Subject: Disclosures Auction Season 2014
Syndicate(s) Affected: s.5820
This statement has been prepared by ANV Syndicates Limited (ASL) for the purpose of disclosing to existing and prospective underwriting members of Syndicate 5820 (the Syndicate) information which may be of relevance to such members in considering their participation for the 2015 year of account (YOA).
Members are also referred to the Business Plan Narrative for the 2015 YOA, other SBF documents, and the Syndicate’s latest financial statements and quarterly returns, all of which have either been provided or are available to members (or their representatives as appropriate), and which include information on various changes affecting ASL and/or the Syndicate which have taken place since the end of 2013.
Consumer Products changes
In August 2014, ASL informed the Syndicate's capital providers that a number of underwriters in its Consumer Products team, including the Active Underwriter, Christopher Biles, would be leaving the company to pursue other opportunities. The departing underwriters are serving their notice periods in order to ensure effective servicing of the account and an orderly handover of their responsibilities as they exit the business between late October 2014 and late January 2015.
Since this initial news was communicated, there have been a number of further developments, all of which have been shared with capital providers:
- Appointment of Gerard van Loon (ASL's Director of Underwriting) as Active Underwriter of Syndicate 5820
- Recruitment of a number of market-leading Consumer Products underwriters, including Sanjay Vara (joined 8 September 2014 as interim Head of Consumer Products)
- Philip Pearce, one of the Syndicate's largest producers of new business since 2012, remains part of the Syndicate’s Consumer Products team
- Revision of 2015 business plan in light of these developments, for inclusion in the Syndicate Business Forecast (SBF) submitted on 16 September 2014.
Consumer Products is a core line of business for the whole ANV Group, including its Lloyd’s operations. ANV is committed to continued investment in leading talent and resources to preserve and build on the value in its existing portfolio, which is the largest of its kind at Lloyd’s.
These developments allow ASL to accelerate the portfolio optimisation programme begun earlier in 2014 and thus establish the Syndicate’s Consumer Products business on a stronger footing for long-term value creation. ASL believes that it is in a strong position to retain those elements of the Syndicate's 2014 Consumer Products portfolio it would wish to retain, and that new business opportunities will to an extent offset non-renewed premium. However, the revised SBF does assume that a meaningful proportion of the portfolio will not be renewed for the 2015 YOA.
Property split stamp
For the 2014 YOA, the Property teams of ANV Syndicates 1861 and 5820 have operated independently of one another in pursuing their respective SBFs. With effect from the 2015 YOA, the Syndicates’ teams and capacity will be combined, with business bound on a 50:50 split stamp basis between the two Syndicates. This consolidation is expected to produce considerable efficiencies in terms of reinsurance spend and exposure management costs, with no reduction in the Syndicate’s premium income relative to the 2014 YOA.
Syndicate capacity & capital
The 2015 SBF submitted to Lloyd’s on 16 September 2014 is based on stamp capacity for the 2015 YOA remaining flat at £131 million. This leaves significant headroom relative to 2015 SBF stamp premium, in order to accommodate a greater volume of income than that assumed in the SBF should the opportunity arise and subject to agreement with Lloyd’s. The capital implications of this approach are not expected to be significant.
In May 2014 capital providers were informed that Peter Haynes would be stepping down as Managing Director of ASL to pursue a portfolio career of non-executive directorships, and that a permanent replacement for him would be announced in due course. As the notice periods for some preferred candidates for this role are up to twelve months, the ASL Board has subsequently decided to appoint R. Matthew Fairfield to the interim role of CEO of ASL, in addition to his responsibilities as ANV Group CEO. This change is effective 1 October 2014, subject to regulatory approval.
The following items, which are consistent with disclosures made in respect of the 2014 YOA, remain applicable for the 2015 YOA, and as such are provided for the sake of completeness.
The Syndicate’s 2010 & prior and 2011 YOAs did not close within the usual Lloyd’s reinsurance to close (RITC) cycle and remain open. However, ASL is confident that both YOAs will be in a position to be closed simultaneously with the RITC of the 2012 YOA as at 31st December 2014, and is engaging positively with certain capital providers to those YOAs (see below) to that end.
Agreement with certain capital providers in respect of 2010 & prior and 2011 YOAs
Certain capital providers have rights in respect of the RITC of the Syndicate’s 2010 & prior and 2011 YOAs which differ from the position under the standard Managing Agency Agreement. Specifically, they have the power to accept or decline any RITC quotation or proposal for these YOAs.
Variation to Managing Agent’s Agreement
Under the Managing Agent’s Agreement (General) and the Deed of Variation thereto, all new members who participate on the Syndicate in a “freehold capacity” effective YOA 2013 onward (and any new members acquiring capacity in the auctions or otherwise) are subject to specific terms in respect of:
- the conduct of ASL and its Related Persons as defined (allowing Related Persons of ASL, or another syndicate managed by ASL, to accept underwriting business from the same source, and of the same classes of business, as are underwritten by the Syndicate;);
- the existence of differences in commercial terms between members; and
- the opportunity to participate in future special purpose syndicates (including provisions which mean that a member’s allocation of capacity for a succeeding YOA may be all or in part determined by the capacity taken up by the member on the special purpose syndicate which may in the future be set up to reinsure the syndicate).
Additional fee and expenses policies are as follows:
- annual fees (0.75% of the member’s capacity for each YOA);
- profit commissions (17.5% of the member’s profit for each YOA);
- capacity fees (1% of the member’s capacity for each YOA up to and including the 2017 YOA; this is in addition to the syndicate’s annual fee and profit commission and is subject to a limit where the syndicate allocated capacity exceeds £250m);
- syndicate expenses (provision for charging the Syndicate for costs incurred in the acquisition of new business for the Syndicate, including through the acquisition of shares or assets).
Commercial terms differ between members participating on a limited tenancy basis and other members of the Syndicate. Members’ agents are familiar with these terms in full, and a summary version of them is available to all current and prospective members.
Syndicate allocated capacity
Lloyd’s has currently granted permission to ASL to increase the syndicate allocated capacity for the Syndicate for a succeeding YOA without complying with the requirements of paragraph 6 of the Syndicate Pre-Emption Byelaw, under which managing agents are obliged to seek the consent of members for pre-emptions exceeding 7.5% of current capacity.
Related parties transactions
ASL remains subject to a variation to its regulatory permission under which gross net premiums produced to an ASL Syndicate by subsidiaries of Ryan Specialty Group, LLC in a given YOA may not exceed 20% of that Syndicate’s stamp capacity in that YOA. ASL does not expect this restriction to affect its ability to deliver its Syndicates’ 2015 SBFs in any way.
Date issued: 26 September 2014
Agency contact name: Jamie Ingham Clark
Agency contact no: + 44 (0) 20 7280 6290
For auction office use only: D2014008
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