LLM2200 - Syndicate accounts: format of three year accounts up to 2004
The underwriting year accounts prepared under three year
accounting are essentially the technical account of the annual
venture. There was one underwriting year account included in the
Accounts for each syndicate year open during the accounts year. The
balance on each underwriting account is taken to the corresponding
year of account balance on the balance sheet. The underwriting
account for the third year formed the basis of the taxable profit
of the syndicate (third and later years for syndicates in run-off).
The underwriting account shows syndicate allocated capacity,
which is a figure, expressed in sterling, which represents the
maximum premium income the syndicate is permitted to receive. In
fact it can receive premium income above this figure, provided that
some of the liabilities are reinsured, so that the net premium
income does not exceed the capacity.
The next entry is the actual premium income received, both
gross and net of reinsurance premiums paid. Other items are gross
and net claims paid, expenses, investment income and, in the third
or later year of a syndicate, either a Reinsurance to Close, or an
estimate of future liabilities.
The accounts of a syndicate contained three of these
underwriting accounts, showing the development (for example) of the
1998 year in year 3, the 1999 year in year two, and the 2000 year
in year one, in each case with the previous year's figures shown
for comparative purposes.
| 1998 YOA |
1997 YOA |
|||
| £’000 | At 24
months | Change in
cal. year | At 36
months | At 36
months |
| Syndicate allocated
capacity | 310,257 | 310,257 | 311,297 | |
| Gross premiums
written (net of brokerage) | 118,512 | 5,602 | 124,114 | 209,862 |
| Outward reinsurance premiums | (17,881) | (657) | (18,538) | (21,331) |
| Net premiums | 100,631 | 4,945 | 105,576 | 188,531 |
| RITC received from
earlier years of account | 107,058 | (575) | 106,483 | 95,367 |
| Gross claims paid | 43,847 | 36,338 | 80,185 | 95,182 |
| Reinsurers' share | (6,448) | (2,616) | (9,064) | (4,913) |
| Net claims | 37,399 | 33,722 | 71,121 | 90,269 |
| RITC paid to close the
account | 115,875 | 115,875 | 107,058 | |
| Profit/(loss) on
exchange | (9) | (160) | (169) | 1,075 |
| Syndicate operating
expenses | (5,340) | (3,090) | (8,430) | (11,595) |
| Balance on technical
account | 164,941 | (148,477) | 16,464 | 76,051 |
| Investment income | 4,563 | 8,961 | 13,524 | 17,581 |
| Profit for the closed
year of account | 169,504 | (139,516) | 29,988 | 93,632 |
There is only one balance sheet for all syndicate years
included in the accounts. The assets and liabilities shown on the
balance sheet therefore represent the combined value of the PTF
assets held by the managing agent for this syndicate. This reflects
the fact that the managing agent generally pools the assets of all
open years of the syndicate and then apportions investment income
to years of account based on a conventional method (see
LLM2210 for the Riesco formula). An
exception to the rule that assets and liabilities are pooled is
that a separate calculation of each year of account balance is
shown on the balance sheet. If a year of account is in profit, the
profit balance will be shown as a liability, representing the
managing agent’s prospective obligation to distribute the
profits to syndicate members. If the year of account is
loss-making, the balance will usually be shown as a negative
liability rather than as an asset.
|
31/12/00 |
31/12/99 |
|
| Assets | £'000 | £'000 |
| Financial investments | 238,173 | 272,814 |
| Debtors | 23,931 | 22,731 |
| Other assets | ||
| Cash at bank and in hand | 85,544 | 83,206 |
| Overseas deposits | 71,793 | 68,300 |
| Total assets | 419,441 | 447,051 |
| Liabilities | ||
| Balance on 1998(1997)
closed year of account |
13,794 |
61,797 |
| Balances on open YOAs | ||
| 2000(1999) YOA | 23,552 | 31,011 |
| 1999(1998) YOA | 360,558 | 301,962 |
| Creditors | 21,537 | 52,281 |
| Total Liabilities | 419,441 | 447,051 |
The accounts include a number of reports and notes
- Underwriter’s report: reviews the type of business written in each year and the results or forecast results, gives some analysis of the reinsurance arrangements, and may comment on the basis of valuation of liabilities for Reinsurance to Close (RITC) premiums or Estimated Future Liabilities (EFL) purposes.
- managing agent’s report: gives factual information about the managing agent and syndicate capacity and results.
- investment manager’s report.
- a seven-year summary of syndicate results.
- a disclosure of related party transactions.
- an analysis of the RITC or EFL distinguishing between outstandings, IBNR and the claims handling reserve.
- an analysis of profit and amounts available for distribution by currency.
- the balance on the Technical Account showing the profit or loss on the year of account which has just closed, and also the profit or loss on business reinsured into the account.
