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ANV Syndicates Ltd

Managing Agent Name: ANV Syndicates Limited

Subject: Disclosures Auction Season 2016

Syndicate Affected: s.5820

This statement has been prepared by ANV Syndicates Limited (ASL) for the purpose of disclosing to existing and prospective underwriting members of Syndicate 5820 (the Syndicate) information which may be of relevance to such members in considering their participation for the 2016 year of account (YOA).

Members are also referred to the Business Plan Narrative for the 2016 YOA, other SBF documents, and the Syndicate’s latest financial statements and quarterly returns, all of which have either been provided or are available to members (or their representatives as appropriate), and which include information on various changes affecting ASL and/or the Syndicate which have taken place since the end of 2014.

Prospective Aligned Capital Participation

ANV is in talks with Ryan Specialty Group Risk, LLC (RSGR) to purchase the share capital of RSGR’s Corporate Name entities. Any such deal would result in ANV acquiring RSGR’s freehold rights on the Syndicate, representing 16.8% of 2016 stamp.

At this time RSGR’s 20% ownership of the ANV Managing Agencies will remain unchanged.

Capital Loadings

As at Auction 1, ASL continues to be considered to be non-compliant with Solvency II by Lloyd’s. The Lloyd’s Capital Planning Group (CPG) meeting to review the Syndicate Business Forecasts, Syndicate Capital Requirements and ASL’s Solvency II rating, will take place in early October 2015. The outcome of this meeting and on-going discussions with Lloyd’s will determine the capital requirement for the Syndicate for the 2016 YOA.

In 2015 the CPG applied a £2.5m capital loading to the Syndicate due to concerns about the high acquisition cost profile of the Consumer Products business within the Syndicate. ASL continues to work with Lloyd’s to address these concerns and is scheduled to be reviewed as part of the Lloyd’s Conduct Risk review programme in late October 2015. This review will inform and update Lloyd’s views on the conduct risk profile of the Syndicate.

Consortium Initiatives

The Syndicate continues to be offered the opportunity to participate in consortia arrangements with ANV Syndicate 1861 on Accident & Health, Cyber, Non-marine Liability and Property business. There have been no changes to these arrangements for the 2016 YOA. Details of the consortia arrangements are provided in the Business Plan Narrative which has been provided to all members (or their representatives as appropriate).

Strategic Review

ASL has begun a detailed review of the Syndicate’s strategy, including an assessment of the current classes to identify the optimum business composition, which will take place through the remainder of 2015 into the first quarter of 2016. ASL recognises the advantages of aligning the underwriting operations of its non-life syndicates, and has an ambition to structure the syndicate operations accordingly to realise these benefits in the future. Any changes to the structure of the syndicate operations will not be effected until the 2017 YOA.

ASL, and the wider ANV Group, remains committed to growing its syndicates’ operations with support from both, aligned and third party capital.

Management Changes

In April 2015, R. Matthew Fairfield stepped down as the Chief Executive Officer of ANV Group and ASL, at which point Andrew Hall was appointed as interim Managing Director of ASL. ASL is in discussions with a candidate to assume the role of Managing Director on a permanent basis.

In May 2015 Bruce Whitmee was appointed Active Underwriter of the Syndicate, reporting to Director of Underwriting, Gerard van Loon. This appointment completed the restructuring of the Syndicate’s underwriting team. Bruce joined with 24 years’ insurance experience in the Consumer Products and Affinity sectors, having recently held senior regional management roles at AIG across a number of geographies.

Open YOAs

Under the terms of a Deed of Undertaking given prior to ANV’s acquisition of ASL, certain capital providers have rights in respect of the reinsurance to close (RITC) of the Syndicate’s 2010 & prior and 2011 YOAs which differ from the position under the standard Managing Agency Agreement. Specifically, they have the power to accept or decline any RITC quotation or proposal for these YOAs.

These capital providers did not accept the RITC quotations offered during 2015, or on previous occasions, and accordingly the Syndicate’s 2010 & prior and 2011 YOAs remain open, respectively 3 years and 2 years beyond the normal time for a Lloyd’s RITC. On current expectations, ASL will not seek RITC quotations from external parties this year, and the YOAs will remain open if the offer from the 2014 YOA is not accepted.

Variation to Managing Agent’s Agreement

Under the Managing Agent’s Agreement (General) and the Deed of Variation thereto, all new members who participate on the Syndicate in a “freehold capacity” with effect from 2013 YOA onward (and any new members acquiring capacity in the auctions or otherwise) are subject to specific terms in respect of:

  • the conduct of ASL and its Related Persons as defined (specifically: allowing Related Persons of ASL, or another syndicate managed by ASL, to accept underwriting business from the same source, and of the same classes of business, as are underwritten by the Syndicate);
  • the existence of differences in commercial terms between members (including fees); and
  • the opportunity to participate in future special purpose syndicates (including provisions which mean that a member’s allocation of capacity for a succeeding YOA may be all or in part determined by the capacity taken up by the member on the special purpose syndicate which may in the future be set up to reinsure the syndicate).

The set fees and the relevant expenses policies under the Managing Agent’s Agreement (General) and the Deed of Variation are as follows:

  • annual fees (0.75% of the member’s capacity for each YOA);
  • profit commissions (17.5% of the member’s profit for each YOA);
  • capacity fees (1% of the member’s capacity for each YOA up to and including the 2017 YOA; this is in addition to the syndicate’s annual fee and profit commission and is subject to a limit where the syndicate allocated capacity exceeds £250m);
  • syndicate expenses (provision for charging the Syndicate for costs incurred in the acquisition of new business for the Syndicate, including through the acquisition of shares or assets).

Commercial terms differ between members participating on a limited tenancy basis and other members of the Syndicate. Members’ agents are familiar with these terms in full, and a summary version of them is available to all current and prospective members.

Apollo Turnkey

ASL provided turnkey services for Apollo’s Syndicate 1969 until August 2015, at which point 1969 migrated to its own managing agency. ANV Group continues to provide Apollo with a material level of outsourced services across a number of support functions, on a commercial third party basis.

Directors’ and Staff Participations / Interests

Tony Hulse holds a common non-executive directorship on the Board of ASL and Apollo Syndicate Management Limited.

Related Parties Transactions

ASL remains subject to a variation to its regulatory permission under which gross net premiums produced to an ASL Syndicate by subsidiaries of Ryan Specialty Group, LLC in a given YOA may not exceed 20% of that Syndicate’s stamp capacity in that YOA. ASL does not expect this restriction to affect its ability to deliver its Syndicates’ 2016 SBFs in any way.

Date issued: 28 September 2015

Contact Information

Agency contact name: Jamie Ingham Clark

Agency contact no: + 44 (0) 207 280 6290

For auction office use only: D2015013

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