11)
—
(7)
(18)
Miscellaneous
4,939
4,591
(4,049)
(1,854)
(89)
(1,401)
Total Direct
398,852
378,023
(227,089)
(109,568)
(59,198)
(17,832)
Reinsurance accepted
13,716
5,080
(6,220)
—
1,543
403
Total
412,568
383,103
(233,309)
(109,568)
(57,655)
(17,429)
*Premium and claims reported under reinsurance accepted relate to inwards reinsurance business which
commenced in 2021 in order to write overseas business.
**Motor is reclassified between Third Party Liability and Other Classes.
The geographical analysis of gross premium by destination as a proxy for risk location is as follows:
2024
2023
£000
£000
United Kingdom
471,865
398,851
European Union Member States
12,661
11,497
Rest of the world
5,526
2,220
Total gross premium written
490,052
412,568
(i)
Claims
Favourable movements of £20.3m (2023: £10.9m) in the past year’s provision for claims outstanding, net of
expected reinsurance recoveries, are included in claims incurred, net of reinsurance. These arose in respect
of the following classes of business:
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
46
2024
2023
Attritional
claims
Major
claims
Prior year
development
Total
Attritional
claims
Major
claims
Prior year
development
Total
£000
£000
£000
£000
£000
£000
£000
£000
Accident and
health
—
—
(208)
(208)
—
—
82
82
Motor (third
party liability)
144,999
—
(20,075)
124,924
119,589
—
(11,084)
108,505
Motor (other
classes)
104,876
—
(22)
104,854
126,109
—
—
126,109
Fire and other
damage to
property
—
—
(46)
(46)
—
—
18
18
Miscellaneous
3,705
—
25
3,730
4,007
—
—
4,007
Total
253,580
—
(20,326)
233,254
249,705
—
(10,984)
238,721
8.
Investment return
All the Syndicate’s investments are recognised at fair value through the profit and loss.
2024
£000
2023
£000
Interest income
From financial instruments designated at fair value through profit or loss
Interest and similar income
15,454
14,158
Total income from financial assets at fair value through profit and loss
15,454
14,158
Interest on cash at bank
536
507
Other income from investments
From financial instruments designated at fair value through profit or loss
Gains on the realisation of investments
21,710
32,924
Losses on the realisation of investments
(19,400)
(34,819)
Unrealised gains on investments
12,663
34,873
Unrealised losses on the investments
(5,848)
(21,047)
Investment expenses and charges
(740)
(709)
Total investment return
24,375
25,887
Transferred to the technical account from the non-technical account
24,375
25,887
Impairment losses on debtors recognised in administrative expenses
(1,112)
(1,170)
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
47
9.
Net operating expenses
2024
£000
2023
£000
Acquisition costs
82,280
72,837
Change in deferred acquisition cost
(3,770)
(4,267)
Administrative expenses
35,904
29,958
Members’ standard personal expenses
15,281
11,040
129,695
109,568
Reinsurers’ share
Acquisition costs – commission expenses
(181)
16
Reinsurance commissions and profit participation
(181)
16
Total
129,514
109,584
Administrative expenses include staff costs (note 10) of £44.3m (2023: £32.4m), and audit fee
s exclusive of
VAT of £0.6m (2023:£0.6m).
Administrative expenses include:
2024
£000
2023
£000
Auditors’ remuneration:
Fees payable to the Syndicate’s auditor for the audit of these financial
statements
479
462
Fees payable to the Syndicate’s auditor and its associates in respect of
other services pursuant to legislation
99
116
Impairment losses on debtors:
Arising out of direct insurance operations
968
1,107
Arising out of reinsurance operations
144
63
10.
Staff costs
The Syndicate and the Managing Agent have no employees, and incur no staff costs directly. All employees
are employed by IQUW ASL and costs are recharged to the Syndicate via IQUW SSL. The following salary
and related costs were recharged to the Syndicate during the year:
2024
£000
2023
£000
Wages and salaries
30,364
24,019
Social security costs
3,709
3,070
Other pension costs
2,016
1,772
Other
8,191
3,538
Total
44,280
32,399
The average number of staff employed by IQUW ASL and recharged to the Syndicate during the year was
as follows:
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
48
2024
2023
Underwriting
275
265
Claims
221
193
Administration
84
99
580
557
The directors of the Managing Agent received the following aggregate remuneration recharged to the
Syndicate and included in net operating expenses:
2024
£000
2023
£000
Directors’ emoluments
1,218
1,347
Pension contributions
36
30
Total
1,254
1,377
The active underwriter received the following remuneration charged as Syndicate expense
:
2024
£000
2023
£000
Emoluments
385
493
Total
385
493
11.
Financial Investments
All financial instruments are designated at fair value through profit or loss on initial recognition.
Carrying value
Cost
2024
£000
2023
Restated*
£000
2024
£000
2023
Restated*
£000
Shares and other variable yield securities and units in
unit trusts*
44,180
41,192
38,449
38,449
Debt securities and other fixed income securities*
435,601
363,296
431,776
363,634
Participation in investment pools*
18,700
17,882
18,700
18,483
Derivative assets
10
—
—
—
Syndicate loans to central fund
4,391
5,402
4,551
5,774
Financial Investments*
502,882
427,772
493,476
426,340
Other
145
146
144
143
Total
503,027
427,918
493,620
426,483
*Restated to correctly reclassify money market funds and exchange-traded funds to participation in investment pools, while also
reclassifying accrued income from investments to prepayments and accrued income. This change does not affect the net assets or
result for the financial year of the Syndicate for either period presented. Further details on note 4.
All financial investments in the current and prior financial year were carried at fair value through profit or
loss. No financial assets in the current or prior financial year were classified as ‘held for trading’ under FRS
102.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
49
The table below analyses the derivative assets and liabilities by type:
2024
2023
Notional amount
Fair value
Notional amount
Fair value
£000
£000
£000
£000
Foreign exchange forward contracts
—
(554)
—
—
Total
—
(554)
—
—
Fair value hierarchy
The Syndicate has classified its financial investments using the fair value hierarchy in accordance with the
FRS 102 amendments to “Fair value hierarchy disclosures” issued by the Financial Reporting Council on 8
March 2016.
The fair value hierarchy classifies financial instruments into Levels 1 through 3 based on the significance of
the inputs used in measuring their fair value with Level 1 being the most reliable. The classifications within
the fair value hierarchy are defined as follows:
•
Level 1 – Quoted price for an identical asset in an active market. This includes securities and financial
investments that are priced based on unadjusted quoted prices in an active market for identical assets
that can be accessed at the measurement date;
•
Level 2 – Price of a recent transaction for an identical asset and valuation technique using observable
market data. This includes securities and financial investments that are priced using valuation
techniques based on direct or indirect observable market data, including market prices from
recognised exchanges, broker-dealers, recognised indices, or pricing vendors; and
•
Level 3 – Valuation technique using unobservable market data. This includes securities which are not
actively traded. The pricing service uses common market valuation pricing models. Observable inputs
used in common market valuation pricing models include, but are not limited to, broker quotes, credit
ratings, interest rates, and yield curves, prepayment speeds, default rates, and other such inputs which
are available from market sources.
At 31 December 2024
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
Shares and other variable yield securities
—
—
44,180
44,180
Debt securities and other fixed income securities
—
435,601
—
435,601
Participation in investment pools
18,700
—
—
18,700
Derivative assets
—
10
—
10
Syndicate loan to central fund
—
—
4,391
4,391
Total financial investments
18,700
435,611
48,571
502,882
Deposits with ceding undertakings
—
—
602
602
Other
143
—
2
145
Derivative liabilities
—
(554)
—
(554)
Total
18,843
435,057
49,175
503,075
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
50
At 31 December 2023 (Restated)*
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
Shares and other variable yield securities
—
—
41,192
41,192
Debt securities and other fixed income securities
3,206
360,090
—
363,296
Participation in investment pools
17,882
—
—
17,882
Derivative assets
—
—
—
—
Syndicate loan to central fund
—
—
5,402
5,402
Total financial investments
21,088
360,090
46,594
427,772
Deposits with ceding undertakings
—
—
606
606
Other
144
2
—
146
Derivative liabilities
—
—
—
—
Total
21,232
360,092
47,200
428,524
*Restated due to a change in a basis of preparation to align to IQUW group methodology resulting in
correction required to previous years amount, see note 4 for further detail.
Shares, other variable yield securities in Level 3 above include £43.9m (2023: £40.9m) of investments in
Octagon Senior Secured Credit Fund. Level 3 investments also consist of loans made to the Lloyd’s Central
Fund to which a fair value adjustment has been applied based on the Lloyd's RT1 valuation model resulting
in an impairment of £0.2m (2023: £0.3m). The fund has been classed as an equity instrument as it is not
tradeable. The repayment of the loan, and payment of interest thereon, are at the discretion of the
Corporation of Lloyd’s.
The values classed as other are the Syndicates Lloyds Canadian Trust Fund and Canadian Margin Fund.
12.
Foreign exchange gain/loss
2024
£000
2023
£000
Non-technical account foreign exchange loss
Foreign exchange translation differences
(745)
(94)
Total
(745)
(94)
13.
Technical Provisions
Unearned premium
At 31 December 2024
Gross technical
provisions
£000
Reinsurers’ share of
technical provisions
£000
Net
£000
Balance at 1 January
212,258
(34,841)
177,417
Premium written in the year
490,052
(55,335)
434,717
Premium earned in the year
(467,312)
60,379
(406,933)
Change in unearned premiums
22,740
5,044
27,784
Balance at 31 December
234,998
(29,797)
205,201
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
51
Unearned premium
At 31 December 2023
Gross technical
provisions
£000
Reinsurers’ share of
technical provisions
£000
Net
£000
Balance at 1 January
182,793
(21,661)
161,132
Premium written in the year
412,568
(63,038)
349,530
Premium earned in the year
(383,103)
49,858
(333,245)
Change in unearned premiums
29,465
(13,180)
16,285
Balance at 31 December
212,258
(34,841)
177,417
Claims outstanding
At 31 December 2024
Gross technical
provisions
£000
Reinsurers’ share of
technical provisions
£000
Net
£000
Balance at 1 January
649,253
(267,856)
381,397
Claims paid
(261,864)
19,531
(242,333)
—
Expected cost of current year claims
234,198
16,619
250,817
Change in estimates of prior year
provisions
(20,319)
2,755
(17,564)
Balance at 31 December
601,268
(228,951)
372,317
Claims outstanding
At 31 December 2023
Gross technical
provisions
£000
Reinsurers’ share of
technical provisions
£000
Net
£000
Balance at 1 January
667,635
(297,851)
369,784
Claims paid
(251,691)
24,583
(227,108)
Expected cost of current year claims
245,874
3,683
249,557
Change in estimates of prior year
provisions
(12,565)
1,729
(10,836)
Balance at 31 December
649,253
(267,856)
381,397
14.
Discounted claims
The claims relating to PPOs have been discounted at the following rate. The period that will elapse before
claims are settled is determined using impaired mortality tables.
Discount rate
Mean of liabilities
2024
2023
2024
2023
Motor (third party liability)
3%
3%
21.1 years
20.4 years
The effect of discounting credits on claims provisions is shown as follows:
Undiscounted claims
Effect of discounting
After discounting
Restated*
2024
£000
2023
£000
2024
£000
2023
£000
2024
£000
2023
£000
Gross claims provisions
257,349
266,222
(125,885)
(126,366)
131,464
139,856
Reinsurers share of total
claims
(218,038)
(237,088)
107,633
113,160
(110,405)
(123,928)
Net claims provisions
39,311
29,134
(18,252)
(13,206)
21,059
15,928
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
52
*A restatement was required to ensure only claims provisions that are subject to discounting have been
included.
15.
Deferred acquisition costs
2024
£000
2023
£000
Gross
Reinsurance
Net
Gross
Reinsurance
Net
Balance at 1 January
35,851
—
35,851
31,584
—
31,584
Incurred Deferred
Acquisition
82,280
—
82,280
72,837
—
72,837
Amortised Deferred
Acquisition
(78,510)
—
(78,510)
(68,570)
—
(68,570)
Balance at 31
December
39,621
—
39,621
35,851
—
35,851
16.
Debtors arising out of insurance operations
2024
£000
2023
£000
Due within one year
85,933
72,671
Total
85,933
72,671
17.
Debtors arising out of reinsurance operations
2024
£000
2023
£000
Due within one year
18,460
12,948
Total
18,460
12,948
18.
Other debtors
2024
£000
2023
£000
Other related party balances (non syndicate)
54,793
37,607
Other
1,475
1,468
Total
56,268
39,075
19.
Cash and cash equivalents
2024
£000
2023
£000
Cash at bank and in hand*
21,169
39,306
Short term debt instruments presented within other financial investments
18,845
18,028
Total cash and cash equivalents
40,014
57,334
*Restated due to a change in a basis of preparation to align to IQUW group methodology resulting in
correction required to previous years amount, see note 4 for further detail.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
53
20.
Analysis of net debt
At January
2024
Cash flows
Acquired
Fair value and
exchange
movements
Non-cash
changes
At 31
December
2024
Cash and cash
equivalents
57,334
(17,320)
—
—
—
40,014
Derivative financial
liabilities
—
—
—
(554)
—
(554)
Total
57,334
(17,320)
—
(554)
—
39,460
21.
Other prepayments and accrued income
2024
£000
2023
£000
Prepaid administrative expenses
5,489
5,826
Prepaid Lloyd’s personal expenses and other charges
3,871
3,496
Accrued interest
6,045
4,095
Total
15,405
13,417
22.
Creditors arising out of direct insurance operations
2024
£000
2023
£000
Amounts due to intermediaries:
Due within one year
4,167
3,077
Total
4,167
3,077
23.
Creditors arising out of reinsurance operations
2024
£000
2023
£000
Amounts due to intermediaries:
Due within one year
58,092
56,178
Total
58,092
56,178
24.
Other creditors including taxation and social security
2024
£000
2023
£000
Due within one year
Amounts due to related companies
43,791
20,711
Profit commission payable to managing agent
7,920
4,112
Other related party balances (non-syndicates)
15,648
15,136
Derivatives liabilities
545
—
Total
67,904
39,959
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
54
25.
Related Parties
IQUW Corporate Member Limited (“IQUW CML”)
IQUW CML is a wholly owned subsidiary of IQUW UK Insurance Group Limited ("IQUW IGL") through
which IQUW group conducts its underwriting business at Lloyd’s.
IQUW CML’s share of the syndicate profit for the year is £55.4m (2023: 6.2m). IQUW CML’s share of the
syndicate’s 2022 closed year of account profit is £9.9m.
IQUW Syndicate Management Limited (The “Managing Agent”)
The Managing Agent is a wholly-owned subsidiary of IQUW IGL and acts as managing agent for the
Syndicate. The Managing Agent charged management fees of £4.3m (2023: £4.3m) to the Syndicate.
IQUW Administration Services Limited (“IQUW ASL”)
IQUW ASL is a wholly owned subsidiary of IQUW IGL and provides services for all activities of IQUW group.
All expenses not paid directly by the Syndicate are paid for by IQUW ASL and recharged accordingly via
IQUW SSL. In accordance with the Managing Agent’s current syndicate expense policy, which complies
with the Lloyd’s Code of Practice:
•
Directly attributable expenses are recharged fully to the Syndicate; and
•
non-directly attributable expenses are recharged to the Syndicate on an allocation basis across all
other IQUW IGL group companies. These allocations are on an equitable basis, to ensure no gain or
loss arises from these accounting treatments.
IQUW Syndicate Services Limited (“IQUW SSL”)
IQUW SSL is a wholly owned subsidiary of the Managing Agent and acts as a service company for the
Syndicate.
IQUW SSL became an appointed representative of the Managing Agent on 14 January 2005 and is
authorised by the PRA and regulated by the Financial Conduct Authority (“FCA”) and the PRA. The
Managing Agent does not receive any direct income from IQUW SSL. No director of the Managing Agent
has received any benefit for acting as a director of IQUW SSL.
IQUW SSL recharged the following expenses to the Syndicate:
Closing balance
receivable/ (payable)
£000
In-year expense/
(income) transactions
£000
2024 calendar year
11,283
61,890
2023 calendar year
17,909
53,457
Closing balance
receivable/ (payable)
£000
Cumulative expense/
(income) transactions
£000
2022 closed year
20,347
48,217
2021 closed year
26,573
48,267
26.
Syndicate structure
The Managing Agent of the Syndicate is IQUW Syndicate Management Limited whose immediate parent
undertaking is IQUW IGL, a company registered in England and Wales.
The ultimate parent undertaking of the largest and smallest group of companies for which group accounts
are drawn up is IQUW Holdings Bermuda Limited. Copies of financial statements can be obtained from the
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
55
Company Secretary Appleby Global Services at Canon's Court, 22 Victoria Street, Hamilton HM12,
Bermuda.
27.
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 resources criteria. These resources are calculated by Lloyd's under the rules of the
Solvency UK regime.
The resources calculation 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 control of the managing agents, no amount has been shown in
these annual accounts for such capital resources. However, managing agents are able to make a call on the
members' FAL to meet liquidity requirements to settle losses.
28.
Foreign Exchange Rates
The following currency exchange rates have been used for principal foreign currency transactions:
2024
2023
Start of period
rate
End of period
rate
Average rate
Start of period
rate
End of period
rate
Average rate
Sterling
US dollar
Euro
Canadian
dollar
Australian
dollar
29.
Post Balance Sheet Event
The closing underwriting year of 2022
was reinsured to close (“RITC”) into the Syndicate on 1 January 2025.
Notes to the accounts (continued)
For the year ended 31 December 2024
Reports & Accounts
Syndicate 218
56
Underwriting
Accounts
2022 Closed
Year of Account
Report of the managing agent
IQUW Syndicate Management Limited (the “Managing Agent”), the managing agent of Syndicate 218 (“the
Syndicate”) presents its report for the 2022 closed underwriting year of account as at 31 December 2024.
This report is prepared in accordance with Lloyd’s regulations and the Syndicate Accounting Byelaw
.
Review of the 2022 closed year of account
The 2022 account has closed with a profit of £12.6m after personal expenses representing a profit on
underwriting capacity of 2.6%. The profit attributable to business reinsured into the 2022 year of account
was £19.4m representing a profit on underwriting capacity of 4.0%. The pure 2022 underwriting year has
generated a loss of £6.8m representing -1.4% of underwriting capacity.
Review of the business
This is available in the Report of the Managing Agent within the Annual Report and Accounts for the 2024
Financial Year.
Disclosure of information to the auditors
The directors of the Managing Agent who held office at the date of approval of the Report of the Managing
Agent confirm that, so far as each of them is aware, there is no relevant audit information of which the
syndicate’s auditors are unaware, and each director has taken all steps that they ought to have taken as a
director to make himself / herself aware of any relevant audit information and to establish that the
syndicate’s auditors are aware of that information.
Syndicate auditors
The syndicate’s auditors, PricewaterhouseCoopers LLP, are deemed reappointed under the provisions of
The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008.
By order of the Board:
Peter Bilsby
Di
rector
5 March 2025
Report of the managing agent
For the 2022 closed year of account as at ended 31 December 2024
Reports & Accounts
Syndicate 218
58
Statement of managing agent’s responsibilities
For the year ended 31 December 2024
The managing agent is responsible for preparing the managing agent’s report and the syndicate
underwriting year accounts in accordance with applicable law and regulations.
The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 requires
the managing agent to prepare syndicate underwriting year accounts at 31 December, in respect of any
underwriting year which is being closed by reinsurance to close, which give a true and fair view of the results
of the underwriting year at closure. Detailed requirements in respect of the underwriting year accounts are
set out in the Lloyd’s Syndicate Accounting Byelaw (No. 8 of 2005) and applicable Accounting Standards in
the United Kingdom, comprising Financial Reporting Standard 102, “The Financial Reporting Standard
applicable in the United Kingdom and the Republic of Ireland (“FRS 102”), as modified by the Insurance
Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the Lloyd’s
Syndicate Accounting Byelaw (No.8 of 2005).
In preparing these syndicate underwriting year accounts, the managing agent is required to:
•
select suitable accounting policies and apply these consistently and where there are items which affect
more than one year of account, ensure a treatment which is equitable as between the members of the
syndicate affected. In particular, the amount charged by way of premium in respect of the reinsurance
to close shall, where the reinsuring members and reinsured members are members of the same
syndicate for different years of account, be equitable as between them, having regard to the nature
and amount of the liabilities reinsured;
•
take into account all income and charges relating to a closed year of account without regard to the
date of receipt or payment;
•
make judgements and accounting estimates that are reasonable and prudent;
•
state whether applicable UK Accounting Standards have been followed, subject to any material
departures disclosed and explained in the underwriting year accounts.
The managing agent is responsible for keeping adequate accounting records that are sufficient to show and
explain the syndicate’s transactions and disclose with reasonable accuracy at any time the financial position
of the syndicate and enable it to ensure that the syndicate underwriting year accounts comply with the
Regulations. It is also responsible for safeguarding the assets of the syndicate and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The managing agent is responsible for the maintenance and integrity of the business's website. Legislation
in the United Kingdom governing the preparation and dissemination of the syndicate underwriting year
accounts may differ from legislation in other jurisdictions.
Statement of managing agent’s responsibilities
For the 2022 closed year of account as at ended 31 December 2024
Reports & Accounts
Syndicate 218
59
Independent auditors’ report to the members of Syndicate 218 -
2022 closed year of account
Report on the audit of the syndicate underwriting year financial
statements
Opinion
In our opinion, 218’s syndicate underwriting year financial statements for the 2022 year of account for the 3
years ended 31 December 2024 (the “underwriting year financial statements”):
•
give a true and fair view of the state of the syndicate’s affairs as at 31 December 2024 and of its
profit and cash flows for the 2022 closed year of account;
•
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting
Standard applicable in the UK and Republic of Ireland”, and applicable law); and
•
have been prepared in accordance with the requirements of The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the Lloyd’s Syndicate
Accounting Byelaw (No. 8 of 2005).
We have audited the underwriting year financial statements included within the Underwriting Accounts
2022 Closed Year of Account the Underwriting Year Accounts, which comprise: the Balance sheet as at 31
December 2024; the
Statement of comprehensive income – technical account for general business, the
Statement of comprehensive income – non-technical account , the Cash flow statement, and the Statement
of changes in members’ balances for the 3 years then ended; the accounting policies; and the notes to the
underwriting year financial statements, which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”),
including ISA (UK) 800, and The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts)
Regulations 2008 and other applicable law. Our responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the audit of the underwriting year financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We remained independent of the syndicate in accordance with the ethical requirements that are relevant to
our audit of the underwriting year financial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to other entities of public interest, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Emphasis of matter – Basis of preparation
Without modifying our opinion, we draw attention to note 1 of the underwriting year financial statements,
which describes the basis of preparation. In particular, as these underwriting year financial statements relate
to a closed underwriting year of account, matters relating to going concern are not relevant to these
underwriting year financial statements. The underwriting year financial statements are prepared in
accordance with a special purpose framework for the specific purpose as described in the Use of this report
paragraph below. As a result, the underwriting year financial statements may not be suitable for another
purpose.
Reporting on other information
The other information comprises all of the information in the Underwriting Year Accounts other than the
underwriting year financial statements and our auditors’ report thereon. The Managing Agent is responsible
for the other information. Our opinion on the underwriting year financial statements does not cover the
other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
Independent auditors report to the members of Syndicate 218 – 2022 closed year of account
For the 2022 closed year of account as at ended 31 December 2024
Reports & Accounts
Syndicate 218
60
In connection with our audit of the underwriting year financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent with the
underwriting year financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of the underwriting
year financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report based on these responsibilities.
Responsibilities for the underwriting year financial statements and the audit
Responsibilities of the Managing Agent for the underwriting year financial statements
As explained more fully in the Statement of managing agent’s responsibilities, the Managing Agent is
responsible for the preparation of the underwriting year financial statements in accordance with the
applicable framework and for being satisfied that they give a true and fair view of the result for the 2022
closed year of account. The Managing Agent is also responsible for such internal control as they determine
is necessary to enable the preparation of underwriting year financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ responsibilities for the audit of the underwriting year financial statements
Our objectives are to obtain reasonable assurance about whether the underwriting year financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these underwriting year financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud, is detailed below.
Based on our understanding of the syndicate and industry, we identified that the principal risks of non-
compliance with laws and regulations related to breaches of regulatory principles, such as those governed
by the Prudential Regulation Authority and the Financial Conduct Authority, and those regulations set by
the Council of Lloyd’s, and we considered the extent to which non-compliance might have a material effect
on the underwriting year financial statements. We also considered those laws and regulations that have a
direct impact on the underwriting year financial statements such as The Insurance Accounts Directive
(Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 . We evaluated management’s incentives
and opportunities for fraudulent manipulation of the underwriting year financial statements (including the
risk of override of controls), and determined that the principal risks were related to management bias in
accounting estimates and the
posting of inappropriate journals. Audit procedures performed by the
engagement team included:
•
Discussions with the Audit Committee, management, internal audit, and the syndicate’s compliance
function, including consideration of known or suspected instances of non-compliance with laws and
regulation and fraud;
•
Assessment of any matters reported on the Managing Agent’s whistleblowing helpline and
management’s investigation of such matters;
•
Reviewing relevant meeting minutes including those of the Board, the Audit Committee, the Risk
Management Committee, the Reserving Committee, and correspondence with regulatory
authorities, including Lloyd’s of London, the Financial Conduct Authority and the Prudential
Regulatory Authority;
•
Reviewing, and challenging where appropriate, the assumptions and judgements made by
management in their significant accounting estimates, in particular in relation to the estimation of
claims outstanding, with a focus on the incurred but not reported (“IBNR”) claims;
•
Designing audit procedures to incorporate unpredictability around the nature, timing or extent of
our testing; and
Independent auditors report to the members of Syndicate 218 – 2022 closed year of account
(continued)
For the 2022 closed year of account as at ended 31 December 2024
Reports & Accounts
Syndicate 218
61
Reports & Accounts
Syndicate 218
62
Independent auditors report to the members of Syndicate 218 – 2022 closed year of account
(continued)
For the 2022 closed year of account as at ended 31 December 2024
•
Identifying and testing journal entries based on selected fraud risk criteria, in particular journal
entries posted with unusual account combinations.
There are inherent limitations in the audit procedures described above. We are less likely to become aware
of instances of non-compliance with laws and regulations that are not closely related to events and
transactions reflected in the underwriting year financial statements. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through
collusion.
A further description of our responsibilities for the audit of the underwriting year financial statements is
located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the syndicate’s members as a body in
accordance with part 2 of The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts)
Regulations 2008 and Part C of the Lloyd’s Syndicate Accounting Byelaw (No. 8 of 2005) and for no other
purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to
any other person to whom this report is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
Other required reporting
Under The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008
and the Lloyd’s Syndicate Accounting Byelaw (No. 8 of 2005), we are required to report to you if, in our
opinion:
•
we have not obtained all the information and explanations we require for our audit; or
•
adequate accounting records have not been kept by the Managing Agent in respect of the
syndicate; or
•
the underwriting year financial statements are not in agreement with the accounting records.
We have no exceptions to report arising from this responsibility.
Sean Forster (Senior statutory auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
5 March 2025
Statement of profit or loss and comprehensive income –
technical account for general business
For the 2022 closed year of account for the three years ended 31
December 2024
Note
£000
Syndicate allocated capacity
479,737
Earned premium, net of reinsurance
Gross premium written
2
360,744
Outward reinsurance premium
(39,600)
Earned premium, net of reinsurance
321,144
Reinsurance to close premium received, net of reinsurance
3
184,741
Allocated investment return transferred from non-technical account
5
18,192
Claims incurred, net of reinsurance
Claims paid
Gross amount
(243,738)
Reinsurers’ share
17,767
Net claims paid
(225,971)
Reinsurance to close premium payable, net of reinsurance
4
(182,898)
Claims incurred, net of reinsurance
(408,869)
Net operating expenses
6
(102,437)
Balance on the technical account for general business
12,771
Statement of comprehensive income – technical account for general business
For the 2022 closed year of account for the three years ended 31 December 2024
Reports & Accounts
Syndicate 218
63
Statement of profit or loss and comprehensive income – non-
technical account
For the 2022 closed year of account for the three years ended 31
December 2024
Note
£000
Balance on the technical account for general business
12,771
Investment return
Investment income
5
12,782
Unrealised gains on investments
5
23,363
Investment expenses and charges
5
(533)
Unrealised losses on investments
5
(17,420)
Total investment return
18,192
Allocated investment return transferred to technical account for general
business
(18,192)
Other charges, including value adjustments
(194)
Profit for the 2022 closed year of account
12,577
Total comprehensive income
12,577
There are no differences between the profit for the financial year stated above and the historical
cost equivalents in the statement of
profit or loss and
comprehensive income for the period.
The notes on pages 68 to 72 form an integral part of these underwriting accounts.
Statement of profit or loss and comprehensive income – non-technical account
For the 2022 closed year of account for the three years ended 31 December 2024
Reports & Accounts
Syndicate 218
64
Balance sheet
For the 2022 closed year of account as at 31 December 2024
Note
£000
Assets
Investments
7
177,633
Deposits with ceding undertakings
602
Debtors
9
48,545
Reinsurance recoveries anticipated on gross reinsurance to close premium
payable
4
177,257
404,037
Other assets
Cash at bank and in hand
7,978
Other
145
Accrued interest and rent
48
Deferred acquisition costs
—
Other prepayments and accrued income
2,104
10,275
Total assets
414,312
Members’ balances
12,138
Total capital and reserves
12,138
Liabilities
Gross reinsurance to close premium payable
4
360,155
Creditors
10
41,412
Accruals and deferred income
607
Total liabilities
402,174
Total liabilities, capital and reserves
414,312
The notes on pages 68 to 72 form an integral part of these underwriting accounts.
The underwriting year accounts on pages 63 to 67 were approved by the Board on 27 February 2025 and
signed on behalf of the Syndicate’s Managing Agent by:
Charlotte Constable
Director
5 March 2025
Balance sheet
For the 2022 closed year of account as at 31 December 2024
Reports & Accounts
Syndicate 218
65
Statement of changes in members’ balances
For the 2022 closed year of account as at 31 December 2024
£000
2021 year of account
Members’ balances brought forward at 1 January 2024
16,002
Receipt of loss from members’ personal reserve funds
(16,002)
Members’ balances carried forward at 31 December 2024
—
2022 year of account
Profit for the closed 2022 year of account
12,577
Members’ agents' fees paid in year
(439)
Amounts due to members carried forward at 31 December 2024
12,138
Combined amount due to members carried forward at 31 December 2024
12,138
The notes on pages 68 to 72 form an integral part of these underwriting accounts.
Statement of changes in members’ balances
For the 2022 closed year of account as at 31 December 2024
Reports & Accounts
Syndicate 218
66
Cash flow statement
For the 2022 closed year of account for the three years ended 31
December 2024
Note
£000
Net cash inflow from operating activities
11
33,267
Cash flow from investing activities
Purchase of equity and debt instruments
(203,147)
Sale of equity and debt instruments
182,943
Investment income received net of expenses paid
12,782
Net cash used in investing activities
(7,422)
Cash flow from financing activities
Transfer from members in respect of underwriting participations
(16,003)
Members’ agents' fees
(439)
Net cash used in financing activities
(16,442)
Net increase in cash at bank and in hand
9,403
Cash and cash equivalents at the beginning of the period
—
Cash and cash equivalents at the end of the period
9,403
Cash and cash equivalents consist of:
Cash at bank and in hand
7,978
Short term deposits with credit institutions
1,425
Cash and cash equivalents
9,403
The notes on pages 68 to 72 form an integral part of these underwriting accounts.
Cash flow statement
For the 2021 closed year of account for the three years ended 31 December 2023
Reports & Accounts
Syndicate 218
67
Notes to the accounts
For the 2022 closed year of account as at 31 December 2024
1.
Accounting policies
Basis of preparation
These accounts have been prepared in accordance with the Insurance Accounts Directive (Lloyd’s
Syndicate and Aggregate Accounts) Regulations 2008, the Lloyd’s Syndicate Accounting Byelaw (No. 8 of
2005) and applicable accounting standards in the United Kingdom, comprising Financial Reporting
Standard 102 “The Financial Reporting Standard applicable in the United Kingdom and the Republic of
Ireland” (“FRS 102”) as modified by the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate
Accounts) Regulations 2008 and the Lloyd’s Syndicate Accounting Byelaw (No. 8 of 2005).
Members participate in a syndicate by reference to a year of account and each syndicate year of account is
a separate annual venture. These accounts relate to the 2022 year of account which has been closed by
reinsurance to close as at 31 December 2024. Consequently, the balance sheet represents the assets and
liabilities of the 2022 year of account at the date of closure. The underwriting accounts reflects the
transactions for that year of account during the three year period from date of inception until closure.
Accordingly, this is the only reporting period and so corresponding amounts are not shown.
The underwriting accounts for each year of account are normally kept open for three years before the result
for that year is determined. At the end of the three year period, outstanding liabilities can normally be
determined with sufficient accuracy to permit the year of account to be closed by payment of a reinsurance
to close (“RITC”) premium to the successor year of account.
Accounting policies
The accounting policies adopted are the same as those disclosed in the annual report and accounts except
for:
RITC premium
The RITC premium is assessed on an individual case basis and is based on the estimated ultimate cost of all
claims notified but not settled by the balance sheet date, together with the provision for related claims
handling costs. The provision also includes the estimated cost of claims incurred but not reported (“IBNR”)
at the balance sheet date based on statistical methods.
Notes to the accounts
For the 2022 closed year of account for the three years ended 31 December 2024
Reports & Accounts
Syndicate 218
68
2.
Segmental analysis
2022 closed year of
account
Gross
premium
written and
earned
£000
Gross claims
incurred
£000
Gross
operating
expenses
£000
Reinsurance
balance
£000
Total
£000
Direct insurance
Accident and health
—
208
—
—
208
Motor (third party liability)
103,181
(59,088)
(29,649)
(16,924)
(2,480)
Motor (other classes)
246,180
(140,979)
(71,036)
(40,083)
(5,918)
Fire and other damage to
property
—
46
—
—
46
Other
4,133
(3,553)
(1,719)
(4)
(1,143)
353,494
(203,366)
(102,404)
(57,011)
(9,287)
Reinsurance accepted
7,250
(3,619)
5
230
3,866
Total
360,744
(206,985)
(102,399)
(56,781)
(5,421)
Investment return
18,192
Technical account
balance
12,771
3.
RITC premium received, net of reinsurance
2021 year of account closure at 31 December 2023
£000
Gross
Provision for reported claims
362,334
Provision for IBNR
34,574
Gross RITC received
396,908
Reinsurers’ share
Provision for reported claims
(197,000)
Provision for IBNR
(15,167)
Reinsurance recoveries anticipated on gross RITC premium received
(212,167)
RITC premium received, net of reinsurance
184,741
Notes to the accounts (continued)
For the 2022 closed year of account for the three years ended 31 December 2024
Reports & Accounts
Syndicate 218
69
4.
RITC premium paid, net of reinsurance
2022 year of account closure at 31 December 2024
£000
Gross
Provision for reported claims
341,813
Provision for IBNR
18,342
Gross RITC payable
360,155
Reinsurers’ share
Provision for reported claims
(169,114)
Provision for IBNR
(8,143)
Reinsurance recoveries anticipated on gross RITC premium payable
(177,257)
RITC premium payable, net of reinsurance
182,898
5.
Investment return
£000
Investment income
Income from financial assets at fair value through profit and loss
12,812
Net loss on realisation of investments
(30)
12,782
Unrealised gains on investments
23,363
Unrealised losses on investments
(17,420)
Investment expenses and charges
(533)
Total investment return
18,192
Investment returns are allocated from the non-technical to the technical account as the entire investment
portfolio supports the general insurance business.
6.
Net operating expenses
£000
Gross
Acquisition costs – commission expenses
42,355
Acquisition costs – operating expenses
22,040
Administrative expenses
27,983
Lloyd’s personal expenses and other charges
10,021
102,399
Reinsurers’ share
Acquisition costs – commission expenses
38
Total
102,437
Notes to the accounts (continued)
For the 2022 closed year of account for the three years ended 31 December 2024
Reports & Accounts
Syndicate 218
70
7. Investments
All financial instruments are designated as fair value through profit or loss on initial recognition.
Fair value
£000
Cost
£000
Designated at fair value through profit or loss
Shares, other variable yield securities and units in unit trusts
19,745
17,914
Debt securities and other fixed income securities
151,386
150,056
Participation in investment pools
6,499
6,499
Other
3
—
Total
177,633
174,469
8.
Discounted claims
The claims relating to PPOs have been discounted at the following rate. The period that will elapse before
claims are settled is determined using impaired mortality tables.
Class of business
Discount rate
Mean term of
liabilities
Motor
3.0 %
-21.1
The effect of discounting credits on claims provisions is shown as follows:
Class of business
Gross
£000
Reinsurers’
share
£000
Claims provisions before discounting
257,349
218,038
Discounting credits
(125,885)
(107,633)
Claims provisions after discounting
131,464
110,405
9.
Debtors
£000
Debtors arising out of direct insurance operations – intermediaries
(624)
Debtors arising out of ceding insurers and intermediaries under reinsurance business
170
Debtors arising out of reinsurance operations
6,726
Debtors due from related parties
40,780
Other
1,493
Total
48,545
Notes to the accounts (continued)
For the 2022 closed year of account for the three years ended 31 December 2024
Reports & Accounts
Syndicate 218
71
10.
Creditors
£000
Creditors arising out of direct insurance operations – intermediaries
2,544
Creditors arising out of reinsurance operations
18,694
Related parties
20,174
Total
41,412
11.
Reconciliation of profit for the year of account to net cash
inflow from operating activities
£000
Profit for the closed year of account
12,577
RITC premium received, net of reinsurance – non cash consideration
(169,439)
RITC premium payable, net of reinsurance
182,898
Decrease in debtors
(3,562)
Increase in creditors
16,769
Movements in other assets and liabilities
(566)
Investment return
(5,410)
Net cash inflow from operating activities
33,267
12.
Related parties
Information regarding related parties of the Syndicate is disclosed on page 55.
Notes to the accounts (continued)
For the 2022 closed year of account for the three years ended 31 December 2024
Reports & Accounts
Syndicate 218
72
Seven year summary of results (unaudited)
2016
2017
2018
2019
2020
2021
2022
closed
closed
closed
closed
closed
closed
closed
Syndicate allocated capacity
(£’000)
359,462
478,865
479,598
479,575
480,000
479,890
479,737
Number of members of the
Syndicate
1,297
1,290
1,076
1,032
602
569
569
Aggregate net premium (£’000)
377,246
354,939
297,843
296,628
276,674
277,603
321,144
Result for a member with an illustrative share of £10,000
Gross premium written
11,559
7,850
6,805
7,361
7,067
6,619
7,520
As a percentage of allocated
capacity
116%
79%
68%
74%
71%
66%
75%
Net premium written
10,495
7,412
6,210
6,185
5,764
5,785
6,694
As a percentage of allocated
capacity
105%
74%
62%
62%
58%
58%
67%
Premium for the reinsurance to
close and earlier years of account
4,306
3,518
3,323
3,086
2,400
4,054
3,851
Net claims paid
(7,751)
(4,973)
(4,694)
(4,546)
(1,173)
(3,828)
(4,710)
Reinsurance to close year of
account
(4,687)
(3,328)
(3,086)
(2,403)
(4,053)
(3,850)
(3,812)
Underwriting result
2,363
2,629
1,753
2,322
2,938
2,161
2,023
As a percentage of gross premium
20%
33%
26%
32%
42%
33%
27%
Syndicate operating expenses
(2,931)
(2,051)
(1,997)
(1,944)
(1,898)
(1,754)
(1,930)
Net underwriting result
(568)
578
(244)
378
1,040
407
93
As a percentage of gross premium
(5)%
7%
(4)%
5%
15%
6%
1%
Investment return
68
161
148
122
24
172
379
Profit/(loss) before personal
expenses
(500)
739
(96)
500
1,064
579
472
Illustrative personal expenses and
profit commission
(193)
(149)
(139)
(169)
(333)
(236)
(209)
Profit/(loss) after illustrative
profit commission and personal
expenses (£000)
(693)
590
(235)
331
731
343
263
Notes:
(i)
The illustrative personal expenses and profit commission are estimates of amounts which might be
charged on a share of £10,000.
(ii)
The effect of any minimum charges on personal expenses or deficit clauses on profit commission has
been ignored.
(iii)
Investment expenses are included within the investment return.
(iv)
Syndicate operating expenses include foreign exchange differences and other non-technical income
and charges.
Seven year summary of results (unaudited)
Reports & Accounts
Syndicate 218
73
