Subject: Syndicate Expenses and the impact of Solvency II
Syndicate Affected: Syndicate 1176
Chaucer Syndicates Limited (CSL) makes the following announcement:
The purpose of this announcement is to disclose the additional costs CSL have incurred and will incur in the future on behalf of Syndicate 1176 in relation with the implementation of Solvency II. CSL also wishes to present its proposal for recharging those costs to Syndicate 1176.
The current agreement between CSL and Syndicate 1176 is that Syndicate 1176 is charged a flat fee which comprises both Syndicate expenses and the Managing Agency fee, with the Syndicate expenses element increasing annually using the appropriate wage inflation factor.
This arrangement was agreed back in 2008 and started from the 2009 underwriting year. Crucially it was entered into before the impact of the Solvency II capital regime on expenditure could be anticipated.
The costs of compliance with Solvency II are significant. Since 2010, CSL has already incurred a considerable amount of cost in relation to Solvency II. As a result, CSL have no option but to recharge an element of the costs CSL has incurred and will incur to the syndicates under our management, including Syndicate 1176.
Based upon our current forecast, CSL propose to charge £520,000 to Syndicate 1176 in addition to the expenses already charged as part of the flat fee. This recharge represents an estimate of the time that will have been spent by CSL staff by the time Solvency II is fully implemented on Syndicate 1176.
As the Syndicate is due to start reporting under Solvency II from quarter one 2013, CSL propose to charge an equal share of £173,333 to all open years during calendar year 2013: being the 2011, 2012 and 2013 underwriting years. For ease CSL propose to charge the 2011 year of account during calendar year 2011, the 2012 underwriting year during 2012 and the 2013 underwriting year during 2013.
It should be noted that the charge to the Syndicate is subject to change if the total cost is different to forecast and may result in further costs being charged or a refund being made to the Syndicate.
Date issued: 9 September 2011
Contact Information
Agency contact name: Mauricio Carrillo
Agency contact no: + 44 (0) 207 105 8061
For auction office use only: D2011021
