Lloyd’s Syndicate
Market Example 0112
Illustrative financial statements template
31 December 20x2
Version: 3.1
For Tagging convenience (annual):
For Tagging
Both for Profit & Loss, Balance Sheet
Current Period 1 January 20x2 – 31 December 2025
Prior Period 1 January 20x1 – 31 December 2024
For Tagging convenience (interim):
Profit & Loss Balance Sheet
Current Period 1 January 20x2 – 30 June 2026 30 June 20x2
Prior Period 1 January 20x1 – 30 June 2025 31 December 20x1
2
Contents
Directors and Administration ................................................................................................. 3
Strategic report of the Managing Agent ................................................................................. 4
Managing Agent’s report ....................................................................................................... 5
Statement of Managing Agent’s responsibilities .................................................................... 6
Independent auditor’s report to the members of [insert syndicate name] ............................... 7
Statement of profit or loss and other comprehensive income: ............................................... 8
Balance sheet – Assets ....................................................................................................... 10
Balance sheet (cont’d) – Liabilities ...................................................................................... 11
Statement of changes in members’ balances ...................................................................... 12
Statement of cash flows ...................................................................................................... 13
Notes to the financial statements – (forming part of the financial statements) .................... 14
Appendix: Disclosure notes and accounting reference ....................................................... 51
Supplementary Information: Change Log ............................................................................ 56
3
Directors and Administration
[This is a placeholder for directors and administration details]
4
Strategic report of the Managing Agent
[This is a placeholder for the strategic report]
5
Managing Agent’s report
[This is a placeholder for the managing agent’s report]
6
Statement of Managing Agent’s responsibilities
[This is a placeholder for the managing agent’s responsibilities]
…………………………………………………….
[insert name]
[insert position]
[insert date of signing]
7
Independent auditor’s report to the members of
[insert syndicate name]
[This is a placeholder for the auditor’s report]
8
Statement of profit or loss and other
comprehensive income:
Technical account – General business/long-term business
For the year ended 31 December 20x2
Note
20x2
£000
20x1
£000
Gross premiums written
5
Outwards reinsurance premiums
(87,000 )
(90,000 )
Premiums written, net of reinsurance
Changes in unearned premium
18
Change in the gross provision for unearned premiums
(25,000 )
Change in the provision for unearned premiums, reinsurers’ share 7,000
(12,000 )
Net change in provisions
for
unearned premiums
(18,000 )
Earned premiums, net of reinsurance
Allocated investment return transferred from the non-technical
account
9 7,140
Other technical income, net of reinsurance
Claims paid
18
Gross amount
(120,000 )
(147,000 )
Reinsurers’ share
Net claims paid
(88,000 )
(106,000 )
Change in the provision for claims
18
Gross amount
(66,300 )
(63,500 )
Reinsurers’ share
Net change in provisions for claims
(30,100 )
(27,500 )
Claims incurred, net of reinsurance
(118,100 )
(133,500 )
Changes in other technical provisions, net of reinsurance, not shown
under other headings
Long term business provision, net of reinsurance
Gross amount
Reinsurers’ share
Net change in long term business provisions
18
Other technical provisions, net of reinsurance
Net change in other technical provisions
Net operating expenses
6
(106,540 )
(113,290 )
Other technical charges, net of reinsurance
(1,500 )
(2,000 )
Balance on the technical account – general business/
long
-
term business
9
Statement of profit or loss and other
comprehensive income: (cont.)
Non-technical account – General business/long-term business
For the year ended 31 December 20x2
[Syndicates can use the “Other” line item in the statement of comprehensive income to disclose any
other item that they have under OCI that has not been provided above.]
[The Syndicate may present a separate statement of comprehensive income, provided it includes the
line items and subtotal lines above where applicable.]
The accompanying notes from page [x] to [xx] form an integral part of these financial statements.
Note | 20x2 £000 | 20x1 £000 | |
Balance on the technical account – general business/long-term business | |||
Investment income | 9 | ||
Realised gains/(losses) on investments | 9 | ( | |
Unrealised gains/(losses) on investments | 9 | ( | |
Investment expenses and charges | 9 | ( | ( |
Total investment return | |||
Allocated investment return transferred to technical account | ( | ( | |
Gain/(loss) on foreign exchange | ( | ( | |
Other income | |||
Other expenses | ( | ( | |
Profit/(loss) for the financial year | |||
Other comprehensive income: | |||
Currency translation gains/(losses) | ( | ||
Realised gains/(losses) on available for sale assets | |||
Unrealised gains/(losses) on available for sale assets | |||
Reclassifications through profit or loss | |||
Other recognised gains/(losses) | ( | ||
Other | ( | ||
Total comprehensive income/(loss) for the year |
10
Balance sheet – Assets
As at 31 December 20x2
Note | 20x2 £000 | 20x1 £000 | |
Financial investments | 11 | ||
Deposits with ceding undertakings | |||
Investments | |||
Provision for unearned premiums | |||
Claims outstanding | |||
Long term business provision | |||
Reinsurers’ share of technical provisions | 18 | ||
Debtors arising out of direct insurance operations | 12 | ||
Debtors arising out of reinsurance operations | 13 | ||
Other debtors | 14 | ||
Debtors | |||
Tangible assets | 16 | ||
Cash at bank and in hand | |||
Other | |||
Other assets | |||
Accrued interest and rent | |||
Deferred acquisition costs | 15 | ||
Other prepayments and accrued income | |||
Prepayments and accrued income | |||
Total assets |
11
Balance sheet (cont’d) – Liabilities
As at 31 December 20x2
Note | 20x2 £000 | 20x1 £000 | |
Members’ balances | |||
Total c apital and reserves | |||
Provision for unearned premiums | |||
Claims outstanding | |||
Long term business provision | |||
Other technical provisions | |||
Technical provisions | 18 | ||
Provisions for other risks | 19 | ||
Deposits received from reinsurers | |||
Creditors arising out of direct insurance operations | 21 | ||
Creditors arising out of reinsurance operations | 22 | ||
Other creditors including taxation and social security | 23 | ||
Amounts owed to credit institutions | |||
Creditors | |||
Accruals and deferred income | |||
Total liabilities | |||
Total liabilities, c apital and reserves |
The Syndicate financial statements on pages [xx] to [xx] were approved by the board of [insert
Managing Agent name] on [insert the signing date] and were signed on its behalf by;
[Insert name]
[Insert position]
[insert date of signing]
12
Statement of changes in members’ balances
For the year ended 31 December 20x2
20x2 £000 | 20x1 £000 | |
| Members’ balances brought forward at 1 January | ||
| Total comprehensive income/(loss) for the year | ||
| Payments of profit to members’ personal reserve funds | ( | ( |
| Losses collected in relation to distribution on closure of underwriting year | | |
| Cash calls on open underwriting years | ||
| Members agent fees | ||
| Net movement on funds in syndicate | ||
| Other | ( | ( |
Members’ balances carried forward at 31 December |
13
Statement of cash flows
For the year ended 31 December 20x2
Note | 20x2 £000 | 20x1 £000 | |
Cash flows from operating activities | |||
| Profit/(loss) for the financial year | | ||
Adjustments: | |||
| Depreciation and other movements in tangible fixed assets | | ||
| (Gain)/loss on disposal of tangible fixed assets | | ||
| Increase/(decrease) in gross technical provisions | |||
(Increase)/decrease in reinsurers’ share of gross technical provisions | ( | ( | |
| (Increase)/decrease in debtors | ( | ( | |
| Increase/(decrease) in creditors | |||
| Increase/(decrease) in deposits received from reinsurers | | ||
| Movement in other assets/liabilities | | ||
| Investment return | ( | ( | |
| Foreign exchange | | ||
| Other | | ||
Net cash flows from operating activities | |||
Cash flows from investing activities | |||
| Purchase of tangible fixed assets | | ||
| Sales of tangible fixed assets | | ||
| Purchase of equity and debt instruments | ( | ( | |
| Sale of equity and debt instruments | |||
| Purchase of derivatives | | ||
| Sale of derivatives | | ||
| Investment income received | | ||
| Other | | ||
| Net cash flows from investing activities | ( | ( | |
Cash flows from financing activities | |||
| Distribution of profit | | ||
| Open year profit release | | ||
| Collection of losses | | ||
| Capital contributions/open year cash calls made | | ||
| Funds In Syndicate released to members | | ||
| Other | | ||
| Net cash flows from financing activities | |||
| Net increase/(decrease) in cash and cash equivalents | ( ) | ( ) | |
| Cash and cash equivalents at the beginning of the year | |||
| Foreign exchange on cash and cash equivalents | ( | ||
Cash and cash equivalents at the end of the year | 24 |
14
Notes to the financial statements –
(forming part of the financial statements)
1. Basis of preparation
[Syndicate should adapt the commentary below
in this section]
[Syndicate name] (‘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 is [the managing agent
address].
The [interim condensed] financial statements
have been prepared in accordance with [FRS
104 Interim Financial Reporting OR the
Lloyd’s Syndicate Accounts Instructions
Version [X.X], as modified by the Frequently
Asked Questions Version [X.X] issued by
Lloyd’s (the ‘instructions’), which require
compliance with FRS 104 Interim Financial
Reporting except as permitted by the
instructions], 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), Financial
Reporting Standard 103 (FRS 103) in relation to
insurance contracts, and the Lloyd’s Syndicate
Accounts Instructions Version [X.X] as modified
by the Frequently Asked Questions Version
[X.X] issued by Lloyd’s.
[The interim report does not include all the notes
of the type normally included in an annual
financial report. However, selected notes are
included to explain events and transactions that
are significant to an understanding of the
Syndicate’s financial position and performance.]
The financial statements have been prepared on
the historical cost basis, except for financial
assets at fair value through profit or loss and
available for sale that are measured at fair value.
The financial statements are presented in GBP ,
[which is also the Syndicate’s functional
currency/the functional currency of the
Syndicate is GBP . [The presentational currency
is different from the functional currency of the
Syndicate because the Syndicate has elected to
use a presentational currency aligned with the
presentational currency of its corporate
member].
All amounts have been rounded to the nearest
thousand, unless otherwise indicated.
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 20x3
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 20x4 year of account. The
Syndicate has sufficient capital for each year of
account in its Funds at Lloyd’s (FAL) [and there
is additional capital available in the corporate
member]. There is no intention to cease
underwriting or cease the operations of the
Syndicate.
Accordingly, the directors of the Managing
Agent continue to adopt the going concern basis
in preparing the annual report and financial
statements.
2. Use of judgements and estimates
[Syndicate should adapt the commentary below
in this section]
In preparing these financial statements, the
directors of the Managing Agent have made
judgements, estimates and assumptions that
affect the application of the Syndicate’s
accounting policies and the reported amounts of
assets, liabilities, income and expenses.
The following critical judgements have been
made in applying the Syndicate’s accounting
policies:
[Syndicates to detail the key judgements made
in applying the accounting policies including
15
those that have the most significant effect on the
amounts disclosed in the financial statements.]
The Syndicate makes estimates and
assumptions concerning the future. The
resulting accounting estimates will, by definition,
seldom equal the related actual results. The
estimates and assumptions that have a
significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities
within the next financial year are addressed
below.
[Syndicates shall disclose the key assumptions
and other sources of estimation uncertainty at
the reporting date, that have a significant risk of
causing a material adjustment to the carrying
amounts of assets and liabilities within the next
financial year. This should include the nature
and carrying amounts at the end of the reporting
period – cross reference to notes if applicable]
3. Significant accounting policies
[Syndicate should adapt the commentary below
in this section]
The following significant accounting policies
have been applied consistently in dealing with
items which are considered material in relation
to the Syndicate’s financial statements.
A. Premiums written
Gross premiums written reflect direct and
inwards reinsurance business written during the
period, gross of commission payable to
intermediaries, and exclude any taxes or duties
based on premiums. Premiums written include
estimates for ‘pipeline’ premiums representing
amounts due to the Syndicate not yet notified
and adjustments to estimates of premiums
written in previous periods.
Estimated premium income in respect of facility
contracts, for example binding authorities and
lines slips, are deemed to be written in a manner
that reflects the expected profile of the
underlying business which has been written.
Outwards reinsurance premiums are accounted
for in the same accounting period as the
premiums for the related direct or inwards
business being reinsured. The earned
proportion of premiums is recognised as
income.
Premiums are earned from the date of
attachment of risk over the indemnity period
based on the pattern of the risks underwritten.
B. Unearned premiums
The provision for unearned premiums comprises
the proportion of gross premiums written which
is estimated to be earned in the following or
subsequent financial periods, computed
separately for each insurance contract using the
daily pro rata method, adjusted if necessary to
reflect any variation in the incidence of risk
during the period covered by the contract.
C. Acquisition costs
Costs incurred in acquiring general insurance
contracts are deferred. Acquisition costs include
direct costs such as brokerage and commission,
and indirect costs such as administrative
expenses connected with the processing of
proposals and the issuing of policies. The
deferred acquisition cost asset represents the
proportion of acquisition costs which
corresponds to the proportion of gross
premiums written that is unearned at the balance
sheet date.
D. Reinsurance
The Syndicate assumes and cedes reinsurance
in the normal course of business. Premiums and
claims on reinsurance assumed are recognised
in the technical account along the same basis as
direct business, taking into account the product
classification. Reinsurance premiums ceded
and reinsurance recoveries on claims incurred
are included in the respective expense and
income accounts. Premiums ceded and claims
reimbursed are presented on a gross basis in
the technical account and statement of financial
position as appropriate.
Reinsurance outwards premiums are earned
according to the nature of the cover. ‘Losses
occurring during’ policies are earned evenly over
the policy period. ‘Risks attaching’ policies are
expensed on the same basis as the inwards
business being protected.
Reinstatement premiums on both inwards and
outwards business are accreted to the technical
account on a pro-rata basis over the term of the
original policy to which they relate.
16
E. Claims provisions and related
reinsurance recoveries
Claims incurred comprise claims and claims
handling expenses (both internal and external)
paid in the year and the movement in provision
for outstanding claims and settlement expenses.
The Syndicate does not discount its liability for
outstanding claims nor the reinsurance share of
outstanding claims, with the exception of
periodic payment orders (“PPOs”) and classes
of business where the claims settlement is
expected to be greater than four years from the
date of incurrence (currently no classes of
business). Within the Motor and liability classes
of business 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 PPO awarded by the courts or agreed
with the claimant.
Outstanding claims include an allowance for the
cost of claims incurred by the balance sheet date
but not reported until after the year end (IBNR).
Salvage and subrogation and other recoveries
are deducted from the provision for outstanding
claims [/ are recognised as other assets]. The
liability for outstanding claims is estimated using
the input of assessments for individual cases
reported to the Syndicate and widely accepted
actuarial techniques for the claims incurred but
not reported (IBNR). The techniques generally
use projections, based on past experience of the
development of claims over time, to form a view
on the likely ultimate claims to be experienced
and an estimate of the expected ultimate cost of
more complex claims that may be affected by
external factors, for example, court decisions
The reinsurers’ share of provisions for claims is
based on calculated amounts of outstanding
claims and projections for IBNR, net of
estimated irrecoverable amounts, having regard
to the reinsurance programme in place for the
class of business, the claims experience for the
year and the current security rating of the
reinsurance companies involved. A number of
statistical techniques are used to assist in
making these estimates. Reinsurance assets
are assessed for impairment at each balance
sheet date. A reinsurance asset is deemed
impaired if there is objective evidence, as a
result of an event that occurred after its initial
recognition, that the Syndicate may not recover
all amounts due, and that event has a reliably
measurable impact on the amount that the
Syndicate will receive from the reinsurer.
Impairment losses are recognised in profit or
loss in the period in which the impairment loss is
recognised.
F. Unexpired risks provision
Provision is made for unexpired risks arising
from general insurance contracts where the
expected value of claims and expenses
attributable to the unexpired periods of policies
in force at the balance sheet date exceeds the
unearned premiums provision in relation to such
policies (after the deduction of any deferred
acquisition costs). The provision for unexpired
risks is calculated by reference to classes of
business which are managed together.
G. Foreign currencies
Transactions in foreign currencies are translated
to the functional currency using the exchange
rates at the date of the transactions. The
Syndicate’s monetary assets and liabilities
denominated in foreign currencies are translated
into the functional currency at the rates of
exchange at the balance sheet date.
Non-monetary assets and liabilities
denominated in foreign currencies that are
measured at fair value are retranslated to the
functional currency at the exchange rate at the
date that the fair value was determined.
Non-monetary items denominated in foreign
currencies that are measured at historical cost
are translated to the functional currency using
the exchange rate at the date of the transaction.
For the purposes of foreign currency translation,
unearned premiums and deferred acquisition
costs are treated as if they are monetary items.
Differences arising on translation of foreign
currency amounts relating to the insurance
operations of the Syndicate are included in the
non-technical account. Differences arising on
translation from the functional currency to the
presentational currency are recognised in other
comprehensive income.
[Syndicates should give additional disclosure
when functional currency differs from
presentational currency and give a reason for
that.]
17
H. Financial assets and liabilities
[Note: this policy is written as an example as
though the syndicate has adopted IAS
39/Chapter 11/12, it is not anticipated
syndicates will adopt IFRS 9. The syndicates are
expected to manage their portfolios on a fair
value basis and therefore under IAS 39/Chapter
11/12 it is anticipated that financial assets will be
at FVTPL.]
In applying FRS 102, the Syndicate has chosen
to apply the recognition and measurement
provisions of [IAS 39 Financial Instruments:
Recognition and Measurement (as adopted for
use in the UK)/Chapters 11 and 12 of FRS 102].
i. Classification
The accounting classification of financial assets
and liabilities determines the way in which they
are measured and changes in those values are
presented in the statement of profit or loss and
other comprehensive income. Financial assets
and liabilities are classified on their initial
recognition.
The initial classification of a financial instrument
shall take into account contractual terms
including those relating to future variations.
Once the classification of a financial instrument
is determined at initial recognition,
re-assessment is only required subsequently
when there has been a modification of
contractual terms that is relevant to an
assessment of the classification.
Financial assets and financial liabilities at fair
value through profit and loss comprise financial
assets and financial liabilities held for trading
and those designated as such on initial
recognition. Investments in shares and other
variable yield securities, units in unit trusts, and
debt and other fixed income securities are
designated as at fair value through profit or loss
on initial recognition, as they are managed on a
fair value basis in accordance with the
Syndicate’s investment strategy. Other financial
assets, principally certain debt and other
fixed-income securities are classified as
available for sale.
The Syndicate does not hold any non-derivative
financial assets or financial liabilities for trading
purposes although derivatives (assets or
liabilities) held by the Syndicate are categorised
as held for trading.
Deposits with credit institutions, debtors, and
accrued interest are classified as loans and
receivables.
ii. Recognition
Financial instruments are recognised when the
Syndicate becomes a party to the contractual
provisions of the instrument. Financial assets
are derecognised if the Syndicate’s contractual
rights to the cash flows from the financial assets
expire or if the Syndicate transfers the financial
asset to another party without retaining control
of substantially all risks and rewards of the
asset. A financial liability is derecognised when
its contractual obligations are discharged,
cancelled or expired.
Regular way purchases and sales of financial
assets are recognised and derecognised, as
applicable, on the trade date, i.e., the date that
the Syndicate commits itself to purchase or sell
the asset.
iii. Measurement
A financial asset or financial liability is measured
initially at fair value plus, for a financial asset or
financial liability not at fair value through profit or
loss, transaction costs that are directly
attributable to its acquisition or issue.
Financial assets at fair value through profit or
loss are measured at fair value with fair value
changes recognised immediately in profit or
loss. Net gains or net losses on financial assets
measured at fair value through profit or loss
includes foreign exchange gains/losses arising
on their translation to the functional currency but
excludes interest and dividend income.
Financial assets classified as available for sale
are initially recognised at fair value, which
typically equates to the cost, plus transaction
costs directly attributable to its acquisition. After
initial measurement, these assets are
subsequently measured at fair value. Interest
earned whilst holding available for sale financial
assets is reported as interest income.
Impairment losses and foreign exchange gains
or losses are reported in profit or loss. Other fair
value changes are recognised in other
comprehensive income.
18
Any gain or loss recognised in OCI will be
recycled to profit and loss on derecognition of
the asset.
Loans and receivables and non-derivative
financial liabilities are measured at amortised
cost using the effective interest method, except
Syndicate Loans to the Central Fund which are
measured at fair value through profit or loss.
iv. Identification and measurement of
impairment
At each reporting date the Syndicate assesses
whether there is objective evidence that financial
assets not at fair value through profit or loss are
impaired. Financial assets are impaired when
objective evidence demonstrates that a loss
event has occurred after the initial recognition of
an asset, and that the loss event has an impact
on the future cash flows on the asset that can be
estimated reliably.
Objective evidence that financial assets are
impaired includes observable data that comes to
the attention of the Syndicate about any
significant financial difficulty of the issuer, or
significant changes in the technological, market,
economic or legal environment in which the
issuer operates.
Impairment losses on available for sale financial
assets are recognised by reclassifying the
losses accumulated in other comprehensive
income to profit or loss. The net cumulative loss
that is reclassified from other comprehensive
income to profit or loss is the difference between
the acquisition cost, net of any principal
repayment, and the current fair value, less any
impairment loss recognised previously in profit
or loss. If, in a subsequent period, the fair value
of an impaired available for sale debt security
increases and the increase can be related
objectively to an event occurring after the
impairment loss was recognised, the impairment
loss is reversed through profit or loss. Otherwise
it is reversed through the statement of
comprehensive income.
An impairment loss in respect of a financial asset
measured at amortised cost is calculated as the
difference between its carrying amount, and the
present value of the estimated future cash flows
discounted at the asset’s original effective
interest rate.
Individually significant financial assets are
tested for impairment on an individual basis. The
remaining financial assets are assessed
collectively in groups that share similar credit
risk characteristics.
An impairment loss recognised on an amortised
cost asset reduces directly the carrying amount
of the impaired asset. All impairment losses are
recognised in profit or loss. An impairment loss
is reversed if the reversal can be related
objectively to an event occurring after the
impairment loss was recognised. For financial
assets measured at amortised cost the reversal
is recognised in profit or loss.
v. Off-setting
Financial assets and financial liabilities are
offset, and the net amount presented in the
balance sheet when, and only when, the
Syndicate currently has a legal right to set off the
amounts and intends either to settle on a net
basis or to realise the asset and settle the liability
simultaneously.
I. Investment return
Investment return comprises investment income
and movements in unrealised gains and losses
on financial instruments at fair value through
profit or loss, less investment management
expenses, interest expense, realised losses and
impairment losses. Investment income
comprises interest income, dividends receivable
and realised investment gains.
Dividend income is recognised when the right to
receive income is established. Usually this is the
ex-dividend date for equity securities. Interest
income on financial assets measured at
amortised cost is recognised using the effective
interest method. For the purpose of separately
presenting investment income and unrealised
gains and losses for financial assets at fair value
through profit or loss, interest income is
calculated using the effective interest method
excluding transaction costs that are expensed
when incurred. For investments at fair value
through profit or loss, realised gains and losses
represent the difference between the net
proceeds on disposal and the purchase price.
For investments measured at amortised cost,
realised gains and losses represents the
difference between the net proceeds on disposal
19
and the latest carrying value (or if acquired after
the last reporting date, the purchase price).
Unrealised investment gains and losses
represent the difference between the fair value
at the balance sheet date and the fair value at
the previous balance sheet date, or purchase
price if acquired during the year. Movements in
unrealised investment gains and losses
comprise the increase/decrease in the reporting
period in the value of the investments held at the
reporting date and the reversal of unrealised
investment gains and losses recognised in
earlier reporting periods in respect of investment
disposals of the current period.
Investment return is initially recorded in the
non-technical account. The return is transferred
in full to the general business technical account
to reflect the investment return on funds
supporting underwriting business.
J. Cash and cash equivalents
Cash and cash equivalents comprise cash
balances and call deposits with maturities of
three months or less from the acquisition date
that are subject to an insignificant risk of
changes in fair value and are used by the
Syndicate in the management of its short-term
commitments.
Cash and cash equivalents are carried at
amortised cost in the statement of financial
position.
Bank overdrafts that are repayable on demand
and form an integral part of the Syndicate’s cash
management are included as a component of
cash and cash equivalents for the purpose of the
statement of cash flows.
K. 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 (currently
at [20%]) deducted from Syndicate investment
income is recoverable by managing agents and
consequently the distribution made to members
or their members’ agents is gross of tax. Capital
appreciation falls within trading income and is
also distributed gross of tax.
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 have been included in the
balance sheet under the heading ‘other debtors’.
No provision has been made for any other
overseas tax payable by members on
underwriting results.
L. Pension costs
[Insert the Managing Agent name] operates a
defined contribution scheme. Pension
contributions relating to Managing agent staff
who act on behalf of the Syndicate are charged
to the Syndicate as incurred and are included
within net operating expenses.
M. Profit commission
Profit commission is charged by the managing
agent at a rate of [X]% of the profit on a year of
account basis subject to the operation of a
3-year deficit clause. This is charged to the
Syndicate as incurred but does not become
payable until after the appropriate year of
account closes, normally at 36 months.
[In case there are any Profit commissions
arrangement such as consortia arrangements
the policy should be included here too]
N. Deposits with ceding undertakings
Deposits with ceding undertakings are funds
held by Lloyd’s Europe on behalf of the
Syndicate to settle Part VII claims. These funds
are held at amortised cost in the balance sheet.
[Syndicate to detail any other deposits with
ceding undertakings]
[Syndicate to detail any other significant policies]
O. Tangible assets
All items classed as tangible fixed assets within
the statement of financial position are carried at
historical cost less accumulated depreciation.
Depreciation is calculated on a straight-line
basis to write down the cost of other assets to
their residual values over their estimated useful
lives as follows:
Fixtures and fittings – over [5] years
Computer equipment – over [3] years
Other assets – over [5] years
20
The assets’ residual values, useful lives and
method of depreciation are reviewed regularly,
and at least at each financial year end, and
adjusted if appropriate. Where the carrying
amount of an asset is greater than its estimated
recoverable amount, it is written down
immediately to its recoverable amount.
Gains and losses on disposal of property and
equipment are determined by reference to their
carrying amount.
P. Other prepayment and accrued income
[Syndicate to detail policy]
Q. RITC and Portfolio Transfer Policy
[Syndicate to detail policy]
R. Deposits received from reinsurers
Deposits received from reinsurers includes other
amounts received in advance from reinsurers
against future claims under the Syndicate's
reinsurance arrangements. These funds are
held at amortised cost in the balance sheet.
S. Operating expenses
Where expenses are incurred by the Managing
Agent [/Service Company] for the administration
of the Syndicate, these expenses are
apportioned appropriately based on type of
expense. Expenses that are incurred jointly are
apportioned between the Managing Agent
[/Service Company] and the Syndicate on bases
depending on the amount of work performed,
resources used, and the volume of business
transacted.
T. Reinsurers’ commission and profit
participation
Reinsurers’ commissions and profit
participations, which include reinsurance profit
commission and overriding commission, are
treated as a contribution to expenses.
U. Funds withheld in SPA arrangements
[if applicable]
[Syndicate to detail policy]
V. Debtors and creditors
Insurance debtors and creditors include
amounts due to and from agents, brokers and
insurance contract holders. These are classified
as debt instruments as they are non-derivative
financial assets with fixed or determinable
payments that are not quoted on an active
market. Insurance debtors are measured at
amortised cost less any provision for
impairments. Insurance creditors are stated at
amortised cost. The Syndicate does not have
any debtors directly with policyholders, all
transactions occur via an intermediary.
Reinsurance debtors and creditors include
amounts due to and from reinsurers. These are
classified as debt instruments as they are
non-derivative financial assets with fixed or
determinable payments that are not quoted on
an active market. Reinsurance debtors are
measured at amortised cost less any provision
for impairments. Reinsurance creditors are
stated at amortised cost. Reinsurance debtor
principally relates to claims recoveries where the
underlying claim has been settled and the
recovery is due. Reinsurance creditors are
primarily premiums payable for reinsurance
contracts and are recognised as an expense
when due.
Other debtors principally consist of amounts due
from members and sundry debtors and are
carried at amortised cost less any impairment
losses.
Other creditors principally consist of amounts
due to related syndicates and other related
entities, profit commissions payable and other
sundry payables. These are stated at amortised
cost determined using the effective interest rate
method.
W. Classification of insurance and
reinsurance contracts
Insurance and reinsurance contracts are
classified as insurance contracts where they
transfer significant insurance risk. If a contract
does not transfer significant insurance risk it is
classified as a financial instrument. [All of the
Syndicates written contracts and purchased
reinsurance contracts transfer significant
insurance risk and therefore are recognised
insurance contract].
4. Risk and capital management
[Syndicate should adapt the commentary below
in this section]
21
Introduction and overview
This note presents information about the nature
and extent of insurance and financial risks to
which the Syndicate is exposed, the Managing
Agent’s objectives, policies and processes for
measuring and managing insurance and
financial risks, and for managing the Syndicate’s
capital.
Risk management framework
The Board of Directors of the Managing Agent
has overall responsibility for the establishment
and oversight of the Syndicate’s risk
management framework. The Board has
established a Risk Committee to oversee the
operation of the Syndicate’s risk management
framework and to review and monitor the
management of the risks to which the Syndicate
is exposed. The Risk Committee has delegated
oversight of the management of aspects of
insurance risks to the Underwriting and
Reserving Committee, which is responsible for
developing and monitoring insurance risk
management policies, and the management of
aspects of financial risks to the Investment
Committee, which is responsible for developing
and monitoring financial risk management
policies.
The Risk Committee reports regularly to the
Board of Directors on its activities. The
Underwriting and Reserving Committee and the
Investment Committee report regularly to the
Risk Committee on their activities.
The risk management policies are established to
identify and analyse the risks faced by the
Syndicate, to set appropriate risk limits and
controls, and to monitor risks and adherence to
limits.
A. Insurance risk
[Syndicate should adapt the commentary below
on insurance risk]
Insurance risk arises from the possibility of an
adverse financial result due to actual claims
experience being different from that expected
when an insurance product was designed and
priced. The actual performance of insurance
contracts is subject to the inherent uncertainty in
the occurrence, timing and amount of the final
insurance liabilities.
The insurance risk the Syndicate is exposed can
be separated into underwriting risk and reserve
risk.
i. Underwriting risk
Underwriting risk is the risk that the insurance
premium will not be sufficient to cover future
insurance losses and associated expenses. This
includes the risks that the premium is set too
low, provides inappropriate levels of cover, or
that the actual frequency or severity of claims
events will be significantly higher than was
expected during the underwriting process.
ii. Reserve Risk
Reserve risk is the risk that the reserves
established in respect of insurance claims
incurred are insufficient to settle the claims and
associated expenses in full.
i. Management of insurance risk
A key component of the management of
underwriting risk for the Syndicate is a
disciplined underwriting strategy that is focused
on writing quality business and not writing for
volume. Product pricing is designed to
incorporate appropriate premiums for each type
of assumed risk. The underwriting strategy
includes underwriting limits on the Syndicate’s
total exposure to specific risks together with
limits on geographical and industry exposures.
The aim is to ensure a well-diversified book is
maintained with no over exposure in any one
geographical region or industry.
Contracts can contain a number of features
which help to manage the underwriting risk such
as the use of deductibles, or capping the
maximum permitted loss, or number of claims
(subject to local regulatory and legislative
requirements).
The Syndicate makes use of reinsurance to
mitigate the risk of incurring significant losses
linked to one event, including excess of loss,
stop loss and catastrophe reinsurance. Where
an individual exposure is deemed surplus to the
Syndicate’s appetite additional facultative
reinsurance is also purchased.
Where considered appropriate, and in limited
circumstances, the Syndicate may adopt a
pro-active approach to early settling long tail
latent disease claims with the contract holder,
22
although each settlement is assessed on a
case-by-case basis to ensure the contract
holder is not disadvantaged by such an
approach.
The Underwriting and Reserving Committee
oversees the management of reserving risk. The
use of proprietary and standardised modelling
techniques, internal and external benchmarking,
and the review of claims development are all
instrumental in mitigating reserving risk.
The Syndicate Managing Agent’s actuaries
perform a reserving analysis on a quarterly basis
liaising closely with underwriters, claims and
reinsurance technicians. The aim of this
exercise is to produce a probability -weighted
average of the expected future cash outflows
arising from the settlement of incurred claims.
These projections include an analysis of claims
development compared to the previous ‘best
estimate’ projections. The output of the
reserving analysis is reviewed by external
consulting actuaries. The Underwriting and
Reserving Committee performs a
comprehensive review of the projections, both
gross and net of reinsurance. Following this
review the Underwriting and Reserving
Committee makes recommendations to the Risk
Committee and the Managing Agent’s Board of
Directors of the claims provisions to be
established.
The claims development table in note number
[X] shows the actual claims incurred to previous
estimates for the last 10 years.
ii. Concentration of insurance risk
[Syndicate to detail any concentrations of
insurance risk]
iii. 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 profit and loss
impact of the sensitivity of the value of insurance
liabilities disclosed in the accounts to potential
movements in the assumptions applied within
the technical provisions. Given the nature of the
business underwritten by the Syndicate, the
approach to calculating the technical provisions
for each class can vary and as a result the
sensitivity performed is to apply a beneficial and
adverse risk margin to the total insurance
liability. The amount disclosed in the table
represents the profit or loss impact of an
increase or decrease in the insurance liability as
a result of applying the sensitivity. The amount
disclosed for the impact on claims outstanding –
net of reinsurance represents the impact on both
the profit and loss for the year and member
balance.
[Other risk variables should be disclosed where
necessary to indicate the exposure and
sensitivity to insurance risk required by FRS
103.4.9]
General insurance business sensitivities as at 31 December 20x | 2 | Sensitivity +5.0%£000 -5.0% £000 | |
| Claims outstanding – gross of reinsurance | ( | ||
| Claims outstanding – net of reinsurance | ( | ||
General insurance business sensitivities as at 31 December 20x1 | Sensitivity +5.0%£000 -5.0% £000 | |
| Claims outstanding – gross of reinsurance | ( | |
| Claims outstanding – net of reinsurance | ( | |
23
B. Financial risk
[Syndicate should adapt the commentary below
on financial risk]
The focus of financial risk management for the
Syndicate is ensuring that the proceeds from its
financial assets are sufficient to fund the
obligations arising from its insurance contracts.
The goal of the investment management
process is to optimise the risk-adjusted
investment income and risk-adjusted total
return by investing in a diversified portfolio of
securities, whilst ensuring that the assets and
liabilities are managed on a cash flow and
duration matching basis.
a. Credit risk
[Syndicate should adapt the commentary below
on credit risk]
Credit risk is the risk of financial loss to the
Syndicate if a counterparty fails to discharge a
contractual obligation.
The Syndicate is exposed to credit risk in
respect of the following:
Debt securities and derivative financial
instruments;
Reinsurers’ share of claims outstanding;
Amounts due from intermediaries;
Amounts due from reinsurers in respect of
settled claims;
Cash and cash equivalents; and
Other debtors and accrued interest.
The nature of the Syndicate’s exposures to
credit risk and its objectives, policies and
processes for managing credit risk have not
changed significantly from the prior year.
i. Management of credit risk
The Syndicate’s credit risk in respect of debt
securities is managed by placing limits on its
exposure to a single counterparty, by reference
to the credit rating of the counterparty. Financial
assets are graded according to current credit
ratings issued by rating agencies such as
Standard and Poor’s. The Syndicate has a
policy of investing mainly in government issued
and government backed debts. The Syndicate
does not currently invest new monies in
speculative grade assets (i.e., those rated
below BBB).
The Syndicate limits the amount of cash and
cash equivalents that can be deposited with a
single counterparty and maintains an
authorised list of acceptable cash
counterparties.
The Syndicate’s exposure to intermediaries and
reinsurance counterparties is monitored by the
individual business units as part of their credit
control processes.
All intermediaries must meet minimum
requirements established by the Syndicate. The
credit ratings and payment histories of
intermediaries are monitored on a regular
basis.
The Syndicate assesses the creditworthiness of
all reinsurers by reviewing public rating
information and by internal investigations. The
impact of reinsurer default is regularly assessed
and managed accordingly.
ii. Exposure to credit risk
The carrying amount of financial assets and
reinsurance assets represents the maximum
credit risk exposure. [The Syndicate does not
hold any collateral as security or purchase any
credit enhancements (such as guarantees,
credit derivatives and netting arrangements that
do not qualify for offset).] [If the carrying amount
does not represent the maximum credit
exposure, or credit derivatives and other similar
securities are used to mitigate the credit
exposure, details required by FRS 102.34.25
will need to be considered]
The following table analyses the credit rating by
investment grade of financial investments, debt
securities and derivative financial instruments,
reinsurers’ share of claims outstanding, amount
due from intermediaries, amounts due from
reinsurers in respect of settled claims, cash and
cash equivalents, and other debtors and
accrued interest.
24
Year 20x2 | AAA £000 | AA £000 | A £000 | BBB £000 | Other £000 | Not rated £000 | Total £000 |
Shares and other variable yield securities and units in unit trusts | |||||||
Debt securities and other fixed income securities | |||||||
| Participation in investment pools | |||||||
| Loans secured by mortgages | |||||||
Loans and deposits with credit institutions | |||||||
| Derivative assets | |||||||
| Syndicate loans to central fund | |||||||
| Other investments | |||||||
| Deposits with ceding undertakings | |||||||
| Reinsurers’ share of claims outstanding | | ||||||
Debtors arising out of direct insurance operations | |||||||
Debtors arising out of reinsurance operations | |||||||
| Cash at bank and in hand | |||||||
| Other debtors and accrued interest | |||||||
Total |
Year 20x1 | AAA £000 | AA £000 | A £000 | BBB £000 | Other £000 | Not rated £000 | Total £000 |
Shares and other variable yield securities and units in unit trusts | |||||||
Debt securities and other fixed income securities | |||||||
| Participation in investment pools | |||||||
| Loans secured by mortgages | |||||||
Loans and deposits with credit institutions | |||||||
| Derivative assets | |||||||
| Syndicate loans to central fund | |||||||
| Other investments | |||||||
| Deposits with ceding undertakings | |||||||
| Reinsurers’ share of claims outstanding | | ||||||
Debtors arising out of direct insurance operations | |||||||
Debtors arising out of reinsurance operations | |||||||
| Cash at bank and in hand | |||||||
| Other debtors and accrued interest | | ||||||
Total |
25
iii. Financial assets that are past due or impaired
The Syndicate has debtors arising from direct insurance and reinsurance operations that are past due
but not impaired at the reporting date.
The Syndicate also has debtors arising from direct insurance operations that are impaired at the
reporting date.
These debtors have been individually assessed for impairment by considering information such as the
occurrence of significant changes in the counterparty’s financial position, patterns of historical payment
information and disputes with counterparties.
[Syndicates to disclose factors considered in determining impairment of the financial instruments]
An analysis of the carrying amounts of past due or impaired debtors is presented in the table below:
Neither past
due nor
impaired
assets
Past due
but not
impaired
assets
Gross value
of impaired
assets
Impairment
allowance
Total
20x2
£000
£000
£000
£000
£000
Shares and other variable yield securities and
units in unit trusts
Debt securities and other fixed income
securities
Participation in investment pools -
Loans secured by mortgages -
Loans and deposits with credit institutions 85,000
Derivative assets 2,600
Syndicate loans to central fund -
Other investments 18,400
Deposits with ceding undertakings 1,000
Reinsurers' share of claims outstanding 145,000
Debtors arising out of direct insurance
operations
(450 )
Debtors arising out of reinsurance operations 30,160
(330 )
Other debtors and accrued interest 6,300
Cash at bank and in hand 8,000
Total
(780 )
26
Neither past
due nor
impaired
assets
Past due but
not impaired
assets
Gross value
of impaired
assets
Impairment
allowance
Total
20x1
£000
£000
£000
£000
£000
Shares and other variable yield securities and
units in unit trusts
Debt securities and other fixed income
securities
Participation in investment pools -
Loans secured by mortgages -
Loans and deposits with credit institutions 60,000
Derivative assets 5,700
Syndicate loans to central fund -
Other investments 10,300
Deposits with ceding undertakings 1,000
Reinsurers' share of claims outstanding 108,300
Debtors arising out of direct insurance
operations
(420 )
Debtors arising out of reinsurance operations 29,670
(310 )
Other debtors and accrued interest 9,000
Cash at bank and in hand 19,000
Total
(730 )
The table below sets out a reconciliation of changes in impairment allowance during the period for
each class of financial asset at the balance sheet date:
1 Jan
New
impairme
nt
charges
added in
year
Changes
in
impairme
nt
charges
Released
to profit
and loss
account
Foreign
exchange
Others
31 Dec
20x2
£000
£000
£000
£000
£000
£000
£000
Financial investments -
Deposits with ceding undertakings 1,000
Reinsurers' share of claims
outstanding
Debtors arising out of direct
insurance operations
Debtors arising out of reinsurance
operations
Other debtors and accrued interest -
Cash at bank and in hand -
Total
27
1 Jan
New
impairme
nt
charges
added in
year
Changes
in
impairme
nt
charges
Released
to profit
and loss
account
Foreign
exchange
Others
31 Dec
20x1
£000
£000
£000
£000
£000
£000
£000
Financial investments -
Deposits with ceding undertakings 1,000
Reinsurers' share of claims
outstanding
Debtors arising out of direct
insurance operations
Debtors arising out of reinsurance
operations
Other debtors and accrued interest -
Cash at bank and in hand -
Total
The table below sets out the age analysis of financial assets that are past due but not impaired at the
balance sheet date:
Past due but not impaired
0-3 months
past due
3-6 months
past due
6-12 months
past due
Greater
than 1 year
past due
Total
20x2
£000
£000
£000
£000
£000
Shares and other variable yield securities
and units in unit trusts
Debt securities and other fixed income
securities
Participation in investment pools -
Loans secured by mortgages -
Loans and deposits with credit institutions -
Derivative assets -
Syndicate loans to central fund -
Other investments -
Deposits with ceding undertakings -
Reinsurers' share of claims outstanding -
Debtors arising out of direct insurance
operations
Debtors arising out of reinsurance
operations
Other debtors and accrued interest -
Cash at bank and in hand -
Total
28
b. Liquidity risk
[Syndicate should adapt the commentary below
on liquidity risk]
Liquidity risk is the risk that the Syndicate will
encounter difficulty in meeting obligations
arising from its insurance contracts and financial
liabilities. The Syndicate is exposed to daily calls
on its available cash resources mainly from
claims arising from insurance contracts.
The nature of the Syndicate’s exposures to
liquidity risk and its objectives, policies and
processes for managing liquidity risk have not
changed significantly from the prior year.
i. Management of liquidity risk
The Syndicate’s approach to managing liquidity
risk is to ensure, as far as possible, that it will
always have sufficient liquidity to meet its
liabilities when they fall due, under both normal
and stressed conditions.
The Syndicate’s approach to managing its
liquidity risk is as follows:
Forecasts are prepared and revised on a
regular basis to predict cash outflows from
insurance contracts over the short, medium
and long term;
The Syndicate purchases assets with
durations not greater than its estimated
insurance contract outflows;
Assets purchased by the Syndicate are
required to satisfy specified marketability
requirements;
The Syndicate maintains cash and liquid
assets to meet daily calls on its insurance
contracts;
The Syndicate holds significant committed
borrowing facilities from a range of highly
rated banks to enable cash to be raised in a
relatively short time-span; and
The Syndicate regularly updates its
contingency funding plans to ensure that
adequate liquid financial resources are in
place to meet obligations as they fall due in
the event of reasonably foreseeable
abnormal circumstances.
Past due but not impaired
0-3 months
past due
3-6 months
past due
6-12 months
past due
Greater
than 1 year
past due
Total
Shares and other variable yield securities
and units in unit trusts
Debt securities and other fixed income
securities
Participation in investment pools -
Loans secured by mortgages -
Loans and deposits with credit institutions
Derivative assets -
Syndicate loans to central fund -
Other investments -
Deposits with ceding undertakings -
Reinsurers' share of claims outstanding -
Debtors arising out of direct insurance
operations
Debtors arising out of reinsurance
operations
Other debtors and accrued interest -
Cash at bank and in hand -
Total
29
ii. Maturity analysis of syndicate liabilities
The maturity analysis presented in the table
below shows the remaining contractual
maturities for the Syndicate’s insurance
contracts and financial instruments. For
insurance and reinsurance contracts, the
contractual maturity is the estimated date when
the gross undiscounted contractually required
cash flows will occur. For financial liabilities, it is
the earliest date on which the gross
undiscounted cash flows (including contractual
interest payments) could be paid assuming
conditions are consistent with those at the
reporting date.
6
Undiscounted net cash flows Year 20x2 No maturity stated £ 000 0-1 yrs £ 000 1-3 yrs £ 000 | 3-5 yrs £ 000 | >5 yrs £ 000 | Total £ 000 | |||
| Claims outstanding | ||||||
| Derivative liabilities | ||||||
Deposits received from reinsurers | ||||||
| Creditors | ||||||
| Other credit balances | ||||||
Total | ||||||
Undiscounted net cash flows Year 20x1 No maturity stated £ 000 0-1 yrs £ 000 1-3 yrs £ 000 | 3-5 yrs £ 000 | >5 yrs £ 000 | Total £ 000 | |||
| Claims outstanding | ||||||
| Derivative liabilities | ||||||
| Deposits received from reinsurers | | |||||
| Creditors | ||||||
| Other credit balances | ||||||
Total | ||||||
c. Market risk
[Syndicate should adapt the commentary below
on market risk]
Market risk is the risk that the fair value or future
cash flows of a financial instrument or insurance
contract will fluctuate because of changes in
market prices. Market risk comprises three types
of risk: interest rate risk, currency risk and other
price risk.
The objective of market risk management is to
manage and control market risk exposures
within acceptable parameters, while optimising
the return on risk. The nature of the Syndicate
exposures to market risk and its objectives,
policies and processes for managing market risk
have not changed significantly from the prior
year.
i. Management of market risks
For each of the major components of market risk
the Syndicate has policies and procedures in
place which detail how each risk should be
managed and monitored. The management of
each of these major components of major risk
and the exposure of the Syndicate at the
reporting date to each major risk are addressed
below.
30
ii. Interest rate risk
Interest rate risk is the risk that the fair value
and/or future cash flows of a financial instrument
will fluctuate because of changes in interest
rates.
The Syndicate is exposed to interest rate risk
through its investment portfolio, borrowings and
cash and cash equivalents.
The risk of changes in the fair value of these
assets is managed by primarily investing in
short-duration financial investments and cash
and cash equivalents. The Investment
Committee monitors the duration of these assets
on a regular basis, targeting an investment
portfolio duration that, in the event of changes in
interest rates, always maintains the internal
capital requirements.
iii. Currency risk
The Syndicate writes business primarily in
Sterling, US dollar, Euro, Canadian dollar,
Australian dollar and Japanese Yen and is
therefore exposed to currency risk arising from
fluctuations in these exchange rates.
The foreign exchange policy is to maintain
assets in the currency in which the cash flows
from liabilities are to be settled in order to hedge
the currency risk inherent in these contracts. In
addition, as at 31 December 20x2, the Syndicate
has in place currency forward contracts which
materially hedge the long position on US dollars.
The table below summarises the carrying value
of the Syndicate’s assets and liabilities, at the
reporting date:
Sterling | US dollar | Euro | Canadian dollar | Australian dollar | Japanese Yen | Other | Total | |
20x2 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
| Investments | ||||||||
Reinsurers' share of technical provisions | ||||||||
| Debtors | ||||||||
| Other assets | ||||||||
Prepayments and accrued income | ||||||||
Total assets | ||||||||
| Technical provisions | ( | ( | ( | ( | ( | |||
Provisions for other risks | ||||||||
Deposits received from reinsurers | ( | ( | ||||||
| Creditors | ( | ( | ( | ( | ( | |||
Accruals and deferred income | ( | ( | ( | ( | ||||
Total liabilities | ( ) | ( ) | ( ) | ( ) | ( ) | |||
Total capital and reserves | ( | ( | ( | ( | ( |
31
Sterling
US dollar
Euro
Canadian
dollar
Australian
dollar
Japanese
Yen
Other
Total
20x1
£000
£000
£000
£000
£000
£000
£000
£000
Investments 85,000
Reinsurers' share of
technical provisions
Debtors 22,500
Other assets 2,350
Prepayments and
accrued income
Total assets
Technical provisions (100,500 )
(265,000 )
(88,000 )
(6,400 )
(459,900 )
Provisions for other
risks
Deposits received from
reinsurers
(1,500 )
(1,500 )
Creditors (18,500 )
(40,400 )
(11,200 )
(800 )
(70,900 )
Accruals and deferred
income
(1,100 )
(300 )
(200 )
(1,600 )
Total liabilities
(
)
(
)
(
)
(
)
(
)
Total capital and
reserves
(28,150 )
(15,850 )
(3,800 )
(46,250 )
[NOTE: The above 6 currencies are the minimum that must be included by the syndicates as these are
the 6 currencies presented by Lloyd’s. Syndicates can present other currencies in this table, however
other currencies permitted to be included are limited to the 14 currencies in which FAL can be held. The
14 permitted currencies are: GBP, USD, EUR, CAN, AUS, JPY, ZAR, CHF, NOK, SEK, DKK, HKD,
NZD, SGD, any other currency exposure should be presented as Other]
iv. Equity price risk
Equity price risk is the risk that the fair value of
a financial instrument will fluctuate because of
changes in market prices (other than those
arising from interest rate risk or currency risk),
principally investment securities, whether those
changes are caused by factors specific to the
individual financial instrument or its issuer, or
factors affecting all similar financial instruments
traded in the market.
The Syndicate holds a limited portfolio of
equities which are subject to equity price risk.
This exposure benefits members through the
enhanced longer-term returns on equities
compared with debt securities.
Equity price risks are managed by setting and
monitoring objectives and constraints on
investments, diversification plans and limits on
investments. The management ensures that
the Syndicate’s internal capital requirements
are met at all times, as well as those mandated
by the Syndicate’s external regulators.
v. Sensitivity analysis to market risks
The analysis below is performed for reasonably
possible movements in market indices on
financial instruments with all other variables
held constant, showing the impact on the result
before tax due to changes in fair value of
financial assets and liabilities (whose fair values
are recorded in the profit and loss account) and
members’ balances.
32
20x2 Impact on results before tax £000 | 20x2 Impact on members’ balances £000 | 20x1 Impact on results before tax £000 | 20x1 Impact on members’ balances £000 | |
Interest rate risk | ||||
| + 50 basis points shift in yield curves | ( | ( | ( | ( |
| - 50 basis points shift in yield curves | ||||
Equity price risk | ||||
| 5 percent increase in equity prices | ||||
| 5 percent decrease in equity prices | ( | ( | ( | ( |
[In addition to interest rate risk and equity price
risk included in the table above, Syndicates
should report the impact of currency risk on
results before tax and members’ balances. The
currency against which is the impact is
assessed will vary by Syndicate depending on
the chosen reporting currency.]
[A 10% increase (or decrease) in exchange
rates, 5% increase (or decrease) in equity
prices and a 50 basis point increase (or
decrease) in yield curves have been selected
on the basis that these are considered to be
reasonably possible changes in these risk
variables over the following year].
The sensitivity analysis demonstrates the effect
of a change in a key variable while other
assumptions remain unchanged. However, the
occurrence of a change in a single market factor
may lead to changes in other market factors as
a result of correlations.
The sensitivity analyses do not take into
consideration that the Syndicate’s financial
investments are actively managed. Additionally,
the sensitivity analysis is based on the
Syndicate’s financial position at the reporting
date and may vary at the time that any actual
market movement occurs. As investment
markets move past pre-determined trigger
points, action would be taken which would alter
the Syndicate’s position.
C. Capital management
[Syndicate should adapt the commentary below
on capital management]
i. Capital framework at Lloyd’s
The Society of Lloyd’s (Lloyd’s) is a regulated
undertaking and subject to supervision by the
Prudential Regulatory Authority (PRA) under
the Financial Services and Markets Act 2000,
and in accordance with the Solvency II
Framework.
Within this supervisory framework, Lloyd’s
applies capital requirements at member level
and centrally to ensure that Lloyd’s would
comply with the Solvency II requirements, and
beyond that to meet its own financial strength,
licence and ratings objectives.
Although, as described below, Lloyd’s capital
setting processes use a capital requirement set
at syndicate level as a starting point, the
requirement to meet Solvency II and Lloyd’s
capital requirements apply at overall and
member level only respectively, not at
syndicate level. Accordingly, the capital
requirement in respect of [Syndicate name] is
not disclosed in these financial statements.
ii. 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’
33
shares. Accordingly, the capital requirements
that Lloyd’s sets for each member operates on
a similar basis.
Each member’s SCR shall thus be determined
by the sum of the 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 II requirement,
is to meet Lloyd’s financial strength, licence and
ratings objectives. The capital uplift applied for
20X2 was 35% (20X1: 35%) of the member’s
SCR ‘to ultimate’.
iii. Provision of capital by members
Each member may provide capital to meet its
ECA either by assets held in trust by Lloyd’s
specifically for that member (FAL), assets held
and managed within a syndicate (FIS), or as the
member’s share of the members’ balances on
each syndicate on which it participates.
Accordingly, all of the assets less liabilities of
the Syndicate, as represented in the members’
balances reported on the balance sheet on
page 16, represent resources available to meet
members’ and Lloyd’s capital requirements.
5. Analysis of underwriting result
An analysis of the underwriting result before investment return is presented in the table below:
20x2
Gross
premiums
written
£000
Gross
premiums
earned
£
000
Gross
claims
incurred
£
000
Gross
operating
expenses
£
000
Reinsurance
balance
£
000
Underwriting
result
£
000
Direct insurance
Accident and health 24,500
(6,000 )
(7,300 )
(600 )
Motor (third party
liability)
Motor (other classes)
Marine, aviation, and
transport
(14,300 )
(16,400 )
(1,500 )
Fire and other
damage to property
(31,000 )
(27,500 )
Third party liability 150,000
(105,000 )
(49,140 )
(2,650 )
(14,790 )
Credit and suretyship
Legal expenses -
Assistance -
Miscellaneous 22,000
(15,000 )
(7,500 )
(1,250 )
(2,250 )
Life -
Total direct
insurance
(171,300 )
(107,840 )
(4,800 )
Reinsurance
acceptances
(15,000 )
(5,200 )
(500 )
Total
(186,300 )
(113,040 )
(5,300 )
34
The below is an additional disclosure for Lloyd’s reporting purposes and is included to facilitate the
classification of the above segments into the Lloyd’s aggregate classes of business:
20x2
Gross
premiums
written
£000
Gross
premiums
earned
£
000
Gross
claims
incurred
£
000
Gross
operating
expenses
£
000
Reinsuran
ce
balance
£
000
Underwriting
result
£
000
Additional analysis
Fire and damage to property of
which is:
Specialties 8,000
(3,100 )
(2,750 )
Energy 400
(155 )
(138 )
Third party liability of which is:
Energy 30,000
(21,000 )
(9,828 )
(530 )
(2,958 )
20x1
Gross
premiums
written
£
000
Gross
premiums
earned
£
000
Gross
claims
incurred
£
000
Gross
operating
expenses
£
000
Reinsurance
balance
£
000
Underwriting
result
£
000
Direct insurance
Accident and health
(6,000 )
(7,300 )
(1,100 )
Motor (third party
liability)
Motor (other
classes)
Marine, aviation,
and transport
(34,000 )
(19,800 )
(6,500 )
Fire and other
damage to property
(40,000 )
(26,600 )
Third party liability 155,000
(115,500 )
(52,490 )
(10,100 )
Credit and
suretyship
Legal expenses -
Assistance -
Miscellaneous 6,000
(6,000 )
(5,200 )
(3,200 )
Life -
Total direct
insurance
(201,500 )
(111,390 )
(19,100 )
Reinsurance
acceptances
(9,000 )
(6,100 )
(1,700 )
(1,800 )
Total
(210,500 )
(117,490 )
(20,800 )
35
The below is an additional disclosure for Lloyd’s reporting purposes and is included to facilitate the
classification of the above segments into the Lloyd’s aggregate classes of business:
20x1 | Gross premiums written £ 000 | Gross premiums earned £ 000 | Gross claims incurred £ 000 | Gross operating expenses £ 000 | Reinsura nce balance £ 000 | Underwriting result £ 000 |
Additional analysis | ||||||
Fire and damage to property of which is: | ||||||
| Specialties | ( | ( | ||||
| Energy | ( | ( | ||||
Third party liability of which is: | ||||||
| Energy | ( | ( |
No gains or losses were [A gain[/loss] of £X was] recognised in profit or loss during the year on buying
reinsurance (20x1: [nil]).
The gross premiums written for direct insurance by location (where the contracts were concluded) is
presented in the table below:
20x2 £000 | 20x1 £000 | |
| United Kingdom | ||
| European Union Member States | ||
| US | ||
| Rest of the world | ||
Total gross premiums written |
6. Net operating expenses
20x2 £000 | 20x1 £000 | |
| Acquisition costs | ||
| Change in deferred acquisition costs | ( | |
| Administrative expenses | ||
Foreign exchange [long - term business only ] | | |
| Members’ standard personal expenses | ||
| Reinsurance commissions and profit participation | ( | ( |
Net operating expenses |
Total commissions for direct insurance business for the year amounted to:
20x2 £000 | 20x1 £000 | |
| Total commission for direct insurance business | |
36
Administrative expenses include:
20x2 £000 | 20x1 £000 | |
Auditors’ remuneration: | ||
| fees payable to the Syndicate’s auditor for the audit of these financial statements | | |
fees payable to the Syndicate’s auditor and its associates in respect of other services pursuant to legislation | ||
Impairment losses on debtors: | ||
| arising out of direct insurance operations | ||
| arising out of reinsurance operations | ||
Impairment losses on financial instruments: | ||
| arising from instrument measured at amortised cost | ||
| arising from instruments measured as available for sale |
7. Key management personnel compensation
The directors of [the managing agent] received the following aggregate remuneration charged to the
Syndicate:
20x2 £000 | 20x1 £000 | |
| Directors’ emoluments | ||
| Fees |
The active underwriter received the following aggregate remuneration charged to the Syndicate.
The run-off manager received the following aggregate remuneration charged to the Syndicate.
20x2 £000 | 20x1 £000 | |
| Emoluments |
20x2 £000 | 20x1 £000 | |
| Emoluments | |
37
8. Staff numbers and costs
All staff are employed by the managing agent [/The syndicate and managing agent have no employees.
Staff are employed by [Name of service Company]. The average number of persons employed by the
managing agent [/service company], but working for the Syndicate during the year, analysed by
category, was as follows:
| Number of employees (whole number) 20x2 20x1 | ||
| Administration and finance | | |
| Underwriting | | |
| Claims | | |
| Investments | | |
Total | ||
The following amounts were recharged by the managing agency [/service company] to the
Syndicate in respect of payroll costs:
20x2 £000 | 20x1 £000 | |
| Wages and salaries | ||
| Social security costs | ||
| Other pension costs | ||
| Other | ||
Total |
38
9. Investment return
20x2 £000 | 20x1 £000 | |
Interest and similar income | ||
From financial assets designated at fair value through profit or loss | ||
| Interest and similar income | ||
| Dividend income | ||
From financial assets classified as Available for Sale | ||
| Interest and similar income | ||
| Dividend income | ||
From financial assets at amortised cost | ||
| Interest and similar income | ||
| Dividend income | ||
| Interest on cash at bank | ||
Other income from investments | ||
From financial asset s designated at fair value through profit or loss | ||
| Gains on the realisation of investments | ||
| Losses on the realisation of investments | ( | ( |
| Unrealised gains on investments | ||
| Unrealised losses on the investments | ( | |
| Other relevant gains/(losses) | ||
From financial assets at amortised cost | ||
| Gains on the realisation of investments | ||
| Losses on the realisation of investments | ||
| Unrealised gains on investments | ||
| Unrealised losses on the investments | ||
| Other relevant gains/(losses) | ||
Financial liabilities at amortised cost | ||
| Interest expense | ( | ( |
| Other relevant gains | ||
| Other relevant losses | ||
| Investment management expenses | ( | ( |
Total investment return | ||
| Transferred to the technical account from the non-technical account | ||
| Investment return on Funds in Syndicate | ||
| Impairment losses on debtors recognised in administrative expenses | ( | ( |
[An investment return of £x was allocated to the technical account and … syndicate to include basis of
allocation.../The investment return was wholly allocated to the technical account]
39
10. Distribution and open years of account
A [distribution to / collection from] members of [Indicate amount] will be proposed in relation to the
closing year of account (20x0) (20x1: [Indicate amount] [distribution / collection] in relation to the
closing year of account (20w9)).
The table below shows the current reporting year result (total comprehensive income/(loss)) of the years
of account remaining open after the three-year period:
20x2 £000 | 20x1 £000 | |
| 20w1 | | |
| 20w2 | | |
| 20w3 | | |
| 20w4 | | |
| 20w5 | - | - |
| 20w6 | - | - |
| 20w7 | - | - |
| 20w8 | - | - |
| 20w9 | - | - |
| 20x0 | - | - |
11. Financial investments
Carrying value
Cost
20x2
£000
20x1
£000
20x2
£000
20x1
£000
Shares and other variable yield securities and units in unit trusts
Debt securities and other fixed income securities 155,000
Participation in investment pools -
Loans secured by mortgages -
Loans and deposits with credit institutions 85,000
Derivative assets 2,600
Syndicate loans to central fund -
Other investments 18,400
Total financial investments
[The Syndicate has pledged [£000] of financial instruments, primarily debt and other fixed income
securities, as collateral against derivatives used for hedging. The pledged assets … terms and
conditions relating to pledge].
Included in the carrying values above are listed investments as follows:
20x2 £000 | 20x1 £000 | |
| Listed investments | |
40
The table below presents an analysis of financial investments by their measurement classification:
20x2 £000 | 20x1 £000 | |
| Financial assets measured at fair value through profit or loss | | |
| Financial assets measured at fair value as available for sale | | |
| Financial assets measured at amortised cost | ||
Total financial investments |
Included within [category] above are financial instruments with a carrying amount of [X (20x1: Y) which
would otherwise be required to be measured at fair value, but for which a reliable measure of fair value
is no longer available. These instruments are primarily [type of instrument] and a reliable measure of
fair value is not available because […].
The table below analysis the derivative assets and liabilities by type:
20x2 Notional amount £000 | 20x2 Fair value £000 | 20x1 Notional amount £000 | 20x1 Fair value £000 | |
| Foreign exchange forward contracts | ||||
| Interest rate future contracts | ||||
| Foreign exchange future options | ||||
| Equity options | ||||
| Foreign exchange contract for difference | | |||
| Other | ||||
Total |
[Syndicates to disclose for each class of derivatives, the extent and nature of the instruments, including
significant terms and conditions that may affect the amount, timing and certainty of future cash flows.]
As the Syndicate is fully aligned, the Syndicate holds the capital supporting their underwriting in their
Syndicate’s premium trust funds. These funds are known as funds in syndicate (FIS). At 31 December
20x2, the following amount was held as funds in syndicate:
20x2 £000 | 20x1 £000 | |
| Funds in Syndicate (FIS) | ||
Total funds in syndicate |
The Syndicate classifies its financial instruments held at fair value in its balance sheet using a fair value
hierarchy based on the inputs used in the valuation techniques as follows:
Level 1 – financial assets that are measured by reference to published quotes in an active market.
A financial instrument is regarded as quoted in an active market if quoted prices are readily and
regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory
agency and those prices represent actual and regularly occurring market transactions on an arm’s
length basis.
Level 2 – financial assets measured using a valuation technique based on assumptions that are
supported by prices from observable current market transactions. For example, assets for which
pricing is obtained via pricing services but where prices have not been determined in an active
market, financial assets with fair values based on broker quotes, investments in private equity funds
41
with fair values obtained via fund managers and assets that are valued using the Syndicate’s own
models whereby the significant inputs into the assumptions are market observable.
Level 3 – financial assets measured using a valuation technique (model) based on assumptions
that are neither supported by prices from observable current market transactions in the same
instrument nor are they based on available market data. Therefore, unobservable inputs reflect the
Syndicate's own assumptions about the assumptions that market participants would use in pricing
the asset or liability (including assumptions about risk). These inputs are developed based on the
best information available, which might include the Syndicate’s own data.
The table below analyses financial instruments held at fair value in the Syndicate’s balance sheet at
the reporting date by its level in the fair value hierarchy:
20x2 | Level 1 £000 | Level 2 £000 | Level 3 £000 | Assets held at amortised cost | Total £000 |
Shares and other variable yield securities and units in unit trusts | |||||
| Debt securities and other fixed income securities | |||||
| Participation in investment pools | |||||
| Loans secured by mortgages | |||||
| Loans and deposits with credit institutions | |||||
| Derivative assets | |||||
| Syndicate loans to central fund | |||||
| Other investments | |||||
| Total financial investments | |||||
| Derivative liabilities | |||||
| Total |
20x1 | Level 1 £000 | Level 2 £000 | Level 3 £000 | Assets held at amortised cost | Total £000 |
Shares and other variable yield securities and units in unit trusts | |||||
| Debt securities and other fixed income securities | |||||
| Participation in investment pools | |||||
| Loans secured by mortgages | |||||
| Loans and deposits with credit institutions | |||||
| Derivative assets | |||||
| Syndicate loans to central fund | |||||
| Other investments | |||||
| Total financial investments | |||||
| Derivative liabilities | |||||
| Total |
42
Information on the methods and assumptions used to determine fair values for each major category of
financial instrument measured at fair value is provided below.
Equity instruments listed on a recognised exchange are valued using prices sourced from the primary
exchange on which they are listed. Units in unit trusts and OEICs are valued using the latest unit price
or share price provided by the unit trust or OEIC managers. Shares and other variable securities and
units in unit trusts are generally categorised as level 1 in the fair value hierarchy except where they are
not actively traded, in which case they are generally measured at prices of recent transactions in the
same instrument. The Syndicate has no exposure to hedge funds.
Debt securities are generally valued using prices provided by external pricing vendors. Pricing vendors
will often determine prices by consolidating prices of recent trades for identical or similar securities
obtained from a panel of market makers into a composite price. The pricing service may make
adjustments for the elapsed time from a trade date to the valuation date to take into account available
market information. Lacking recently reported trades, pricing vendors will use modelling techniques to
determine a security price.
Some government and supranational securities are listed on recognised exchanges and are generally
classified as level 1 in the fair value hierarchy. Those that are not listed on a recognised exchange are
generally based on composite prices of recent trades in the same instrument and are generally
classified as level 2 in the fair value hierarchy.
Corporate bonds, including asset backed securities, that are not listed on a recognised exchange or
are traded in an established over-the-counter market are also mainly valued using composite prices.
Where prices are based on multiple quotes and those quotes are based on actual recent transactions
in the same instrument the securities are classified as level 2, otherwise they are classified as level 3
in the fair value hierarchy.
The derivative assets and liabilities held at the reporting date comprise over-the-counter US Dollar
forward foreign exchange contracts with a notional amount of [Indicate amount] (20x1: [Indicate
amount]. These derivatives are valued using [observable prices…/valuation techniques….] and are
classified as [level 2/level 3] in the fair value hierarchy.
Management performs an analysis of the prices obtained from pricing vendors to ensure that they are
reasonable and produce a reasonable estimate of fair value. Management considers both qualitative
and quantitative factors as part of this analysis. Examples of analytical procedures performed include
reference to recent transactional activity for similar securities, review of pricing statistics and trends and
consideration of recent relevant market events.
At the reporting date Level 1 and Level 2 financial assets and liabilities were valued using valuation
techniques based on observable market data. All of the investments categorised as Level 3 are fair
valued based on the inputs to the valuation technique used.
[Where valuation techniques are used to determine fair value syndicates are required under FRS
102.11.43 to disclose the assumptions applied in determining fair values of each class of financial
assets or financial liabilities (e.g., if applicable, syndicate discloses information about the assumptions
relating to prepayment rates, rates of estimated credit losses, and interest rates or discount rates)]
[Where fair value of the instruments and other assets has been determined other than by reference to
market value syndicates should provide disclosure of the fair valuation techniques used.]
43
12. Debtors arising out of direct insurance operations
20x2 £000 | 20x1 £000 | |
| Due within one year | | |
| Due after one year | ||
Total |
13. Debtors arising out of reinsurance operations
20x2 £000 | 20x1 £000 | |
| Due within one year | | |
| Due after one year | ||
Total |
14. Other debtors
20x2 £000 | 20x1 £000 | |
| Inter syndicate balances | ||
| Other related party balances (non-syndicate) | | |
| Amounts due from members | ||
| Other | ||
Total |
15. Deferred acquisition costs
The table below shows changes in deferred acquisition costs assets from the beginning of the period
to the end of the period:
20x2
20x1
Gross
£000
Reinsurance
£000
Net
£000
Gross
£000
Reinsurance
£000
Net
£000
Balance at 1 January 27,200
Incurred deferred acquisition
costs
Amortised deferred acquisition
costs
(91,800 )
(91,800 )
(93,330 )
(93,330 )
Foreign exchange movements 100
Other -
Balance at 31 December
44
16. Tangible fixed assets
20x2
20x1
Fixtures
and
fittings
Computer
equipment
Other
Total
Fixtures
and
fittings
Computer
equipment
Other
Total
£000
£000
£000
£000
£000
£000
£000
£000
Cost or valuation
At 1 January -
-
-
-
-
-
-
-
Additions -
-
-
-
-
-
-
-
Disposals -
-
-
-
-
-
-
-
Impairment losses -
-
-
-
-
-
-
-
Foreign exchange -
-
-
-
-
-
-
-
Other movements -
-
-
-
-
-
-
-
At 31 December -
-
-
-
-
-
-
-
Depreciation
At 1 January -
-
-
-
-
-
-
-
Charge for the year -
-
-
-
-
-
-
-
Disposals -
-
-
-
-
-
-
-
Impairment losses -
-
-
-
-
-
-
-
Foreign exchange -
-
-
-
-
-
-
-
Other movements -
-
-
-
-
-
-
-
At 31 December
-
-
-
-
-
-
-
-
Carrying amount at
31 December
-
-
-
-
-
-
-
-
45
17. Claims development
The following tables illustrate the development of the estimates of earned ultimate cumulative claims
incurred, including claims notified and IBNR, for each successive underwriting year, illustrating how
amounts estimated have changed from the first estimates made.
As these tables are on an underwriting year basis, there is an apparent large increase from amounts
reported for the end of the underwriting year to one year later as a large proportion of premiums are
earned in the year of account’s second year of development.
Balances have been translated at exchange rates prevailing at 31 December 20x2 in all cases.
Gross:
Pure underwriting year
20w3
20w4
20w5
20w6
20w7
20w8
20w9
20x0
20x1
20x2
Total
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
Estimate of gross claims
at end of underwriting year
one year later
two years later
three years later
four years later
five years later
six years later
seven years later
eight years later
nine years later
Estimate of gross claims
reserve
Provision in respect of prior
years
Less gross claims paid
(157,000 )
(154,000 )
(165,000 )
(149,000 )
(144,000 )
(119,000 )
(109,000 )
(997,000 )
Gross claims reserve
Net:
Pure underwriting year
20w3
20w4
20w5
20w6
20w7
20w8
20w9
20x0
20x1
20x2
Total
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
£000
Estimate of net claims
at end of underwriting year
one year later
two years later
three years later -
four years later
five years later
six years later
seven years later
eight years later
nine years later
Estimate of net claims
reserves
Provision in respect of prior
years
Less net claims paid
(86,000 )
(96,000 )
(116,000 )
(98,000 )
(65,000 )
(95,000 )
(40,000 )
(596,000 )
Net claims reserve
46
18. Technical provisions
The table below shows changes in the insurance contract liabilities and assets from the beginning of
the period to the end of the period.
20x2
20x1
Gross
provisions
£000
Reinsurance
assets
£000
Net
£000
Gross
provisions
£000
Reinsurance
assets
£000
Net
£000
Claims outstanding
Balance at 1 January 359,300
(108,300 )
(71,800 )
Claims paid during the year (120,000 )
(88,000 )
(147,000 )
(106,000 )
Expected cost of current year
claims
(68,200 )
(77,000 )
Change in estimates of prior year
provisions
Discount unwind -
Foreign exchange movements 1,400
(500 )
(500 )
Other -
Balance at 31 December
(
)
(108,300 )
The unwind of discount has been included within the statement of profit or loss – technical account –
within [indicate which line item – i.e. claims incurred].
20x2
20x1
Gross
provisions
£000
Reinsurance
assets
£000
Net
£000
Gross
provisions
£000
Reinsurance
assets
£000
Net
£000
Unearned premiums
Balance at 1 January 100,600
(13,650 )
(25,500 )
Premiums written during the year 362,500
(87,000 )
(90,000 )
Premiums earned during the year
(337,500 )
(257,500 )
(383,400 )
(281,400 )
Foreign exchange movements (50 )
(50 )
(150 )
Other -
Balance at 31 December
(
)
(
)
20x2
20x1
Gross
provisions
£000
Reinsurance
assets
£000
Net
£000
Gross
provisions
£000
Reinsurance
assets
£000
Net
£000
Long term business provisions
Balance at 1 January -
-
-
-
-
-
Movements in provision -
-
-
-
-
-
Foreign exchange movements -
-
-
-
-
-
Other -
-
-
-
-
-
Balance at 31 December
-
-
-
-
-
-
Refer to Note 4 for the sensitivity analysis performed over the value of insurance liabilities, disclosed in
the accounts, to potential movements in the assumptions applied within the technical provisions.
47
19. Provisions for other risks
20x2
20x1
£000
£000
Balance at 1 January -
-
Additions during the year -
-
Unwind of discount -
-
Amounts utilised -
-
Unused amounts reversed to the profit and loss account -
-
Foreign exchange movements -
-
Other -
-
Balance at 31 December
-
-
[Provide narrative description of the types of provisions included in the above including the information
required by FRS 102.21.14]
20. Discounted claims
Discounting may be applied to claims provisions where there are individual claims with structured
settlements that have annuity-like characteristics, or for books of business with mean term payment
greater than four years from the accounting date.
The claims have been discounted as follows:
| Average discounted rates (%) | Average mean term of liabilities (Years | ) | ||
20x2 | 20x1 | 20x2 | 20x1 | |
Class of business | ||||
| Accident and health | - | - | - | - |
| Motor (third party liability) | ||||
| Motor (other classes) | ||||
| Marine, aviation, and transport | - | - | - | - |
| Fire and other damage to property | - | - | - | - |
| Third party liability | ||||
| Credit and suretyship | - | - | - | - |
| Legal expenses | - | - | - | - |
| Assistance | - | - | - | - |
| Miscellaneous | - | - | - | - |
| Life | - | - | - | - |
The period that will elapse before claims are settled is determined using impaired life mortality tables.
The claims provision before and after discounting are as follows:
Undiscounted claims
Effect of discounting
After discounting
20x2
£000
20x1
£000
20x2
£000
20x1
£000
20x2
£000
20x1
£000
Gross claims provisions 439,810
(12,810 )
(10,779 )
Reinsurers share of total claims (149,350 )
(111,549 )
(145,000 )
(108,300 )
Net claims provisions
(
)
(
)
48
21. Creditors arising out of direct insurance operations
20x2 £000 | 20x1 £000 | |
| Due within one year | ||
| Due after one year | | |
Total |
22. Creditors arising out of reinsurance operations
20x2 £000 | 20x1 £000 | |
| Due within one year | | |
| Due after one year | | |
Total |
23. Other creditors
20x2 £000 | 20x1 £000 | |
| Inter syndicate balances | ||
| Profit commissions payable | ||
| Other related party balances (non-syndicates) | | |
| Derivative liabilities | ||
| Other liabilities | ||
Total |
24. Cash and cash equivalents
20x2 £000 | 20x1 £000 | |
| Cash at bank and in hand | ||
| Short term debt instruments presented within other financial investments | ||
| Deposits with credit institutions | ||
| Bank overdrafts | ( | ( |
Total cash and cash equivalents |
Only deposits with credit institutions with maturities of three months or less that are used by the
Syndicate in the management of its short-term commitments are included in cash and cash equivalents.
[Cash at bank and in hand above excludes £xm, which is presented as cash at bank and in hand
in the balance sheet but relates to amounts held in accounts with more than three-month
maturity from origination.]
49
Included within cash and cash equivalents are the following amounts which are not available for use by
the Syndicate because…[reason – should include regulated bank accounts in overseas
jurisdictions]
20x2 £000 | 20x1 £000 | |
| Cash at bank and in hand | ||
| Short term debt instruments presented within other financial investments | ||
| Deposits with credit institutions | ||
| Bank overdrafts | ||
Total cash and cash equivalents not available for use by the syndicate |
25. Analysis of net debt
At 1 January 20x2 | Cash flows | Acquired | Fair value and exchange movements | Non-cash changes | At 31 December 20x2 | |
| Cash and cash equivalents | | ( | ( | |||
| Derivative financial liabilities | | |||||
| Other | ||||||
Total | ( ) | ( ) |
26. Related parties
[Syndicate to provide details of related party disclosures – For reference: The Insurance Accounts
Directive (Lloyd's Syndicate and Aggregate Accounts) Regulations 2008 states that the information
required by paragraph 90 of Schedule 3 of the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 must be given by the managing agent relating to any
transactions entered into by the managing agent on behalf of the syndicate and must in addition identify
any related party who is an insurance or reinsurance intermediary together with particulars of the
amount of any material transactions with these related parties if they are concluded otherwise than
under normal market conditions. Where there are no transactions with related insurance or reinsurance
intermediaries requiring disclosure under paragraph 90 this fact should be disclosed.
Material transactions with the managing agent (and related undertakings of the managing agent),
including any profit commission and other fees payable; with syndicate participants (and related
undertakings of syndicate participants) including reinsurance arrangements; loans and other
transactions with directors and other key management personnel of the managing agent; and any
relationships with other Lloyd’s of London Market groups where the NED has more than one
appointment should be disclosed. The disclosures shall include the amount of the transactions and any
outstanding balances including the terms of conditions for their repayment.]
These disclosure requirements are in addition to the requirement to disclose key management
personnel compensation. This disclosure is given in note [xx].
50
27. Off-balance sheet items
[Unless the possibility of any outflow of resources is remote, if the syndicate has been party to
arrangements that are not reflected in its balance sheet, and at the balance sheet date the risks or
benefits arising from those arrangements are material, then the syndicate must disclose the nature and
business purpose of the arrangements and the financial impact of the arrangements on the syndicate.
The information should be given to the extent necessary for enabling the financial position of the
syndicate to be assessed.]
28. Post balance sheet events
The amounts that are proposed to be transferred to members are disclosed in note [xx]. [Disclose the
nature and estimated financial effect of any non-adjusting post-balance sheet events]
29. Contingencies and commitments
[Syndicate to disclose any contingencies and commitments]
30. Foreign exchange rates
The following currency exchange rates have been used for principal foreign currency transactions
(reported to 2dp):
20x2
20x1
Start of
period rate
End of
period
rate
Average
rate
Start of
period rate
End of
period
rate
Average
rate
Sterling 1.00
Euro 1.11
US dollar 1.27
Canadian dollar 1.74
Australian dollar -
Japanese Yen -
31. Funds at Lloyd’s
Every member is required to hold capital at Lloyd’s which is held in trust and known as Funds at Lloyd’s
(‘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 Prudential Regulatory Authority requirements
and resource criteria. The determination of FAL has regard to a number of factors including the nature
and amount of risk to be underwritten by the member and the assessment of the reserving risk in respect
of business that has been underwritten. Since FAL is not under the management of the Managing
Agent, no amount has been shown in these Financial Statements by way of such capital resources.
However, the Managing Agent is able to make a call on the Member’s FAL to meet liquidity requirements
or to settle losses.
51
Appendix:
Disclosure notes and accounting reference
Disclosure notes
Accounting reference
Table
Collect at Interim
Interim reporting
period (Current)
Interim reporting
period (Prior)
Managing Agent’s report LR Sch1 8(1)(b)
LR Sch1 9(1)
LR Sch1 9(2)(b), LR
Sch1 10
LR Sch1 8(2)(b)
LR Sch1 8(1)(a)
LR Sch1 11
N/A Yes
Six months ending
30 June 20x2
N/A
Statement of Managing Agent’s
responsibilities
N/A Yes
Six months ending
30 June 20x2
N/A
Auditor’s report LR Sch1 12(1) N/A Yes (review report)
Six months ending
30 June
20
x2
N/A
Statement of profit or loss – technical account
LR Sch1 1(2)(b)
Sch3 P&L format
FRS 102.3.17
FRS 102.5.7E
FRS 104.8A
FRS 104.20(b)
Statement Yes
Six months ending
30 June 20x2
Six months ending
30 June 20x1
Statement of profit or loss – Non-technical
account
LR Sch1 1(2)(b)
Sch3 P&L format
FRS 102.3.17
FRS 102.5.7E
FRS 103.2.32
FRS 104.8A
FRS 104.20(b)
Statement Yes
Six months ending
30 June 20x2
Six months ending
30 June 20x1
Statement of OCI FRS 102.3.17
FRS 102.3.19
FRS 104.8A
FRS 104.20(b)
Statement Yes
Six months ending
30 June 20x2
Six months ending
30 June 20x1
Balance sheet LR Sch1 1(2)(a)
Sch3 BS Format
FRS 104.20(a)
Statement Yes
As at 30 June 20x2
As at
31 December 20x1
52
Disclosure notes
Accounting reference
Table
Collect at Interim
Interim reporting
period (Current)
Interim reporting
period (Prior)
Statement of changes in members’ balances Best practice Statement Yes
Six months ending
30 June
20
x2
Six months ending
30 June
20
x1
Statement of cash flows FRS 102.7.1
FRS 104.8(d)
Statement Yes
Six months ending
30 June 20x2
Six months ending
30 June 20x1
Note 1 – Basis of preparation FRS 102.3.24(a), LR
5(3)(b), FRS 102.3.3,
FRS 102.8.5(a), FRS
102.3.23 (d),(e) FRS
104.19
None Yes
Six months ending
30 June 20x2
N/A
Note 2 – Use of judgements and estimates FRS 102.8.6,7, IG2.10
FRS 104.16A(d)
FRS 104.41
None Yes
Six months ending
30 June 20x2
As at 31 December
20x1
Note 3 – Significant accounting policies FRS 102.8.5(b)
FRS 104.16A(a)
None Yes
Six months ending
30 June 20x2
As at 31 December
20x1
Note 4 – Risk and capital management
FRS 102.34.21
FRS 102.34.23
FRS 102.34.24
FRS 102.34.25
FRS 102.34.26(a)
FRS 102.34.24
FRS 102.34.28
FRS 102.34.24
FRS 102.34.29
FRS 102.34.31
MB Y4856
General insurance
business sensitivities
No
-
-
Exposure to credit risk by
rating
No
-
-
Financial assets that are
past due or impaired
No
-
-
Movement in impairment
allowance
No
-
-
Aged analysis of past due
but not impaired assets
No
-
-
Analysis of liabilities by
duration
No
-
-
Analysis of balance sheet
by currency
No
-
-
Sensitivities to market
risks
No
-
-
53
Disclosure notes
Accounting reference
Table
Collect at Interim
Interim reporting
period (Current)
Interim reporting
period (Prior)
Note 5 – Analysis of underwriting result Sch3 85
Sch3 87 (1)
FRS 102.1.5
FRS 103 4.5
Analysis of result by
segment
Yes
Six months ending
30 June 20x2
Six months ending
30 June 20x1
Geographical split of
premiums by origination
No -
-
Note 6 – Net operating expenses FRS 103.4.6
Sch 3 88
LR Sch 2
Net operating expenses
by type
Yes
Six months ending
30 June 20x2
Six months ending
30 June 20x1
Direct commission No -
-
Auditors remuneration No -
-
Note 7 – Key management personnel
compensation
LR Sch1 5
FRS 102.33.6
Directors emoluments No -
-
Active underwriter
emoluments
No
-
-
Run off manager
emoluments
No
-
-
Note 8 – Staff numbers and costs LR Sch1 4
S.411(1)
S.411(5)
Staff numbers by type No -
-
Staff costs by type No
-
-
Note 9 – Investment return Sch 3 P&L format
FRS 102.11.48 (a)
FRS 102.11.48 (b)
FRS 102.11.48 (c)
Investment return No -
-
Note
10
–
Distribution and open years
Required by Lloyd‘s Distribution on open years
No -
-
Note 11 – Financial investments Sch3 BS
Sch3 73
Sch3 72
FRS 102.11.41
FRS 102.11.27
FRS 102.34.22
FRS 102.11.43
Sch3 73(2)(c)
FIS - required by Lloyds
Investment by asset type Yes
As at
30 June
20x2
As at
31 December
20x1
Investments by
measurement
classification
No -
-
Derivatives by type No -
-
Funds in syndicate table Yes
As at
30 June
20x2
As at
31 December
20x1
Asset by FV hierarchy
classification
No
-
-
54
Disclosure notes
Accounting reference
Table
Collect at Interim
Interim reporting
period (Current)
Interim reporting
period (Prior)
Note 12 – Debtors arising out of direct
insurance operations
FRS 102.4.4A
Split by one year, > one
year
No
-
-
Note 13 – Debtors arising out of reinsurance
operations
FRS 102.4.4A Split by one year, > one
year
No
-
-
Note 14 – Other debtors Required by Lloyds Analysis of other debtors Yes
As at
30 June
20x2
As at
31 December
20x1
Note
15
–
DAC
FRS 103.4.5(d) Movement analysis No -
-
Note
16
–
Tangible fixed assets
FRS 102.17.31(e) Movement in fixed asset No -
-
Note 17 – Claims development FRS 103.4.8(b)(iii) Development triangle –
Gross
No
-
-
Development triangle –
Net
No
-
-
Note 18 – Technical provisions FRS 103.4.5(d) Claims movement
analysis
No
-
-
UPR movement analysis No -
-
Long term business
provision movement
analysis
No
-
-
Note 19 – Provisions for other risks FRS 102.21.14 Provisions movement
analysis
No
-
-
Note 20 – Discounted claims FRS 103.4.5(b)
Discount rates and mean
terms
No
-
-
Discounted claims values No -
-
Note 21 – Creditors arising out of direct
insurance
operations
FRS 102.4.4.7
Split by one year, > one
year
No
-
-
Note 22 – Creditors arising out of reinsurance
operations
FRS 102.4.4.7
Split by one year, > one
year
No
-
-
Note 23 – Other creditors Required by Lloyd’s Other creditors by type Yes
As at
30 June
20x2
As at
31 December
20x1
Note 24 – Cash and cash equivalents FRS 102.7.20 Analysis by type Yes
As at
30 June
20x2
As at
31 December
20x1
55
Disclosure notes
Accounting reference
Table
Collect at Interim
Interim reporting
period (Current)
Interim reporting
period (Prior)
FRS 102.7.21
Cash not available for use
Yes
-
-
Note 25 – Analysis of net debt FRS 102.7.22 Analysis of net debt
movement
No
-
-
Note 26 – Related parties LR Sch1 1(5), (6)
FRS 102.33.1
FRS 104.15B
None Yes
Six months ending
30 June 20x2
As at 31 December
20x1
Note 27 – Off-balance sheet items LR Sch1 7
FRS 102.21.15
None No
-
-
Note 28 – Post balance sheet events FRS 102.32.10
FRS 104.16A(h)
None Yes
-
-
Note
29
–
Contingencies and commitments
FRS 102.21.15 None No -
-
Note 30 – Foreign exchange rates Required by Lloyd’s Summary of currency
rates used
Yes
Start of period:
1 Jan 20x2
End of period:
30 Jun 20x2
Average: Six months
ending 30 June
20x2
Start of period:
1 Jan 20x1
End of period:
30 Jun 20x1
Average: Six months
ending 30 June
20x1
Note
31
–
FAL
Best practice None No -
-
56
Supplementary Information: Change Log
Version Note Section Change Change Implemented Rationale
V3.1
Statement of managing
agent’s responsibilities
Update Updated to include illustrative wording and signing requirement
Updated per Q2
2025 FAQ – A5, B1
V3.1 Appendix Update
Note 24 updated to reflect the requirement to report cash not available for
use at interim in addition to annual reporting periods
Updated to meet
requirements set out
in FRS 102 7.21 in
the interim accounts
V3.1 Appendix Update Note 24 updated to reflect the comparative period as 31 December 20X1
Updated per Q2
2025 FAQ – A1
V3.1
1. Basis of
preparation
- Update Wording updated to refer to Instructions and FAQ
Updated per Q2
2025 FAQs – A3
V3.1 Appendix Update
Note 3 accounting reference has been updated to correctly reference FRS
104.16A(a).
Updated per Q2
2025 FAQs – A4
V3.1 Cash flow statement Update
Presentational amendments to correctly display brackets for
(increase)/decrease in relation to debtors and reinsurers’ share of gross
technical provisions
Updated to correct
presentation in
illustrative accounts
V3.1 Note 5
Analysis of underwriting
result
Update
Illustrative figures updated to be more reflective of the split historically
reported by the market based on location where contract is concluded
Update to improve
guidance
V3.1 Note 11 Financial investments Update
Disclosure of current and comparative figures for listed investments
included within financial investments has been moved from narrative to a
table to support the requirement for this figure to be tagged under the
latest taxonomy.
Updated to align
with new taxonomy
