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Argenta Private Capital Limited Lloyd’s Syndicate Profiles – 2015

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Argenta Private Capital Limited Lloyd’s Syndicate Profiles – 2015

1

Lloyd’s Syndicate Profiles September 2015

Contents

Argenta Private Capital Limited

Introduction and Changes to Ratings 3

Explanatory Notes 6

Syndicate Profiles 21

Managing Agent Profiles 147

Appendix A – Forecast Results 2013 Account Forecast Results 174 2014 Account Forecast Results 175 2015 / 2016 Account and Long Term Average (LTA) Forecast Results 176

Appendix B – Financial Ratios

Syndicate Fees and Profit Commission Terms 179 Average Funds as percentage of Capacity 181 IBNR percentage of Net Outstanding Claims 182 RITC In as percentage of Capacity 183 Reinsurance Premiums as percentage of Gross Premium 184 Underwriting Account Results as percentage of Capacity 185 Pure Year Underwriting Result as percentage of Capacity 186 Prior Year Underwriting Result as percentage of Capacity 187 Operating Expenses as percentage of Capacity 188 Average Auction Prices 189 2014 Auction Prices and Volumes 190 Gross Premium Utilisation 191 LTA and Earnings Ratio 192 Capital Ratios 193

Appendix C – Business Forecast Ratios

Split of Account by Category of Business 195 Source of Business as percentage of Gross Income 196 Geographic Split as percentage of Gross Income 197 Gross Realistic Disaster Scenarios 198 Net Realistic Disaster Scenarios 199

Appendix D – Class of Business Description 200

Appendix E – Glossary of Terms 202

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Introduction and Changes to Ratings

This section summarises Argenta’s ratings for syndicates available to third party capital. An explanation of these ratings is shown on pages 11 to 13. The Rating Changes section details any changes to our ratings from last year.

Syndicates included in this book

95 syndicates traded in 2015 with 32 of these supported by third party capital members. Of the syndicates open to third party capital, three (1729, 2014 and 4242) are on a Limited Tenancy Capacity (LTC) basis and six (6103, 6104, 6105, 6107, 6111 and 6117) are Special Purpose Syndicates (SPS). Syndicates 4242 and 6117 are not currently available to APCL members. The remaining 30 syndicates are covered in this profile book.

Ratings Summary

Syndicate Qua

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33 A M 7 8 6 5 2 2 218 C M 2 9 10 7 8 5 308 C+ LM 5 7 10 9 5 2 318 B MH 3 7 2 8 6 5 386 B+ MH 8 7 10 1 2 3 510 B+ M 6 8 6 7 4 5 557 B VH 8 1 1 7 9 8 609 A M 7 8 7 5 3 2 623 A MH 7 8 2 4 2 2 727 B MH 7 7 5 2 3 2 779 C M 1 7 10 6 7 5 1176 B+ VH 10 6 9 4 1 1 1200 C+ MH 2 7 4 6 6 4 1729 C H 2 8 7 3 10 2 1884 C MH 2 8 8 8 10 8 1969 C+ MH 3 8 3 7 5 3 1991 C H 3 7 5 4 9 10 2010 A MH 6 7 3 6 3 2 2014 C MH 2 8 4 5 10 10 2121 B MH 3 8 5 7 7 4 2525 B MH 7 7 10 1 2 2 2526 D H 1 7 10 1 1 1 2791 A MH 8 7 4 4 3 2 4020 B+ M 5 9 7 5 10 1 4444 B M 3 8 3 3 6 4 5820 D H 1 9 7 6 9 8 6103 B+ VH 10 1 1 10 10 2 6104 B+ VH 9 4 1 9 10 2 6107 B VH 10 1 1 9 10 4 6111 B+ M 5 8 5 5 10 1

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Rating Changes

Quality Rating Rating Outlook Risk Rating

Syndicate 2014/15 2015/16 2014/15 2015/16 2014/15 2015/16 33 A A Stable Stable M M

218 C C Watch Watch M M 308 B C+ Watch Stable LM LM 318 C+ B Stable Stable MH MH 386 B+ B+ Watch Watch MH MH 510 B+ B+ Stable Stable M M 557 B B Stable Watch VH VH 609 A A Stable Stable M M 623 A A Stable Stable MH MH 727 B B Stable Stable MH MH 779 D C Watch Watch MH M

1176 B+ B+ Stable Stable VH VH 1200 C C+ Stable Stable MH MH 1729 C C Positive Positive H H 1884 C C Positive Positive MH MH 1969 C+ C+ Positive Positive MH MH 1991 C C Positive Positive H H 2010 A A Stable Stable MH MH 2014 C C Watch Watch MH MH 2121 B B Stable Stable MH MH 2525 C+ B Stable Stable MH MH 2526 D D Watch Watch H H 2791 A A Stable Stable MH MH 4020 B+ B+ Stable Stable MH M 4444 C B Positive Positive MH M 5820 D D Watch Watch H H 6103 B+ B+ Stable Stable VH VH 6104 B+ B+ Stable Stable VH VH 6107 B B Stable Stable VH VH 6111 B+ B+ Stable Stable M M

Any changes to Quality, Risk or Outlook are highlighted in the table above. Note that the 2014/15 ratings for syndicates 4020 and 4444 and those for syndicates 6105 and 958 respectively. Explanation of the rationale for any changes is included within each syndicate’s profile. Syndicates not recommended for support for 2016

We do not currently recommend that members support the following syndicates for 2016. This list is under continuous review:

Syndicate Underwriter Managing Agency 779 Garner ANV

2014 Indge Pembroke 2526 Sibthorpe Asta 5820 Whitmee ANV

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Syndicates ceasing at 31 December 2015

Syndicate Underwriter Managing Agent Reason

958 Gargrave Canopius Business being transferred to Syndicate 4444

6105 ARK SPS ARK Participation will be offered on host Syndicate 4020

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Explanatory Notes

Sample – Syndicate Profile Page One

See Note 1

See Note 3

See Note 2

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Sample – Syndicate Profile Page Two

See Note 4

See Note 14

See Note 18

See Note 5

See Note 13

See Note 15

See Note 12

See Note 6

See Note 10

See Note 7

See Note 16

See Note 17

See Note 8See Note 9

See Note 11

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Sample – Syndicate Profile Page Three

See Note 19

See Note 20

See Note 21

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Sample – Syndicate Profile Page Four

See Note 22

See Note 26

See Note 28

See Note 24

See Note 23

See Note 25

See Note 27

2010 2011 2012 2013 2014Aviation 54.6 - 72.1 - -Casualty 127.1 88.6 64.3 85.1 97.8Energy 65.9 103.6 64.9 92.9 82.0Life - - - - -Marine 103.9 81.9 109.8 77.8 89.6Motor - - - - -Property 64.4 54.2 88.2 74.2 81.4Reinsurance 90.7 123.8 65.9 63.3 49.4Whole Account 89.5 92.5 75.8 75.2 76.4

Gross Net Gross Net Two Events 88% 18% 88% 18% Information not supplied 0.0% US Terrorism - Rockefeller Center 44% 17% 44% 17% Gulf of Mexico Windstorm 57% 11% 57% 11% Vancouver Earthquake 39% 11% California Earthquake - Los Angeles 47% 10% 47% 10% North East Windstorm 47% 9% 47% 9% Florida Windstorm - Miami Dade 41% 9% 41% 9%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 95.9 105.4 70.0 68.5 72.3Reinsurance Premium % Gross Premiums 32.4 39.7 36.9 41.1 38.5Pure Year Underwriting Result % Capacity 38.0 53.1 19.2 22.5 34.1Prior Years Underwriting Result % Capacity 0.3 11.2 7.6 5.6 5.9RITC received % Capacity 104.1 97.2 66.2 70.3 60.7IBNR % Net Outstanding Claims 61.1 62.1 60.2 80.7 99.4Operating Expenses % Capacity 6.9 10.6 0.0 4.6 6.9

Combined Ratio by Class of BusinessClass of Business Split

1.4%3.2%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

4.5%2.1%

46.3%

3.8%38.8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 20 40 60 80 100

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

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Sample – Managing Agency Profile

See Note 29

See Note 30

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The following notes refer to the numbered specimen profiles on pages 6 to 10 and help to explain various aspects of the information contained in the profiles.

Syndicate Profiles

1 Argenta Assessment

The Assessment contains a distillation of APCL’s current views, as elaborated upon in the Strengths/Opportunities and Weaknesses/Challenges analysis that follows. This will include any changes in our recommendation for the syndicate. It is emphasised that developments may cause us to revise our assessment at any time after the publication of these Profiles.

2 Strengths / Opportunities

We identify the characteristics that, in our view, give the syndicate competitive advantage and represent the major reasons for supporting it.

3 Weaknesses / Challenges

We identify what we believe to be structural weaknesses and potential threats to the syndicate. Not all perceived weaknesses will carry the same weight, nor will certain weaknesses render the syndicate unsupportable; they are an element in the process of arriving at the overall assessment.

4 Rating (outlook)

To supplement our overall recommendations, a number of ratings are included per syndicate.

The ratings, which range from D (worst), through C, C+, B, B+, A to A+ (best), are largely objective, based on certain key statistical ratios which are combined to give an overall rating for each syndicate. They are designed to respond to current changes in syndicates' operations, including the impact of mergers, pre-emptions and de-emptions. Ratings can and will therefore change, although experience in recent years suggests that few syndicates will move significantly over the year. We consider the following factors to be of major importance in the successful running of a syndicate:

Performance

Prudence of reserves

The potential volatility of underwriting returns

The security behind the reinsurance programme

The level of delegated authority given by a syndicate to third parties

The efficiency and strength of the managing agency

Additionally, the rating includes a degree of subjectivity which reflects those factors that cannot easily be quantified (e.g. the strength and depth of the management and underwriting team and the alignment of interest between underwriters and supporting capital).

In addition, we have included a rating outlook to indicate the direction in which we expect the rating to move in the future. A “Positive” outlook indicates that we expect the rating to improve, a “Stable” outlook indicates that we expect the rating to remain the same. A “Watch” rating is assigned where there is uncertainty about the syndicate and/or its management such that the direction of any rating movement is uncertain.

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5 Risk Rating

The Risk Rating represents APCL’s view of each syndicate’s trading and management risk. “Risk” may be defined, in this context, as the likelihood of the syndicate suffering a large, above average, loss as assessed by reference to a number of quantitative and qualitative criteria as follows:

The Syndicate Capital Requirements produced by Lloyd’s (reflecting the volatility of the business written)

The volatility of past results

Exposure to catastrophic loss (as determined by syndicates’ Realistic Disaster Scenarios)

The exposure to reinsurance failure

The quality of the managing agent

The Risk Rating is not a measure of potential profitability. Nor does the fact that a syndicate has a lower rating mean that it will not suffer a large loss. Rather, that based on a number of objective tests, followed by a subjective assessment, it is thought less likely to suffer an abnormally large loss. Insurance is inherently a high risk business and therefore the emphasis of this analysis is relative risk. The ratings used are as follows:

Lower L

Lower to Medium LM

Medium M

Medium to Higher MH

Higher H

Very High

VH

6 Return Rating

This rates syndicates based on their expected return on capacity. It uses APCL’s Long Term Average (LTA) Return. These are then scored between 1 to 10, with a score of 1 representing the lowest returns on capacity and 10 the highest. Further details of the LTAs are contained in Appendix A.

7 Capital Rating

This rates syndicates based on their marginal capital requirement, being the amount of additional capital that would be required to add additional capacity on a syndicate to a portfolio. It assumes a member underwrites a £1,000,000 portfolio with the same allocation split as the Third Party market and uses the additional capital required for adding a further £25,000 line on a given syndicate. These are then scored between 1 to 10, with 1 representing the highest marginal capital requirements and 10 the lowest. Further details of the Capital Ratios are shown in Appendix B.

8 Catastrophe Rating

This rates syndicates based on their expected exposure to a 1 in 30 year catastrophe. It uses the average of syndicates’ 1 in 30 year Aggregate Exceedance Probability (AEP) figures from their 2016 SBFs as a percentage of syndicate capacity. These are then scored between 1 to 10, with 1 representing the highest exposure, and 10 the lowest. These 1 in 30 AEP figures are shown in Appendix C alongside the Gross and Net Realistic Disaster Scenarios information.

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9 Tail Rating

This rates the length and amount of a syndicates “tail”. It uses both the level of claims paid at the end of 36 months as a percentage of ultimate claims and the level of a syndicate’s reinsurance to close as a percentage of net premiums. These are then scored between 1 to 10, with 1 representing the longest tail and 10 the shortest.

10 Cost Rating

This rates the cost of purchasing capacity on a syndicate in the auctions. It assumes the lower the price, the better. Each syndicate’s 2014 adjusted average auction price is scored between 1 to 10, with 1 representing the highest auction price and 10 the lowest. Syndicates which do not trade at the auctions, such as Special Purpose Syndicates are given a score of 10. Details of auction prices are shown in Appendix B.

11 Scarcity Rating

This rates the availability of capacity on a syndicate via the auction process or otherwise (e.g. for limited tenancy or SPS capacity). It uses a measure of the capacity available on a syndicate compared to the amount of capacity supported by third party capital. These are then scored between 1 to 10, with 1 representing the least availability (scarce) and 10 the most (not scarce).

12 Auction Volume and Average Price

This graph shows the volumes of capacity traded on each syndicate together with the average price paid in the 2010 to 2014 auctions. The bars show the volumes traded in each of the three main auctions and are measured against the left hand axis. The line is measured against the right hand axis and shows the average weighted price paid to acquire capacity on the syndicate across the three auctions in each year.

13 Auction Commentary

We provide a commentary on the price and auction activity for each syndicate in order to provide insight into the “whys and wherefores” of the auction prices and the demand and supply of capacity.

14 Syndicate Capacity

This graph provides the constitution of the capacity of the syndicate by year of account, separated between “Argenta”, “Other Third Party”, and “Aligned” (dedicated, including direct corporate participations). The breakdown for 2016 assumes the ratio between the various types of capital remain the same as for 2015 unless we have been advised otherwise by the managing agent.

15 Gross and Net Capacity Utilisation

This graph shows the amount of income written on a gross and net basis compared to a syndicate’s capacity. The net premium income utilisation is after deduction of brokerage and other acquisition costs and outwards reinsurance. The inclusion of the syndicate’s reinsurance spend gives the syndicate’s gross premium income utilisation (after deduction of brokerage and other acquisition costs). Figures for the 2012 account are actual figures. For 2013 to 2016, they are based on APCL’s forecasts.

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16 Summary of Results / Forecasts

Gives a summary of each syndicate’s results for the 2008 to 2012 closed years of account and APCL’s forecasts for the 2013 to 2016 years of account. The closed year results are taken from syndicates’ Annual Report and Accounts, including illustrative personal expenses. APCL’s forecasts are based on our own assessment of the syndicate’s likely performance as described in Appendix A. Summaries of all syndicates’ percentage results and forecasts (together with the managing agents’ own forecasts) are shown in the Appendices. Operating expenses include exchange rate gains. This explains why these figures are positive in certain instances.

17 Forecasts Commentary

We provide a commentary on the forecasts for the open years of each syndicate, based on our own forecasts and expectations.

18 Syndicate Forecast Trend

This graph shows how each syndicate’s forecasts develop as a year of account matures towards closure. It could be viewed as an indicator of a managing agent’s ability to forecast the syndicate’s result. An upward line indicates that the forecast and final result have improved over time whereas a downward line shows that the forecast has deteriorated.

19 Description

This provides a brief description of the syndicate and the type of business it underwrites.

20 Syndicate Business Forecast

This section contains a commentary on the 2016 business plan for each syndicate. Any material changes are highlighted and where appropriate a commentary on recent performance to plan is provided.

21 Significant Points

This highlights major changes and significant developments within the syndicate/managing agency over the past year, incorporating details contained in the Report and Accounts as at 31st December 2014.

22 Class of Business Split

The categories used are broad classes of business based on the expected split of account supplied by syndicates in their 2016 business forecasts. The initial risk codes supplied by syndicates are numerous; therefore APCL combines these initial codes into the broader categories shown. A more detailed breakdown is shown in the appendices.

23 Combined Ratio by Class of Business

This table shows how each of the main classes of business written by a syndicate has performed – a lower ratio indicating a better performance. The ratio is the annual accounting combined ratio (as opposed to underwriting year of account). The combined ratios for smaller classes of business are not captured. Therefore, a blank does not indicate that a syndicate does not write a particular class of business at all. The Whole Account ratio is likely to encompass classes of business not included above.

24 Realistic Disaster Scenarios (RDS)

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The top seven net RDS for 2016 are shown for each syndicate. The figures for each different RDS are based on each syndicate's 2016 business forecast. The gross RDS for each is also shown, as are the comparative figures for 2015. Details of the individual Lloyd’s RDS and how each is treated for the purpose of this publication are given below.

In addition to showing the specific scenarios in the individual syndicate profiles we have also tabulated syndicates’ RDS in Appendix C on a standardised basis. This is to allow for ready comparison between syndicates and is also as shown in the Personal Portfolio Analysis (PePA) reports provided to Members during the year. Where a prescribed scenario has more than one sub-set (e.g. there are two Florida Windstorm scenarios; three Political Risks scenarios; seven Liability scenarios) we have taken the largest of each. Whilst these may not strictly aggregate we believe it provides a worst case position. We do not show the Major Risk Loss scenario as these represent a different loss scenario for each syndicate and cannot be aggregated for the purpose of the PePA.

The figures for each scenario are given Gross (i.e. before reinsurance recoveries) and Net (after reinsurance recoveries). It is important to bear in mind that syndicates with a large Gross exposure to an event face the risk of cash flow difficulties after an event (possibly giving rise to cash calls on the Members) as well as the risk of reinsurers defaulting on the contract or disputing a claim when made.

The percentages shown represent a guide as to the potential cost to each syndicate in the event of the occurrence of one of these loss scenarios, and not the overall "bottom line" result for a year of account. Other non-aggregating sections of the account could produce profits to mitigate such catastrophe losses. They could also, of course, produce further losses. We stress that the figures should be treated as indicative, as actual losses are likely to be different, particularly in the event of multiple losses of similar magnitude occurring in the same period. Furthermore, it should be noted that a number of syndicates set the level of RDSs to represent the maximum expected exposure or even the maximum appetite for exposure to each event. A number of managing agents have expressed the view that Lloyd’s Underwriting Performance Directorate (UPD) views the RDS as per the agreed plan as a limit rather than guidance to capital and they have said that they would rather build in headroom than have to approach UPD to agree a revised plan. We believe that these RDS exposures are overstated.

Aviation Collision – Assumes a collision between 2 aircraft over a major city, anywhere in the world, using the syndicate’s two highest airline exposures. Assumes a total liability loss of up to US$4 billion, comprising of up to US$2 billion per airline and any balance up to US$1 billion from an air traffic control liability policy(ies) and/or a major product manufacturer’s product liability policy(ies), where applicable.

California Earthquake – Syndicates are required to return both of the following scenarios.

i) Los Angeles Earthquake - Assumes a US$78 billion Industry Property (shake and fire following) Loss, gross of take-up rates and including consideration of demand surge, from an earthquake causing major damage to Los Angeles.

ii) San Francisco Earthquake - Assumes a US$78 billion Industry Property (shake and fire following) Loss, gross of take-up rates and including consideration of demand surge, from an earthquake causing major damage to San Francisco.

European Windstorm – Based upon a low pressure track originating in the North Atlantic basin resulting in an intense windstorm with maximum/peak gust wind speeds in excess of 20 metres per second (45 mph or 39 knots). The strongest winds occur to the south of the storm track, resulting in a broad swathe of damage across southern England, France, Belgium, Netherlands, Germany and Denmark. This event results in an estimated Industry Property Loss of Euro 23bn.

Florida Windstorm – Syndicates are required to return both of the following scenarios:

i) Miami, Dade County - A US$125bn Industry Property Loss, including consideration of demand surge

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and storm surge, from a Florida Hurricane landing in Miami-Dade County.

ii) Pinellas County - A US$125bn Industry Property Loss, including consideration of demand surge and storm surge, from a Florida Hurricane landing in Pinellas County.

Gulf of Mexico Windstorm – A US$111 billion Industry Loss from a Gulf of Mexico Hurricane resulting in offshore energy losses of approximately US$4.5 billion and mainland property losses of US$107 billion including the consideration of demand surge and storm surge.

Japanese Earthquake – This event is based on the Great Kanto event of 1923 with an estimated Industry Property Loss of Yen 5trn.

Japanese Typhoon – This event is based on the Isewan (‘Vera’) typhoon event of 1959. As a guide, the estimated Industry Property Loss from this event would be Yen 1.5trn.

Liability Risks – Syndicates are required to report two internally modelled liability loss scenarios. Although syndicates’ scenarios under this heading cannot be accurately aggregated it provides an indication of the maximum impact of a liability loss to a syndicate.

i) A professional lines scenario; for example:

Mis-selling of a financial product

Failure / collapse of a major corporation

Failure of a merger

Failure of a construction project

Recession-related losses

ii) A non-professional lines scenario; for example:

Industrial / transport incident

Multiple public / products losses

Loss of Major Complex – Assumes a total loss to all platforms and bridge links of a major complex. Includes property damage, removal of wreckage, liabilities, loss of production income and capping of the well.

Marine Event – Syndicates are required to return both of the following scenarios.

i) A fully laden tanker calling at Prince William Sound, Alaska, is involved in a collision with a cruise vessel carrying 500 passengers and 200 staff and crew. The incident involves the tanker spilling its cargo and loss of lives aboard both vessels. Assumes 70% tanker owner / 30% cruise owner apportionment of negligence and that the collision occurs in US waters. Also assumes that the cost to the tanker and cruise vessel owners of the oil pollution is US$2 billion and that there are 125 fatalities, 125 persons with serious injuries and 250 persons with minor injuries (average compensation being US$1.5m, US$2.5m and US$0.5m respectively).

ii) A US owned cruise vessel is sunk or severely damaged with attendant loss of life, bodily injury, trauma and loss of possessions. Claims to be heard in a Florida court. Assumes 500 passenger fatalities and 1,500 injured persons with average compensation of US$2m and US$1m respectively.

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Also assumes an additional Protection and Indemnity loss of US$500m for costs such as removal of wreck and loss of life and injury to the crew.

New Madrid Earthquake – Assumes a US$47 billion Industry Property (shake and fire following) Loss, gross of take-up rates and including consideration of demand surge from an earthquake causing major damage within the New Madrid Seismic Zone.

Political Risks – Syndicates are required to return Political Risk loss scenarios that generate losses above a de minimis reporting level set by Lloyd’s from time to time. Examples include:

i) An economic downturn in South East Asia.

ii) An economic crisis in South America.

iii) A political crisis in the Middle East.

iv) An economic downturn in Turkey.

v) An economic downturn in the Russian Federation.

vi) An economic and social disintegration leading to Civil War in Nigeria

Satellite Risks – Syndicates are required to return information relating to the largest loss from any one of four different scenarios.

i) A Solar Energetic Particle Event – such as a solar flare or coronal mass ejection produces a vast outpouring of protons, electrons and other charged particles which will cause permanent damage to semiconductor devices. A single large event (or a number of smaller events in close succession) has the potential to affect all geosynchronous satellites and could result in a loss of power on a majority of satellites. All live exposures in this orbit will be affected by the proton flare. Syndicates should assume a 5% insurance loss to all affected policies.

ii) Design Deficiency - assumes that a design deficiency leaves a particular geosynchronous satellite type vulnerable to space weather events. Such a deficiency should be assumed to leave the satellite, or component part thereof, prone to the effects of deep di-electric charging, surface charging, electrostatic discharge, total radiation dose or other similar effect which could be triggered by a large solar energetic particle event or related disturbances in the Earth’s geomagnetic field. Syndicates should include exposures to all live policies covering geosynchronous satellites.

iii) Generic Defect – An undetected generic defect in a number of operational satellites has the potential to cause significant losses to the space insurance market. During the time it takes for a generic defect to emerge, many more satellites of the same model/variant may have been launched. Syndicates are required to report on a prescribed set of satellite models and damage levels.

iv) Space Debris - A satellite break-up or collision in low Earth orbit (LEO) resulting in the generation of a cloud of debris that progresses around, above and below the orbit. The debris cloud then poses an increased threat for other satellites in LEO. Syndicates are required to report on prescribed groups of satellites.

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Terrorism – Syndicates are now required to complete returns for the two following scenarios.

a. Rockefeller Center Event - The Midtown Manhattan area, New York, at 11:00am on 1st January suffers a 2-tonne bomb blast attack causing collapse and fire following within a radius of 200m, massive debris damage to surrounding properties up to a radius of 400m and light debris damage to surrounding properties up to a radius of 500m. 1,000 blue/white collar worker deaths and 2,500 injuries in total.

b. Exchange Place Event - The lower Manhattan area, New York, at 11:00am on 1st January suffers a 2-tonne bomb blast attack causing collapse and fire following within a radius of 200m, massive debris damage to surrounding properties up to a radius of 400m and light debris damage to surrounding properties up to a radius of 500m. 1,000 blue/white collar worker deaths and 2,500 injuries in total.

Two Events – Syndicates are required to model on an ‘as if’ basis the occurrence of a South Carolina hurricane in the immediate aftermath of a North East US hurricane. Assumes that these events fall in the same reinsurance year and that there has not been sufficient time between events to purchase additional reinsurance protection. Syndicates are required to return losses to both events separately. This provides us with two scenarios: The cost of a North East US hurricane and the combined cost of the two events. Both are shown where they feature in the top seven events for a syndicate.

i) North East US Windstorm - A US$78bn Gross property Industry Loss including consideration of demand surge and storm surge from a north-east hurricane making landfall in New York State. The hurricane also generates significant losses in the States of New Jersey, Connecticut, Massachusetts, Rhode Island and Pennsylvania.

ii) South Carolina hurricane - A US$36bn Gross property Industry Loss from a hurricane making landfall in South Carolina, including consideration of demand surge and storm surge.

UK Flood – Assumes an Industry Insured Loss of £6.2bn. This scenario is based on a heavy rainfall event causing extensive flooding of the River Thames and surrounding areas covering 194 km2 from western London to Oxford.

Average 30 Year AEP – Shown only in the RDS tables in Appendix C is the average of syndicates’ gross and net 1 in 30 year Aggregate Exceedance Probability Loss for either a major hurricane or earthquake.

Alternative RDS A & B – Syndicates are required to report two further realistic events not included under other prescribed scenarios that represent a potential material impact to the syndicate. For example: earthquakes outside of California, New Madrid and Japan; a major flood incident; a Caribbean/US hurricane clash; pandemic risk; terrorism accumulations excluding Manhattan; a Selby-type liability loss; an accumulation of sports team members.

Where these are similar in nature to one of the prescribed scenarios we have categorised them as such and the highest net loss is taken. Otherwise they are shown as a specific scenario as described by the syndicate.

The percentages shown represent a guide as to the potential cost to each syndicate in the event of the occurrence of one of these loss scenarios, and not the overall "bottom line" result for a year of account. Other non-aggregating sections of the account could, depending on their profitability, produce profits to mitigate such catastrophe losses. They could also, of course, produce further losses. We stress that the figures should be treated as indicative as actual losses are likely to be different, particularly in the event of multiple losses of similar magnitude occurring in the same period.

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25 Largest Net Losses 2011 to 2015

This table details the largest seven net losses sustained by each syndicate. These are based on the major losses reported in each syndicate’s Quarterly Monitoring Report (QMR) as at 31 March 2015 and is calculated using the total reported loss as a percentage of the syndicate’s capacity in the year the loss occurred. It is useful to assess these by reference to each syndicate’s RDS. Where a syndicate has not sustained an individual loss of sufficient size to trigger the minimum reporting level these are shown as “No classified major losses”.

26 Net Incurred Loss Ratios

This graph shows the development of the syndicate’s net incurred loss ratio for each of the 2010 to 2014 years of account. It also shows how each year is developing against others. The information is taken from syndicates’ QMRs as at 30 June 2015.

27 Geographic Split

This table shows a breakdown of each syndicate’s premium income by geographic location. This provides a useful insight as to where in the world the syndicate’s exposures lie. In addition, it also provides an indication of a syndicate’s possible exposure to US situs funding issues in the event of US losses. Syndicates are no longer required to report these figures in the first submission of their 2016 business plan. However, most syndicates have. For those that have not we have used their 2015 figures as there is unlikely to be much change from last year.

28 Key Ratios

This section shows a number of key ratios for each syndicate. These ratios are described in Appendix B which also contains comparison tables for all syndicates.

Managing Agent Profiles

29 The financial data included in the Managing Agent Profiles is annual accounting data (as opposed to underwriting year of account data shown in the Syndicate Profiles). It is the aggregate of all syndicates operated by the managing agent reporting in each calendar year and shows the annually accounted performance of the managing agent’s Lloyd’s operation.

30 The text provides general information about the managing agent, including its structure, ownership and any overseas platforms.

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Syndicate Profiles

22

Syndicate 33 Hiscox Syndicates Limited Paul Lawrence

Although the market continues to be very competitive, Hiscox insists that “brains do matter” and that it is more than possible to pick your way through the market. The reinsurance programme for the syndicate involves writing in conjunction with other entities, including the insurance linked security fund, Kiskadee, and Special Purpose Syndicate 6104. This provides the syndicate with non-risk bearing income and helps it to maintain relevance when line size and speed of response are important for the broker and the cedant. Meeting client needs continues to be a major driver and will insulate the syndicate from the worst of the rate war, although in order to maintain premium income volumes Hiscox has shown that it is not afraid to participate in major brokers’ facilities on the current very competitive terms. In the current spate of M&A activity, Hiscox has attracted its share of rumour-mongering, but we are not aware of any developments of substance. We consider this syndicate to be a core ingredient of our portfolio of syndicates and recommend that it forms a meaningful part of all our advised members’ underwriting.

Strengths / Opportunities: Highly profitable, over the past seven closed years the syndicate has declared a total profit in excess of £1.2

billion. Despite medium risk profile, the capital requirement is relatively low. Increasing use is made of pro rata reinsurance arrangements, which pay ceding commissions and overriders

to the syndicate. Increases in the levels of these commissions have been sought and largely achieved in the current soft market and they have made a sizeable contribution to the bottom line, reducing expenses by an average of almost 5% of capacity in the last four closed years. The structure also allows the syndicate to expand and contract without needing to develop sufficient premium to pay fixed levels of premium for excess of loss contracts.

The syndicate’s profile benefits from the high visibility television and media campaign by Hiscox Insurance Company for homeowners and small commercial business.

Consistently and conservatively reserved. The syndicate’s declared result has exceeded the estimate as at quarter 6 by an average of almost 15% of capacity over the past seven closed years. Releases from reserves have contributed more than 6% of capacity. Reserving levels have continued to improve, with the ratio of IBNR to outstanding claims increasing to 99% at the close of 2012.

A leader in almost all areas of the syndicate’s operation, with a focus on shorter tail lines. Weaknesses / Challenges: The 2016 business plan is more aggressive than we expected, with premium volumes increasing in some

lines despite fiercer competition. In particular, Hiscox is growing its longer tail element by around 25%, having recruited new underwriters.

Catastrophe exposures are up: some of the main critical catastrophe exposures are substantially higher for 2016, for example the Miami hurricane RDS increases from £55m to £91m. In part this is a consequence of the change in the value of sterling against the US dollar, but it seems to reverse the de-risking of the book in 2013 and 2014.

Although expenses are mitigated by profit commissions, overall expenses are high. The budget for 2016 is £73m. A share of any deficit in the group’s defined benefit pension fund is charged to the syndicate. In 2014 this came to £11m, after a surplus of £4.5m in 2013.

Given its obligations as a listed company not to disseminate price sensitive information, Hiscox provides us with a fairly limited data set for both business plans and the regular quarterly updates. In particular, it does not provide incurred or ultimate loss data for major catastrophes.

As a listed insurer, the business has not been immune to rumours of takeover in the current round of merger and acquisition activity.

23

Rating (outlook): A (stable) Risk Rating: Medium

Return Rating: 7 Capital Rating: 8

Catastrophe Rating: 6 Tail Rating: 5

Cost Rating: 2 Scarcity Rating: 2

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 700 750 999 899 950 950 1,000 1,000 1,000Gross Premiums 671 791 699 616 686 700 725 737 692Net Premiums 453 477 441 363 422 423 418 437 411Pure Year Result 88 196 17 46 153 180 140 86 90Prior Year Result 2 84 75 51 56 35 30 30 30Operating Expenses -48 -80 -55 -41 -65 -112 -97 -93 -97Investment Return 63 35 33 16 22 20 25 28 30

Result (Est) £m 106 235 69 71 159 123 98 50 53% 15% 31% 7% 8% 17% 13% 10% 5% 5%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryHiscox syndicate results have traditionally come in well above thepreliminary forecasts as reserving on open and prior years isconservative. The increase in the liability element of the accountwill lengthen the tail. As the original gross result improves, profitcommissions on the quota share reinsurances increase inquantum, thereby creating a doubling effect on the overall result.We continue to expect reserves to produce surpluses. Reservereleases have been around 6% of capacity on average. Our modelhalves the level of future release to 3%, but this may prove to beconservative.

Auction CommentaryAuction Volume and Average Price

Prices fell in from Auctions One to Three despite a reduction in the volume of capacity traded. Capacity that was tendered at pricesin excess of 63p in Auction One, 58p in Auction Two and 54p inAuction Three remained unsold. The syndicate has broad thirdparty support, almost all non-aligned members have a share.Hiscox has not increased its share of capacity since 2004 and has not bid for capacity since 2009. Clients of all three members’agents were buyers and sellers of capacity. Argenta clients werethe largest sellers, although this related to a single very largeseller.

0

200

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1,200

2012 2013 2014 2015 2016

£ m

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ns

Syndicate Capacity

Argenta Other Third Party Aligned

0%

10%

20%

30%

40%

50%

60%

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80%

2012 2013 2014 2015 2016

Gross and Net Capacity Utilisation

Net Premium Reinsurance Premium

-10

-5

0

5

10

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% o

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acity

Syndicate Forecast Trend

2010 2011 2012 2013 2014

0

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2010 2011 2012 2013 2014p/

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s

Auction 1 Auction 2 Auction 3 Ave Price

24

Syndicate 33 Hiscox Syndicates Limited Paul Lawrence

Description:

Syndicate 33 writes large complicated risks that rely on the London subscription market, as well as smaller risks bundled together under delegated underwriting arrangements. Homogenous risks, with smaller profit margins and reliant on efficient processing, are not written. Hiscox runs a UK insurance company for this type of business. The major divisions of the syndicate are currently (in declining order of projected premium volume) property, reinsurance, aerospace & specialty, marine & energy, casualty and art & private client. A separate, and currently small operating team, was established to write business under the emerging broker facilities. Syndicate 6104 operates as a quota share reinsurer of the reinsurance division, and pays an overriding commission to Syndicate 33. Syndicate Business Forecast:

Income on the 2015 year of account is likely to be substantially ahead of plan, a variance only partially explained by the movement in rates of exchange. The plan is essentially flat for 2016, with an overall average expectation of rates 5.5% lower than in 2015. There is growth in the reinsurance, aerospace & specialty and casualty divisions, compensated for by reductions in property and marine & energy. Some of the growth is from newly recruited underwriting teams displaced by recent merger activity. Hiscox is leader on one section of the Willis 360 market facility and a follower on parts, although premium volumes have been lower than anticipated in 2015. The reinsurance programme has been restructured over the past decade with far more proportional cover. This cover pays an overriding commission to the syndicate, as well as a large profit commission contribution if results are good. Aggregate exposures are broadly up on last year, some, including critical catastrophe RDSs, by as much as 60%. Significant Points:

a) No change is planned to the current capacity of £1 billion for 2016.

b) Mike Krefta was appointed joint Active Underwriter with Paul Lawrence in September 2014. Mike is also Director of Non-Marine Underwriting for Hiscox Re in London while Paul is Chief Underwriting Officer of Hiscox London Market.

c) Syndicate funds currently total £1.30 billion with an average duration of 18 months.

d) The reinsurance book is written as Hiscox Re, a combination of the underwriting platforms in Bermuda, London and Paris. The Hiscox ILS fund, Kiskadee, participates as a reinsurer of Hiscox Re.

25

2010 2011 2012 2013 2014Aviation 54.6 - 72.1 - -Casualty 127.1 88.6 64.3 85.1 97.8Energy 65.9 103.6 64.9 92.9 82.0Life - - - - -Marine 103.9 81.9 109.8 77.8 89.6Motor - - - - -Property 64.4 54.2 88.2 74.2 81.4Reinsurance 90.7 123.8 65.9 63.3 49.4Whole Account 89.5 92.5 75.8 75.2 76.4

Gross Net Gross Net Two Events 88% 18% 88% 18% Information not supplied US Terrorism - Rockefeller Center 44% 17% 44% 17% Gulf of Mexico Windstorm 57% 11% 57% 11% Vancouver Earthquake 39% 11% California Earthquake - Los Angeles 47% 10% 47% 10% North East Windstorm 47% 9% 47% 9% Florida Windstorm - Miami Dade 41% 9% 41% 9%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 95.9 105.4 70.0 68.5 72.3Reinsurance Premium % Gross Premiums 32.4 39.7 36.9 41.1 38.5Pure Year Underwriting Result % Capacity 38.0 53.1 19.2 22.5 34.1Prior Years Underwriting Result % Capacity 0.3 11.2 7.6 5.6 5.9RITC received % Capacity 104.1 97.2 66.2 70.3 60.7IBNR % Net Outstanding Claims 61.1 62.1 60.2 80.7 99.4Operating Expenses % Capacity 6.9 10.6 0.0 4.6 6.9

Combined Ratio by Class of BusinessClass of Business Split

1.4%3.2%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

4.5%2.1%

46.3%

3.8%38.8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 10 20 30 40 50

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

26

Syndicate 218 ERS Syndicate Management Limited Mark Bacon

ERS Syndicate 218 has obeyed the first maxim of a loss making business – stop losing money. The 2012 result and the 2013 and 2014 accounts are broadly breakeven. The UK legal environment continues to present challenges and it is clear that recent regulatory reforms have not delivered the expected benefits to insurers. There are signs that rates are beginning to increase in the UK motor sector, and merger activity is likely to produce interesting opportunities for the syndicate. Much has been achieved in the past few years: the new IT system has been implemented, reducing the expense base by £10m; the head office has been relocated to London and the branch offices closed. In addition, head count has been halved and the syndicate has cleared Solvency II hurdles. The business forecast presented to Lloyd’s is the first in recent years to show a meaningful profit at 5% of the increased capacity for 2016. We continue to recommend support.

Strengths / Opportunities: The account has been transformed, with ERS now positioned as a broker only/motor only insurer, focused on

specialist segments of the market where barriers to entry exist and where price competition is less intense. The management sees growth opportunities in these segments, especially if there is to be consolidation in the

UK motor sector, with the possibility of the syndicate acquiring portfolios of business. The putative merger of RSA with Zurich could bring major opportunities to the syndicate if it were to take place.

There is evidence of a gradual strengthening of the rating environment, with increasing rates in private car business – a recent confused.com survey reported prices up 3.6% in the past twelve months. Although the focus of the ERS account is on specialist segments, this upward momentum will be beneficial to ERS.

The remediation programme is now complete: new IT systems have been implemented, Solvency II hurdles have been cleared and the office has been relocated to London, which it is believed will enable recruitment of higher calibre personnel. All of these initiatives have required management resource and secondment of the underwriting team away from their principal roles. All key staff can now focus on their primary roles.

Reserving practices have been overhauled, with far more robust provisions. Reserves are now held at a margin of 10% over actuarial best estimates. The 2012 account produced a reserve release of £12m and the 2013 account currently is forecast to have a release of £7m (as at Q2).

Weaknesses / Challenges: Lloyd’s remains an expensive place for a motor insurer to trade. ERS states that the cost of trading at Lloyd’s

adds 3 percentage points to the expense ratio. ERS would argue that little of this cost benefits the syndicate materially. Although strides have been made to reduce the expense base, the syndicate expense ratio is forecast to be 32% of net premium (down from 35% for the 2015 year of account and 38% for 2014). Although comparisons with volume insurers can be misleading, the UK motor market achieved an expense ratio of 30.6% in 2014.

Recent changes in the legislative landscape have not produced the predicted benefits to insurers. These include the LASPO reforms, and the banning of referral fees. This has introduced additional uncertainties into the 2014 account, with improvements in claims settlement statistics, but a deterioration in the outstanding losses.

Changes in the composition of the account, coupled with changes in legislation and in the syndicate’s claims’ practices, mean that inter year comparisons of underwriting statistics can be misleading.

Relations with the Lloyd’s PMD had become frosty, with recent years plans scaled back, leading to proposals to write part of the account into a non-Lloyd’s insurance company (where Lloyd’s would not have rights of veto over the premium volumes to be written by the company). We believe that the decision to shelve this proposal is a sign of both parties attempting to foster a better working relationship.

The Chancellor of the Exchequer increased insurance premium tax from 6.5% to 9% in his July 2015 budget statement. This could make it more difficult for the syndicate to achieve planned rate increases. Although equally it could result in more customers seeking alternative quotes for their business as they are presented with price increases irrespective of the actions of their insurer.

27

Rating (outlook): C (watch) Risk Rating: Medium

Return Rating: 2 Capital Rating: 9

Catastrophe Rating: 10 Tail Rating: 7

Cost Rating: 8 Scarcity Rating: 5

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 421 452 486 486 438 438 438 350 360Gross Premiums 355 434 417 366 294 287 265 292 350Net Premiums 330 399 385 335 278 254 245 270 326Pure Year Result -98 -115 -103 -32 -1 1 9 12 26Prior Year Result -139 0 0 -24 12 7 0 0 0Operating Expenses -7 -15 -12 -19 -18 -19 -17 -19 -20Investment Return 7 4 14 14 6 9 9 9 9

Result (Est) £m -237 -127 -101 -61 1 2 0 2 15% -56% -28% -21% -13% 0% 0% 0% 1% 4%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryThe published statistics can be misleading both due to changes inthe account' in claims’ settlement practices. However, it isapparent that the syndicate has increasingly got a better handle onits pricing and planning, with recent years having largely deliveredthe plan approved by Lloyd’s. We are expecting Lloyd’s to curbthe initial 2016 plan, with a revised version submitted beforeapproval is given, although the projected rate increases in the July2015 plan are lower than those reported in the wider market. Ourmodel does not assume any credit for reserve releases beyondthose currently forecast for the 2013 year by ERS

Auction CommentaryAuction Volume and Average Price

Auction prices increased from less than 3p in Auction One tomore than 6p in Auction Three as ERS increased the price it wasbidding. Having been unsuccessful in Auction One with 4 bids for£5m at prices of 0.5p, 1.0p, 1.5p and 2.0p, it revised its strategy,buying £1.4m in Auction Two at 4.0p (it bid for £30m in total) andanother £1.9m (of another bid for £30m) in Auction Three at 6.0p.ERS bought 38% of the capacity changing hands, although bothArgenta and Alpha were also strong buyers, buying 25% and 28%respectively of the capacity traded. The sales were distributedacross all three of the members’ agents.

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Syndicate Capacity

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0%

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2012 2013 2014 2015 2016

Gross and Net Capacity Utilisation

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-30

-25

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Syndicate Forecast Trend

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0

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p/£1

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Auction 1 Auction 2 Auction 3 Ave Price

28

Syndicate 218 ERS Syndicate Management Limited Mark Bacon

Description

Syndicate 218 is a UK motor insurer. ERS has undergone a prolonged period of transformation, with the exit from volume lines of business to focus on commercial and specialty lines. All business is accessed through insurance brokers with none written through aggregator sites or through brokers where there is a larger insurer panel. These classes include commercial fleet, bus and coach, minibus, haulage, motor trade, bespoke private car (including classic and collectors’ cars, kit cars, motor homes and convicted drivers) agricultural vehicles and roadside rescue. ERS is one of the largest insurers of motorcycles, with a focus on enthusiasts’ bikes rather than commuter bikes.

Syndicate Business Forecast

ERS plans to continue to focus on commercial and specialist business where it sees rating levels as more stable. The syndicate is targeting specific opportunities for small and medium enterprises operating with one or two cars, in collections of classic cars and products designed for rural drivers of cars, vans and fleets. It forecasts an overall rate improvement of around 5% in 2016, in addition to rate increases of an average 3.1% that have been implemented during 2015. The managing agent feels that increases of this magnitude more than offset the prevailing level of claims’ inflation and there is a small reduction in the planned loss ratio in consequence. Overall premium volumes are up 13%, with increases in most lines of business, although the management does not rule out the prospect of acquiring entire portfolios of business. The recent transformation of the business is designed to lower the expense base, which is achieved through reductions in headcount and a major saving in the cost of IT as legacy systems are replaced.

Significant Points

a) The capacity is projected to increase by pre-emption from £350m to £360m, having de-empted from £438m in 2014.

b) The head office of the business was relocated to London from Brentwood during the second quarter of 2015. Overall headcount has been reduced from 1,100 to 600, with all branch offices closed. The business has established a dedicated operations centre in Swansea.

c) The Lloyd’s business was acquired by Aquiline Capital Partners in April 2013. The business was renamed ERS Syndicate Management in April 2014

d) The management team made preliminary approaches to members’ agents with a proposal that would have seen ERS form a Gibraltar based insurer that would write in consortium with the syndicate. This was seen as an alternative to seeking to grow the Lloyd’s business as the management feel that the syndicate has been restricted by Lloyd’s FPD in recent years. These proposals were shelved in May this year.

e) The syndicate has total funds of £397m as at 30 June 2015. As a UK motor operation, the funds are almost entirely denominated in sterling.

29

2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - -Energy - - - - -Life - - - - -Marine - - - - -Motor 206.4 105.0 107.4 110.5 102.2Property 161.2 123.8 113.2 84.9 88.5Reinsurance - - - - -Whole Account 199.1 108.1 108.1 107.7 101.0

Gross Net Gross Net Double Decker Bus Collision 11% 1% UK Weather (Dec13 - Feb14) 0.4% Motor Vehicle Collision with Train 25% 1% 34% 1% European Windstorm 1% 1% 1% 1% UK Flood 0% 0% 0% 0%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 84.3 95.9 85.7 75.4 67.2Reinsurance Premium % Gross Premiums 8.3 8.0 7.6 8.7 5.2Pure Year Underwriting Result % Capacity 13.3 11.6 20.1 27.4 31.8Prior Years Underwriting Result % Capacity -34.1 0.0 0.0 -4.8 2.8RITC received % Capacity 17.1 0.0 51.4 49.7 54.3IBNR % Net Outstanding Claims -10.0 -7.6 -19.9 2.6 9.7Operating Expenses % Capacity 2.3 3.4 0.0 4.0 4.0

2016

Geographic Split

0.0%0.0%0.0%

0.0%0.0%

Combined Ratio by Class of BusinessClass of Business Split

99.5%0.5%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

0%

20%

40%

60%

80%

100%

120%

140%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 20 40 60 80 100

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

30

Syndicate 308 Tokio Marine Kiln Syndicates Limited (TMK) Tim Prifti

Following the departure of former underwriter Cathy Garner to rival ANV Syndicate 779, Syndicate 308 has been more closely associated with TMK Syndicate 510’s accident & health division, which underwrites one of the largest A&H accounts in the Lloyd’s market. Life syndicates face many challenges, although price competition is less of an issue here. Scrutiny by regulators and exposure to conduct risk regulations are a concern that could increase an already large expense base. Members have also been challenged by solvency requirements, caused in part by the rapid growth of the syndicate, whereby capital requirements can increase significantly. We see life business as lower risk than the standard business written at Lloyd’s and recommend Syndicate 308 to those who wish to diversify their underwriting.

Strengths/Opportunities

The syndicate has achieved sufficient scale to deliver worthwhile returns to the capital providers

The underwriters work in close proximity to the accident & health team of TMK Syndicate 510. The two syndicates can offer combined natural causes/accidental death policies. Accident & health and life business are often handled by the same team within broking firms.

Recent start-ups in the life sector, including new syndicates managed by Beazley and Catlin, while increasing competition, have served to increase the visibility of the sector and encouraged Lloyd’s to take life business more seriously.

Weaknesses/Challenges

The small scale of the syndicate can result in individual losses hitting the bottom line and causing movement in the forecast results. The forecasts have therefore been volatile. The new active underwriter is keen to put in place more conservative reserving, which may mean lower forecast results in the early stages but should reduce the scope for such volatility.

As the syndicate has a number of touch points with retail customers, it needs to have procedures in place to ensure all aspects of conduct risk are appropriately managed. This regulatory overhead is likely to increase expenses and detract from the main purpose of the syndicate.

Solvency deficits caused by deferred acquisition costs have been a regular problem. They are exacerbated by rapid growth (as has been the case here in the past) and can significantly increase a members’ overall capital requirement.

Life syndicates enjoy fewer international licences than non-life syndicates. New business opportunities can therefore be restricted to the UK, Europe and Japan or those that can be written under reinsurance contracts.

In Cathy Garner and Sue Clark the syndicate has lost two key underwriters who are likely to compete for business with their former employer.

31

Rating (outlook): C+ (stable) Risk Rating: Lower to Medium

Return Rating: 5 Capital Rating: 7

Catastrophe Rating: 10 Tail Rating: 9

Cost Rating: 5 Scarcity Rating: 2

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 15 15 20 20 23 27 32 32 32Gross Premiums 11 14 18 19 21 21 21 24 25Net Premiums 9 12 11 17 19 20 19 22 23Pure Year Result 3 2 3 4 4 3 5 5 6Prior Year Result 1 0 1 1 0 0 0 0 0Operating Expenses -1 -2 -2 -3 -3 -3 -4 -4 -4Investment Return 0 0 0 0 0 0 0 0 0

Result (Est) £m 3 1 3 2 1 0 1 1 1% 17% 6% 13% 9% 6% -1% 3% 2% 4%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryPremium levels have been traditionally hard to predict as theaccount consists of a small number of contracts that are oftenslow to become established. The syndicate's small size can alsomean that the account can be impacted by a single large life (thereinsurance retention is £500,000 any one life). Life reserves areset according to actuarial life tables and our forecasts do notinclude any projected surplus. The 2013 account is projecting asmall prior year deficit as at 30 June 2015, and the pure year hasbeen hit by a frequency of unconnected individual losses. Our2016 premium projections are lower than the syndicate’s.

Auction CommentaryAuction Volume and Average Price

Sales of capacity had been dominated by a large single investor(Berkley Life, owned by a former non-executive director of Kiln)who had taken a 32% share in the syndicate. This vehicle hadbeen selling down its capacity for a number of years andcompletely exited its position in the 2013 auctions. 2014 thereforewas the first year when there was no large seller. Pricesremained broadly in line with earlier years, although tailed offslightly between Auctions One and Three. All three agents weresellers, but Argenta and Alpha clients bought 97% of the capacitytransacted.

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Gross and Net Capacity Utilisation

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-5

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f Cap

acity

Syndicate Forecast Trend

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32

Syndicate 308 Tokio Marine Kiln Syndicates Limited (TMK) Tim Prifti

Description

This is a specialist life syndicate. It co-operates with the accident & health division (and other divisions where appropriate) of Syndicate 510, which has one of the largest A&H accounts in Lloyd’s. The syndicate writes individuals and groups, sometimes for hazardous occupations and pastimes. For example, it was the first market to offer cover for people in the UK that are HIV positive. The largest section of the account is treaties, schemes & binders, including a range of products such as cover for ex-patriot US citizens and substandard lives in the UK. Specialist schemes for UK police and fire brigade federations are written, as are small books of creditor and individual life. Reinsurance treaties are also written. Syndicate Business Forecast

The traditional insurance cycle is less pronounced in the life sector, although the activities of individual competitors can create opportunities. Historically, income forecasts have tended to be on the aspirational side, with actual income coming in short of business plan targets (2013 21% below plan, 2014 14% below plan). Premium income for 2016 is forecast to be 10% up on the most recent reforecast for 2015, with growth coming in the treaties, schemes & binders book, which now dominates the account (70% of planned income). There is a small planned reduction in the individual life book. The small size of the whole account means that the loss ratio can be impacted by single losses, but the change in the product mix produces a slightly better planned loss ratio for 2016. Significant Points

a) Capacity is unchanged at £32m for 2016.

b) Tim Prifti was appointed active underwriter in June 2014 following the resignation of Cathy Garner. Tim is also active underwriter for the accident & health division of Syndicate 510.

c) Medical underwriter Sue Clark has left to join Cathy Garner at ANV Syndicate 779. TMK reports that it has appointed a “highly experienced underwriter with Lloyd’s market and reinsurance experience…to complement the already strong team”. Nick Allen, formerly Active Underwriter of life Syndicate 389, has day to day responsibility for the underwriting.

33

2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - -Energy - - - - -Life 91.8 96.4 97.9 119.0 95.6Marine - - - - -Motor - - - - -Property - - - - -Reinsurance - - - - -Whole Account 90.2 88.4 98.3 93.5 97.2

Gross Net Gross Net UK Epidemic 14% 14% 16% 16% Heart Attack (Aug 2012) 2.2% Police PA Catastrophe 7% 5% Clements Worldwide (May 2013) 2.0% Aviation Collision 30% 2% 27% 3% Miller Insurance (Aug 2013) 2.0% Wellington Mgmt Intl (May 2013) 1.9% Malaysian Airlines (March 2014) 1.4%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 74.6 93.3 89.8 95.5 92.8Reinsurance Premium % Gross Premiums 13.5 14.8 38.7 8.6 8.5Pure Year Underwriting Result % Capacity 54.0 51.1 47.6 52.1 50.9Prior Years Underwriting Result % Capacity 4.7 2.3 5.4 2.8 1.3RITC received % Capacity 25.5 21.3 12.6 5.3 2.8IBNR % Net Outstanding Claims 278.9 249.2 1,236.3 346.4 89.9Operating Expenses % Capacity 6.9 11.7 8.3 12.7 13.4

2016

Geographic Split

6.8%2.3%7.8%

4.6%5.7%

Combined Ratio by Class of BusinessClass of Business Split

55.8%17.1%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

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UK Motor

Property Treaty

Property

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Liability Treaty

Liability

Energy

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Accident & Health

% of Business Written2016 2015

34

Syndicate 318 Beaufort Underwriting Agency Limited Derek Eales

A marked improvement in results has allowed us to move our overall rating up from C+ to B. This is not to underestimate the challenges that the business faces, especially as two of the three key areas are under severe competitive pressure. Syndicate 318 occupies a respected position within the large risk property direct and facultative market and can carve out a niche for itself by being prepared to quote business, including writing facultative reinsurances of other Lloyd’s syndicates. It is also trying harder to find ways of benefiting from being owned by one of the largest reinsurers in the world. We have found Munich Re to be largely hands off. For its part, Munich Re seems more than happy to co-exist with third party capital and we sense that the underwriter and management welcome third party participation as it gives some protection from total parental control. The account is fiercely short-tail although this has not ruled out significant boosts to the results from prior years. We continue to recommend support and we believe that, whilst not a core syndicate, 318 represents a worthwhile component of any portfolio, especially for those looking to avoid longer tail exposures. Strengths/Opportunities

The syndicate is seeking to better leverage its relationship with its parent, Munich Re, one the world’s largest reinsurers. For example, Munich Re owns a successful broker in the US delegated property sector, from which business is starting to flow to Syndicate 318.

After a disappointing run towards the end of the last decade with two consecutive loss years, results have greatly improved, with an average profit between 2009 and 2014 (including forecasts) of 8%.

The account is short tail with an average of 76% of ultimate claims paid inside the three year accounting period (average 2010 to 2012 underwriting years inclusive).

Despite the short tail, the reserving history is very good, with average releases of 5% of capacity over the past seven years. The IBNR to outstanding claims ratio has continued to increase, standing at 71% at the close of the 2012 year of account.

The expense base is among the lowest, at 5.4% of capacity, and 6.9% of projected gross premium after acquisition costs.

Weaknesses/Challenges

Of the syndicate’s three core areas of operation, two (direct & facultative property and aviation) are under severe competitive pressure.

The reinsurance programme has provided little by the way of risk mitigation in recent years. A total of £96m was paid out in reinsurance premiums between 2010 and 2013, but recoveries amounted to less than 25% (including projected recoveries on outstanding claims).

A small line size and a limited leadership role increases the risk of the syndicate being marginalised by brokers seeking to reduce the number of risk carriers used on placements.

The aspirations of Munich Re are unclear. It owns more than 90% of 318’s capacity but is making no serious effort to acquire the balance. Munich Re owns another Lloyd’s managing agent, Munich Re Underwriting Limited, which manages Watkins Syndicate 457 (2015 capacity £425m). It appears that there are no plans to merge the operations as the ownership of the two businesses is in separate parts of Munich Re’s structure.

35

Rating (outlook): B (stable) Risk Rating: Medium to Higher

Return Rating: 3 Capital Rating: 7

Catastrophe Rating: 2 Tail Rating: 8

Cost Rating: 6 Scarcity Rating: 5

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 202 202 225 225 235 235 235 235 235Gross Premiums 149 144 120 123 134 122 115 115 116Net Premiums 113 109 94 99 112 99 96 98 100Pure Year Result -19 14 -2 20 26 35 14 20 18Prior Year Result 8 14 16 9 13 9 3 3 3Operating Expenses -4 -7 -7 -10 -12 -16 -11 -14 -13Investment Return 2 2 1 2 2 1 2 2 2

Result (Est) £m -13 23 9 21 29 28 8 11 10% -6% 11% 4% 9% 12% 12% 3% 4% 4%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryWe have been expecting the level of prior year releases tomoderate, although the most recent forecast for 2013 shows a£8.5m release, although we expect smaller releases for 2014onwards. The 2014 pure account is showing an uptick in lossactivity and Beaufort reduced prospective profitability. 2015 isahead of the income plan at this stage, with limited loss activity sofar. The syndicate’s plan is to increase premium volumes in 2016, difficult given the underwriting climate. Our forecast shows theincome remaining static with deteriorated loss ratios givenincreasing competition, although with the benefit of cheaperreinsurance.

Auction CommentaryAuction Volume and Average Price

The auction price rose at each successive auction during 2014,although overall volumes were small, with less than £600,000changing hands. Munich Re, often a bidder at low prices appearsnot to have bid at all in 2014. It last increased its share in 2013with a purchase of £50,000 of capacity. The syndicate was heavilyover-subscribed in 2014, with more than £4 of capacity bidding forevery £1 that was tendered. Argenta is the largest supporter ofthe syndicate and its clients accounted for 85% of the capacitysold and 89% of the capacity purchased.

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36

Syndicate 318 Beaufort Underwriting Agency Limited Derek Eales

Description

Syndicate 318 is a short tail specialist syndicate writing in three main areas, direct and facultative property (‘D&F’), property binders and aviation. The two property divisions account for almost 90% of the projected gross premium income and while both are nominally ‘international’, they are dominated by USA domiciled risks. The D&F book writes medium to large commercial, industrial and retail risks, focused on primary and lower layer business. Facultative reinsurances, including those of other Lloyd’s syndicates, are written. The binder book is concentrated on commercial property and homeowners business but includes a small amount of auto and difference-in-conditions business. The aviation book is geographically diverse, consisting of non-USA domiciled second and third tier airlines and general aviation, but major airlines, products’ liability, airport operators’ exposures, hull war or hull deductible business, common to many other Lloyd’s syndicates’ aviation accounts, are not underwritten. Syndicate Business Forecast

All three areas of underwriting are under pressure, both from overcapacity and from brokers’ aggressive tactics. Conditions are worse in D&F property and in aviation than in the (predominately) US binding authority market. The plan is therefore largely defensive, to resist rate reductions and to look to improve reinsurance protection. Syndicate 318 is a leader of approximately half of its overall account and this relevance to clients and brokers is expected to prevent signed lines being reduced. It is also one of a few syndicates that will entertain writing facultative reinsurance of Lloyd’s competitors. Declining margins have increased the projected loss ratios, and there are increases in catastrophe exposures, as policy limits increase and coverage widens. Significant Points

a) Capacity remains unchanged at £235m.

b) Cash and investments stood at £182m at 30 June 2015.

c) Since 2010, the syndicate has had an agreement with Great Lakes Reinsurance UK Limited which, as a wholly owned subsidiary of Munich Re, is part of the same group. Airline and general aviation business is written by the syndicate’s aviation team of behalf of Great Lakes in return for an overriding commission. Syndicate 318 is able to secure its desired line before any business is allocated to the reinsurance company. The underwriting team also administers a general aviation facility on the behalf of the reinsurer, in which the syndicate does not currently participate. The syndicate nevertheless has the option to participate at renewal if it wishes.

d) Syndicate 318 accepted the reinsurance to close of syndicates 1318 and 2318 into the 2012 year of account for a combined total RITC premium of £2,525,000. Both the accounts (respectively North American property binders and US catastrophe reinsurance) are short tail.

e) The longstanding managing director, Andy Dawe, who managed the relationship with third party capital, left in December 2014. He has been replaced by Arthur Hoffman who was previously strategy and risk management director.

37

2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - -Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property 54.1 100.5 84.0 81.9 76.9Reinsurance 118.9 102.8 67.6 73.8 77.7Whole Account 90.8 98.3 77.2 78.9 76.2

Gross Net Gross Net Two Events 31% 17% 45% 22% Superstorm Sandy (Oct 2012) 12.4% Gulf of Mexico Windstorm 28% 11% 42% 16% Hurricane Odile (Sept 2014) 4.3% California Earthquake - Los Angeles 31% 11% 39% 13% New Zealand Quake (Feb 2011) 1.4% North East Windstorm 17% 9% 23% 11% Thailand Floods - (Oct 2011) 1.1% New Madrid Earthquake 20% 10% 17% 11% Thailand Floods - CBI (Oct 2011) 1.0% US Terrorism - Exchange Place 5% 5% 5% 5% Polar Vortex Storm (Dec 2013) 0.7% Japanese Earthquake 7% 4% 8% 5% Alberta flooding (June 2013) 0.2%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 73.8 71.6 53.2 54.7 56.9Reinsurance Premium % Gross Premiums 24.1 24.5 21.3 19.3 16.4Pure Year Underwriting Result % Capacity 6.2 24.2 12.2 21.9 25.3Prior Years Underwriting Result % Capacity 4.0 7.0 7.3 4.0 5.5RITC received % Capacity 39.0 44.2 39.1 34.0 27.8IBNR % Net Outstanding Claims 55.3 58.5 49.0 58.2 70.7Operating Expenses % Capacity 1.9 3.6 2.9 4.4 4.9

Combined Ratio by Class of BusinessClass of Business Split

1.7%5.5%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

10.0%3.3%0.0%

16.5%63.0%

0%10%20%30%40%50%60%70%80%90%

100%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

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UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

38

Syndicate 386 QBE Underwriting Limited David Harries

The forecast results update at 30 June 2015 showed that the 2013 account, while an overall profit, is now expected to suffer a second successive prior year loss, with a deterioration of £15m following a declared deterioration of £16m on the close of the 2012 account. Reserving shortfalls on longer tail syndicates always ring alarm bells as it can be difficult to be certain that the syndicate has done enough strengthening to prevent further shortfalls in the years to come. The reserves are set at a margin above actuarial best estimates and that this gives rise to an 80% probability of surplus provides a degree of comfort. Staff defections have also been an issue, with several key team members leaving to set up elsewhere in direct competition. The vacancies have mostly been filled by internal appointments as befits a large syndicate acknowledged as a good training ground. We downgraded the syndicate from “A” to “B+” (in 2014) to highlight these concerns. The syndicate continues to have a high quality book, with an exceptionally high renewal ratio and a unique set of characteristics. We continue to recommend support. Strengths/Opportunities

Long-standing renewal book with a loyal client base. Liability claims can take a long time to settle and clients are often reluctant to switch insurers when they have outstanding claims with the incumbent insurer.

In spite of a number of staff defections, almost all positions have been filled from within the team. In addition a number of individuals have spent their entire career with the syndicate.

QBE Syndicate 386 remains a recognised leader in the liability field and is able to commit some large lines.

Increasing opportunities to cross sell products to policyholders of the wider QBE group.

Brokers increasingly seek to enhance commission levels and squeeze margins for insurers; QBE, with its range of local offices, is able to combat this by writing business outside the London market.

Weaknesses/Challenges

Releases from reserves have been one of the principal sources of profit, contributing more than £370m to the bottom line in the six years to the close of 2011. However, there was a shortfall of £16m at the close of 2012 and a forecast deficit on the 2013 account of £15m as at 30 June 2015. These recent shortfalls are attributed to Australian liability business, where tort reforms have been rolled back by the courts, as well as to more general attritional movement in the professional indemnity sector. IBNR to net outstanding claim ratios have reduced slightly over the past five years, from 70% at the close of 2008 to 60% at the close of 2012.

Staff defections have been a feature in recent years. Senior underwriters from all product lines have set up as new entrants to the market with rival organisations, increasing the overall level of competition and capacity available.

Interest rates available on the £1 billion syndicate investment fund are modest and no longer have the potential to mitigate poor underwriting performance.

The reinsurance programme was extensively overhauled for 2014, with a much higher retention but at a lower cost. The higher retention could lead to greater volatility.

39

Rating (outlook): B+ (watch) Risk Rating: Medium to Higher

Return Rating: 8 Capital Rating: 7

Catastrophe Rating: 10 Tail Rating: 1

Cost Rating: 2 Scarcity Rating: 3

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 340 340 365 365 413 413 413 353 353Gross Premiums 339 346 364 369 367 349 297 290 272Net Premiums 303 305 297 300 301 292 276 264 258Pure Year Result 48 68 117 104 93 99 79 73 68Prior Year Result 94 83 10 21 -16 -15 0 0 0Operating Expenses 2 -42 -56 -71 -58 -69 -58 -60 -58Investment Return 41 37 33 22 25 14 11 9 12

Result (Est) £m 185 146 105 76 39 28 32 22 22% 54% 43% 29% 21% 9% 7% 8% 6% 6%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryThe syndicate has a large share of renewal business, whichdespite competitive pressures, appears stable. New businessvolumes are harder to predict. As the underwriting teams thathave left and set up in their new homes, it can be expected thatthe competition for renewal business will increase. Currencyexposures are hedged, which reduces some of the volatility,although the larger reinsurance retention brings a new form ofvolatility. We have reduced income volumes a little from the firstiteration of the syndicate business plan. We do not model anyfurther leakage or surplus on closed years.

Auction CommentaryAuction Volume and Average Price

Prices fell between Auction One and Three. In Auction One therewas a wide spread of prices paid by the highest (£1.10) andlowest successful buyer (65p) and many buyers lowered theirpricing for subsequent auctions. The range of successful buyersfell to 62p-89p in Auction Two and to 61p-71p in Auction Three.Unusually for a syndicate of this value, there were large volumesof capacity unsold after Auctions Two and Three, tendered atprices which would have sold in recent years. In Auction Two, one seller was hoping for 90p for his £3m of capacity. The volume ofunsuccessful bids was high, with £5.4m of unmatched buyersacross the auctions. QBE has not bought capacity since 2005,and appears to have ceased bidding.

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40

Syndicate 386 QBE Underwriting Limited David Harries

Description

Syndicate 386 is a specialist writer of non-US dollar liability business. It underwrites in three main areas: international liability, UK & Ireland, and professional indemnity, split 40%/40%/20% in 2015, but intends to shift slightly to 42%/38% International/UK and Ireland liability in 2016. International liability comprises worldwide general liability business including products guarantee and recall. Business is written in over 100 countries although Australia (24%), Canada (27%) and Europe (29%) are the most significant. The UK & Ireland account consists principally of employers’ liability and public liability, split 53%/47%, underwritten on both an excess and primary basis. The professional indemnity book includes professions such as solicitors, design and construction professionals, accountants, engineers, surveyors, insurance brokers, architects, IT professionals and others. 90% of the risks are domiciled in the UK, Ireland, Australia or Canada. In all cases, exposures to the USA and its legal system are studiously avoided. Syndicate Business Forecast

2015 premium volumes are running approximately 9% behind plan (at £336m) due principally to price competition, caused by overcapacity and local market competition. For 2016, further rate reductions for international liability business are expected to be offset by increases in UK & Ireland driven by exposure growth, resulting in a broadly flat overall rate assumption for 2016. This, coupled with an increased focus on client value and cross selling opportunities, is expected to deliver modest growth for 2016 to £355m gross written premium (net of acquisition costs) or 87% of capacity. However, discussions with the management team reveal an expectation that subsequent iterations of the plan are likely to be more pessimistic as the second quarter saw increased levels of competition. Large loss exposures are generally identical to those for 2015. Significant Points

a) No change is planned to the syndicate capacity of £352.5m.

b) Syndicate cash and investments stood at £1,030m as at 31 March 2015. The funds are managed by QBE Investment Management in a conservatively managed portfolio with duration of less than 12 months.

c) The syndicate had historically not hedged its exposure to foreign currencies. It incurred foreign exchange losses to the 2011 and 2012 years of account, but members have otherwise benefited from this strategy. QBE reviewed the strategy, and commenced hedging during the second half of 2014.

d) Syndicate 386 writes business in conjunction with QBE Insurance Europe Limited (a non-Lloyd’s company), and Syndicate 1886, a sub-syndicate of QBE Syndicate 2999. New and renewal business is allocated between the various businesses according to an agreed set of protocols.

41

2010 2011 2012 2013 2014Aviation - - - - -Casualty 59.9 66.5 82.8 95.2 91.1Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property - - - - -Reinsurance 67.2 74.9 81.7 88.4 98.9Whole Account 60.6 67.3 82.7 94.4 92.0

Gross Net Gross Net Loss of Major Complex 50% 22% 57% 25% Hatfield Colliery (Feb 2013) 0.4% Building Products 28% 21% 28% 21% Alberta flooding (June 2013) 0.3% Food contamination 28% 21% 28% 21% Hurricane Irene (Aug 2011) 0.0% Pharmaceutical Contamination 28% 21% 28% 21% Superstorm Sandy (Oct 2012) 0.0% UK House price collapse 14% 14% 14% 14% Aviation Collision 8% 8% 10% 10% California Earthquake - Los Angeles 8% 8% 10% 10%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 99.9 101.8 99.8 101.1 89.0Reinsurance Premium % Gross Premiums 10.7 11.9 18.4 18.6 17.9Pure Year Underwriting Result % Capacity 37.4 45.5 54.3 51.4 46.8Prior Years Underwriting Result % Capacity 27.6 24.3 2.7 5.7 -3.9RITC received % Capacity 219.1 212.8 185.9 173.4 149.0IBNR % Net Outstanding Claims 70.0 68.4 57.6 61.9 59.9Operating Expenses % Capacity -0.6 12.3 15.3 19.6 14.1

Combined Ratio by Class of BusinessClass of Business Split

57.7%11.3%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

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10.1%3.9%0.0%

3.0%14.1%

0%

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35%

40%

45%

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Energy

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Accident & Health

% of Business Written2016 2015

42

Syndicate 510 Tokio Marine Kiln Syndicates Limited (TMK) “Kiln”

Syndicate 510 offers a broad spread of predominantly short tail insurance and reinsurance. There is a consistency of approach and a deep and reassuring pool of talent, often trained in-house from the well renowned graduate recruitment scheme. The business had a long term aversion to casualty classes but has recently embraced it with the development of Chris Jones’ international (excluding USA) liability book which is set to exceed 10% of the whole account in 2016. We take comfort from the appointment of David Constable (former underwriter of QBE Syndicate 386) as an agency non-executive director. As we would expect of TMK, the book has been researched and has proper oversight. Although the results look slightly lacklustre compared to some peers, we have confidence in TMK, where there is conservatism throughout the organisation. We continue to recommend the syndicate as the core part of your Lloyd’s portfolio.

Strengths / Opportunities:

Broad spread composite account with empowered underwriters leading a large proportion of the account.

Prudent reserving; prior years have contributed an average of £26 million (3.5% of capacity) to the closing year result over the past seven closed years. The ratio of IBNR to outstanding claims has continued to increase over this period and has reached a high point of 61% at the close of 2012.

The worldwide office network of Tokio Marine provides an outlet for the syndicate’s specialty products.

The managing agency has taken stakes in key coverholders in order to secure increased lines on profitable books of business, including lender placed and flood insurance in the USA.

The syndicate enjoys long standing quota share reinsurance support from key European reinsurers which give consistency and certainty of cover as well as paying over-riders and commissions to offset expenses. These contributions have averaged more than £40m in the past seven years.

Strong supporters of private capital. TMK has a staff underwriting vehicle with 18 employees providing £3.4 million of capacity to the syndicate.

Short tail account; between 2010 and 2012, 70% of projected ultimate claims were settled within the first 36 months of each underwriting year.

Weaknesses / Challenges:

The liability division under Chris Jones (part of the Specialist Property, Liability and Motor division) has grown rapidly, and now accounts for more than 11% of the proposed account. The syndicate will also be writing UK employers’ liability and public liability in 2016. The managing agent appointed David Constable, former Active Underwriter of QBE Syndicate 386, as a non-executive director in 2013 to help oversee this book.

Results have been somewhat lacklustre. The seven year average 2008 to 2014 of just under 10% compares unfavourably to other core third party syndicates such as Hiscox 33 (13.0%), Atrium 609 (12.3%), Beazley 623 (10.5%), MAP 2791 (13.3%).

The syndicate’s reinsurance book is built on some very long standing relationships with the larger reinsurers. Unlike the small insurance companies in the USA, the role of reinsurance buyer in a large company can be short-term and often the incumbent wants to make an impression in his career progression by changing the structure and sometimes the security of the reinsurance programme.

43

Rating (outlook): B+ (stable) Risk Rating: Medium

Return Rating: 6 Capital Rating: 8

Catastrophe Rating: 6 Tail Rating: 7

Cost Rating: 4 Scarcity Rating: 5

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 588 630 923 922 1,064 1,064 1,064 1,064 1,064Gross Premiums 585 666 683 695 865 829 852 883 872Net Premiums 392 431 466 490 603 599 593 621 611Pure Year Result -28 65 2 73 81 126 87 93 73Prior Year Result 33 25 32 24 31 15 15 15 15Operating Expenses 63 13 -23 -36 -31 -50 -35 -60 -42Investment Return 31 17 14 8 16 11 14 15 17

Result (Est) £m 99 120 25 69 90 102 82 64 64% 17% 19% 3% 7% 9% 10% 8% 6% 6%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryForecast income has often been set at an aspirational level, ratherthan being a true forecast. Within the six operating units there arealways elements that either under- or outperform and each unithead is responsible for his own business plan. We have reducedthe forecast income closer to the most recent re-forecast for2015. We continue to build in prior releases but have reducedthese to around 60% of the recent levels. The account is short tailbut the increasing (non-dollar) liability content is likely to increasetail length and could increase scope for prior year movements.We do not yet factor this in as the account is still immature.

Auction CommentaryAuction Volume and Average Price

With over £400m of support from the three members’ agents, thisis the largest third-party syndicate at Lloyds. This means there isgenerally a good flow of capacity to the auction. Prices have beenmore stable than most, generally at a lower level than the otherlarge composite peers. TMK has been a regular buyer of smallparcels of capacity, securing £27m in 2011 and 2012. It missedout in 2013 but bid for £10m in each auction in 2014 at a price of15p. It was successful only in Auction One and securing only£1.2m. Clients of each members’ agent bought at least £1m ofcapacity in 2014. Syndicate 510 is the most actively traded allsyndicates in the the past six years with an aggregate of morethan £100m changing hands in this period.

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44

Syndicate 510 Tokio Marine Kiln Syndicates Limited (TMK) “Kiln”

Description

Syndicate 510 is a broad based composite insurer and reinsurer writing most lines of short tail business. The six operating divisions, in descending order of size, are: specialist property, liability & motor, including small commercial business and homeowners’ under delegated authorities, larger open market risks, motor and a book of international (but non-US) casualty business; marine & special risks, including hull & cargo, offshore energy, marine liabilities, excess of loss reinsurance, political risk, trade credit and contract frustration; reinsurance (US and international catastrophe); accident & health; aviation; and enterprise risk, including cyber risk, reputational harm, intellectual property, non-damage business interruption insurance and product recall. Each unit has an appointed active underwriter. Syndicate Business Forecast

Forecasts have tended to be on the aspirational side, set at a level to challenge underwriters to develop new business. Often, given the competitive conditions in the market, these targets have not been met in recent years. Forecast growth, with the gross income plan 6% ahead of latest 2015 reforecast (itself 6% ahead of 2014 reforecast as at 31 March 2015) may not be achieved. Premium volumes are projected to rise in the property unit by 7%, which includes the non-dollar liability book growing by 25%, as well as further growth in the delegated authority book, in the aviation book by 5% and in the enterprise risk unit by 53%. The latter unit’s growth arises out of expected increases in the cyber book, seeking to be a market leader in more niche lines of the coverage and also by increasing cyber business written under delegated authorities, using both the Tokio Marine network of offices as well as existing coverholders in the USA and Australia. The accident & health book is forecast to be flat, while there are reductions forecast for both the reinsurance and the marine and energy accounts. Significant Points

a) No change to the current capacity of £1,064m is planned for 2016.

b) Syndicate funds stood at £828m as at 30 June 2015

c) The Lloyd’s business was renamed Tokio Marine Kiln Syndicates Limited (‘TMK’) in November 2014, when the businesses of Kiln Syndicates and Tokio Marine Europe were merged. The renaming coincided with the relocation of the businesses to 20 Fenchurch Street, known as the “Walkie-Talkie”.

d) Paul Culham, previously head of the Marine & Special Risks and Enterprise Risks divisions was promoted to the role of Chief Underwriting Officer of TMK in July 2015 succeeding Richard Lewis, who remains Group Chief Underwriting Officer. Paul has been succeeded in both underwriting roles by his deputy, Peter Merton.

e) TMK adds a loading to its RDS exposures in the syndicate plans. The actual exposures are believed to be around 20% less than the published RDS, but relate to the syndicate’s current maximum appetite.

f) TMK has taken strategic investments in a number of US coverholders in order to secure larger lines on some better business. These are businesses that are well known to TMK and in which it has participated for many years.

45

2010 2011 2012 2013 2014Aviation 78.1 58.2 49.0 73.9 69.5Casualty 85.4 89.3 101.7 93.0 92.3Energy 72.8 98.1 66.0 81.7 77.9Life - - - - -Marine 83.8 87.0 95.7 87.4 92.8Motor 92.7 110.3 98.9 99.3 95.4Property 95.2 105.5 100.5 87.3 86.2Reinsurance 75.3 167.6 100.8 85.6 85.4Whole Account 87.6 103.9 93.8 87.5 87.2

Gross Net Gross Net Two Events 72% 23% 92% 16% Superstorm Sandy (Oct 2012) 7.2% Political Risks - South East Asia/China 21% 10% 24% 11% New Zealand Quake (Feb 2011) 6.4% California Earthquake - Los Angeles 31% 10% 43% 8% Tripoli Airport Attack (July 2014) 0.9% US Terrorism - Exchange Place 8% 5% 19% 8% Thailand Floods - (Oct 2011) 0.9% Gulf of Mexico Windstorm 41% 11% 49% 8% New Zealand Quake (Jun 2011) 0.7% North East Windstorm 42% 13% 51% 8% Hurricane Odile (Sept 2014) 0.7% Florida Windstorm - Tampa Bay 35% 8% 42% 7% Costa Concordia (Jan 2012) 0.6%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 99.6 105.8 74.0 75.3 81.4Reinsurance Premium % Gross Premiums 33.0 35.3 31.7 29.5 30.3Pure Year Underwriting Result % Capacity 30.6 47.8 25.9 34.9 36.2Prior Years Underwriting Result % Capacity 5.7 4.0 3.4 2.6 2.9RITC received % Capacity 50.2 50.5 36.0 37.0 35.3IBNR % Net Outstanding Claims 42.8 44.7 41.2 50.0 61.0Operating Expenses % Capacity -10.7 -2.1 2.5 3.9 2.9

Combined Ratio by Class of BusinessClass of Business Split

3.7%6.2%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

10.2%2.7%

26.3%

4.5%46.5%

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100%

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Liability Treaty

Liability

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Accident & Health

% of Business Written2016 2015

46

Syndicate 557 Tokio Marine Kiln Syndicates Limited (TMK) David Huckstepp

Although the number does not start with a “6”, this is, to all intents and purposes, a special purpose catastrophe syndicate writing a quota share reinsurance of Syndicate 510. Forecasts for the open years are more encouraging than the recently closed years of account, but it is still apparent that this syndicate has underperformed the newer class of catastrophe SPS including syndicates 6103, 6104 and 6106. The book continues to be of a high quality, with many clients having a trading relationship with Kiln (and now TMK) for more than 50 years. There are changes in reinsurance buying patterns that may not work to the benefit of the syndicate but this syndicate has many of the attributes we appreciate. Reserving is prudent, the approach is consistent and, for those who understand the risks, we continue to recommend support. Strengths/Opportunities

Exceptional book of high quality reinsurance partners, many of whom have traded with the Kiln group since its formation in 1962.

Membership of the TMK fleet including Syndicates 510 and 1880 allows this syndicate to punch above its weight in terms of leadership profile, business showing and achieving the desired lines on slips.

Short tail account; an average of 69% of ultimate claims are paid within the 36 month account period (2010 to 2012 years of account).

Syndicate 557 has an inward RITC that generates both investment income and reserve releases. The RITC payable to the 2013 account was £21m. The average release from reserves over the past seven closed years has been £1.4m (1.9% of capacity). The comparative numbers for other catastrophe specialist syndicates are much smaller.

The reinsurance market is responsive to losses and the syndicate has traditionally paid any loss with interest the following year (e.g. 2005 loss 14%, 2006 profit 40%; 2001 loss 34%, 2002 profit 40%).

Unlike its catastrophe specialist SPS peers, capacity on this syndicate carries with it rights of tenure.

Weaknesses/Challenges

Results have been distinctly lacklustre by comparison with peers. The seven year average to 2014 including forecasts is a profit of 7.5% of capacity. This compares poorly to Syndicates 6103 and 6104 with their averages of 32% and 31% respectively over the same period. A comparison is slightly unfair as 6103 writes only US business while 6104 wrote a small international book over the period. The majority of catastrophe losses have been international, rather than US during this time.

Although there is great benefit in the long standing relationships espoused by TMK, there does appear to be a trend within the client population whereby the reinsurance buyer can be a transient appointment and the incumbent looks to “make a difference” by changing the program or introducing elements of non-traditional reinsurance such as ILWs or Cat Bonds.

Its reinsurance programme, designed to protect the syndicate against very significant losses, has provided little by way of mitigation. Despite being re-designed in 2013, it seems unlikely that the amended programme will provide sufficient protection against the pattern of large but not enormous losses of the type seen in 2010 and 2011.

Capital requirements are high. We calculate that a spread member adding additional capacity would have a marginal capital requirement of 110%. (In other words, in order to take £10,000 share members would be required to increase FAL by £11,000)..

47

Rating (outlook): B (watch) Risk Rating: Very High

Return Rating: 8 Capital Rating: 1

Catastrophe Rating: 1 Tail Rating: 7

Cost Rating: 9 Scarcity Rating: 8

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 120 120 120 60 56 46 39 35 35Gross Premiums 31 39 33 29 34 29 21 18 16Net Premiums 27 34 28 25 27 24 19 16 14Pure Year Result 14 22 -28 7 4 9 11 6 5Prior Year Result 1 1 0 1 1 1 1 1 1Operating Expenses -2 -7 -4 -3 -2 -4 -4 -4 -3Investment Return 4 2 1 0 1 0 1 1 0

Result (Est) £m 17 18 -30 6 3 7 9 3 3% 14% 15% -25% 10% 6% 15% 22% 10% 8%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryThe major component of the loss ratio is the catastrophe andmajor loss element, accounting for around 75% of the total in thepast twelve years. Planning loss ratios include a provision forattritional losses but are based on average loss experienceadjusted for rating levels. There is considerable volatility so ourforecast is what we expect given “average” catastropheexperience. The recent absence of major losses serves to reducethe overall level of claims’ reserves within the RITC, and is likely intime to reduce the scope for reserve releases. The reserves haveconsistently delivered a surplus and we expect this to continue,albeit at lower rates.

Auction CommentaryAuction Volume and Average Price

The advent of competition in the form of alternative specialistcatastrophe syndicates has undermined the price of Syndicate557. Supply has greatly exceeded demand in recent years to theextent that capacity has been returned to the managing agencyand the syndicate total capacity has been allowed to fall. AtAuction Three, more than £3.6m was left unsold. The averageprice was less than 0.2p. Hampden was the most significantbuyer, securing 99.5% of capacity that traded. However, it waspossible to be allocated the capacity from dropped capacityreturned to the managing agent at nil cost.

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48

Syndicate 557 Tokio Marine Kiln Syndicates Limited (TMK) David Huckstepp

Description

Syndicate 557 writes a quota share reinsurance of Syndicate 510’s reinsurance division. Although members have evergreen rights of participation and the capacity is eligible for auction, the syndicate operates in many other respects as a special purpose syndicate. The largest part of the book is North American catastrophe reinsurance, followed by (in declining order of scale) a book of international (i.e. non-US and Canada) catastrophe reinsurance, per risk excess of loss, pro rata treaties and a small book of retrocession. Syndicate Business Forecast

There are forecast reductions in all areas of the account of 12% on average, with rate reductions expected to continue, despite some reinsurance contracts needing to be repriced in order to be completed in the July renewals. US exposures are considered better priced than international ones, and with careful risk selection prices can be adequate, so there is only a small reduction in gross and net RDS exposures. Away from the US, prices have fallen more rapidly, from a lower base and the business is extremely selective, formed of long term relationships with core clients. Risk excess rates are falling more slowly, although there are concerns around the broadening of terms and conditions, and there is a forecast 16% reduction in exposures despite a 6% forecast reduction in rating levels. Significant Points

a) Capacity is projected to be unchanged at £35m. Support from members has waned in recent years, largely in consequence of the competition for catastrophe opportunities offered by the special purpose syndicates. Without any formal de-emption, capacity has dropped from £60m in 2011.

b) Cash and investments stood at £44.9m as at 30 June 2015.

c) The syndicate’s parent does not participate as a capital provider. Although some interpret this as equivocal support for the syndicate, this is not the case. The reinsurance book is written in a consortium between Syndicate 510 and the Syndicate 1880, where Tokio Marine has 55% of the former and 100% of the latter. Syndicate 557 writes as a reinsurer of Syndicate 510, so any additional exposure would be beyond the risk appetite of the group. TMK has said that it will continue to run Syndicate 557 for the benefit of third party members for as long as there is sufficient demand to make the syndicate viable.

d) The managing agent adds a loading to its forecast RDS exposures as reported here and in Argenta clients’ PePAs. The numbers reported here relate to the maximum expected exposure, we understand actual exposures are likely to be around 20% lower.

49

2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - -Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property - - - - -Reinsurance 86.4 225.3 75.6 56.4 55.9Whole Account 86.3 228.4 75.6 56.9 55.9

Gross Net Gross Net Two Events 203% 140% 226% 152% New Zealand Quake (Feb 2011) 24.7% North East Windstorm 147% 89% 165% 96% Superstorm Sandy (Oct 2012) 23.2% Gulf of Mexico Windstorm 126% 67% 135% 67% Germany hailstorms (July 2013) 7.0% European Windstorm 93% 78% 93% 60% Geismar explosion (June 2013) 3.6% California Earthquake - San Francisco 89% 58% 92% 56% Nebraska Storms (June 2014) 3.6% Florida Windstorm - Miami 64% 52% 71% 55% Thailand Floods - (Oct 2011) 3.3% US Terrorism - Exchange Place 16% 14% 58% 47% Italian Earthquake (May 2012) 2.9%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 26.1 32.3 27.4 48.8 59.5Reinsurance Premium % Gross Premiums 11.9 12.9 14.2 14.9 19.1Pure Year Underwriting Result % Capacity 18.1 27.0 -17.8 13.9 8.9Prior Years Underwriting Result % Capacity 1.0 0.9 0.3 1.6 1.3RITC received % Capacity 7.5 8.6 8.9 45.3 33.3IBNR % Net Outstanding Claims 69.5 69.9 26.5 46.0 52.1Operating Expenses % Capacity 1.6 5.9 3.0 4.5 3.6

Combined Ratio by Class of BusinessClass of Business Split

3.5%4.5%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

4.4%0.2%

32.2%

2.0%53.3%

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Property Treaty

Property

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Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

50

Syndicate 609 Atrium Underwriters Limited Richard Harries

The syndicate has a coherent, underwriter led approach. It continues to be considered one of the more attractive homes for entrepreneurial and motivated underwriters. Growth for 2016 is largely in the areas previously written by Syndicate 570 (with which 609 merged for the 2012 year of account), including US property and casualty binding authorities, where the AUGold trading platform is growing, and international liability and UK & international property binder classes. The marine & energy liability class is also forecast to increase following the appointment of a new underwriter. The Atrium culture attracts capable and experienced underwriters, who are rewarded for success and empowered to achieve it. Returns have consistently been boosted by a prudent reserving strategy. We continue to recommend the syndicate as core to any portfolio. Strengths/Opportunities

The syndicate enjoys a good reputation for taking an innovative approach. It employs a number of market leading underwriters and attracts a good showing from brokers.

Reserves are set at the 80th percentile (meaning that only 20% of possible outcomes are worse than the syndicate’s held reserves) which is at a high level compared to peers. Releases from reserves have contributed an average of more than 10.5% of capacity at the close of the last seven underwriting years, with Syndicate 570 having had a marginally higher average release as it had a longer tail profile. The ratio of IBNR to net outstanding claims is at a high point of 146% at the close of the 2012 account.

The remuneration structure is based around the performance of the whole rather than that of individual line underwriters. Consequently there is incentive both to oversee other lines of business and to ensure that capacity is allocated to those best able to use it profitably.

Strong community of interest, eight directors (up from five for 2014) and a number of staff members provide an aggregate capacity of more than £2,450,000 (0.6% of the total capacity) to the syndicate. Atrium has indicated that this LLP will increase its capacity for 2016 as permitted under the Syndicate Pre-emption Byelaw.

Syndicate members also benefit from the reserving strength by way of a credit under Solvency II, which helps with the coming into line position.

Weaknesses/Challenges

The longstanding core book of highly volatile London market insurance business is becoming increasingly competitive. This business has been the main profit driver for Syndicate 609 for many years. Increasingly income is derived from lower margin and less volatile lines of business, often more closely associated with Syndicate 570 in the past.

The owners, Enstar and Stonepoint, acquired another Lloyd’s managing agency, Torus, during 2014. Torus has not performed nearly as well as Atrium. Torus Syndicate 1301 recorded an average combined ratio of 116% over the past five years, while Atrium Syndicate 609 achieved an average combined ratio of 82% in the same period and not once exceeded 100%. We sense that this could be a distraction for the owners and Atrium principals have to date resisted any efforts to get them involved in remediating the Torus business.

51

Rating (outlook): A (stable) Risk Rating: Medium

Return Rating: 7 Capital Rating: 8

Catastrophe Rating: 7 Tail Rating: 5

Cost Rating: 3 Scarcity Rating: 2

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 216 200 275 274 420 420 420 421 421Gross Premiums 158 188 183 171 274 300 268 289 290Net Premiums 124 142 142 131 226 252 233 249 252Pure Year Result 23 54 32 26 73 65 68 48 50Prior Year Result 11 18 21 25 39 36 20 18 18Operating Expenses 3 -20 -14 -13 -42 -54 -50 -45 -46Investment Return 8 6 7 2 11 5 5 5 6

Result (Est) £m 45 58 46 40 74 55 42 26 28% 21% 29% 17% 15% 18% 13% 10% 6% 7%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryAtrium tends to set premium forecasts at an aspirational level inorder to challenge its underwriters. Historically, especially in softmarket conditions, the syndicate has undershot premium levelsand we would not be surprised to see the same happen in 2016.Atrium is the only managing agent that builds in prior-yearreleases at any point before the closure of the year immediatelyprior to the forecast year. These forecasts tend to be on theconservative side and the syndicate has exceeded them in everyyear to date. All open years currently look good and we expectimprovements in the pure year results at the time of closure.

Auction CommentaryAuction Volume and Average Price

Auction prices were down in 2014, with the price falling from anaverage of 57p in 2013 to just over 41p in Auction Three. At £10mthe total capacity transacted was at a five-year high. The alignedvehicle bid for £20m in each auction but was successful only inAuction One when it picked up £336,000 at its bid price of 25p.Under the averaging effect of the auction allocation system, thefact that some buyers paid more than 70p allowed others to beallocated capacity at much lower than the average price. Over thethree main auctions, small spread vehicle Athanor bought £1.25mbut the major buyers were again private clients, with £3.1m boughtby clients of Argenta and £3.4m by clients of Hampden.

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Syndicate 609 Atrium Underwriters Limited Richard Harries

Description

Syndicate 609 is a multi-line composite syndicate, making a speciality of writing volatile classes. The main classes include aviation, space & satellite, war & terrorism, and direct & facultative property risks. A number of more stable and predictable classes are written, including accident & health, property & casualty binders, professional liability, casualty treaty and general liability. During 2013, specialist international casualty classes (principally in Australia, Canada and South Africa) were added, and the syndicate has recruited a marine liability underwriter, who will be joining in October 2015, as well as an international professional indemnity underwriter, due to arrive in 2016. Much of the business is written through Atrium’s service companies and consortia. Syndicate Business Forecast

Target total premium income for 2016 is 3.7% above the current expectation for 2015 at £308m, representing 73% utilisation of capacity. The main areas of growth are in the delegated authority classes, in particular US property & casualty (‘P&C’), where the AUGold website platform in the USA is a growing source of premium income. US P&C binding authorities will increase from just under 20% of the whole account to 22% for 2016. Continued growth is also forecast in international liability and UK & international property binder classes and the marine & energy liability division is expected to grow with the arrival of a new underwriter. Reductions are expected in upstream energy, non-marine direct & facultative property, and aviation hull & liability, due to anticipated rate reductions. In current market conditions, there is a shift in the balance of the account away from the more volatile classes towards lower margin delegated underwriting business. Significant Points

a) No change to syndicate capacity of £420.8m is anticipated for 2016.

b) Syndicate funds were £542 million as at 30 June 2015.

c) The syndicate merged with Syndicate 570 for the 2012 year of account. Syndicate 609 assumed the reinsurance to close of the 2011 and prior liabilities of Syndicate 570 into the 2013 account for a reinsurance to close premium of £135 million.

53

2010 2011 2012 2013 2014Aviation 52.7 70.5 56.7 90.2 144.1Casualty 87.2 83.6 102.1 98.7 88.4Energy 67.5 75.5 39.3 82.5 57.2Life - - - - -Marine 87.9 78.6 58.1 71.3 89.7Motor - - - - -Property 81.1 92.7 109.4 76.7 79.0Reinsurance 77.6 194.3 101.2 41.9 79.4Whole Account 75.8 89.7 79.3 82.1 85.4

Gross Net Gross Net Two Events 32% 25% 39% 29% Japanese Earthquake (Mar 2011) 6.7% Gulf of Mexico Windstorm 21% 15% 27% 17% New Zealand Quake (Feb 2011) 6.0% North East Windstorm 19% 15% 23% 17% Superstorm Sandy (Oct 2012) 5.3% California Earthquake - San Francisco 22% 14% 27% 17% Thailand Floods - (Oct 2011) 3.4% Florida Windstorm - Tampa Bay 15% 12% 18% 14% Costa Concordia (Jan 2012) 2.4% Aviation Collision 22% 11% 25% 12% Gas FPSO Gryphon (Feb 2011) 2.1% Japanese Earthquake 10% 7% 12% 9% Malaysian Airlines (March 2014) 1.7%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 73.2 94.0 66.6 62.4 65.4Reinsurance Premium % Gross Premiums 21.2 24.6 22.0 23.6 17.4Pure Year Underwriting Result % Capacity 30.4 53.5 30.3 28.6 43.2Prior Years Underwriting Result % Capacity 4.9 9.0 7.5 9.1 9.3RITC received % Capacity 68.4 79.3 53.0 59.2 69.5IBNR % Net Outstanding Claims 96.8 130.0 97.6 119.3 145.7Operating Expenses % Capacity -1.3 9.9 5.1 4.9 10.0

Combined Ratio by Class of BusinessClass of Business Split

2.5%6.3%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

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2016

Geographic Split

6.7%3.6%

27.4%

5.1%48.4%

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Accident & Health

% of Business Written2016 2015

54

Syndicate 623 Beazley Furlonge Limited Neil Maidment

The most significant differentiator continues to be a very large book of specialty lines business, encompassing various flavours of US casualty business. Financial lines are avoided, but there are some volatile accounts, including liability cover for medical malpractice, lawyers, architects & engineers and directors’ & officers’. Beazley has assumed a leading position in most of these lines as the underwriting team works hard to identify client needs. The syndicate was a pioneer in writing a policy to protect against hacking of electronic information. Beazley Breach Response is now a well-established product, promoted with the slogan ‘A data breach isn’t always a disaster. Mishandling it is’. Reserving levels are amongst the highest in the market and there is a good track record of releases, which have increased the average result by 6.5% of capacity in the last seven closed years. We continue to rate this syndicate “A” and recommend it as a core part of your portfolio. Strengths/Opportunities

Highly regarded underwriter led business with a number of able individuals.

Innovative and proactive approach. Beazley has long embedded claims handlers into underwriting teams with a view to identifying potential problems at the time of underwriting risk. The claims function is often key to retaining business and also to the better than average results achieved.

Consistent and conservative reserving. A release from reserves of at least £10m has been made in each of the last seven closed years. The ratio of IBNR to net outstanding claims has reduced slightly, being 172% at the close of the 2012 account. Claims reserves are held at a margin above actuarial best estimates, varying between 5% and 10%, and stood at 8.8% as at 30 June 2015.

Community of interest is shown by way of large personal shareholdings in Beazley plc and through an innovative deferred bonus scheme whereby bonuses fund a staff LLP that supports the syndicate with funds at risk if the syndicate loses money.

Consistently profitable, the syndicate is yet to record a loss in 26 closed years.

Weaknesses/Challenges

Some difficult classes are written, especially in liability arena. Beazley has been the one syndicate to thrive in the sector and it is often the only remaining London market business on a risk. Claims service is a factor, as is the strict insistence on the claims made wording, but such business can be volatile and could produce some nasty surprises.

As a listed company, there can be pressures to show top line premium growth and maintain risk appetite when market conditions weaken.

Beazley plc is now a very large business employing almost 1,000 staff worldwide. While it is clearly an attractive career choice for ambitious individuals, managing the aspirations of such a large and broadly spread group of people could be a challenge.

55

Rating (outlook): A (stable) Risk Rating: Medium to Higher

Return Rating: 7 Capital Rating: 8

Catastrophe Rating: 2 Tail Rating: 4

Cost Rating: 2 Scarcity Rating: 2

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 158 150 215 215 215 225 243 230 258Gross Premiums 176 190 167 169 169 188 185 187 208Net Premiums 140 117 125 128 125 148 148 139 165Pure Year Result 19 29 13 21 35 37 40 39 40Prior Year Result 12 10 10 17 13 11 8 8 8Operating Expenses -15 -13 -14 -20 -27 -35 -34 -37 -37Investment Return 4 5 4 4 8 6 6 5 5

Result (Est) £m 21 31 13 22 29 20 20 14 16% 13% 21% 6% 10% 14% 9% 8% 6% 6%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryAs a listed company, Beazley does not provide indicative lossratios for fear of disseminating price sensitive, forward-lookinginformation. Given the size of the specialty line book, loss ratiostend to be stable with less impact from catastrophe losses, whichhave averaged around 7% of net premium over the past decade.Reserve releases have formed a significant part of the overallresult, with an average of £12m over the past seven closed years.We have modelled these as continuing into the future, albeit at aslightly lower rate.

Auction CommentaryAuction Volume and Average Price

Syndicate 623 has always been one of the more sought-after andby the final auction last year was trading at a price higher than allbut Syndicates 1176, 386 and 2525. Beazley did not bid forcapacity in 2014, the first year for many that it has not done so. Itlast successfully bid for capacity in 2012. The syndicate enjoysbroad support from the three members agencies and their clientsbought and sold all capacity traded. Hampden clients weremarginally the largest buyers, ahead of Argenta.

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Syndicate 623 Beazley Furlonge Limited Neil Maidment

Description

Syndicate 623 is a major composite with five operating units, each writing a range of products through both the London market and overseas offices. The largest single division is specialty lines, representing 46% of the whole. US business, including professional liability, directors’ & officers’ and medical malpractice, forms a large part of this. All US liability business is written on a claims made form. The remaining teams, by descending order of premium volumes, are: property (including risk managed Fortune 500 type risks, smaller business through binding authorities and engineering), marine (including hull, cargo, war & piracy and aviation), reinsurance and political risk and contingency. Syndicate Business Forecast

Beazley is forecasting premium growth of 5%, in spite of rate reductions at an average of 2%. Areas of growth include: satellite and cargo within the marine book; contingency within the political risk and contingency account; the small business unit and the excess and surplus lines part of the US account within the property division; and the cyber product line within the specialty lines account. Beazley’s RDS exposures often look larger than we would expect given the business mix and our understanding of its risk appetite. This is a consequence of underwriting a book of business that includes US binding authorities and direct & facultative property, as well as catastrophe reinsurance. Significant Points a) A pre-emption of 12.04%, increasing capacity to £258m, is proposed for 2016.

b) Beazley presents its accounts in US dollars.

c) Syndicate 623 underwrites in parallel with the wholly aligned corporate syndicate 2623. Beazley has now aligned the two syndicates’ investment strategies.

d) As a public limited company, Beazley plc is very careful with the dissemination of price sensitive information. We receive a slightly less detailed syndicate business forecast from the managing agent, but it does provide the full document once it has been approved by Lloyd’s, usually in October.

e) Beazley made a mandatory offer to members of Syndicate 623 in 2006. Although it owns more than 75% the syndicate it is not obliged to make any further offers for capacity.

f) Syndicate funds as at 30 June 2015 stood at £395 million. The average duration of the entire Beazley portfolio was 1.4 years (down from 1.8 years at the end of 2014).

57

2010 2011 2012 2013 2014Aviation - - - - -Casualty 94.4 95.1 98.9 99.6 101.5Energy 72.9 71.3 88.1 72.5 85.9Life - - - - -Marine 82.2 80.6 68.6 70.1 78.9Motor - - - - -Property 88.0 101.6 84.6 75.1 86.8Reinsurance 90.7 153.0 92.4 57.9 81.9Whole Account 88.8 101.7 89.1 81.4 91.2

Gross Net Gross Net Two Events 72% 36% 71% 35% Superstorm Sandy (Oct 2012) 5.7% Gulf of Mexico Windstorm 42% 21% 41% 20% New Zealand Quake (Feb 2011) 4.6% North East Windstorm 38% 21% 38% 20% Japanese Earthquake (Mar 2011) 3.8% Florida Windstorm - Tampa Bay 42% 18% 41% 18% Thailand Floods - (Oct 2011) 2.0% California Earthquake - San Francisco 53% 17% 53% 17% Hurricane Odile (Sept 2014) 0.7% European Windstorm 24% 13% 24% 13% Tripoli Airport Attack (July 2014) 0.7% Japanese Earthquake 21% 12% 21% 12% Alberta flooding (June 2013) 0.3%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 111.5 128.2 77.5 78.6 78.8Reinsurance Premium % Gross Premiums 20.9 38.1 25.0 24.0 25.9Pure Year Underwriting Result % Capacity 43.3 50.8 28.3 32.3 41.3Prior Years Underwriting Result % Capacity 7.8 6.9 4.7 7.8 6.2RITC received % Capacity 117.1 142.3 97.7 98.9 103.7IBNR % Net Outstanding Claims 0.0 186.9 184.1 188.0 172.3Operating Expenses % Capacity 9.2 8.9 6.7 9.2 12.5

Combined Ratio by Class of BusinessClass of Business Split

7.2%8.9%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

6.2%2.3%

14.9%

5.2%55.3%

0%

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Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

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Property Treaty

Property

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Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

58

Syndicate 727 S A Meacock & Company Limited Michael Meacock

It is hard to envisage anyone ever eclipsing Michael Meacock’s fifty years as active underwriter. He or she would have to be appointed young and to work well past normal retirement age, just as Mr Meacock has done. He says the intellectual challenge of dealing with brokers still enthuses him and that there is little else that he would prefer to be doing. In spite of some gloomy commentators suggesting that the agency, one of the three smallest at Lloyd’s, would struggle to meet the requirements of Solvency II, all hurdles to date have been cleared. The syndicate continues to embody much of the best of Lloyd’s, a thorough understanding of risk and reward and a willingness to take a view. The syndicate’s prior year results are testament to a rigorous reserving strategy. Of course, with the active underwriter not far off his 80th birthday (he will be 81 by the time the 2016 account closes), there is the question of what happens next. We sense that most members of the syndicate understand this, and it is largely why the syndicate is not rated higher than “B”. For those who understand the unique features of this business, we are happy to recommend continued support. Strengths/Opportunities

Renewal retention ratios are very high, running at 87% in January 2015. Many trading partners, including reinsurance cedants and coverholders, have enjoyed business relationships that stretch back over much of Mr Meacock’s 50 year tenure as active underwriter.

Strong supporter of private capital and the annual venture. Michael Meacock, his immediate family and directors of the agency provide around 25% of the syndicate’s capacity through a number of underwriting vehicles.

Exceptionally robust reserves. More than £64m has been released from prior years over the past five closed years, but the RITC is still more than 200% of capacity. The ratio of IBNR to outstanding claims has consistently been one of the highest, and was in excess of 300% (a high) at the close of the 2012 year of account.

Weaknesses/Challenges

The longevity of the underwriter is becoming more of an issue as there is little certainty as to the exact proposals for succession. The deputy underwriter is himself approaching (normal) retirement age. Mr Meacock is highly regarded at Lloyd’s but there can be no guarantee that the successor would be treated with the same light touch by the regulator.

There has been little or no growth, the 2015 premium volume is scarcely 50% higher than that of twenty years ago. The underwriter prefers to pare the book back and increase its overall quality rather than expand. This means that the syndicate has fewer contracts, which become more important to the whole, and thereby potentially increase volatility.

The reserving approach, where little profit is released until there is a high degree of certainty as to the final outcome, means that the syndicate often looks poor in comparison to peers in the benchmarking procedures used by Lloyd’s PMD.

Given their length of service, none of the managing agent’s non-executive directorate could be considered truly independent.

59

Rating (outlook): B (stable) Risk Rating: Medium to Higher

Return Rating: 7 Capital Rating: 7

Catastrophe Rating: 5 Tail Rating: 2

Cost Rating: 3 Scarcity Rating: 2

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 74 74 80 80 80 81 81 81 81Gross Premiums 94 60 59 65 63 57 52 46 48Net Premiums 92 58 58 63 62 56 51 45 47Pure Year Result -1 4 -9 -7 2 3 3 2 2Prior Year Result 7 9 19 18 12 10 8 6 6Operating Expenses -1 -5 -7 -5 -7 -7 -7 -7 -7Investment Return 6 3 6 3 8 2 2 5 5

Result (Est) £m 11 11 9 8 9 8 6 6 6% 15% 16% 11% 11% 12% 10% 8% 7% 7%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryClosing years are reserved on a very conservative basis. Three of the last five years have been closed with a pure year loss, with theoverall result brought into profit by releases from the old years.Although the forecasts are intended to be for the pure year only inthe first instance, there is an element of prior year release built in.As the year progresses, the prior year content increases but thepure year can often deteriorate, albeit that the overall forecasttends to improve. We expect substantial reserve releases onclosure of all open year as new reserves on the closing yearreplace those released from the old years.

Auction CommentaryAuction Volume and Average Price

Capacity was particularly sought after, with more than £12m bidfor but just £2.2m tendered for sale. All successful buyers paidmore than 52p and all capacity tendered was trade with theexception of two blocks at 60p and 66p. Meacock’s ownunderwriting vehicle added £455,000 with successful bids inAuctions One and Three. There were also unsuccessful bids for£2m of capacity in each auction, pitched at 45p. Hampden clientsbought the most capacity, with Alpha selling the most. There were buyers and sellers from all of the three members’ agencies.

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60

Syndicate 727 S A Meacock & Company Limited Michael Meacock

Description

Syndicate 727 is a generalist non-marine syndicate writing small lines across both short and long tail and direct and reinsurance classes. The emphasis is on risks emanating from the USA, Canada and Caribbean, although the balance of the account changes according to where the underwriter sees the greatest profit opportunity. The direct book is sourced through a network of coverholders, some of whom have traded with the syndicate for almost the entire tenure of the active underwriter. US liability is written on a claims-made form. Syndicate Business Forecast:

Treaty excess of loss business is expected to continue to reduce in 2016. This class represented 30% of the business plan for 2013 (although actual income did not reach planned level) but has halved to 15% of the whole in 2016. The underwriter finds rating levels for smaller business, often written under delegated authorities (binders account for 61% of the proposed account), to be more attractive. With most of the book written to long standing clients and coverholders, the remainder of the premium volumes are subject to less year on year change, with small reductions or zero growth estimated. The syndicate has a very small reinsurance spend, (budget is less than £1m) and maintains that it would write a similar book if no reinsurance was available, although opportunities are kept under close review. Significant Points

a) No change is planned to the current capacity of £80.8m for 2016.

b) Syndicate funds stood at £233.5m as at 30 June 2015. Unusually, these are managed in house by the managing agent rather than outsourced to a fund management company. Funds are currently held in short dated corporate bonds and in cash.

c) Profit commission is calculated on the rolling average performance over seven years. Should the average profit exceed 10% of capacity, profit commission will be 20%. If it falls below 10%, the profit commission reverts to 17½%. If the profit is less than 5%, the profit commission reduces to 15%. All of the above are subject to the usual two year deficit clause.

61

2010 2011 2012 2013 2014Aviation - - - - -Casualty 158.1 198.8 55.3 82.3 112.8Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property 97.3 77.3 114.7 94.4 78.7Reinsurance 85.1 118.9 103.2 88.6 62.9Whole Account 104.9 121.2 9.5 87.1 79.6

Gross Net Gross Net Two Events 37% 29% 43% 33% Superstorm Sandy (Oct 2012) 11.6% California Earthquake - Los Angeles 20% 18% 23% 21% Thailand Floods - (Oct 2011) 10.2% Florida Windstorm - Miami 20% 18% 23% 21% New Zealand Quake (Feb 2011) 8.8% Gulf of Mexico Windstorm 20% 18% 23% 21% Japanese Earthquake (Mar 2011) 7.6% North East Windstorm 17% 14% 19% 17% Alberta flooding (June 2013) 2.1% European Windstorm 14% 13% 17% 15% US Tornadoes (May 2011) 1.6% Japanese Earthquake 14% 13% 17% 15% Medolla Earthquake (May 2012) 1.3%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 127.4 81.3 74.4 81.5 79.2Reinsurance Premium % Gross Premiums 1.6 2.6 2.9 2.7 2.1Pure Year Underwriting Result % Capacity 22.0 33.2 16.3 18.6 27.2Prior Years Underwriting Result % Capacity 9.8 12.7 23.4 22.2 14.8RITC received % Capacity 175.7 237.2 226.3 218.8 219.9IBNR % Net Outstanding Claims 248.4 269.3 282.6 267.9 303.5Operating Expenses % Capacity 1.2 6.8 8.6 6.9 8.7

Combined Ratio by Class of BusinessClass of Business Split

9.9%3.5%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

1.6%1.5%7.2%

4.2%72.2%

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50%

60%

70%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 5 10 15 20 25 30 35 40

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

62

Syndicate 779 ANV Syndicates Limited Cathy Garner

Syndicate 779 is repositioning itself in the Lloyd’s life sector. For many years it has been a writer of specialist schemes via wholly-owned Lutine Assurance Services and Jubilee Europe. Both of these relationships have now ostensibly ended and the syndicate is attempting to establish a presence in the underwriting room at Lloyd’s as well as accessing business in conjunction with sister ANV Syndicate 1861’s accident & health book. There is an acceptance that the business is subscale and growth is targeted both in the Lloyd’s subscription market and via schemes and treaties. Cathy Garner, previously of TMK Syndicate 308, has recruited her former medical underwriter, Sue Clark, to assist in this growth. The account has been cleaned up, and it is encouraging to see the improvement in loss ratios so soon. The expense burden means we struggle to see the syndicate delivering a profit for the 2016 year of account and although we have been able to improve our overall rating from C to C+ and our risk rating from medium-to-high to medium, we still feel that further evidence of improvement must be demonstrated before we are able to recommend the syndicate for participation. Strengths/Opportunities

Cathy Garner has a successful track record as the former active underwriter of Syndicate 308 where she increased premium volumes by more than 400% and delivered an average closed year result of 9.7% capacity (last seven closed years).

Opportunities exist in the void created by life insurers’ desire to write only standard risks. The syndicate plans to exploit this through ANV’s managing general underwriting business, accessing business that is non-standard, for example impaired lives or expatriates.

The reinsurance programme has been restructured for 2015, giving the syndicate far more control over its risk appetite, without needing to refer to reinsurers.

Weaknesses/Challenges

Syndicate expenses are high, budgeted at 18.5% of syndicate capacity.

Solvency deficits caused by deferred acquisition costs are a problem for life syndicates seeking growth and can significantly increase a members’ overall capital requirement.

The syndicate has a number of touch points with UK and international retail clients requiring a significant resource to ensure compliance with FCA conduct risk requirements.

Life syndicates do not benefit from Lloyd’s network of direct insurance licences in the same way that non-life syndicates do. Licences and new business opportunities are therefore largely restricted to the UK, Japan and Europe and a handful of other territories. The rest of the world is accessible only via reinsurance.

There have been a number of accounts where the syndicate has withdrawn its capacity. We expect the overall performance of the syndicate to improve in consequence, but these discontinued accounts will continue to require management resource as they run off.

ANV is the only managing agency in which Argenta has an involvement that has so far not met the requirements of Solvency II. Although we understand this should be achieved in the coming weeks, it is likely to be a distraction to management at a time when the two former Jubilee and ANV businesses have yet to be fully integrated.

63

Rating (outlook): C (watch) Risk Rating: Medium

Return Rating: 1 Capital Rating: 7

Catastrophe Rating: 10 Tail Rating: 6

Cost Rating: 7 Scarcity Rating: 5

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 30 30 27 27 27 22 22 22 22Gross Premiums 17 17 18 16 17 13 10 13 17Net Premiums 11 9 10 9 10 7 7 11 15Pure Year Result -2 -5 1 1 -12 3 2 3 5Prior Year Result 10 8 0 0 15 0 0 0 0Operating Expenses -4 -2 -2 -2 -4 -3 -3 -3 -4Investment Return 1 1 1 0 1 0 0 0 0

Result (Est) £m 6 2 -1 -1 -1 0 -1 0 1% 19% 8% -3% -3% -3% 1% -7% 0% 3%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts Commentary2015 projected premium is around 55% ahead of 2014. At Q2,income is ahead but by less than 40% and we think it is unlikelythat 2015 forecast income will be achieved. 2016 growth is lessmaterial but has been benchmarked off initial 2015 numbers. Weexpect lower income for both years. Encouragingly, loss ratioshave improved with the account changes. We also expect thatthe newer business will be shorter tail than parts of the non-renewed book. The large reserve releases for 2010 and earlieraccounts related to the creditor book and these are unlikely to bereplicated. We build in no allowance for any reserve releases.

Auction CommentaryAuction Volume and Average Price

The syndicate had fallen out of favour in recent years with capacity prices falling very close to zero in 2013 when £5.7m of capacitywas tendered and just £204,000 bid for. Prices recovered during2014 largely due to the lack of any tendered capacity. Less than£500,000 of capacity changed hands. The price rose stronglybetween Auctions One and Two and was one of the largest pricerises in the year. With the exception of a block of capacitytendered at 20p in Auction Two and 15p in Auction Three, alltendered capacity was sold. There was a total of more than £3mof unsuccessful subscriptions. Hampden, which hasapproximately two thirds of the third-party capital on the syndicate,bought 95% of the capacity traded.

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64

Syndicate 779 ANV Syndicates Limited Cathy Garner

Description

With the recruitment of a new active underwriter in late 2014, the syndicate’s business has been re-segmented into six sub-classes. Individual life, written both on an open market basis and through binding authorities, represents 30% of the 2016 target account. Group life is the largest sub-class at 33%. The others are: morbidity, which is the life element of a policy covering permanent total disability or critical illness, at 5%; affinity (products tailored for specialised homogenous groups, such as sports associations, or a specific distribution method, such as workplace marketing) at 9%; treaty (5%); and executive death in service cover (18%). Part of the repositioning of the syndicate involves establishing a regular presence in Lloyd’s alongside ANV’s accident & health team at Syndicate 1861, which should improve access to London market brokers. New products will also be developed in conjunction with Syndicate 1861, combining life cover with accident & health and kidnap & ransom policies. Syndicate Business Forecast

The syndicate is forecasting premium income growth across all sub-classes, except executive death in service, of £3.7m, an increase of 26% over the current forecast for 2015. The largest area of growth is individual life where the drivers are an increased box presence and the hire of a new medical underwriter. Group life is also expected to increase as the portfolio is balanced away from conventional UK business and overseas direct markets are targeted. Anticipated changes to Lloyd’s licencing rules that will allow life syndicates to underwrite accident & health risks with effect from 1 January 2016 should allow growth in the morbidity sub-class, provided that certain operational details are clarified by then. Significant Points

a) No change is planned to the syndicate’s capacity of £22.3m.

b) Syndicate funds were £13.6m as at 30 June 2015.

c) Cathy Garner, previously active underwriter of TMK Syndicate 308, took over as active underwriter in November 2014 in succession to Jon Clarke, who has now left the business.

d) Former owner Ryan Specialty Group (RSG) continues both as a minority shareholder in ANV Syndicates Limited and also as a capital provider to the syndicate. RSG also owns two of the service companies that have provided business to the syndicate in the past. The volume of income from these businesses is now much reduced; indeed no new business specifically linked to Lutine or Direct Group (both RSG owned businesses) is assumed as part of the 2016 plan. The syndicate is subject to the “20% rule” that prohibits a syndicate from exceeding 20% of its gross written premium from related parties.

65

2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - -Energy - - - - -Life 96.0 94.9 108.2 88.0 94.4Marine - - - - -Motor - - - - -Property - - - - -Reinsurance - - - - -Whole Account 96.0 94.9 108.2 88.1 94.4

Gross Net Gross Net New Epidemic / Contagious Disease 13% 13% 12% 12% D Hager Death (Jan 2015) 1.9% Gulf of Mexico Windstorm 5% 2% Terror – Bomb in London 3% 2% US Terrorism - Exchange Place 3% 3% 3% 2% European Windstorm 1% 1% 1% 1% Japanese Earthquake 1% 1% 1% 1% Japanese Typhoon 1% 1% 1% 1%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 57.8 58.0 56.3 58.5 63.4Reinsurance Premium % Gross Premiums 37.7 46.2 43.5 40.9 39.9Pure Year Underwriting Result % Capacity 39.7 15.0 57.1 52.5 -2.8Prior Years Underwriting Result % Capacity 33.1 26.7 18.4 0.0 55.9RITC received % Capacity 127.6 111.4 119.0 0.0 71.5IBNR % Net Outstanding Claims - - - - -Operating Expenses % Capacity 13.4 5.1 13.3 7.2 13.4

2016

Geographic Split

0.0%2.3%0.0%

4.0%0.0%

Combined Ratio by Class of BusinessClass of Business Split

85.5%8.2%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

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Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

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UK Motor

Property Treaty

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Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

66

Syndicate 958 Canopius Managing Agents Limited Stephen Gargrave

Syndicate 958 will merge with Syndicate 4444 for the 2016 account. Those members who voted were unanimously in favour. The combined syndicates will trade as Syndicate 4444, for which there is a separate profile.

67

Rating (outlook): Risk Rating:

Return Rating: Capital Rating:

Catastrophe Rating: Tail Rating:

Cost Rating: Scarcity Rating:

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 250 250 280 280 280 220 175 185 -Gross Premiums 252 284 260 200 184 129 139 173 -Net Premiums 157 174 162 110 120 84 90 127 -Pure Year Result -11 28 -18 -22 -6 22 21 26 -Prior Year Result 8 3 -2 -1 24 3 0 0 -Operating Expenses 5 -15 -27 -14 -21 -20 -19 -22 -Investment Return 6 5 3 3 3 5 5 5 -

Result (Est) £m 9 21 -44 -34 0 11 7 9 -% 3% 8% -16% -12% 0% 5% 4% 5% -

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts Commentary

Auction CommentaryAuction Volume and Average Price

Canopius was an active buyer Syndicate 958 in the 2014 auctions, picking up £1.2m in Auction One, £1m in Auction Two and£400,000 in Auction Three. It was bidding for a total of around£10m and succeeded in buying 60% of the capacity traded. It hadbid for capacity in 2013, failing to secure any, but bought £27m in2012 at 3p. In 2014, Canopius increased its bid price from 10p inAuction One to more than 19p in Auction Three. In consequence,the average price increased from 10.8p to 20.2p. The balance ofthe capacity was bought by clients of Hampden and Argenta, butAlpha has a very small share of syndicate and did not buy anycapacity at all.

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68

Syndicate 1176 Chaucer Syndicates Limited Michael Dawson

The nuclear syndicate provides a unique opportunity in the Lloyd’s market. Returns have been exceptionally good, averaging almost 40% of capacity in the 25 years since it commenced underwriting. The underwriter constantly reminds us that there will be a big loss at some stage and he points out that attritional loss activity has increased. Progress is being made towards new builds in various parts of the world. The syndicate is prepared to entertain construction risks, although the underwriter fears that competition from non-nuclear underwriters may restrict opportunities. Once nuclear capacity comes on stream, the syndicate is one of a few able to write the risk. Government initiatives to pass the liability risk on to private insurers have caused policy limits to be increased, in turn pushing up premiums. The syndicate is keen to maintain its share of the risk pools, which has led it to pre-empt its capacity for the first time since 2008. Membership of the nuclear pools precludes the syndicate from buying reinsurance, so members have the option of buying reinsurance in their personal capacity if they wish to mitigate their overall exposure. We recommend support for members who have the appropriate risk appetite. Strengths/Opportunities

Syndicate 1176 holds a leading position in nuclear insurance and has produced exceptional returns in a class that has little or no correlation with any other major classes at Lloyd’s.

European governments are increasing the liability limits that nuclear installations must hold. The UK government has proposed an increase from £140m to £700m followed by a gradual increase to £1.2 billion. Other European governments have similar aspirations and this will increase the demand for insurance and the pool of available premiums.

The average release from prior years has been £3.5m (equivalent to almost 12% of capacity) over the last seven years. As liability limits increase, there is potential for larger releases.

Nuclear power is being re-evaluated by a number of countries as traditional energy sources are both scarce and the supply from overseas can become uncertain. A number of new plants are under construction, notably in China. The syndicate can and has written the newer Chinese reactors which it considers to be built to similar safety and maintenance standards as Western plants.

Weaknesses/Challenges

The syndicate assumes a maximum exposure in excess of 700% of capacity. In the event of a major nuclear incident, very substantial cash calls to fund immediate liabilities should be expected. Any liability element is likely to delay the closure of the account for many years.

Although competition from other insurers and reinsurers is relatively muted, business can be lost to companies that decide to self-insure.

Some of the older installations are nearing the end of their lives. Although nuclear safety continues to be paramount, the syndicate has experienced an increase in the level of attritional losses arising out of the non-nuclear element of the risk. Business planning loss ratios and projected profitability have been adjusted accordingly.

As liability limits increase, there is an increased risk of opportunistic legal challenge on behalf of, for example, a pressure or lobby group seeking compensation for illness, which may be beyond the intent of policy language.

69

Rating (outlook): B+ (stable) Risk Rating: Very High

Return Rating: 10 Capital Rating: 6

Catastrophe Rating: 9 Tail Rating: 4

Cost Rating: 1 Scarcity Rating: 1

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 28 32 32 32 32 32 32 32 35Gross Premiums 25 25 26 26 27 26 23 24 28Net Premiums 21 21 21 22 27 26 23 24 28Pure Year Result 16 18 11 3 22 16 13 13 15Prior Year Result 7 3 3 4 4 2 2 2 2Operating Expenses -5 -5 -4 -2 -7 -5 -4 -3 -5Investment Return 2 1 0 0 1 1 1 1 1

Result (Est) £m 20 16 10 5 20 13 11 12 13% 73% 52% 32% 17% 62% 43% 35% 39% 37%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryPremium income has been very consistent and predictable, so wehave some comfort that the proposed increase will be achieved.Loss ratios are based on attritional, non-nuclear losses whichhave been increasing in recent years. Almost all losses everreported to the syndicate have been non-nuclear ones. Thesyndicate reserves for liability claims, even if there have been nonoted losses and there is an increasing trend of reserve releases.Our forecasts appear conservative when compared to resultsactually achieved. However, a major nuclear event could producea loss of many multiples of syndicate capacity.

Auction CommentaryAuction Volume and Average Price

This syndicate is the only one that routinely trades with a price inexcess of £1.50 per pound of capacity. As individual line sizes areoften very small, with an average line of just 2% of an overallportfolio, there are often many bids for small amounts of capacityand small packets of capacity are tendered. The spread betweenthe highest and lowest successful bid can be large. In AuctionOne, this spread was 26p, from 175p and 201p. The syndicate isnormally in high demand, and in 2014 £6 of bids chased every £1of tendered capacity. Hampden has the largest share of thesyndicate, and sold 95% of the capacity traded. Its clients werealso the largest buyers, although clients of Argenta and Alphawere also purchasers.

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40

2012 2013 2014 2015 2016

£ m

illio

ns

Syndicate Capacity

Argenta Other Third Party Aligned

68%

70%

72%

74%

76%

78%

80%

82%

84%

86%

2012 2013 2014 2015 2016

Gross and Net Capacity Utilisation

Net Premium Reinsurance Premium

-20

0

20

40

60

80

Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

% o

f Cap

acity

Syndicate Forecast Trend

2010 2011 2012 2013 2014

0

50

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2010 2011 2012 2013 2014

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Auction 1 Auction 2 Auction 3 Ave Price

70

Syndicate 1176 Chaucer Syndicates Limited Michael Dawson

Description

Syndicate 1176 describes itself as the world’s leading insurer of nuclear risks, maintaining shares on key nuclear pools and mutuals. It provides cover for property risks in all parts of the nuclear energy cycle, including the manufacture of nuclear fuel and its transportation and storage. It also covers non-nuclear parts of the plant including turbines. Policies include property damage from radioactive release. The syndicate also offers liability cover to nuclear installations, but to none in the USA. In the past, it has underwritten US liabilities coverages as a reinsurance of a US nuclear pool. There is potential exposure to US liability within the reserves. At present Syndicate 1176 does not write any US liability, but would consider doing so if an acceptable risk were offered. In most countries property terrorism is excluded or significant coverage limits are provided through Government reinsurance schemes such as Pool Re (Nuclear) Ltd in the UK (for property insurance) and under TRIPRA (Terrorism Risk Insurance Program Reauthorization Act) in the USA. Coverage is given by the syndicate in some countries where the terrorism risk is considered lower. The syndicate has historically only underwritten exposures once nuclear fuel is on site. The construction business, prior to fuel being on site, has been left to the conventional markets. With the likelihood of new plants being built over the coming years (100 over the next 35 years) the syndicate will start to underwrite construction insurance of nuclear power stations. Syndicate Business Forecast

After several years of premium income at the same level, as increase of £4m (gross and net as no reinsurance is purchased) is planned for 2016. It is expected that approximately £1m of additional nuclear liability premium income will be written. The resumption of nuclear power generation in Japan at a number of units, following the Fukushima event in March 2011, will also give additional premium, as will the increased share of the UK nuclear pool risks that the syndicate will be underwriting. Significant Points

a) A pre-emption of 10.5% increasing capacity to £35m is planned for 2016.

b) No reinsurance is purchased. This is a condition of membership of some the nuclear pools. Reinsurance is available to members on an individual basis, although cost, and in extremis, availability, of this cover cannot be guaranteed.

c) The syndicate operates on a fixed fee basis whereby the managing agent’s fee includes all syndicate expenses.

d) The syndicate has cash and investments £38m as at 30 June 2015.

71

2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - -Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property -7.9 92.4 96.6 - -Reinsurance - - - 34.3 30.5Whole Account 13.1 68.5 72.3 45.1 21.8

Gross Net Gross Net Loss of Major Complex 711% 711% 771% 771% Ringhals NPP Fire (May 2011) 12.7% Loss at a Major Facility 241% 241% 258% 258% CEPCO (May 2011) 12.3% Major Turbine Failure 126% 126% 143% 143% NECSA (Nov 2013) 5.3% European Windstorm 5% 5% 2% 2%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 90.0 79.4 82.3 82.0 84.2Reinsurance Premium % Gross Premiums 15.3 16.2 20.2 13.8 0.0Pure Year Underwriting Result % Capacity 60.2 59.4 33.3 12.4 68.1Prior Years Underwriting Result % Capacity 26.1 8.4 9.2 12.9 12.6RITC received % Capacity 59.4 37.9 38.2 59.9 65.4IBNR % Net Outstanding Claims 239.9 683.5 156.7 177.7 227.7Operating Expenses % Capacity 16.9 15.1 11.9 7.8 20.9

Combined Ratio by Class of BusinessClass of Business Split

5.5%34.3%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

24.9%2.1%0.0%

0.9%32.3%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 20 40 60 80 100

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

72

Syndicate 1200 Argo Managing Agency Limited Bruno Ritchie

The transformation of Argo continues. The business has been de-risked in recent years and has increasingly looked to Argo group’s distribution network to source business. Results, while far from spectacular, have become more consistent. It would seem that the rapid turnover of staff on both the underwriting and the management side has now stabilised and there are some very capable individuals in senior roles. The syndicate has started to score much better in our modelling, and we grade the syndicate as C+, up from C twelve months ago. This mirrors our increasing regard for the business. We have had the syndicate on the “not recommended” list for many years. Although better capacity is available elsewhere and we do not consider this syndicate part of the core portfolio, the improved outlook makes our recommendation look inconsistent. The syndicate is therefore now classified as recommended. The small volumes of capacity likely to be available in the auctions preclude the possibility of building a significant stake. Strengths/Opportunities

There are able people in senior roles: David Harris (MD, formerly with Amlin), Richard Crinson (Underwriting Performance, previously with Lloyd’s FPD), Bruno Ritchie (CUO and Active Underwriter, previously with Hiscox) and Neil Chapman (Head of Property, ex Wellington).

The 2009 and prior years have been reinsured into another syndicate, bringing greater certainty to reserving. Of the four underwriting years up to this transaction, three produced a prior year deficit; in the three years since there have been prior year releases.

Access to the Argo Group distribution network around the world. This includes writing the reinsurance portfolio via a quota share with Argo Re (headed by Matthew Wilken, former deputy reinsurance underwriter at Kiln) and a quota share of the mid-market property book of specialty insurer Colony in the USA.

Argo is routinely willing to provide more information than any other agency. Quarterly data includes the full performance information pack from Lloyd’s, with informative and clear supporting documentation.

Third party capital friendly. The risk appetite of the Argo group is such that it does not want to provide 100% of the capacity to the syndicate (the syndicate is the most volatile element of the group’s business). The syndicate uses third party quota shares as part of its capital.

Weaknesses/Challenges

The account is broadly spread, and largely based on direct insurance - the business plan lists 24 subclasses. Expenses are high for a syndicate of this size, budgeted at 12.9% of capacity for 2016.

The reinsurance spend is high, budgeted at 37% of gross premium for 2016, but as high as 50% in 2012 and 47% in 2013. It also appears to have provided little effective risk mitigation, with just 41% of outward reinsurance premium being recovered or projected to be recovered between 2010 and 2013.

The longer term outlook for Argo group is difficult to determine. It writes around $2 billion of gross premium annually. This places it towards the lower end of Bermudian reinsurers in an industry where there has been rapid consolidation.

Results have been a little lacklustre, the period since the acquisition by Argo has seen the syndicate record average profits of just 4% capacity (2009 to 2014 including estimates). The market average has been approximately twice this.

73

Rating (outlook): C+ (stable) Risk Rating: Medium to Higher

Return Rating: 2 Capital Rating: 7

Catastrophe Rating: 4 Tail Rating: 6

Cost Rating: 6 Scarcity Rating: 4

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 325 325 350 350 350 350 350 350 400Gross Premiums 333 310 231 291 335 323 320 355 370Net Premiums 277 244 -11 199 176 184 208 235 232Pure Year Result -38 10 -34 24 27 37 45 54 57Prior Year Result -1 -5 46 12 11 5 0 0 0Operating Expenses 12 -11 -25 -34 -18 -37 -33 -48 -48Investment Return 14 17 15 5 6 13 7 8 8

Result (Est) £m -13 11 3 7 25 18 19 14 17% -4% 3% 1% 2% 7% 5% 5% 4% 4%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryArgo provides much detailed supplementary information, inaddition to the regular reports from Lloyd’s. This greatly helps us in compiling our forecasts. The external RITC of the 2009 and prioryears of account gives limited scope for releases from closedyears. However, Argo is forecasting a release of £5m to the 2013account as at quarter two 2015 and a much improved investmentreturn. Our forecasts do not include any further prospectivereleases and a more normalised investment return.

Auction CommentaryAuction Volume and Average Price

The syndicate does not feature as a major part of any of the threemembers’ agents’ portfolios. Last year only very small volumeswere available and the total traded was less than £500,000. Itappears that Argo bid unsuccessfully in both Auctions One andTwo, as there were unsatisfied subscription bids in both auctionsfor £2m of capacity at a price of 10.1p. All three agents sold smallshares on behalf of their clients. Two individual Hampden clientsbought shares of £150,000 each.

0

50

100

150

200

250

300

350

400

450

2012 2013 2014 2015 2016

£ m

illio

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Syndicate Capacity

Argenta Other Third Party Aligned

0%

20%

40%

60%

80%

100%

120%

2012 2013 2014 2015 2016

Gross and Net Capacity Utilisation

Net Premium Reinsurance Premium

-15

-10

-5

0

5

10

Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

% o

f Cap

acity

Syndicate Forecast Trend

2010 2011 2012 2013 2014

0

2

4

6

8

10

12

14

16

18

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2010 2011 2012 2013 2014

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Auction 1 Auction 2 Auction 3 Ave Price

74

Syndicate 1200 Argo Managing Agency Limited Bruno Ritchie

Description

Syndicate 1200 underwrites a diversified account, with five main operating divisions: property (33%) comprising direct & facultative, binders, forced-placed/real estate owned, mortgage impairment and property reinsurance, written through Argo Re in Bermuda; liability (31%) comprising general liability, employers’ liability, professional indemnity, international casualty treaty, directors’ and officers’ and medical malpractice; marine & energy (19%) comprising offshore and onshore energy, cargo, marine liability, yachts and hull; specialty (12%) comprising personal accident, contingency and political risk; and aerospace (5%) comprising airline, space, general aviation, aerospace products and operators’ liability. Syndicate Business Forecast

At like-for-like exchange rates the plan for 2016 shows additional premium income of £24m (7%). The planned growth is sourced from recently launched products and a range of distribution initiatives, rather than organic London market growth. These initiatives include growing business on each of the Lloyd’s overseas platforms – China, Dubai, Japan and Brazil – but not Singapore, where an underwriter has departed and the operation has got off to a slower start than expected. The distribution initiatives also include using the Argo US distribution network and broker portfolio opportunities. The managing agent is hoping that a number of new initiatives, including business in Dubai and China will be finalised in time for inclusion in the later iteration of the plan due in September. Significant Points

a) A pre-emption of 14.3% increasing capacity from £350m to £400m is proposed for 2016.

b) The syndicate held funds of £350 million as at 30 June 2015.

c) Bruno Ritchie was appointed active underwriter in 2014. Prior to this the role had been split between Neil Chapman, Head of Property and Paul Kneafsay, Head of Liability. Bruno joined Argo in 2011, having previously been director of Hiscox’s Global Risks European office in Paris.

d) The syndicate bought an external reinsurance to close for the years 2009 and prior from Shelbourne Syndicate 2008. The 2010, 2011 and 2012 years have been closed in the normal way into the successor years of Syndicate 1200.

e) Argo provides 93% of syndicate capacity with the balance provided by the three members’ agents. However, 36% of Argo’s share (i.e. 34% of the whole) is supported by a variety of quota share reinsurances from industry capital.

75

2010 2011 2012 2013 2014Aviation - - - - -Casualty 124.4 95.4 - 104.4 98.2Energy - 95.0 82.3 99.6 83.0Life - - - - -Marine - - 129.7 - 111.4Motor - - - - -Property 100.8 113.4 87.8 88.8 69.3Reinsurance 98.8 183.4 107.3 72.1 90.2Whole Account 110.1 125.9 51.2 93.0 88.9

Gross Net Gross Net Two Events 61% 29% 60% 30% Superstorm Sandy (Oct 2012) 7.7% Florida Windstorm - Pinellas 47% 21% Japanese Earthquake (Mar 2011) 6.1% Gulf of Mexico Windstorm 45% 21% 45% 21% New Zealand Quake (Feb 2011) 2.5% California Earthquake - San Francisco 41% 14% 39% 14% Thailand Floods - (Oct 2011) 2.4% North East Windstorm 27% 11% 25% 10% Hurricane Irene (Aug 2011) 1.1% New Madrid Earthquake 14% 9% 13% 9% Hurricane Odile (Sept 2014) 0.5% Aviation Collision 15% 6% 17% 8% Tripoli Airport Attack (July 2014) 0.5%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 102.3 95.2 66.0 83.1 95.8Reinsurance Premium % Gross Premiums 16.7 21.2 104.8 31.6 47.6Pure Year Underwriting Result % Capacity 30.4 43.2 17.5 30.2 31.7Prior Years Underwriting Result % Capacity -0.3 -1.4 13.3 3.3 3.2RITC received % Capacity 59.6 80.5 86.5 28.5 37.0IBNR % Net Outstanding Claims 58.4 67.0 96.4 92.0 71.6Operating Expenses % Capacity -3.5 3.5 7.2 9.7 5.2

Combined Ratio by Class of BusinessClass of Business Split

13.6%5.4%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

12.1%2.0%

17.4%

4.6%44.9%

0%10%20%30%40%50%60%70%80%90%

100%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 10 20 30 40 50

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

76

Syndicate 1729 Asta Managing Agency Limited Duncan Dale

Dale Syndicate 1729 is not the first new syndicate to struggle to achieve the planned level of premium income in its opening years. It had originally planned that capacity would be £90m for 2015 and £122m for 2016, so in increasing from £75m for 2015 to £90m for 2016 it is a year behind plan. Underwriters have stuck to their principles and are endeavouring to build a business for long term profitability, rather than simply to deliver short term premium targets. At the same time, it has been successful in developing areas of non-Lloyd’s business. Early year returns will be thin, although they will be helped by low catastrophe incidence in the reinsurance book. The reinsurance programme has been structured to avoid a major hiccup should there be significant loss events. We still have faith in the developing Dale Underwriting brand and recommend that supporters should take up their offered increased lines. Strengths/Opportunities

The syndicate has achieved its objective of attracting blocks of business that are new to the Lloyd’s market. Of the 2014 book, £22m of premium had not previously been written in Lloyd’s and a further £22m of the business written to date in the 2015 account is also new.

Although the syndicate has missed its income target in 2014 and looks set to do so again in 2015, this seems to be because the underwriters have exercised discipline rather than sacrifice margin in the pursuit of volume.

The active underwriter is an acknowledged specialist in his class. He has been joined by capable team leaders in property insurance and property reinsurance.

The underwriter has long term relationships with a number of smaller and medium sized clients, who do not see their insurer relationship as a commodity whose value is determined by price alone.

The syndicate has managed to secure positions on good quality quota share reinsurances that have increased premium volumes in areas complementary to the book.

Weaknesses/Challenges

As the syndicate specialises in longer tail business (43% of proposed book for 2016 is casualty business) it could be some time before the true profitability of the book can be established.

Wordings used include the longer tail occurrence policy form in the USA.

Even the established smaller syndicates have struggled to maintain their shares on existing renewals as brokers have actively tried to reduce the number of participants on slips. New syndicates without a renewal book face an even greater challenge.

Some clients have proved wary of placing their business with a syndicate that is closely associated with a competitor in the form of Pro-Assurance (see significant points).

The tenure arrangements are not optimal for a longer tail syndicate. We expect that third party members will form a long term part of the syndicate’s capital base but there is currently no guarantee that the tenure will continue after the first seven years of the syndicate’s existence, nor that new members will be able to take up shares dropped by members who do not want to continue or wish to reduce their allocations.

77

Rating (outlook): C (positive) Risk Rating: Higher

Return Rating: 2 Capital Rating: 8

Catastrophe Rating: 7 Tail Rating: 3

Cost Rating: 10 Scarcity Rating: 2

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) - - - - - - 75 75 90Gross Premiums - - - - - - 36 59 73Net Premiums - - - - - - 34 50 63Pure Year Result - - - - - - 5 10 12Prior Year Result - - - - - - 0 0 0Operating Expenses - - - - - - -8 -10 -10Investment Return - - - - - - 0 0 1

Result (Est) £m - - - - - - -2 0 3% - - - - - - -3% 1% 3%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryThe syndicate has thus far struggled to achieve target premiumvolumes. Loss ratios have been encouraging and we understandthat the syndicate is getting a good showing of business. Theshortfalls in premium targets arise from risk selection rather thanbeing unable to access business. Income forecasts for 2014 areone-third short of initial plan, the 2015 latest forecast is currently6% below plan (although at an earlier stage). The reinsuranceaccount has an element of cat load resuting in the improved2014 forecasts at Q6 as the cat book ran off without loss. We donot build in any reserve release from the currently open years.

Auction CommentaryAuction Volume and Average Price

Syndicate capacity is not tradeable at auction but is granted on alimited tenancy basis, initially for a period of five years with a rolling two year notice of termination thereafter. The first notice cannot begiven until the end of the five year period. Asta has stipulated thatany capacity dropped should be returned to them, although wehave requested that any capacity freed up in this way may bereallocated amongst our members. We do not expect that therewill be meaningful volumes of new capacity available.

0

10

20

30

40

50

60

70

80

90

100

2012 2013 2014 2015 2016

£ m

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Syndicate Capacity

Argenta Other Third Party Aligned

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2012 2013 2014 2015 2016

Gross and Net Capacity Utilisation

Net Premium Reinsurance Premium

-4

-4

-3

-3

-3

-3

Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

% o

f Cap

acity

Syndicate Forecast Trend

2010 2011 2012 2013 2014

0

0

0

0

0

1

1

1

1

1

1

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78

Syndicate 1729 Asta Managing Agency Limited Duncan Dale

Description

Syndicate 1729 was established for the 2014 year of account. It has three principal areas of operation, casualty, property reinsurance and property insurance. The largest element of the casualty account is the medical malpractice account, estimated to be more than a quarter of the entire account in 2015. This is supplemented by (non-medical) professional liability, workers compensation, auto liability, general liability and personal accident. The largest account in the property reinsurance division is catastrophe reinsurance (17% of the entire account), supplemented by risk excess of loss and specialty reinsurance (agricultural and terrorism business in 2014, with plans to add aviation, satellite and nuclear in 2015). The property insurance book consists of binder business (85% in the USA), open market business, with an emphasis of middle market business, auto physical damage and motor truck cargo and a small book of specialty insurance including contingency, nuclear and terrorism business. Syndicate Business Forecast

Growth is forecast for each of the three business units, with overall forecast income budgeted to be 14% higher than the most recent reforecast of the 2015 account. Both the property direct and property reinsurance accounts are expected to grow by more than 20%, despite the underwriters projecting rate reductions of 2% and 6% respectively. The casualty book is projected to increase by 8%, in a flat rating environment. The syndicate continues to enjoy good support from clients and brokers. The projected loss ratios are lower than would be expected given the rating movements, as the management feels that selected loss ratios for the 2014 and 2015 accounts were conservative. The purchase of an additional layer of reinsurance, coupled with an increase in capacity, reduces many of the net RDS exposures. Florida hurricane (Pinellas County) and the various US terrorism RDS events are the largest exposures. The managing agent is expected to reduce premium volumes in the second iteration of the business planning process, but this is likely to be counteracted by the syndicate recruiting an additional underwriter in the property binding authority market. Significant Points

a) A pre-emption of 20% increasing capacity from £75m to £90m, is planned for 2016.

b) Syndicate funds as at 31 March 2015 were £25m.

c) The syndicate is managed by Asta Managing Agency Limited on a turnkey basis. Dale Underwriting Partners is expected to form a managing agency in time, although this is unlikely to be before 2019 (five years from formation of the syndicate) and at a time when the syndicate has sufficient scale to support a managing agent.

d) Capacity is on a limited tenure basis, initially agreed for a minimum of five years (2016 being the third year), with a rolling two year notice of cancellation thereafter. The first notice of cancellation cannot be effective until the end of the five year period.

e) The capital base consists of a majority share from Pro-Assurance (a US specialty insurer with a background in medical professional liability) and a small number of other insurance industry capital providers and approximately one third from individual clients of the three members’ agents.

79

2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - -Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property - - - - -Reinsurance - - - - 113.7Whole Account - - - - 124.7

Gross Net Gross Net Two Events 76% 28% 70% 17% SE Queensland Storm (Nov 2014) 0.2% US Terrorism - Exchange Place 25% 13% 27% 20% Hurricane Odile (Sept 2014) 0.1% Florida Windstorm - Tampa Bay 50% 16% 60% 18% California Earthquake - Los Angeles 39% 15% 49% 10% Gulf of Mexico Windstorm 42% 15% 42% 9% North East Windstorm 39% 14% 32% 8% Aviation Collision 5% 5% 9% 7%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity - - - - -Reinsurance Premium % Gross Premiums - - - - -Pure Year Underwriting Result % Capacity - - - - -Prior Years Underwriting Result % Capacity - - - - -RITC received % Capacity - - - - -IBNR % Net Outstanding Claims - - - - -Operating Expenses % Capacity - - - - -

Combined Ratio by Class of BusinessClass of Business Split

1.3%0.9%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

2.0%0.2%7.4%

4.0%84.1%

0%

5%

10%

15%

20%

25%

30%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 5 10 15 20 25 30 35 40

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

80

Syndicate 1884 Charles Taylor Managing Agency Limited Robert Dorey

Having commenced on 1 April 2015, data for only one quarter has been issued to date. Reports to date are encouraging. Business sourced from members of the Standard Club has been at the level planned, sometimes better. In some instances, a broker reluctant to offer business to the syndicate has been directed to do so by the Club member. It remains to be seen whether the syndicate can achieve its plan for 2015. Although the increase in capacity from £36m to £100m seems ambitious at first glance, 2016 will be the first full year of the syndicate’s operation and the first opportunity to write the business that renews in the first three months of the year. It may also be able to secure larger lines at renewal of the business written for the first time in 2015. The start-up costs are high, and may be sufficient to push the syndicate into loss for both 2015 and 2016. Nonetheless, we consider this syndicate a good long term prospect and continue to recommend support. Strengths/Opportunities

Unique access to key marine and energy clients.

New lines of business to the market, accessed via Charles Taylor and the Standard Club’s established network of international offices.

In addition to providing a source of business, the Standard Club is providing at least 40% of the syndicate’s capacity, creating community of interest between the syndicate, its clients and its capital base.

The syndicate is able to share resources (for example actuarial work) with the Standard Club and Charles Taylor Group. The Standard Club is an established business with proven risk management practices.

The syndicate has begun to gain access to existing Standard Club business placed in the Lloyd’s market and led by respected Lloyd’s leaders including the Hiscox, Catlin and Watkins syndicates.

Unlike other new syndicates, where the underwriting team is expected to attract new business from their former employers, the team has warm leads to new business via Club members.

Catastrophe exposures are typically very small.

Weaknesses/Challenges

The challenge of a simultaneous launch of syndicate and managing agency should not be under-estimated.

Margins in the early years are thin and returns can reasonably be expected to be negative.

The syndicate will not have cash resources for some time. An early cash call is a possibility.

Should income forecasts slip in the early years, losses could be exacerbated.

Expenses remain high, with an internal budget (i.e. not including acquisition costs) of 18.4% of gross premium in 2016.

Although partially defrayed by the roll out into an existing office infrastructure, there are additional expenses in forming and developing the service company distribution network.

81

Rating (outlook): C (positive) Risk Rating: Medium to Higher

Return Rating: 2 Capital Rating: 8

Catastrophe Rating: 8 Tail Rating: 8

Cost Rating: 10 Scarcity Rating: 8

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) - - - - - - - 36 100Gross Premiums - - - - - - - 36 96Net Premiums - - - - - - - 31 82Pure Year Result - - - - - - - 6 15Prior Year Result - - - - - - - 0 0Operating Expenses - - - - - - - -10 -18Investment Return - - - - - - - 1 2

Result (Est) £m - - - - - - - -3 -1% - - - - - - - -9% -1%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryThe syndicate commenced underwriting on 1 April 2015, sofigures for only one quarter have been issued at the time of writing. Gross net written premium income in the quarter was £7m andthe managing agent is confident of achieving its 2015 incomeforecast of £36m. Given its close relationship with the clubmembers buying insurance from the syndicate, it is also confidentthat it can better the benchmark loss ratios imposed on it byLloyd’s in the business planning process and that the catastropheloads are unnecessary given the low catastrophe content of thebook. The forecasts here are very much in line with the Lloyd'sapproved plan.

Auction CommentaryAuction Volume and Average Price

Participation in the syndicate was offered on an evergreen basiswith full auction rights. Argenta is the only members’ agent withclients on the syndicate and at the time of writing it is uncertainwhether clients of the other agents will be granted an agencyagreement. This is likely to impact the market for capacity as itcould potentially be restricted to Argenta clients and any directparticipants through Charles Taylor or the Standard Club.

0

20

40

60

80

100

120

2012 2013 2014 2015 2016

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Syndicate Capacity

Argenta Other Third Party Aligned

0%

20%

40%

60%

80%

100%

120%

2012 2013 2014 2015 2016

Gross and Net Capacity Utilisation

Net Premium Reinsurance Premium

0

0

0

1

1

1

Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

% o

f Cap

acity

Syndicate Forecast Trend

2010 2011 2012 2013 2014

0

0

0

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1

1

1

2010 2011 2012 2013 2014p/

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acity

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Auction 1 Auction 2 Auction 3 Ave Price

82

Syndicate 1884 Charles Taylor Managing Agency Limited Robert Dorey

Description

Syndicate 1884 was established to underwrite business emanating from the members of the Standard Club. The Standard Club, a mutual insurer, owned by its members, is the fifth largest Protection and Indemnity Club. Business is largely marine focused, including energy (floating production vessels, drill platforms and package business), hull and machinery, marine liabilities (excluding those insured into the P&I Club but including port and terminal operations and energy liabilities), general property exposures (including head office risks and storage risks such as warehouses) cargo and specie and directors’ and officers’ and errors and omissions. Political risks will be added as a new class for 2016. A large part of its income is sourced from the overseas offices of the Standard Club in London, New York, Piraeus, Singapore, Hong Kong, Tokyo and Rio de Janeiro. Syndicate Business Forecast

Increases in all lines of business are planned for 2016 as this will be the first full year of operation. A new line, political risks, will be added, in accordance with the original plan, which will include terrorism, political violence, war on land, contract repudiation, trade credit and confiscation, expropriation, nationalisation and deprivation. The liability account, which was very small for 2015, is expected to grow following the recruitment of a specialist underwriter. Loss ratios are broadly similar to those selected for 2015, although the managing agent continues to believe that Lloyd’s has been conservative in arriving at these benchmarks, given the syndicate’s relatively low catastrophe exposure. Significant Points

a) A pre-emption of 177.8%, increasing capacity from £36m to £100m, is planned for 2016. This is slightly ahead of the original three year plan as the exchange used for this plan is $1.48:£1 while the original plan used an exchange rate of $1.71:£1. The syndicate commenced underwriting on 1 April 2015 so the 2016 account will be the syndicate’s first full year and the first time that it will be able to write business with a renewal date during January, February and March.

b) Founder syndicate members pay a capacity fee of 0.7% of syndicate capacity for four years starting with the 2016 year of account (the fee for 2015 was waived). The fee for new joiners in 2016 and later years is 1.0% of capacity. This is to allow Charles Taylor to recover the costs incurred in forming the new syndicate (but not the costs incurred in forming the new agency). The capacity fee will not be included in the profit commission calculation.

c) The managing agency fee is based on a sliding scale, so that the fee reduces as the syndicate increases in size. Assuming the syndicate achieves its target capacity, the fee will be 1.1875% in 2016.

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2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - -Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property - - - - -Reinsurance - - - - -Whole Account - - - - -

Gross Net Gross Net Two Events 23% 11% 13% 4% No classified major losses Political Risks - South East Asia/China 17% 4% Loss of Major Complex 73% 22% 30% 4% Gulf of Mexico Windstorm 41% 18% 25% 3% Marine Collision in Prince William Sound 41% 17% 26% 3% Political Risks - Nigeria 17% 3% US Terrorism - Exchange Place 15% 3%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity - - - - -Reinsurance Premium % Gross Premiums - - - - -Pure Year Underwriting Result % Capacity - - - - -Prior Years Underwriting Result % Capacity - - - - -RITC received % Capacity - - - - -IBNR % Net Outstanding Claims - - - - -Operating Expenses % Capacity - - - - -

Combined Ratio by Class of BusinessClass of Business Split

6.2%47.9%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

20.9%3.6%2.0%

1.6%17.8%

0%

20%

40%

60%

80%

100%

120%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 10 20 30 40 50 60

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

84

Syndicate 1969 Apollo Syndicate Management Limited Nick Jones

As a new syndicate with an even newer managing agency, the business needs to tread a fine line. There is always a temptation to increase capacity and premium income in order to defray expenses, as these can increase rapidly when one medium-sized syndicate is supporting the agency infrastructure. Some functions have been outsourced to ANV. The team that has been recruited in recent years is of high quality, including underwriters from Catlin, Kiln and Aspen and CEO David Ibeson from Catlin. We think this team is getting the balance about right. All of the underwriters have previously managed much greater premium volumes than is expected at Apollo and have bought into the concept of co-investing with third-party capital in the fortunes of the syndicate. Results to date have perhaps not justified the hype, although we believe the team will get it right. We continue to recommend support. Strengths/Opportunities

Strong community of interest with all senior staff and management having a significant stake in the business through the staff underwriting vehicle. New members of the underwriting team have all bought into this concept, which has been a condition of their joining.

The syndicate has attracted some capable and well respected individuals into both management and underwriting roles over the past three years. All the underwriters have controlled greater premium volumes in former employment than they are expected to deliver at this syndicate.

The syndicate attracts support from a wide range of brokers. The big three are each forecast to produce less than 10% of premium with the balance from smaller brokers. This reduces the risk of renewals on following lines being absorbed into broker facilities and not placed with the syndicate.

Consortium underwriting has been used effectively. Apollo leads consortia for aviation and casualty, and participates in consortia for terrorism and accident & health. This gives the syndicate access to business without the expense of employing an underwriter and increases line size (and hence attractiveness to brokers) and defrays expenses.

An independent, underwriter led business where incentives are based on profitability not growth.

Weaknesses/Challenges

The syndicate recorded prior year deficits at the close of both 2011 (£2m) and 2012 (£21k). This is disappointing in a short tail account. The 2013 account forecast surplus is £842,000 at 30 June 2015.

The reinsurance programme has provided little by way of mitigation to date. Between 2010 and 2013, the syndicate spent £66m on reinsurance but has recovered or expects to recover on outstanding claims just £17.5m (23%).

The transition to a full managing agent has a number of dangers. There are additional responsibilities and the cost base inevitably goes up, creating the temptation to increase the size of the syndicate in order to cover costs.

Apollo became the managing agency for the syndicate on 1 August 2015. It has continued to use former agent ANV Syndicates for outsourced contracts. ANV is still going through a merger with the former Jubilee business and, at the time of writing, has yet to meet all Lloyd’s and FCA requirements of Solvency II. There is a risk that Apollo will not get the appropriate level of service.

The syndicate is still in overall loss on a closed year basis. The forecast result for 2013 is disappointing at just 0.5% profit.

85

Rating (outlook): C+ (positive) Risk Rating: Medium to Higher

Return Rating: 3 Capital Rating: 8

Catastrophe Rating: 3 Tail Rating: 7

Cost Rating: 5 Scarcity Rating: 3

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) - - 64 74 85 110 140 160 180Gross Premiums - - 53 66 74 97 125 155 164Net Premiums - - 40 51 59 75 90 113 118Pure Year Result - - -7 6 12 11 23 25 26Prior Year Result - - 0 -2 0 1 0 0 0Operating Expenses - - -2 -4 -5 -12 -16 -18 -18Investment Return - - 0 1 0 0 0 1 1

Result (Est) £m - - -9 0 8 1 7 7 9% - - -13% 0% 9% 0% 5% 4% 5%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryThe account has become more balanced with the addition of newlines of business. The early years, while the syndicate was largelya property account, have been impacted by several of theinternational catastrophes of 2010 and 2011, and we think thecatastrophe load can be reduced as the syndicate diversifies. Thesyndicate has recorded prior deficits for both closed years but isnow forecasting a surplus on the 2013 account. We do not buildsurplus or deficit into our model at this stage for any years. Themanaging agent is in negotiation with other underwriting teamsthat may change the business plan.

Auction CommentaryAuction Volume and Average Price

This became one of the most sought after syndicates in 2014 withmore than £5.7m of would-be buyers chasing just £1.7m ofcapacity for sale. This was despite a 14% pre-emption for 2015.The price had already increased from 1.3p in 2012 to almost 15pin 2013. It rose a further 46% in 2014. Clients of Argenta were thelargest buyer, increasing the net share by more than £500,000.Alpha, which had been biggest buyer in 2013, was the largestseller and reduced it share by just under £1m. Hampden was alsoa net buyer

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Syndicate Capacity

Argenta Other Third Party Aligned

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60%

80%

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120%

2012 2013 2014 2015 2016

Gross and Net Capacity Utilisation

Net Premium Reinsurance Premium

-20

-15

-10

-5

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5

10

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Syndicate Forecast Trend

2010 2011 2012 2013 2014

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86

Syndicate 1969 Apollo Syndicate Management Limited Nick Jones

Description

Syndicate 1969 writes a predominately short tail book. It was established for the 2010 account, with lines in direct and facultative property and property binding authorities. It has since expanded by adding new lines of business in property treaty (2011), cargo & specie (2012), energy and international casualty (2013) and aviation, terrorism and accident & health in 2014. The latter two classes are written under consortia. The property account remains the most significant part of the book, this includes smaller and medium sized business of residential, light industrial, retail and hospitality occupancies as well as specialist book of real estate owned (protecting the property portfolios of financial institutions) and mortgage impairment (a contingent product that protects a lender’s interest where the borrower either fails to buy or renew his insurance or where the borrower’s insurance fails to respond to a loss). The casualty book has increased to become the second largest part of the book in 2015 and 2016. Syndicate Business Forecast

The syndicate has recruited a number of new underwriters as it seeks to diversify. In all cases, the underwriters have demonstrable records of profit and are forecast to write at an income level well below that of their previous employment. More recent recruits include Simon Mason (energy), Paul Letherbarrow (Aviation) and Matt Newman (casualty). Although the direct and facultative property, the treaty and the energy books are being scaled back in response to competitive pressures, there are increases in the casualty book, as well as in the specie account. Gross exposures to major catastrophes are broadly unchanged, but net exposures are significantly down as the syndicate has availed itself of a lower attachment point for reinsurance. Significant Points

a) A pre-emption of 12.5%, increasing capacity £180m is proposed for 2016.

b) Apollo completed the transition to a new managing agency established expressly to manage the syndicate on 1 August 2015. The former managing agent, ANV Syndicates Limited, continues to provide a number of services to the business including IT, actuarial and compliance.

c) The casualty book is written under a consortium led by Syndicate 1969 and supported by Hiscox Syndicate 33 and Argenta 2121. The accident & health book is written through a consortium led by ANV Syndicate 1861, while terrorism is written under a consortium led by BRIT Syndicate 2987.

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2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - 136.3Energy - - - - 65.8Life - - - - -Marine - - - - -Motor - - - - -Property 100.5 127.8 102.4 96.0 97.1Reinsurance 102.7 124.5 73.8 90.4 83.6Whole Account 102.6 123.5 90.6 97.2 93.7

Gross Net Gross Net Two Events 82% 25% 84% 15% New Zealand Quake (Feb 2011) 15.5% European Windstorm 29% 15% 29% 14% Superstorm Sandy (Oct 2012) 9.3% Pacific North West quake 45% 14% Hurricane Manuel (Sept 2013) 4.1% Japanese Earthquake 37% 17% 32% 13% Hurricane Odile (Sept 2014) 4.0% Gulf of Mexico Windstorm 52% 19% 51% 13% Japanese Earthquake (Mar 2011) 3.9% California Earthquake - Los Angeles 49% 14% 51% 12% Hurricane Irene (Aug 2011) 3.4% US Terrorism - Exchange Place 34% 10% 29% 11% US Tornadoes (Apr 2011) 3.2%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity - - 82.5 89.0 87.9Reinsurance Premium % Gross Premiums - - 24.2 23.2 21.4Pure Year Underwriting Result % Capacity - - 24.8 40.4 45.3Prior Years Underwriting Result % Capacity - - 0.0 -2.6 0.0RITC received % Capacity - - 0.0 16.4 16.6IBNR % Net Outstanding Claims - - 0.0 18.8 40.5Operating Expenses % Capacity - - 3.4 5.8 5.9

Combined Ratio by Class of BusinessClass of Business Split

2.8%7.0%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

7.6%3.5%6.4%

9.1%63.7%

0%

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80%

100%

120%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 10 20 30 40 50 60

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

88

Syndicate 1991 R&Q Managing Agency Limited Daniel Wright

Both the 2013 and 2014 years of account results are likely to fall short of initial expectations. Income forecasts for 2015 have been reduced and a result better than breakeven seems unlikely. Nonetheless, the underwriting and management team’s enthusiasm for the venture is undimmed. The syndicate is now approaching the volumes envisaged in year two (although 2015 is its third year of operation), with 49 coverholders now transacting business on the syndicate’s behalf. (The original plan contemplated a range of between 50 and 75). Market conditions have been against the new start-up and it has taken longer than expected to get business through the rigorous due diligence process. Although the volumes remain small and the account immature, there is growing evidence of underwriting outperformance, in particular on the shorter tail lines. There are some exciting possibilities here, especially with the R&Q group owning a licensed insurer in the USA. We feel that the syndicate has been through its difficult development stage; the prospects for 2016 are better, albeit that the market conditions and the sensible steady approach means that returns are still likely to be modest. We continue to recommend support. Strengths/Opportunities The syndicate has not compromised on its underwriting standards despite the shortfall in premium volumes for

2013, 2014 and 2015. Although at an early stage, underwriting loss ratios are encouraging; and are below both the Lloyd’s benchmarks and the targets set in the initial plan.

All coverholders appointed by the syndicate have a rigorous business planning process and must comply with an exacting due diligence standard.

With 49 coverholders now signed up, the syndicate has achieved roughly the number of coverholders targeted by this point in its development. Its challenge now is to work with these agents to secure the preferred business it seeks.

The business model, with risks processed through a R&Q developed website, diligense.com, is a more cost-effective and efficient way of underwriting binding authority business, allowing the syndicate access to up to the minute aggregates and premiums and the ability to withdraw from business outside its risk appetite.

R&Q acquired Accredited Holdings Corporation, a Florida based licensed insurer and its associated MGAs, in late 2014. This will provide opportunities for the syndicate to write in conjunction with the company.

New business continues to be sourced from outside Lloyd’s, building on the active underwriter and the deputy’s profitable relationships established when working for a Bermudian reinsurer.

Weaknesses/Challenges The syndicate has struggled to achieve the business volumes planned for the first three years. This is due to

a combination of a weakening market with softening rates, and initial difficulties in getting all sub-offices of some coverholders to submit business to the facilities.

The shortage of premium has impacted on syndicate expenses, which at reforecast level of income now account for almost 30% of gross premium (after deduction of acquisition costs) for the 2013 account and almost 20% for 2014.

The forecast loss for the 2014 account has increased from £500,000 (0.4% of capacity) to £5m (3.3% of capacity). The managing agent is resubmitting a business plan for the 2015 year of account, which we expect will not be much better than breakeven at best.

In order to achieve some level of premium volume into the early years, contracts have been extended to allow them to develop more premium. This has extended the reporting tail and means that earlier years are exposed to catastrophe losses for longer than would ordinarily be the case.

The syndicate has limited funds. Although it has lending agreements in place, a major catastrophe could prompt a cash call on the members ahead of calling expected losses on the open years of account.

There is a large element of longer tail business, with 47% of forecast gross premium assigned to longer tail risk codes. UK, international and US business is written on the longer tail occurrence policy wordings.

89

Rating (outlook): C (positive) Risk Rating: Higher

Return Rating: 3 Capital Rating: 7

Catastrophe Rating: 5 Tail Rating: 4

Cost Rating: 9 Scarcity Rating: 10

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) - - - - - 77 150 146 130Gross Premiums - - - - - 29 67 95 101Net Premiums - - - - - 23 55 84 88Pure Year Result - - - - - 1 5 13 19Prior Year Result - - - - - 0 0 0 0Operating Expenses - - - - - -7 -11 -14 -16Investment Return - - - - - 0 0 1 1

Result (Est) £m - - - - - -5 -5 0 4% - - - - - -7% -4% 0% 3%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryGetting an accurate handle on premium volumes has proveddifficult. 2013 account income is less than 45% of plan, and for2014 it is little better at 53% of plan. At Q2 2015 the managingagent has reforecast all open years, with a combined reduction inpremium forecasts of £42m. Extending the acceptance period fora number of the binding authorities means that the developmentcurves are distorted. The management argues that theunderwriting loss ratios achieved by the team exceed the marketaverages and that final loss ratios will be better than thebenchmarking numbers that it has been allocated by Lloyd’s.

Auction CommentaryAuction Volume and Average Price

Supply considerably outstripped demand for the syndicate with£5.7m of capacity failing to find a buyer at the end of AuctionThree, although £4.4m of this capacity came from a singleunsatisfied seller. Much of this capacity was returned to themanaging agent and was not reallocated. The capacity for 2015 is therefore lower than for 2014. All subscription bids for capacitywere successful. Prices fell auction by auction and the AuctionThree price was the lowest recorded (and at a level where sellersare not covering their Lloyd’s dealing costs). Argenta clients werethe largest buyers and sellers of the syndicate. Hampden did notrecommend support for the syndicate in 2013 and sold nocapacity but was a buyer of more than £1.6m.

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Gross and Net Capacity Utilisation

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-8

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Syndicate Forecast Trend

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90

Syndicate 1991 R&Q Managing Agency Limited Daniel Wright

Description

Syndicate 1991 was established for the 2013 year of account to write business under delegated authorities. The selected Managing General Agents fall into two categories, Elite and Advantage. Elite MGAs enjoy an exclusive arrangement (so appointed underwriters do not compete for the same business) with the syndicate and this status is aimed at best in class coverholders. Advantage MGAs follow the more traditional route through Lloyd’s brokers and the London subscription market. In the USA, the business is largely commercial and homeowners property, including some difference in conditions (i.e. all risks excluding fire and allied perils), wind only and lender placed business. Occurrence based liability is written in conjunction with some of the property business. Outside the USA, the book consists of smaller value and typically lower hazard commercial and homeowners property and liability business in the UK, Europe, Australia, New Zealand, the Middle East, Africa and South America. A specialty book consists of third party and employers’ liability for sports and leisure, motorsports and riding schools and livery yards. There is a small miscellaneous book of UK and international directors’ and officers’, errors and omissions and cyber liability, all written either through coverholder relationships or the service company. Syndicate Business Forecast

Although income is broadly flat, it is expected that subsequent iterations of the income forecast will see a reduction in the forecast for 2015. The income for 2016 is expected to show an increase over the final income for 2015 as increasing number of coverholders use their facilities to bind increasing business volumes. The syndicate is projecting lower loss ratios for 2016 as the syndicate history becomes more persuasive over the Lloyd’s average ratios that it has been required to use until now. Although gross RDS exposures are largely unchanged, there are some large increases in net exposures. Significant Points

a) The initial business plan did not envisage a change to the syndicate’s capacity of £146.2m. However, following a review of expected business volumes for 2015, R&Q advises that consideration is being given to reducing capacity to £130m, a de-emption of 11.1%.

b) As the syndicate moves into its fourth year, the new syndicate load applied to dedicated members falls away, which will allow the aligned member to increase its underwriting limit without increasing its capital.

c) The syndicate does not have a Lloyd’s box, and much of its business is written outside the subscription market.

91

2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - 144.0Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property - - - - 381.9Reinsurance - - - - -Whole Account - - - - 209.3

Gross Net Gross Net Two Events 72% 17% 95% 37% Polar Vortex Storm (Dec 2013) 0.4% California Earthquake - Los Angeles 39% 7% 52% 20% UK Weather (Dec13 - Feb14) 0.0% Florida Windstorm - Miami 39% 9% 52% 20% New Madrid Earthquake 39% 7% 52% 20% Canadian Earthquake 33% 8% 43% 11% Gulf of Mexico Windstorm 33% 8% 43% 11% North East Windstorm 33% 8% 43% 11%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity - - - - -Reinsurance Premium % Gross Premiums - - - - -Pure Year Underwriting Result % Capacity - - - - -Prior Years Underwriting Result % Capacity - - - - -RITC received % Capacity - - - - -IBNR % Net Outstanding Claims - - - - -Operating Expenses % Capacity - - - - -

Combined Ratio by Class of BusinessClass of Business Split

35.1%9.7%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

4.5%1.1%5.1%

1.1%43.4%

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60%

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2010 2011 2012 2013 2014

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UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

92

Syndicate 2010 Cathedral Underwriting Limited John Hamblin

The account is one of the most consistent amongst our portfolio; other than some additional income from the consortium established to write aviation war business, it is substantially the same as it has been since the syndicate commenced underwriting for the 2001 year of account. The renewal ratio of 93% is one of the highest in the market. Despite the move to the 29th floor of the Walkie-Talkie tower on Fenchurch Street, we sense that the team has managed to keep its feet on the ground. The acquisition by Lancashire Holdings in 2013 has changed very little, not even the expected change of name. There is a very comforting air at Cathedral of having seen it all before and not being panicked into something rash just because the competition is doing odd things. There is a distinct possibility that some of the key executives will reduce their involvement as the lock-in periods following acquisition expire, but we believe that the team beneath the top echelon is equally capable. This continues to be one of our core participations and we continue to recommend support. Strengths/Opportunities

The syndicate has a long standing renewal book, especially for the core US property treaty book that is focused on the smaller, local insurers. These often buy only one or two layers of reinsurance and, while subject to the same competitive pressures as other buyers, they tend to value their reinsurance relationship more highly than do other, larger clients.

The broad geographic spread of the account means that it is more exposed to localised events such as tornadoes than many other syndicates, but correspondingly less exposed to major events such as hurricanes. Amongst other effects, this makes it easier to buy an efficient reinsurance programme, as the business is consuming proportionately less critical aggregate.

Short tail account with an average of 74% (2010 to 2012 accounts) of total estimated claims paid by the close of the account at the 36 months stage.

Strong profit record, with an average profit since formation of 11.7% of capacity, with no losses.

Robust reserves: the average release from reserves in the last seven closed years has been 2.8% of capacity. The ratio of IBNR to outstanding claims at the close of 2012 is 50%, with a peak of 59% at the close of 2009.

The underwriting and management team has been remarkably stable, with the majority holding the same role since the formation of the syndicate fifteen years ago.

Weaknesses/Challenges

The Cathedral business was acquired by Lancashire Holdings Limited in 2013. Key staff were locked into the business for between three and five years. We expect that some of these staff could start to reduce their commitment to the business in the coming year or so.

Although the syndicate’s core client base is probably not prone to buying non-traditional reinsurance products such as insurance linked securities or catastrophe bonds, the book of business is under pricing pressure, as reinsurers that have found their market share threatened by this type of instrument have moved into the smaller regional insurer space, where Syndicate 2010 operates.

There is volatility here, the 2010 and 2011 catastrophes (largely non-US events) added 46% and 35% respectively to the net loss ratios of the two underwriting years.

As a small listed (re)insurer, Lancashire has not escaped rumours regarding possible tie-ups in the current bout of merger activity. We are not aware of any firm proposals at the time of writing.

93

Rating (outlook): A (stable) Risk Rating: Medium to Higher

Return Rating: 6 Capital Rating: 7

Catastrophe Rating: 3 Tail Rating: 6

Cost Rating: 3 Scarcity Rating: 2

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 300 300 350 350 350 350 350 306 306Gross Premiums 207 238 238 248 236 224 186 182 180Net Premiums 142 160 153 171 163 156 135 133 133Pure Year Result 30 57 4 17 73 65 45 33 32Prior Year Result 5 10 19 14 12 10 5 5 5Operating Expenses -12 -16 -18 -17 -20 -27 -24 -22 -23Investment Return 5 4 4 3 4 3 2 2 2

Result (Est) £m 27 54 9 18 67 51 27 19 16% 9% 18% 3% 5% 19% 15% 8% 6% 5%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryOpen year loss ratios continue to look good, and the syndicatehas a good track record of prior year releases. The 2013 forecastrelease as at Q2 2015 (£8.5m) is already in excess of ourprojections, as the managing agent says that the development ofolder claims has been extremely benign in the year to date.Historically average releases have been around 10% of RITCbrought forward; we have chosen a slightly more conservativefigure than this. There were modest reductions in premiumvolume for 2015, but the early part of the year passed withoutsignificant tornado activity, so we are able to maintain our overall2015 forecast.

Auction CommentaryAuction Volume and Average Price

Prices in the three main auctions were consistently between 48pand 49p, which was very close to the average price in 2013(although the individual auction prices were less stable that year).Cathedral had in the past been an aggressive buyer; one of thefew managing agents that would change its price from auction toauction to maximise the amount of capacity that it bought. It hasnot bought capacity since 2006 and not bid for capacity since2007. All trading in 2014 was therefore by clients of the threemembers’ agents. Argenta was both the largest seller and thelargest buyer. Buyers outnumbered sellers, only capacitytendered at 50p and above was left unsold, but there wereunmatched bids for capacity totalling £4.7m, some at prices ashigh as 46p.

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94

Syndicate 2010 Cathedral Underwriting Limited John Hamblin

Description

The three core accounts are direct and facultative property, property reinsurance and aviation reinsurance. The direct property book includes both Fortune 500 type risks and smaller business written under delegated authority. Heavy industries such as petrochemicals, steel smelting, high tech and onshore energy are avoided. The property reinsurance book is built around small, often mutual local US insurers, typically with a total premium income of less than $100m. Reinsurance is also written for first world insurers in Canada, UK, Europe, Japan, Australia, New Zealand and South Africa. The typical size of the international insurers is much larger than for the USA book. The aviation book consists of sub-classes including aviation XL, quota share, general aviation, hull war, war third party liability, and personal accident. The two remaining accounts, contingency and satellite, are both expected to produce less than £6m of gross premium. Syndicate Business Forecast

Slight reductions in the direct property account income are offset by a small increase in the property reinsurance book. The aviation account income is down slightly, while the contingency and satellite accounts are broadly static. Rate competition has been greater for high valued property than for the delegated authority book, and the syndicate will adjust the account towards the latter category, albeit bearing in mind that the former can still throw up opportunities as competitors can withdraw abruptly. The property reinsurance book is based around 300 companies, the vast majority having very long standing relationships with the syndicate and its predecessors, and where the syndicate enjoys a leading position. Price competition, while still an issue, is less prevalent in the sector. The syndicate also hopes to benefit from their client base restricting the exposure to merged companies following the wave of M&A activity in the (re)insurance sector. Although hopes that loss activity in the aviation reinsurance sector could lead to rate improvements in 2015 have proved to be optimistic, there is an expectation that 2016 should begin to see some stability, if not an improvement in rates when airlines renew at the end of 2015. The managing agent does not anticipate making many changes to the plan before the second submission in mid-September 2015. Although RDS exposures are only slightly lower than for 2015, the syndicate has reduced its reinsurance attachment point and most loss events would be expected to deliver smaller net losses to the syndicate. The managing agent has continued to file slightly higher RDSs as Lloyd’s centrally can take the RDS figures as a limit rather than a guide. Significant Points

a) Capacity is unchanged at £306m for 2016.

b) Total cash and investments were £220m at 30 June 2015.

c) Syndicate 2010 supports consortia led by sister Syndicate 3010 for the majority of the aviation war book.

95

2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - -Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property 89.5 102.8 82.9 78.9 67.8Reinsurance 95.5 109.5 74.3 60.0 84.8Whole Account 93.6 107.7 77.8 66.9 78.9

Gross Net Gross Net Two Events 94% 23% 112% 28% New Zealand Quake (Feb 2011) 8.0% North East Windstorm 51% 17% 61% 20% Superstorm Sandy (Oct 2012) 6.4% Aviation Collision 31% 15% 35% 17% Thailand Floods - (Oct 2011) 4.8% European Windstorm 37% 14% 47% 17% Japanese Earthquake (Mar 2011) 4.8% California Earthquake - San Francisco 43% 13% 49% 15% Nebraska Tornadoes (June 2014) 2.5% Florida Windstorm - Miami 47% 13% 53% 15% US Tornadoes (Apr 2011) 2.1% Gulf of Mexico Windstorm 44% 12% 50% 12% Heavy rainfall, Denmark (Jul 2011) 1.9%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 68.9 79.3 68.0 70.9 67.4Reinsurance Premium % Gross Premiums 31.4 32.7 35.8 31.1 31.0Pure Year Underwriting Result % Capacity 22.5 33.5 13.4 17.8 33.8Prior Years Underwriting Result % Capacity 1.6 3.3 5.4 4.0 3.3RITC received % Capacity 23.5 28.0 27.0 27.3 27.1IBNR % Net Outstanding Claims 55.8 59.0 45.4 56.3 49.8Operating Expenses % Capacity 4.0 5.4 5.1 4.8 5.8

2016

Geographic Split

9.1%1.3%

26.4%

9.0%46.8%

Combined Ratio by Class of BusinessClass of Business Split

2.6%4.7%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

0%10%20%30%40%50%60%70%80%90%

100%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 10 20 30 40 50 60

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

96

Syndicate 2014 Pembroke Managing Agency Limited David Indge

Acappella was formed as a joint venture between Pembroke, a managing agency owned by Bermuda based insurer, Ironshore, and Willis, the insurance broker. It has the ambition of re-engineering private capital in the Lloyd’s market, although the project also entails a fund management arm and an MGA platform. As a related party, the syndicate is restricted to no more than 20% of its premium volumes being sourced from Willis. The MGA platform remains a work in progress so there is no income to the syndicate from that source at present. A number of new teams have been added in the past year, diversifying the account and changing the focus from short tail, with a large catastrophe exposure, to long tail, with 44% of the proposed account represented by the casualty reinsurance and liability direct books. We chose not to support the syndicate in 2014 or 2015, and do not believe that we have missed out. The business plan envisages an increase of 50% for 2016. We are still reviewing the plan therefore any change in our recommendation (the syndicate is currently on our ‘not recommended’ list) for 2016 will be communicated in due course. Strengths/Opportunities

The recently arrived underwriting teams comprise former senior underwriters at much larger organisations. The accounts they are proposing to write are much smaller than their previous books and they are thus able to devote time to client relationships and develop a book of preferred business.

Forecasting has been conservative and the early results acceptable. The 2012 account (of predecessor Syndicate 6110) closed with a profit of 8.0%, whereas the Q6 forecast had been a profit of 1.25% (at midpoint). The 2013 account has improved from forecast loss of 2.8% at Q6 to a profit of 0.9% at Q10. The 2014 account (for syndicate 2014) is showing a small profit at 30 June 2015.

The syndicate has been able to access some existing books of business through quota shares and consortium arrangements with Pembroke Syndicate 4000. It will continue to share back office functions with Pembroke.

Weaknesses/Challenges

The syndicate commenced underwriting during 2012, and has added a number of new teams during 2014 and 2015. These have changed the focus of the syndicate from short tail to long tail. Until reserve patterns can be established, it is likely that reserving will be cautious and release of profit will be small.

The aspirations of the joint venture partners seem at odds. Willis does not want to be seen as a risk carrier, so has no underwriting participation in the syndicate. Pembroke has not supported the syndicate with underwriting capital.

Small syndicates have found it difficult to justify their place in the subscription market with brokers increasingly looking to reduce the number of participants on slips. When the syndicate has an overt connection to a rival broker, it seems that there will be even less incentive to use the syndicate.

As a new syndicate, it has a high expense base (budgeted expenses are 14.5% of estimated gross net premiums).

A move to establish a new agency will increase cost pressures on the business. It is likely that the syndicate will seek further growth.

97

Rating (outlook): C (watch) Risk Rating: Medium to Higher

Return Rating: 2 Capital Rating: 8

Catastrophe Rating: 4 Tail Rating: 5

Cost Rating: 10 Scarcity Rating: 10

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) - - - - 25 45 75 100 150Gross Premiums - - - - 21 36 55 90 126Net Premiums - - - - 16 26 43 73 102Pure Year Result - - - - 3 5 10 12 20Prior Year Result - - - - 0 0 0 0 0Operating Expenses - - - - -2 -6 -9 -12 -19Investment Return - - - - 0 1 0 0 1

Result (Est) £m - - - - 2 0 1 1 2% - - - - 8% 1% 2% 1% 2%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryThe syndicate has largely achieved its income plan, although there were shortfalls on sectors of the account including personalaccident. Much of the business is written in consortium withsyndicate 4000, which should give some more certainty topredicted volumes. The business plan shows lower loss ratios for2016 over 2015 (and indeed than for 2013 and 2014); we feelthese could be optimistic on a book that is increasing in tail length.We have used higher loss ratios. The corollary is that as theproportion of reinsurance business reduces, potential volatilityreduces.

Auction CommentaryAuction Volume and Average Price

This syndicate is not eligible for auction. We understand that thismay be reviewed in the future when Acappella has established itsown managing agency. Ironshore feels unable to give theundertakings implicit in offering evergreen capacity. Capacity isoffered on annual tenancy only basis at present, althoughAcappella envisages building a long term and stable capital base.

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98

Syndicate 2014 Pembroke Managing Agency Limited David Indge

Description

The syndicate started life as a special purpose reinsurance syndicate, writing a number of reinsurance contracts of Pembroke Syndicate 4000, which gave it breathing space as it developed business lines of its own during 2012 and 2013. These lines were initially property treaty and accident & health, adding casualty reinsurance, marine reinsurance, specie and cargo and political risks when the syndicate became a standalone entity for the 2014 year of account. It has added property binders and liability in 2015. It further plans to add new lines in property D&F and US casualty binding authorities (under the property and liability accounts respectively) in 2016. Syndicate Business Forecast

A number of new lines were added for the 2015 year of account, most of these are expected to grow during 2016. The largest account will be the liability book, with GNPI of £31m, up 47% on 2015. Casualty reinsurance, also new for 2015, grows 42% to £28m and the property account grows to £19m with the addition of a direct and facultative account to the exiting binder book. Likewise, the cargo and transit book grows 21% to £7.5m in its second full year. The reinsurance book is also expected to grow as the syndicate seeks increased lines on its existing book and an expansion into the international market. A proposal to enter the offshore energy market is currently on hold given the fall in the price of oil and the high degree of competition in the sector. Willis, a joint venture partner in Acappella, is expected to produce 17% of the projected premium volumes. Significant Points

a) Capacity is projected to increase to £150m for 2016, a 50% increase on 2015.

b) Acappella, a joint venture between the insurance broker, Willis, and Pembroke (owned by Bermuda based (re)insurer Ironshore) plans to form its own managing agent to manage the syndicate during 2016.

c) The syndicate began its existence as special purpose syndicate 6110 in 2012, writing a reinsurance of certain lines of business underwritten by Pembroke Syndicate 4000 before becoming a fully fledged syndicate for the 2014 account.

d) David Indge replaced David Bruce as Active Underwriter in September 2014. David Indge joined Acappella from Lloyd’s where he spent more than a decade working in the Performance Management Directorate, first as Head of Underwriting Performance and then Head of Class of Business. Prior to joining Lloyd’s, he spent twenty years in the reinsurance industry.

e) The managing agency fee is 1.0%, but this is discounted to 0.75% while the syndicate is managed by Pembroke. The fee will be 1.0% at the time that the syndicate changes managing agent, although it will revert to 0.75% when the syndicate capacity exceeds £150m.

99

2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - -Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property - - - - -Reinsurance - - 139.6 105.1 106.4Whole Account - - 139.6 105.1 109.4

Gross Net Gross Net Two Events 87% 29% 100% 24% Superstorm Sandy (Oct 2012) 13.0% California Earthquake - Los Angeles 46% 20% 58% 22% Alberta flooding (June 2013) 6.0% New Madrid Earthquake 33% 18% 53% 19% Oklahoma City Tornado (May 2013) 1.0% Florida Windstorm - Miami Dade 38% 16% 52% 15% Malaysian Airlines (March 2014) 1.0% Gulf of Mexico Windstorm 51% 16% 58% 13% North East Windstorm 52% 15% 58% 13% Political Risks - South East Asia/China 29% 22% 17% 13%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity - - - - 82.5Reinsurance Premium % Gross Premiums - - - - 23.4Pure Year Underwriting Result % Capacity - - - - 42.5Prior Years Underwriting Result % Capacity - - - - 0.0RITC received % Capacity - - - - 0.0IBNR % Net Outstanding Claims - - - - 168.9Operating Expenses % Capacity - - - - 6.3

2016

Geographic Split

6.3%1.5%0.2%

4.0%64.4%

Combined Ratio by Class of BusinessClass of Business Split

11.1%12.5%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

0%

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80%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 5 10 15 20 25 30 35 40

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

100

Syndicate 2121 Argenta Syndicate Management Limited Ian Maguire

The re-underwriting of the account carried out during 2012 has largely been successful. Underperforming subclasses have been culled and there is a distinct improvement in performance. Recent years have seen the syndicate outperform both its own business plan and the Lloyd’s market benchmarks. On a GAAP basis (used increasingly by Lloyd’s to benchmark syndicates) performance is first quartile for 2013 and 2014. A new class, SME property/liability package business in the UK, was added for 2015 and one further class, cyber is added for 2016. There are also developments in Asia and Australia as the syndicate diversifies away from London market broker business and increases its presence in Lloyd’s overseas offices. Brokers can make life tough for the small and medium sized syndicates but 2121 does not over-rely on support from the big three brokers, which should protect to a certain extent against those brokers’ attempts to reduce the influence and importance of the following market. The nature of the account lends itself to effective reinsurance purchase; the 2015 programme increased protection at lower prices and we fully expect that the syndicate will be able to do the same for 2016. We continue to recommend support. Strengths/Opportunities

Performance is much improved. The syndicate achieved top quartile performance across the Lloyd’s market in both 2013 and 2014.

Reserves have proved to be robust.

The account is short tail. An average of 71% of ultimate claims are settled at the end of the 36 month account (2010 to 2012 accounts). New accounts, such as the casualty book written in consortium, as well as the cyber book, may increase the tail characteristics.

Given the structure of the account and the relatively small catastrophe exposures there are good opportunities to buy a cost effective reinsurance programme. Reinsurance recovery rates (72% between 2010 and 2013) are well above the Lloyd’s average.

Big strides have been made in developing the Singapore office, which is expected to develop premiums of around £17.5m in 2016. The syndicate also hopes to write £3.3m out of Lloyd’s office in Shanghai.

Weaknesses/Challenges

The syndicate has a relatively low leadership profile in most of its lines of business. The desire of brokers to reduce frictional costs by using fewer markets can and has led to a loss of business.

There is catastrophe exposure here; from 2007 to 2012, catastrophe losses added 17% on average to the syndicate’s loss ratio. Recently there have been fewer major losses and the results have been much better. The syndicate management would argue that the account is now better spread and better reinsured.

Based on current income levels for the 2015 account, some of the income projections for 2016 look optimistic.

Cyber business will bring a new set of challenges to the syndicate as regards overseeing the business, setting policy wordings for emerging risks and settling new types of claim. We understand that the 2016 income for cyber is now likely to be less than the £6.5m target in the initial business plan.

101

Rating (outlook): B (stable) Risk Rating: Medium to Higher

Return Rating: 3 Capital Rating: 8

Catastrophe Rating: 5 Tail Rating: 7

Cost Rating: 7 Scarcity Rating: 4

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 112 130 175 200 200 200 240 240 270Gross Premiums 97 119 140 164 184 177 162 192 214Net Premiums 73 95 106 126 136 136 122 154 170Pure Year Result -7 20 -8 5 40 41 36 32 37Prior Year Result 6 1 7 11 2 3 2 2 2Operating Expenses 3 -9 -10 -9 -17 -27 -19 -24 -28Investment Return 4 3 3 3 3 2 2 3 3

Result (Est) £m 6 15 -8 9 27 20 22 13 14% 5% 11% -4% 4% 14% 10% 9% 5% 5%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryWe have slightly reduced the catastrophe load in our model.Catastrophe losses from 2007 to 2012 have added almost 17% tonet loss ratios, although the addition of new accounts (UK SME,accident & health and cyber) will reduce the scope for this tohappen. The reinsurance programme's lower attachment pointand better coverage will have the same effect. We expect thesecond submission of the plan to show lower premium income,due to exchange rate changes and lower premium income fromthe new cyber book. Reserve releases have been significant; theolder years in particular look robust.

Auction CommentaryAuction Volume and Average Price

There was plenty of enthusiasm for the syndicate with the priceopening at 5.0p, twice the average price in 2013, and proceedingto double to 9.8p by Auction Three. Subscriptions for capacityoutnumbered tendered capacity by 4 to 1, and only capacitytendered at very high prices (including one parcel at 20p in AuctionThree) remained unsold. As the biggest supporting agent, Argentaled by sales and purchases, although there was also strongbuying by Hampden clients.

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102

Syndicate 2121 Argenta Syndicate Management Limited Ian Maguire

Description

Syndicate 2121 writes a largely direct and short tail account across a range of non-marine and marine product lines. The largest account is the property book, built around a number of long standing relationships with managing general agents, mostly but not exclusively, in the USA, supplemented by open market business. The syndicate also writes onshore power and utility business and terrorism in the property sector. The marine book consists of most traditional lines of marine business including cargo, specie, hull, war and fine art. Energy includes oil exploration, production and distribution risks, but refining risks are not written. Marine and energy liability risks, both in conjunction with the physical damage lines and on a standalone basis, are written. International casualty business, with an accent on heavy industries, including railroads, construction, chemicals and mining is written by way of a consortium (led by Apollo Syndicate 1969). There is a small accident & health book. The syndicate formed a new unit to underwrite UK SME property and liability business in 2015 and for 2016 is setting up a cyber unit. The cyber team has underwritten for a consortium, of which Syndicate 2121 was a member, for a number of years but has now joined to underwrite directly for the syndicate. Syndicate Business Forecast

The main development is the addition of a new line of Cyber business with forecast income of £6.5m. There is also growth in the accident & health account, added for 2014, with income forecast to increase from £5m to £10m. The new line of UK Insurance, aimed at small and medium commercial property and liability business in the UK is forecast to remain static. The syndicate has changed some of the classifications of business, forming a new Specialty class from existing small accounts including crop, space and some onshore energy. All were previously reported within other classes. Income from the property book, one of the syndicate’s mainstays, is down by just over 12% on the latest 2015 forecast, although part of this is accounted for by the reclassification of business. Energy and casualty (via the Apollo consortium) are broadly static, while there are small reductions in utility, terrorism, marine liability and treaty reinsurance. The largest reduction is in the energy book, down by around 17%. While there is limited movement in the gross RDS exposures, some of the net exposures are significantly reduced as the syndicate has taken advantage of the softening reinsurance market by reducing the reinsurance attachment point. Significant Points

a) A pre-emption of 12.5%, increasing capacity to £270m, is proposed for 2016.

b) APCL personnel Alan Tucker, Graham White and David Williams all stood down from the board of Argenta Syndicate Management Limited with effect from 1 April 2015. Andrew Annandale, CEO of ASML, is a non-executive director of APCL.

c) Cash and investments stood at £209m as at 30 June 2015, down on twelve months ago largely in consequence of the payment of the 2012 account profit and an early release on the 2013 account.

d) Profit commission is subject to a hurdle rate, whereby the syndicate needs to maintain a seven year rolling average return on capacity in excess of 7.5% in order to trigger the higher profit commission of 17.5%. If the average falls below this, subject to the usual deficit clauses, the profit commission falls to 15%. The first year for the calculation of the rolling average is 2012.

103

2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - -Energy 90.3 85.2 96.6 85.0 84.5Life - - - - -Marine 80.7 87.2 121.0 100.0 117.8Motor - - - - -Property 84.9 109.9 99.0 93.6 81.0Reinsurance 137.7 123.3 75.2 75.9 64.9Whole Account 97.2 103.8 97.7 87.4 82.6

Gross Net Gross Net Two Events 47% 23% 48% 17% Superstorm Sandy (Oct 2012) 12.1% California Earthquake - Los Angeles 30% 8% 31% 10% Gas FPSO Gryphon (Feb 2011) 2.5% Gulf of Mexico Windstorm 30% 8% 28% 8% New Zealand Quake (Feb 2011) 2.5% European Windstorm 25% 11% 19% 8% Rainbow Pipeline (Apr 2011) 2.2% New Madrid Earthquake 27% 7% 24% 7% K.S Endeavour Explosion (Jan 2012) 1.9% Florida Windstorm - Miami 17% 6% 17% 6% Pipeland Damage (June 2012) 1.8% North East Windstorm 28% 10% 28% 6% Xcel Energy Fire (Nov 2011) 1.8%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 86.3 91.3 79.8 82.0 92.3Reinsurance Premium % Gross Premiums 24.7 20.2 24.0 22.9 26.0Pure Year Underwriting Result % Capacity 29.3 53.7 26.8 33.8 53.9Prior Years Underwriting Result % Capacity 4.9 0.9 4.2 5.3 0.9RITC received % Capacity 44.0 42.3 39.3 41.8 41.4IBNR % Net Outstanding Claims 65.2 60.1 61.0 61.3 65.9Operating Expenses % Capacity -2.8 7.1 5.5 4.6 8.4

Combined Ratio by Class of BusinessClass of Business Split

19.1%5.4%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

15.4%2.5%

12.7%

5.9%39.0%

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100%

120%

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UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

104

Syndicate 2525 Asta Managing Agency Limited David Dale

Syndicate 2525 has an impressive track record, with an average profit in excess of 30% over the past seven closed years. The majority of the team, including the active underwriter and the claims manager, spent their formative years at QBE Syndicate 386. Tim Butcher (also ex QBE 386) joined in December 2014 to develop an international account. The product set is limited and the market conditions are tough. Nonetheless, the syndicate operates a proven formula: robust case reserves are established and the claims manager keeps close oversight on all claims. Typically claims are settled well within the initial reserve and the syndicate has never yet needed to use the IBNR reserve. The expense base remains disproportionately high and all involved accept that the syndicate needs to grow. The development of the international account and the associated pre-emption are part of this process. We think that this remains a worthwhile alternative for those who wish to increase exposures outside the standard property and catastrophe lines and we recommend support. Strengths/Opportunities

Specialist liability insurer, with a long-standing and loyal client base.

The syndicate’s success has been based on highly conservative reserving and proactive claims management.

The syndicate has developed a rehabilitation product called ReWage that provides for an injured employee to continue to receive wages following an accident at work and often makes formal legally represented claims unnecessary.

Releases from reserves have averaged more than 35% of closing year capacity over the past seven years.

Almost all underwriting is carried out by the syndicate personnel at the underwriting box. The team develops an in-depth understanding of the risks written and co-operates closely with a claims manager.

Weaknesses/Challenges

Expenses are high, budgeted at 17.4% of gross net premium income. A large part of this is the Asta service charge, which includes some per unit charges which fall more heavily on a small syndicate such as this.

The syndicate habitually forecasts an overall loss for the pure year and is dependent upon the continuation of old year releases to turn the account into profit.

Excluding SPSs, this is currently the smallest non-life syndicate for which we recommend support. The underwriter accepts the need to grow the account, hence the pre-emption for 2016, in order to defray expenses and maintain relevance. The market continues to be highly competitive. Growth therefore comes principally from the new international account. This may have different characteristics from the pre-existing book of business and in any event the contribution of investment income and reserve releases will be diluted on a larger syndicate capacity.

Reserve levels have reduced in recent years and the potential for future releases is reducing.

Business is written on an occurrence policy form, the longest tail policy wording of all.

We sense that the relationship with Asta is something less than harmonious. Under the structure whereby the syndicate is unique in not being turnkeyed, the underwriting personnel are employees of the managing agent and perhaps have less control over their destiny than they would like.

105

Rating (outlook): B (stable) Risk Rating: Medium to Higher

Return Rating: 7 Capital Rating: 7

Catastrophe Rating: 10 Tail Rating: 1

Cost Rating: 2 Scarcity Rating: 2

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 42 42 42 42 42 42 42 42 50Gross Premiums 33 29 28 29 29 33 35 37 40Net Premiums 27 23 22 23 23 27 28 29 32Pure Year Result -2 0 -1 2 -3 3 3 2 2Prior Year Result 13 15 18 15 18 8 7 6 6Operating Expenses -2 -4 -5 -7 -7 -7 -6 -7 -7Investment Return 2 2 2 1 2 1 1 1 1

Result (Est) £m 11 13 14 11 9 5 4 3 2% 26% 30% 32% 25% 22% 12% 9% 6% 5%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryThe syndicate is highly reliant on reserve releases, averagingmore than £15m over the past seven years. Further releases arecurrently forecast by the managing agent for 2013. The IBNRmargin has reduced in recent years, although the syndicate hasnever used any of this and claims have historically been settledwithin the aggregate case reserves. We do expect lower releasesin the future albeit these will remain a significant part of the overallresult. The high gearing of the syndicate investment fund tocapacity (currently almost 200%) means investment returns couldimprove if there is an increase in interest rates.

Auction CommentaryAuction Volume and Average Price

The syndicate was one of the most sought after at auction in 2014with prices up 86% on average over the 2013 levels. The AuctionThree price was almost a third up on the Auction One price. Therewere almost £8 of subscription bids for every £1 of capacitytendered. No tendered capacity remained unsold after any of thethree auctions. Hampden clients were the largest buyers,followed by clients of Argenta. Alpha clients did not succeed inbuying any capacity.

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106

Syndicate 2525 Asta Managing Agency Limited David Dale

Description

The syndicate is a specialist liability insurer with an account split approximately 50:50 between employers’ liability and public/products liability. Exposures to the USA’s legal environment are rigorously avoided. All UK business is written on a facultative basis, by syndicate personnel, with no delegated authority. The syndicate has sought to expand its international account, initially by writing excess of loss business in 2008, but expanding this to include primary business in 2014. It also writes some offshore business, from “one-man-bands” offering non-manual professional services, to larger concerns working both in the offshore mineral extraction industry and increasingly in the offshore windfarm business. The syndicate has also written some maritime casualty cover for security consultants working off the coast of Africa seeking to prevent piracy attacks. Syndicate Business Forecast

Tim Butcher, formerly of QBE Syndicate 386, was appointed in December 2014 to grow the international liability book. The account continues to develop, although exact business volumes are hard to presage. Unlike the UK account, part of this book will be accessed via delegated authority. In the UK, the renewal rates have been essentially flat, with two years of rate increases at less than 0.1%. 2016 is expected to be similar. The syndicate expects to keep its long standing reinsurance programme, under which it has a retention of £500,000. Significant Points

a) A pre-emption of 18.4%, increasing capacity to £50m, is proposed for 2016.

b) Syndicate cash and investments as at 30 June 2015 are £83.8m.

c) The syndicate is managed by Asta Managing Agency Limited. Unlike other syndicates managed by Asta, this syndicate is not managed on a turnkey basis and there are no plans to migrate to a stand-alone agency at some point in the future. Asta does not provide capital to syndicate.

107

2010 2011 2012 2013 2014Aviation - - - - -Casualty 62.6 64.8 64.9 67.6 73.1Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property - - - - -Reinsurance - - - - -Whole Account 62.6 64.8 64.9 67.6 73.1

Gross Net Gross Net Catastrophe on a Major Contruction Project 46% 3% No classified major losses Loss of Major Complex 71% 3% 60% 2% Rail Crash (similar to Paddington) 50% 2%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 78.4 68.1 67.2 69.4 68.7Reinsurance Premium % Gross Premiums 18.9 20.8 20.7 19.5 19.7Pure Year Underwriting Result % Capacity 14.8 21.5 20.1 22.3 11.7Prior Years Underwriting Result % Capacity 31.6 36.8 42.8 35.4 43.7RITC received % Capacity 206.7 202.4 184.5 166.6 147.2IBNR % Net Outstanding Claims 33.8 38.8 33.3 33.7 18.6Operating Expenses % Capacity 5.7 10.6 12.6 17.4 16.2

2016

Geographic Split

4.0%4.4%3.4%

2.6%4.2%

Combined Ratio by Class of BusinessClass of Business Split

79.0%2.5%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

0%10%20%30%40%50%60%70%80%90%

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108

Syndicate 2526 AmTrust at Lloyd’s Mike Sibthorpe

AmTrust, which assumed managing agency responsibility from 1 April 2015, acquired almost £25m of capacity in 2014 taking its share of the syndicate to 99.5%. We expect a minority buyout of the remaining unaligned shares to be negotiated during 2015 and that the syndicate will be closed to third-party capital for 2016. We have never recommended support for this syndicate and those Argenta advised clients who did support the syndicate in 2014 sold in last year’s auctions. The syndicate has suffered a series of losses, largely arising out of under-reserving earlier years. We continue to recommend that clients do not participate in this syndicate but we will work with the recently appointed managing agent to ensure equitable and timely exit via RITC for those members with allocations in 2013 and 2014. Strengths/Opportunities

A specialist liability syndicate with strong underwriting principles. Its relatively small capacity means it can be selective in its underwriting and is able to act autonomously.

Although questions remain over the future strategy of AmTrust, their involvement brings certainty to capital provision and provides options for developing the managing agency function. We anticipate that AmTrust will provide exit for members with open positions via reinsurance to close of the currently open years of account.

Weaknesses/Challenges

AmTrust has two bottom quartile syndicates – Syndicate 1206 (seven year average combined ratio 109.1%) and Syndicate 2526 (113.5%). Lloyd’s will focus on fixing the operational platform before it allows the managing agency to develop and grow the business. This will impede any return to profit.

The syndicate operates in some fiercely competitive market sectors

Under the terms of the sale of the business to AmTrust, founder director Andy Dore had a period of non-competition. He left the business in the early part of 2014, so it is quite likely that he will be back in the market at some point during 2016.

There have been a series of reserving shortfalls, most significantly at the close of 2012 (a prior year deficit of £17.9m) although three of the last four closed years have produced shortfall. Although there is some evidence of stabilisation, there is another (£800,000) small deficit forecast on the 2013 account as at 30 June 2015 and the reserve ratios are only as strong at the close of 2012 as they were at the close of 2007 (IBNR/Net outstanding at 75.8% at close of 2012, 75.0% at close of 2007).

109

Rating (outlook): D (watch) Risk Rating: Higher

Return Rating: 1 Capital Rating: 7

Catastrophe Rating: 10 Tail Rating: 1

Cost Rating: 1 Scarcity Rating: 1

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 32 32 32 50 56 60 64 64 60Gross Premiums 26 27 25 34 33 36 32 34 49Net Premiums 21 21 19 25 23 28 25 29 41Pure Year Result 5 1 3 1 1 2 3 5 7Prior Year Result 0 -2 0 -2 -18 -1 0 0 0Operating Expenses -2 -1 -2 -5 -5 -7 -8 -8 -8Investment Return 1 1 1 1 2 0 0 1 1

Result (Est) £m 5 -2 2 -5 -21 -5 -5 -3 0% 14% -7% 7% -10% -38% -9% -8% -4% 0%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryAs we represent no 2016 capital providers, we have only seen anabridged business plan. The syndicate is planning to reduce thecore professional indemnity book and introduce shorter tailproperty and personal accident lines. Overall income is up byaround 27% on original plan, although we note that the latest 2015forecast is down significantly both on plan and previous years.The managing agent is forecasting another prior deterioration for2013 as at 30 June 2015. We model reserve releases at nil butnote that reserving ratios have not materially changed despite prior-year losses and heavy IBNR utilisation in the first half year.

Auction CommentaryAuction Volume and Average Price

AmTrust acquired £24.8m at auction in 2014, increasing its shareto 99.5%. AmTrust purchases were at a price of 3.0p. Other thanAmTrust, there was just one buyer of capacity, outbiddingAmTrust in auction four with a bid for £170,000 at a price of 3.1p.

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110

Syndicate 2526 AmTrust at Lloyd’s Mike Sibthorpe

Description

The syndicate has traditionally been a long tail specialist with lines in professional indemnity for traditional classes including construction, architects, engineers, solicitors, accountants, property consultants, insurance intermediaries and real estate agents. It also writes medical malpractice, financial institutions and directors’ and officers’ liability. For 2016 it proposes to add books of property and personal accident written both facultatively and via reinsurance treaty. Syndicate Business Forecast

The syndicate plans to scale back its professional indemnity account by around 30%. This will continue to be the largest section of the account. There is approximately 25% growth in the medical malpractice book. Directors and officers and financial institutions are largely flat. The syndicate plans to add new lines in property schemes and personal accident in 2016. The syndicate anticipates a largely flat rating environment. Significant Points

a) AmTrust Corporate Capital Limited, which provides 99.53% of syndicate capacity has announced that it proposes to make a mandatory offer to acquire the remaining £304,000 of non-aligned capacity on the syndicate. These are the details have been mailed to the non-aligned members of the syndicate in 2015.

b) The proposed capacity will fall slightly from £64.138m to £60m, a de-emption of 6.5%.

c) Syndicate held cash and investments of £82.8m as at 30 June 2015.

d) Mike Sibthorpe replaced Dominic Frost as active underwriter in 2015.

e) AmTrust acquired the syndicate’s service company in July 2012. Separately, AmTrust acquired Sagicor at Lloyd’s Limited (since renamed AmTrust at Lloyd’s), managing agent to Syndicates 44 and 1206, combined capacity £212m. The management of Syndicate 2526 was transferred to AmTrust in April 2015.

111

2010 2011 2012 2013 2014Aviation - - - - -Casualty 85.7 119.7 99.4 130.3 185.3Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property - - - - -Reinsurance - - - - -Whole Account 85.7 119.7 98.9 125.2 173.2

Gross Net Gross Net Liability (Failure of a Corporation) 25% 7% 27% 12% No classified major losses Liability (Failure of a Construction Project) 19% 8% 21% 10% US Terrorism - Exchange Place 25% 5% Aviation Collision 17% 5% California Earthquake - Los Angeles 20% 4% Japanese Earthquake 20% 4% New Madrid Earthquake 20% 4%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 82.6 86.4 77.4 67.7 60.1Reinsurance Premium % Gross Premiums 19.7 21.8 20.8 25.9 31.1Pure Year Underwriting Result % Capacity 39.9 27.8 35.1 21.1 19.3Prior Years Underwriting Result % Capacity 0.2 -7.8 1.1 -4.7 -32.4RITC received % Capacity 84.1 101.8 127.8 79.1 81.3IBNR % Net Outstanding Claims 48.1 57.1 50.8 45.2 75.8Operating Expenses % Capacity 5.7 4.6 6.3 9.2 9.7

Combined Ratio by Class of BusinessClass of Business Split

25.0%33.7%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

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2016

Geographic Split

9.9%5.3%4.5%

5.6%16.1%

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Accident & Health

% of Business Written2016 2015

112

Syndicate 2791 Managing Agency Partners Limited Richard Trubshaw

The account has been pared back to the absolute core and the syndicate is planning to write just one third of its stamp capacity. Others in the market draw attention to the need to maintain ‘relevance’; MAP achieves this not by line size or the ability to write all that the broker brings to it, but its skill in being able to price complex and hard to place risks. The underwriter will argue that there will always be some distressed business, in a hard market there is simply more of it. However, there are shifts in the distribution network and not as much business routinely comes to London. Meanwhile, the management has a plan for the time when capital is in short supply, which envisages the syndicate writing upwards of £700m. That time may be some way off; until then the syndicate will continue to reduce its risk appetite and select only those risks where it feels there is adequate margin. Results will inevitably be diluted by the low utilisation, but we consider this approach embodies much that is best about the Lloyd’s market and we continue to recommend support as part of your core portfolio. Strengths/Opportunities

The syndicate has shown itself to be exceptionally, perhaps uniquely, nimble. It has shrunk a highly profitable book rapidly and is able to ride out the soft part of the cycle on a core book of business, primed and ready to expand if conditions improve.

There is a very high degree of alignment between syndicate members and the management. All key staff (indeed almost all staff) are shareholders in the agency and are capital providers via MAP Capital.

An informed and robust cast of non-executive directors including three former active underwriters in Christine Dandridge (Syndicate 609), Raymond Dumas (1028/2020) and David Shipley (2791).

Reserves are held above the actuarial best estimate giving both some comfort that closed years are more likely to produce surpluses than deficits and providing members with solvency credits to help offset capital requirements. Since 2006, the average release from closed years has been £15m or 3.5% of capacity. The IBNR to outstanding claims ratio reached a high at the close of 2012 of 137%.

MAP is a firm supporter of third-party capital and the annual venture.

Expenses are low at less than 5% of capacity although cuts to premium income mean they are budgeted to be more than 14% of gross premium. Salaries are below peer syndicates, but there is the opportunity to make large profit related bonuses, as well as underwriting returns via staff participation.

Weaknesses/Challenges

The intention is to continue as an employee owned business and not to seek a stock market listing or a trade sale to an international insurer. This requires careful management of succession and equity ownership. The transition from founder and key stakeholder David Shipley has been successfully managed with his shareholding dispersed amongst younger members of staff. The next transition, were several founder members to retire simultaneously, could be harder to achieve.

A degree of risk is undertaken on the investment side. The assets include some longer dated stock as well as equities and credit bond funds.

Reducing exposures are problematic to reinsure as reinsurance underwriters like to relate the premium they receive to the amount of claims they have paid in the past, so the syndicate does not always receive due credit for the reduction in exposures.

113

Rating (outlook): A (stable) Risk Rating: Medium to Higher

Return Rating: 8 Capital Rating: 7

Catastrophe Rating: 4 Tail Rating: 4

Cost Rating: 3 Scarcity Rating: 2

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 400 404 504 504 507 511 453 400 400Gross Premiums 233 264 215 218 244 197 149 143 136Net Premiums 190 203 174 174 189 147 113 116 108Pure Year Result 51 127 81 68 61 74 55 34 30Prior Year Result 10 21 24 18 10 10 10 10 10Operating Expenses -20 -37 -36 -30 -25 -28 -20 -21 -19Investment Return 22 19 20 12 20 8 4 3 3

Result (Est) £m 62 129 89 68 59 64 49 25 24% 16% 32% 18% 13% 12% 12% 11% 6% 6%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryThe syndicate has a conservative record of reserving, with the2006-2012 final results being on average 7% of capacity betterthan forecast at Q6. Less than half of this improvement relates toreserve releases; the majority arises out of conservative pure yearforecasting . We expect improvements for 2014 and 2015,notably 2014 where the loss ratio is better than any year in thesyndicate’s history, other than 2003 and 2006. MAP does notforecast prior year releases ahead of closing the account. The runrate has been around £15m, although our model expects lowerreturns in the future.

Auction CommentaryAuction Volume and Average Price

Auction prices fell in 2014 from the highs they had recorded in2013. Both prices and volumes reduced from Auction One toAuction Three, and some buyers were able to get capacity at bidprices well below the published averages. Unusually, there weresome large volumes of capacity tendered that did not find a buyer.Although MAP Capital has been an auction buyer in the past, therewas no evidence of it bidding last year. Clients of Argenta wereboth the biggest buyers and the largest sellers of capacity, but thesyndicate enjoys substantial support from all three agents, all ofwhom bought and sold capacity.

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114

Syndicate 2791 Managing Agency Partners Limited Richard Trubshaw

Description

The syndicate is an opportunistic underwriter, moving capacity between various product lines to areas that offer the best return on capital. In recent years, this has tended to be catastrophe reinsurance, which has become the largest single part of the account, even after the cession to SPS 6103. The remainder of the book revolves around London market specialty business including direct and facultative property, North American property binders, marine hull, war & terrorism, and North American auto. Although casualty has been written, the directors’ & officers’, medical malpractice and errors & omissions books are a fraction of their former size. There is also a small amount of overseas motor (including some Irish business). Syndicate Business Forecast

The plan is predicated on a continued soft market. MAP envisages premium levels to remain close to the 2015 level as the syndicate has retreated to its core in many areas and it expects any business that it loses to be replaced in part by distressed business on which it can impose its own terms. There is some growth in the North American auto book, as the syndicate has recently begun to win more firm orders at its pricing levels. The syndicate provides three scenarios for each line of business giving a worst case, expected case and best case. It is possible that the worst case may prevail in one class while the best case occurs in another, so the range between cases is probably overstated, but if all classes were at worst case, the premium could fall as low as £90m (after deduction of acquisition costs). At best case, which would require loss activity and a consequent withdrawal of capacity, income could be as high £369m. The business forecast is based on the expected conditions in each business line. Finally, the syndicate provides an absolute best case, being the premium levels the business could support in an extremely hard market. This could be as high as £572m, requiring a stamp capacity of £600m. The RDS figures quoted are based on syndicate appetite and actual exposures are likely to be significantly below these in the current soft market. Significant Points

a) Capacity will be unchanged at £400m for 2016.

b) Syndicate funds were £398 million as at 30 June 2015. Funds are diversified across a range of asset managers and asset classes with the intention to seek balance. At the end of 2014, funds were allocated 40% to US corporate debt, 21% to US Treasury bonds, 14% in cash or equivalent, 8% in equities, 7% in US agency bonds, 5% in credit bond funds and 5% in overseas regulatory trust funds. Currency exposure is not hedged.

c) Syndicate 2791 cedes 10% of its US catastrophe reinsurance book to Special Purpose Syndicate 6103. This proportion has reduced over time from 30% in 2013, 20% in 2014 and 10% in 2015.

d) MAP Capital Limited is independent of the managing agency (see the managing agency profile) although it has always allocated 100% of its capacity to MAP managed syndicates.

115

2010 2011 2012 2013 2014Aviation - - - - -Casualty 99.3 71.8 57.2 68.7 -Energy 50.4 38.1 57.7 57.8 -Life - - - - -Marine 87.5 68.3 - - -Motor - - 96.4 90.3 96.0Property 76.2 108.7 72.7 58.5 73.3Reinsurance 57.9 85.8 67.4 71.6 67.1Whole Account 63.8 82.4 68.1 69.6 73.0

Gross Net Gross Net Two Events 92% 35% 101% 38% Superstorm Sandy (Oct 2012) 10.0% US Terrorism - Exchange Place 15% 13% 25% 20% US Tornadoes (Apr 2011) 2.6% California Earthquake - Los Angeles 51% 17% 56% 19% US Tornadoes (May 2011) 2.5% Florida Windstorm - Miami 51% 17% 56% 19% Fungal Meningitis (2014) 2.4% Gulf of Mexico Windstorm 53% 17% 56% 19% Thailand Floods - (Oct 2011) 2.0% North East Windstorm 53% 17% 56% 19% New Zealand Quake (Feb 2011) 1.9% North West Quake 37% 13% Costa Concordia (Jan 2012) 0.2%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 58.3 65.5 42.5 43.2 48.1Reinsurance Premium % Gross Premiums 18.6 23.1 19.0 20.1 22.6Pure Year Underwriting Result % Capacity 29.1 49.0 27.3 25.0 25.8Prior Years Underwriting Result % Capacity 2.5 5.1 4.8 3.5 2.0RITC received % Capacity 67.5 67.9 50.5 45.4 43.0IBNR % Net Outstanding Claims 112.4 124.3 117.3 132.0 136.9Operating Expenses % Capacity 5.1 9.2 7.2 5.9 4.9

Combined Ratio by Class of BusinessClass of Business Split

1.1%8.6%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

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2016

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3.3%2.2%9.2%

1.9%73.8%

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% of Business Written2016 2015

116

Syndicate 4020 Ark Syndicate Management Limited Nick Bonnar

At the time of writing it is not yet clear on what basis, if any, third party capital will participate for 2016. Ark has said that it wishes to dispense with the SPS and any participation is likely to be on a limited tenure basis on Syndicate 4020. It has also warned us that it would like to review the fee basis for 2016. These negotiations are ongoing, and we will report to members as usual later in the year when we invite you to renew your participations on the Special Purpose Syndicates. We admire Ark and would like to be able to continue. The business has done well since we have been involved, and the plan for 2016 is one of the more conservative ones we have seen. We believe that an independent business married to private capital has been one of the most successful operating models at Lloyd’s. Strengths/Opportunities

Impressive track record of almost 10% profit (including forecasts for 2013 and 2014) since the syndicate was formed in 2007.

Following a successful buyout from private equity owners, Ark is positioned as an owner operator independent managing agency backed by in-house, reinsurance and traditional third-party capital. Historically this has been one the most successful models for Lloyd’s managing agents.

There is a high level of shareholding throughout the organisation and a significant community of interest between management and syndicate capital providers.

The relative newness of the organisation and the recent MBO mean that sufficient share capital remains unallocated to make Ark an attractive proposition for ambitious underwriters. The business successfully took a large team from Hardy when that business’s acquisition by CNA.

The management team has been unafraid of taking some additional credit risk on the asset side without increasing duration risk. It has achieved average returns of 3.0% on invested funds over the past four years (more than twice the Lloyd’s average).

Weaknesses/Challenges

Syndicate expenses, by way of a “costs plus” over-rider, have been relatively high for Syndicate 6105.

The management style is broadly risk seeking. It has run some substantial retentions on the reinsurance programme and taken on the risk of salvage of losses as well as the credit risk noted above.

Despite the relative short lifespan of the syndicate, there have been number of changes to the underwriting team. We suspect that some of these changes have been engineered, but these are sufficient in number to suggest some discontent among the troops.

The MBO seems heavily leveraged. We suspect that the management team has some fairly onerous targets.

117

Rating (outlook): B+ (stable) Risk Rating: Medium

Return Rating: 5 Capital Rating: 9

Catastrophe Rating: 7 Tail Rating: 5

Cost Rating: 10 Scarcity Rating: 1

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 20 28 30 11 11 19 60 60 400Gross Premiums 18 24 16 5 6 10 33 35 253Net Premiums 14 18 13 4 4 8 23 24 206Pure Year Result 0 8 -1 2 3 3 8 8 41Prior Year Result 0 0 0 0 0 0 0 0 0Operating Expenses 0 -3 0 -1 -1 -2 -5 -6 -29Investment Return 1 1 1 0 0 1 1 1 7

Result (Est) £m 0 6 0 1 2 2 3 3 18% 2% 21% 0% 13% 17% 10% 6% 5% 5%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryThe management has not been afraid to reduce premium volumes when rating levels have fallen and capacity is moved to moreattractive lines. There is volatility, and catastrophes cost 28% ofnet premium in 2010. Investment returns have been impressive,but we think there is volatility here as well. We do not build in anyreserve release into our model until we have comfort that releasesare sustainable. The 2010 account shortfall was largelyoccasioned by the casualty reinsurance book which has sincebeen scaled back. The higher reinsurance spend in 2015 andearlier years relates to the cession to syndicate 6105.

Auction CommentaryAuction Volume and Average Price

Third party members traded through SPS 6105 for 2015. It is nowlikely that participation will transfer to syndicate 4020. There will beno auction rights but trading will be on a limited tenancy basis(LTC). We anticipate inviting members to reaffirm their 6105 lineson syndicate 4020 when we have reached agreement with Ark. Itis possible there may be some capacity released by memberswho either do not wish to continue or wish to continue at a lowerlevel . As is the case with all LTC, allocation of additional capacityis subject to Argenta’s policy designed to ensure the fair andequitable treatment of clients and the operation of which isoverseen by the agency’s conflicts committee.

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118

Syndicate 4020 Ark Syndicate Management Limited Nick Bonnar

Description

Ark operates as Syndicate 4020 and incidental Syndicate 3902 on the basis that two shop fronts on the same street can attract more business than one. There are some areas of overlap, where both syndicate and incidental syndicate write the same business, but the syndicates are managed as a single unit. Syndicate 4020 writes (in decreasing order of premium volume) specialty programmes, accident & health, energy, property reinsurance, casualty reinsurance, property programmes, property direct & facultative, aviation war & terrorism, specialty reinsurance, political risk, marine & energy liabilities, cargo & specie, fine art and marine hull. Sub-syndicate 3902 writes energy, package programmes, property direct & fac, cargo & specie, marine hull, aviation and contingency. Syndicate Business Forecast

The overall reduction between 2015 reforecast and 2016 plan is 5.5%. All of the Syndicate 4020 lines are flat or will reduce, the biggest reductions are in the property reinsurance, energy and specialty programmes accounts. Some of the new accounts written into incidental-Syndicate 3902 (including aviation, cargo & specie, marine hull and energy) will increase as they enter their second year. All of the proposed increases are small; none exceeds £1m of gross net premium income. Reduced exposures and a lower reinsurance attachment point reduce gross and net RDSs. Significant Points

a) Ark proposes to dispense with Special Purpose Syndicate 6105 and have all capital behind Syndicate 4020.

b) Currently Ark operates as Syndicate 4020 and incidental syndicate 3902, which share the same capital base but each operates as a distinct entity, with separate underwriting teams. For 2017, we understand at Lloyd’s behest, it will separate into two syndicates, albeit with the identical capital backing. Members will not have the choice of one syndicate over another; indeed Ark has said it would prefer to have the capital aligned behind one corporate member backing the two syndicates.

c) Fee and profit commission structure has yet to be agreed.

d) Ark secured the services of a number of former Hardy underwriters following the acquisition of Hardy by US insurer CNA. This caused a late revision to the syndicate plan, increasing 2015 forecast gross premium income from £309m to £368m.

119

2010 2011 2012 2013 2014Aviation -31.7 25.1 - - -Casualty 86.6 83.4 104.0 109.6 100.7Energy 142.8 106.7 81.8 69.5 61.2Life - - - - -Marine 81.3 81.3 106.7 103.5 89.0Motor - - - - -Property 58.8 72.1 99.0 71.5 90.5Reinsurance 158.1 141.6 95.8 68.4 -Whole Account 94.1 96.2 96.3 86.0 88.2

Gross Net Gross Net Two Events 23% 23% 36% 14% Tripoli Airport Attack (July 2014) 5.5% Aviation Collision 6% 6% 7% 7% Superstorm Sandy (Oct 2012) 4.5% Gulf of Mexico Windstorm 10% 10% 28% 6% New Zealand Quake (Feb 2011) 4.4% North East Windstorm 10% 10% 22% 6% Malaysian Airline MH17 (July 2014) 1.1% New Madrid Earthquake 5% 5% 9% 6% Malaysian Airlines (March 2014) 0.8% California Earthquake - Los Angeles 9% 9% 24% 6% Germanwings 9525 (April 2015) 0.7% Political Risks - Russian Federation 6% 6% 7% 5% New Zealand Quake (Jun 2011) 0.4%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 88.9 85.1 54.5 49.8 52.6Reinsurance Premium % Gross Premiums - - - - -Pure Year Underwriting Result % Capacity 11.9 33.0 0.0 35.6 25.8Prior Years Underwriting Result % Capacity 0.0 0.6 0.0 0.0 0.0RITC received % Capacity 0.0 29.9 49.3 0.0 10.5IBNR % Net Outstanding Claims 64.7 122.5 64.6 91.4 91.2Operating Expenses % Capacity 1.9 12.3 1.2 9.5 12.5

2016

Geographic Split

5.9%4.7%

29.3%

5.7%47.6%

Combined Ratio by Class of BusinessClass of Business Split

2.5%4.3%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 5 10 15 20 25 30 35

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

120

Syndicate 4444 Canopius Managing Agents Limited Stephen Gargrave

Canopius is establishing itself as one of the more prominent businesses at Lloyd’s. Premium income is likely to exceed £1billion in 2015 and the merger of Syndicates 958 and 4444 simplifies the structure and is likely to benefit former 958 members through better investment returns, lower expenses and a more efficient reinsurance structure. The business is using the parent Sompo Japan Nipponkoa’s network of international offices to access specialty lines of business, as well as developing a UK specialty book including motor and consumer products. In our view this is a business of substance; there are challenges ahead and we see the plan as aggressive in tough operating conditions, but there are some able operators here. We do not yet consider this on a par with some of our core portfolio, Syndicate 4444’s seven year average combined ratio of 96% places it firmly in the second quartile, which feels about right, but we are happy to recommend continued support. Strengths/Opportunities

The acquisition of Canopius by Japanese insurance group Sompo Japan Nipponkoa Holdings (SJNK) allows the syndicate to access specialty business sourced from SJNK’s network of overseas offices.

The business now has sufficient scale to attract brokers and clients and to ensure a good showing of business, especially in rating sensitive lines such as reinsurance where cedants can be reluctant to use syndicates with a capacity of less than £200m (as was the case with Syndicate 958).

Reserving practices have been thoroughly overhauled; the ratio of IBNR to net outstanding claims was increased from 42% at the close of 2010 to 66% at the close of 2011. There were prior-year losses on both 2010 and 2011 but a release of £24m on the close of 2012.

The merger will reduce costs by eliminating duplication in processing, claims and production of reports.

A broad spread account including London market wholesale and retail business.

Weaknesses/Challenges

Information relating to Syndicate 4444 can be opaque, with the managing agent having released little data to date.

Alignment of interest between underwriting and management seems to have been reduced following the acquisition of Canopius by SJNK.

A large motor excess of loss account was written under the previous management. This account has been much reduced by Canopius but the legacy issues remain. This business can have a very long tail especially where severe bodily injury requiring long-term care is involved and court awards are subject to periodic payment orders (PPOs).

Retail business, including consumer products, is exposed to conduct risk and requires detailed procedures and reporting to satisfy the regulator that products meet consumers’ needs.

121

Rating (outlook): B (positive) Risk Rating: Medium

Return Rating: 3 Capital Rating: 8

Catastrophe Rating: 3 Tail Rating: 3

Cost Rating: 6 Scarcity Rating: 4

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 250 250 280 280 280 220 175 185 975Gross Premiums 252 284 260 200 184 129 139 173 962Net Premiums 157 174 162 110 120 84 90 127 787Pure Year Result -11 28 -18 -22 -6 22 21 26 134Prior Year Result 8 3 -2 -1 24 3 0 0 0Operating Expenses 5 -15 -27 -14 -21 -20 -19 -22 -111Investment Return 6 5 3 3 3 5 5 5 29

Result (Est) £m 9 21 -44 -34 0 11 7 9 52% 3% 8% -16% -12% 0% 5% 4% 5% 5%

Estimates in blue are APCL's own forecasts. Results/forecasts for 2008-2015 are those for Syndicate 958

Forecasts CommentaryThe forecasts shown here are for Syndicate 958 up to 2015 andfor Syndicate 4444 for 2016. The 2016 forecast seems relativelyaggressive with growth of around 10% over the most recentincome forecasts for 2015 as at 30 June 2015. This may prove tobe an aspirational rather than a realistic estimate of income,although some of the growth will arise out of the UK specialty linesbook including the second year for the consumer products team.A release from reserves on the 2013 account as a quarter 2 isforecast for Syndicate 958. We are modelling further releases onthe open years where we are more sanguine about the reservingposition.

Auction CommentaryAuction Volume and Average Price

Canopius was an active buyer Syndicate 958 in the 2014 auctions, picking up £1.2m in Auction One, £1m in Auction Two and£400,000 in Auction Three. It was bidding for a total of around£10m and succeeded in buying 60% of the capacity traded. It hadbid for capacity in 2013, failing to secure any, but bought £27m in2012 at 3p. In 2014, Canopius increased its bid price from 10p inAuction One to more than 19p in Auction Three. In consequence,the average price increased from 10.8p to 20.2p. The balance ofthe capacity was bought by clients of Hampden and Argenta, butAlpha has a very small share of syndicate and did not buy anycapacity at all.

0

200

400

600

800

1,000

1,200

2012 2013 2014 2015 2016

£ m

illio

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Syndicate Capacity

Argenta Other Third Party Aligned

0%

20%

40%

60%

80%

100%

120%

2012 2013 2014 2015 2016

Gross and Net Capacity Utilisation

Net Premium Reinsurance Premium

-20

-15

-10

-5

0

5

10

Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

% o

f Cap

acity

Syndicate Forecast Trend

2010 2011 2012 2013 2014

0

0

0

1

1

1

1

0

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1

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1

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Auction 1 Auction 2 Auction 3 Ave Price

122

Syndicate 4444 Canopius Managing Agents Limited Stephen Gargrave

Description

Canopius divides its business into three strategic business units: global property (comprising property direct and facultative, property treaty, and a predominantly North America book of binding authorities); global specialty (including casualty, casualty treaty reinsurance, cargo, energy, engineering, marine, marine reinsurance and political risk) and UK specialty (which comprises UK household and retail property, casualty (including accident & health and travel), commercial combined business for SMEs and UK motor business formerly written by Syndicate 260, a niche account based around affinity schemes and specialist vehicles). Syndicate Business Forecast

Gross written premiums for the combined Syndicates 958/4444 for the 2016 year of account are projected to increase by 6.2% (£77m) over 2015 at constant rates of exchange. Net premiums increase by a higher percentage as a 10% whole account quota share reinsurance for 2015 is not being renewed. The overall increase is described as ‘organic growth’. In the global property division there is an overall reduction of 3%, with a small increase in direct & facultative commercial property driven by new offices in the Netherlands and the USA, outweighed by reductions in North American facilities and property treaty. Global Specialty is expected to grow by 10%, mainly in the casualty division, in particular professional indemnity (cyber, D&O, E&O and transactional liability). Within the specialty unit, small increases are planned in energy, political risk, marine and marine reinsurance, with growth in the latter two in part driven by the arrival of new underwriters. Within UK specialty all three main divisions (property, casualty and motor) are forecast to contribute to overall growth of 11%. Significant Points

a) Syndicate 958 will merge with Syndicate 4444 for the 2016 year of account. All valid votes in a ballot of the capital base were in favour of the merger. The syndicate will have a capacity of £975m for 2016, the capacities of 958 and 4444 were £185m and £740m respectively. The business was written on a split stamp basis in the proportions 20:80. Members of both syndicates will have pre-emption rights of 5.4% of 2015 capacity. Canopius provides 93% of the capacity to Syndicate 4444 in 2015 and 61% to Syndicate 958. After the merger, it will provide 86% of the syndicate’s capacity.

b) It is expected that the naturally open years of Syndicate 958 will close into the successors until the 2015 account closes into the 2016 account of Syndicate 4444.

c) KGM Motor syndicate 260 ceased trading at the end of 2014. The account, with gross premium income £50 million, was absorbed into Syndicates 958 and 4444. Again, it is expected that this syndicate will ultimately close into Syndicate 4444’s 2016 account.

d) Syndicate 958 bought a whole account quota share reinsurance with Omega Specialty Insurance Ltd, later renamed Canopius Reinsurance Ltd, from 2006 onwards. This reinsurance is to be discontinued for 2016.

e) Stuart Davies (formerly with Aegis) was appointed group Chief Executive Officer in May 2015, succeeding Michael Watson who remains chairman of Canopius. Stephen Gargrave was appointed sole active underwriter in July 2015; previously he was joint active underwriter with Mike Duffy, who continues as CEO of the Global Property Division.

123

2010 2011 2012 2013 2014Aviation - - - - -Casualty 142.3 110.0 98.5 118.4 104.9Energy 108.5 111.7 64.6 93.4 89.6Life - - - - -Marine 67.2 78.8 92.5 99.9 78.6Motor 106.1 94.6 100.3 107.9 108.6Property 97.7 96.8 98.7 75.9 94.0Reinsurance 77.8 143.3 94.4 84.9 67.5Whole Account 99.0 109.1 94.8 89.8 90.3

Gross Net Gross Net Two Events 60% 26% 81% 35% New Zealand Quake (Feb 2011) 7.8% Gulf of Mexico Windstorm 42% 16% 59% 23% Superstorm Sandy (Oct 2012) 4.6% European Windstorm 39% 22% Costa Concordia (Jan 2012) 1.3% California Earthquake - Los Angeles 33% 15% 47% 21% Hurricane Odile (Sept 2014) 0.7% Florida Windstorm - Miami 35% 13% 46% 18% New Zealand Quake (Jun 2011) 0.6% North East Windstorm 33% 12% 45% 16% Alberta flooding (June 2013) 0.4% Marine Collision in Prince William Sound 18% 13% SE Queensland Storm (Nov 2014) 0.1%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 101.4 113.9 93.1 71.6 65.9Reinsurance Premium % Gross Premiums 37.8 38.6 37.8 45.3 34.8Pure Year Underwriting Result % Capacity 20.5 38.9 17.5 11.0 16.1Prior Years Underwriting Result % Capacity 3.2 1.3 -0.7 -0.3 8.6RITC received % Capacity 53.9 55.6 61.1 76.6 83.7IBNR % Net Outstanding Claims 21.7 37.6 41.8 65.8 68.7Operating Expenses % Capacity -2.0 6.1 9.8 5.1 7.6

Combined Ratio by Class of BusinessClass of Business Split

24.2%2.6%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

2016

Geographic Split

0.0%1.5%

43.9%

2.4%25.4%

0%

20%

40%

60%

80%

100%

120%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 10 20 30 40 50

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

124

Syndicate 5820 ANV Syndicates Limited Bruce Whitmee

This is a business that has been subject to almost continual change over the past three years. There have been changes of management team, ownership and underwriters. The syndicate does have a number of lines unique within Lloyd’s, including consumer products such as motor warranty, phone and gadget insurance, brown and white goods warranties and mortgage protections. It does now write a number of more traditional London market products in conjunction with Syndicate 1861. We sense that ANV is beginning to get its arms around the problems, but we still feel that our clients are better served by not supporting this syndicate in 2016. Strengths/Opportunities

Core parts of the account have no exposure to natural catastrophes and are not replicated elsewhere in the Lloyd’s market.

Retention rates on the consumer products book can be very high and pricing more resilient in a soft pricing cycle.

Although Ryan Specialty Group (RSG) is no longer the majority shareholder in the business, it retains a minority (20%) stake and continues as a capital provider to the business. These connections, together with Direct Group, a subsidiary of RSG and an insurance services provider, should ensure a good flow of business to the syndicate.

Consortium arrangements with sister Syndicate 1861 give access to business in more traditional Lloyd’s areas at a lower cost base than would be the case if the syndicate decided to go it alone.

There has been a steady improvement in loss ratios on open years of account, with 2012 and 2013 performing much better than 2010 and 2011. At this early stage, 2014 is better still.

Weaknesses/Challenges

The 2010 and 2011 underwriting years remain open, depriving the syndicate of investment returns. Although the current management regard this as a legacy issue, relating to set of owners prior to Jubilee’s acquisition by RSG, it still has the potential to be a distraction.

ANV is the last remaining managing agent still to meet Lloyd’s/FCA’s requirements regarding Solvency II. Failure to do so by the deadline could result in capital loadings for members. If the requirements are not met, the business could be closed down, although we consider this only an extreme possibility.

The business has been subject to a number of management changes including the departure of the chief executive in April 2015 and late last year most of the consumer products team to rival Canopius.

ANV is considering the future structure of it syndicates. It may elect to merge Syndicate 5820 with the wholly aligned Syndicate 1861

The consumer products business has a number of touch points with retail consumers. This increases conduct risk and the regulatory burden in dealing with UK’s FCA.

Commission rates (payable to introducing brokers) on some parts the business are extraordinarily high. On the creditor book, they are estimated to be 75% and on the product breakdown book 66%.

ANV has had great difficulty in arriving at accurate forecasts for premium volumes. Latest forecasts for 2012, 2013 and 2014 are an average 20% less than initial forecasts.

125

Rating (outlook): D (watch) Risk Rating: Higher

Return Rating: 1 Capital Rating: 9

Catastrophe Rating: 7 Tail Rating: 6

Cost Rating: 9 Scarcity Rating: 8

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 42 63 139 100 113 131 131 131 131Gross Premiums 35 64 74 62 75 89 85 85 92Net Premiums 34 56 61 51 64 75 76 76 80Pure Year Result -1 -11 -26 -6 9 14 16 17 18Prior Year Result 12 3 12 0 0 -1 0 0 0Operating Expenses -9 -3 -13 -11 -14 -15 -16 -16 -15Investment Return 1 2 2 1 0 0 1 1 1

Result (Est) £m 3 -10 -24 -16 -4 -2 0 2 3% 6% -16% -18% -16% -4% -2% 0% 2% 2%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryAs noted above, ANV has found it very difficult to get an accurateestimate of the likely premium volumes, especially in theconsumer products business, where most business isunderwritten by schemes and binders. Recent years have shownbusiness plans to be over optimistic by around 20%. We havereduced projected income by 15% from ANV's forecast. Theultimate destination of the 2010 and 2011 account RITCs mayhave an impact on investment income. The 2013 account iscurrently showing a deficit on the prior year (in this case only the2012 account). We do not build into our model any releases fromreserves in future years.

Auction CommentaryAuction Volume and Average Price

Trading at 0.12p, 0.03p, and 0.07p in the three auctions last year,this was the lowest priced syndicate. More than £1m was left asunsold capacity after both Auctions One and Two. However, therewas much more enthusiasm, albeit only at 0.01p, in the finalauction when two Hampden clients stepped in to buy all that wastendered. Indeed, the combined subscriptions exceeded capacityon offer for sale and there was more than £1m of unmatchedsubscription capacity. Hampden is the only members’ agent torecommend support for the syndicate so it is unsurprising that itprovided 95% of the capacity sold and accounted for 99% of thecapacity purchased.

0

20

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80

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120

140

2012 2013 2014 2015 2016

£ m

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Syndicate Capacity

Argenta Other Third Party Aligned

0%

10%

20%

30%

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80%

2012 2013 2014 2015 2016

Gross and Net Capacity Utilisation

Net Premium Reinsurance Premium

-2

-1

0

1

2

3

4

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% o

f Cap

acity

Syndicate Forecast Trend

2010 2011 2012 2013 2014

0

0

0

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0

500

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126

Syndicate 5820 ANV Syndicates Limited Bruce Whitmee

Description

The largest area of the account is the consumer products book, which includes products such as warranty, creditor (accident, sickness and unemployment insurance), mortgage indemnity and structural defects written to retail consumers, manufacturers, retailers and contractors. Political risk and credit (including potentially an element of financial guarantee business in 2016) covers financial institutions and commodity traders principally in emerging markets, for risks in oil and gas, power, agriculture and mining. The property non-marine liability, cyber and accident & health books are all now largely written in consortium with ANV Syndicate 1861. Here the property book consists of open market business and business written under binding authorities. Syndicate Business Forecast

The syndicate is forecasting modest growth in the overall account, with increases in the specialist accounts such as consumer products and specialty lines being offset by reductions in some of the more traditional Lloyd’s lines, such as property. A number of the consumer products team left in 2014, and have been replaced by a new team. There is a slight change in focus, to diversify away from the UK and Europe and also to reduce the proportion of motor orientated business by increasing the electrical, creditor, gadget and bancassurance book. A large part of the book is written in consortium with fellow ANV Syndicate 1861, these arrangements include accident & health, cyber and non-marine liability. In the latter category, Syndicate 1861 hired a leading underwriter in the excess casualty field, but lines of business written directly by Syndicate 5820 are being reduced. There is a change to the political risks account, where premium for longer term policies will no longer be signed forward into later years of account; this will increase premium volumes by around £4m (before acquisition costs). Significant Points

a) No change to the current capacity of £131m is planned for 2016.

b) Bruce Whitmee was appointed active underwriter in May 2015, having joined the business from AIG.

c) Most of the former consumer products team have now left the company.

d) Syndicate 1969 was managed by ANV until 31 July 2015, but has now established a new managing agency. ANV Syndicates Limited now manages Syndicates 779 and 5820 with a mixed capital base and Syndicate 1861, where all of the capital is aligned.

e) Syndicate 5820 was managed by Jubilee Managing Agency Limited until December 2013.

f) The 2010 and 2011 years of Syndicate 5820 remain open. It is uncertain whether these years will close into the currently open years of Syndicate 5820. A group of former capital providers has a veto over the closure of the accounts which they have continued to exercise.

g) Under Lloyd’s rules, the syndicate is restricted to a maximum of 20% from related party Ryan specialty Group (RSG).

127

2010 2011 2012 2013 2014Aviation - - - - -Casualty 99.6 126.7 97.0 106.4 98.4Energy - - - - -Life - 127.7 - - -Marine - - - - -Motor 118.9 - - - -Property 105.4 160.8 108.9 82.0 102.6Reinsurance 105.3 136.1 120.8 37.4 -Whole Account 105.4 146.6 107.3 83.5 100.9

Gross Net Gross Net US Terrorism - Rockefeller Center 9% 9% 21% 15% Superstorm Sandy (Oct 2012) 7.4% Two Events 56% 30% 52% 11% Japanese Earthquake (Mar 2011) 6.5% Consumer Products – European Recession 10% 10% New Zealand Quake (Feb 2011) 2.8% Political Risks - Nigeria 4% 2% 18% 9% Thailand Floods - CBI (Oct 2011) 2.4% California Earthquake - Los Angeles 28% 15% 27% 8% US Tornadoes (Apr 2011) 1.8% Gulf of Mexico Windstorm 28% 15% 26% 7% Hurricane Irene (Aug 2011) 1.8% North East Windstorm 28% 15% 26% 7% Tornadoes (USA - 14-16 April 2011) 1.4%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity - - 53.2 62.1 66.7Reinsurance Premium % Gross Premiums - - 27.1 18.4 15.4Pure Year Underwriting Result % Capacity - - 28.1 53.3 78.1Prior Years Underwriting Result % Capacity - - 7.5 0.0 0.0RITC received % Capacity - - 32.1 0.0 0.0IBNR % Net Outstanding Claims - - 160.7 120.1 599.1Operating Expenses % Capacity - - 11.2 10.6 12.1

2016

Geographic Split

17.9%5.3%1.5%

5.6%16.0%

Combined Ratio by Class of BusinessClass of Business Split

40.7%13.0%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

0%

20%

40%

60%

80%

100%

120%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 10 20 30 40 50 60

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

128

Syndicate 6103 Managing Agency Partners Limited 2791 SPS

The most focused of all the catastrophe specialists, writing only US catastrophe business via a quota share of Syndicate 2791’s property reinsurance book. Prices for this class of business have been under pressure for a number of years and MAP’s decision to keep the syndicate running rather than to cease it is largely pragmatic, in the expectation that it would be easier to expand the existing syndicate at the appropriate time rather than seek approval to restart it at short notice. Nonetheless, MAP believes that there will always be business that requires technical underwriting and business that will meet their technical pricing requirements. The account is very narrow and the maximum RDS exceeds 100% of capacity. We assign a “very high” risk rating to SPS 6103 and we continue to recommend support to those who appreciate the risks. Strengths/Opportunities

MAP’s reinsurance underwriting has outperformed market averages since the syndicate’s formation. The approach is to determine a technical price sufficient to meet expected claims, plus a margin for profit to meet the cost of capital, and not to write any business below this price for any reason. The account focuses solely on US catastrophe business.

Exceptional profit record, with an average exceeding 30% on capacity over the syndicate’s lifetime.

Weaknesses/Challenges

High capital requirements; depending on the member’s current portfolio, an additional share of £10,000 would increase the FAL requirement by £13,100. Members who have a larger than average share of Syndicate 2791 may find the capital requirement even more penal.

Unlike the other SPS, the syndicate does not reinsure to close the old years into the oldest open year of account. Although the numbers are relatively small (RITC premium payable to Syndicate 2791 as at 31 December 2014 was £4,008,000), the roll up of funds coupled with releases of redundant reserves can enhance overall profitability.

The exposures from this account are is highly aggregational with other syndicates writing a US catastrophe account.

The syndicate does not plan to buy reinsurance. The maximum RDS is 134% of capacity, making a cash call in the immediate aftermath of any loss event very likely.

By MAP’s reckoning the account has now shrunk to a minimum core. Utilisation of capacity will be very low (estimated at less than 30%) and returns will be diluted in consequence.

129

Rating (outlook): B+ (stable) Risk Rating: Very High

Return Rating: 10 Capital Rating: 1

Catastrophe Rating: 1 Tail Rating: 10

Cost Rating: 10 Scarcity Rating: 2

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 39 40 34 29 32 41 30 13 14Gross Premiums 16 31 20 20 27 20 10 4 4Net Premiums 16 31 20 20 25 19 10 4 4Pure Year Result 2 28 16 8 10 17 7 2 2Prior Year Result 0 0 0 0 0 0 0 0 0Operating Expenses 1 -6 -4 -2 -3 -4 -2 0 0Investment Return 1 2 1 0 0 1 0 0 0

Result (Est) £m 3 24 13 6 8 14 5 1 1% 8% 61% 38% 20% 25% 34% 18% 10% 9%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryThe syndicate has achieved an average loss ratio during itsexistence of 33%, although the business planning loss ratios aredouble this. There is the ever present possibility of loss and actualexperience will be very different from the plan. Our forecasts arebased on the syndicate performing slightly better than plan butworse than long-term average performance. The syndicate doesnot reinsure to close predecessor years so there is no prospect ofback year movements.

Auction CommentaryAuction Volume and Average Price

6103 is a Special Purpose Syndicate and therefore capacitycannot be traded in the auctions. MAP originally indicated that itwished to increase capacity for 2016 to £15m but with themovement in the £/$ exchange rate in the second quarter this hasbeen reduced to £14m (12% increase on 2015). We will offerexisting members the opportunity to increase their 2015 capacityby this proportion. Should existing members not wish to continueat the increased level or wish to relinquish their capacity, theremay be some capacity available for new members or for thosemembers to increase their share. We expect the amount ofcapacity to be very limited but we will as usual write to memberswhen renewing capacity for 2016.

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0%

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Gross and Net Capacity Utilisation

Net Premium Reinsurance Premium

0

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acity

Syndicate Forecast Trend

2010 2011 2012 2013 2014

0

0

0

1

1

1

1

0

0

0

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130

Syndicate 6103 Managing Agency Partners Limited 2791 SPS

Description

Syndicate 6103 is a Special Purpose Syndicate writing a quota share reinsurance of Syndicate 2791’s US catastrophe reinsurance account. The cession has varied over time, from a maximum of 30% of gross premium down to 10%. It is will remain at 10% for 2016. Syndicate Business Forecast

Planned volumes for 2016 are up by 10% on the 2015 plan, but down slightly on the reforecast as at 31 March, although this is largely because of the change in the business planning rate of exchange. In the absence of a major market changing event, it is expected that rates for US catastrophe business will continue to reduce. Forecast loss ratios are reduced in consequence. Although the syndicate has purchased reinsurance in previous years, this has been for specific perils and regions in order to keep all exposures within risk appetite, and it is not expected that reinsurance will be bought for 2016. Maximum RDS exposure remains at 125% of capacity for all major US scenarios (they are nil for all other scenarios). These are appetite rather than exposure figures as the actual exposure tends to be much lower. Significant Points

a) MAP plans to increase capacity by 12% from £12.5m to £14m for 2016. This is largely in order to keep maximum exposures within agreed parameters and follows the weakening of sterling against the dollar (all business written by the syndicate is in dollars). As a Special Purpose Syndicate 6103 falls outside the pre-emption byelaw

b) MAP Capital Limited, a corporate member dedicated to Syndicate 2791 but independent of the managing agency, does not participate in Syndicate 6103. Many of the directors of MAP have participations via Namecos and LLPs.

c) The reinsurance to close of Syndicate 6103 is written by Syndicate 2791. The reinsurance to close premium for the 2012 account was £4m.

d) Profit commission of 15% is payable to the managing agent. Syndicate 6103 pays a ceding commission of 5% and an overriding commission of 1% to Syndicate 2791. There is no managing agency fee.

131

2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - -Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property - - - - -Reinsurance 24.9 69.0 77.8 18.6 -Whole Account 24.9 69.0 77.8 18.6 -

Gross Net Gross Net Two Events 281% 250% 299% 268% Polar Vortex Storm (Dec 2013) 0.3% North West Quake 149% 134% US adverse weather (April 2014) 0.0% California Earthquake - Los Angeles 141% 125% 149% 134% Alberta flooding (June 2013) 0.0% Florida Windstorm - Miami 141% 125% 149% 134% Gulf of Mexico Windstorm 141% 125% 149% 134% North East Windstorm 141% 125% 149% 134% US Terrorism - Exchange Place 31% 28% 149% 134%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 39.6 78.7 58.5 67.8 85.3Reinsurance Premium % Gross Premiums 0.0 0.0 0.0 0.0 7.6Pure Year Underwriting Result % Capacity 8.6 72.1 47.5 28.1 33.2Prior Years Underwriting Result % Capacity 0.0 0.0 0.0 0.0 0.0RITC received % Capacity 0.0 0.0 0.0 0.0 0.0IBNR % Net Outstanding Claims 60.1 78.9 132.4 21.8 100.2Operating Expenses % Capacity -1.4 14.8 12.0 8.6 8.9

2016

Geographic Split

0.0%0.0%0.0%

0.0%100.0%

Combined Ratio by Class of BusinessClass of Business Split

0.0%0.0%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

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132

Syndicate 6104 Hiscox Syndicates Limited 33 SPS

Hiscox SPS 6104 has been hugely successful since formation and currently enjoys a seven year average profit (2008 to 2014 including open year forecasts) of 31.9% of capacity, second only to Nuclear Syndicate 1176. Hiscox has capitalised on the success of this and other reinsurance arrangements by seeking to increase the fees charged to members - we have yet to receive fee proposals for 2016, but have been warned that an increase is likely. Hiscox continues to believe that there are worthwhile profits to be made if the focus remains on delivering a product that the client wants, matched with a line size that commands brokers and reinsurance buyers’ attention. Returns will inevitably be lower in the current competitive environment, and this is exacerbated by ever rising fees. Hiscox sees this syndicate as an important part of its overall offering; it values the capacity very highly and the spirit of partnership has done a great deal to restore relationships between it and third party capital generally. This is a high risk venture and the exceptional track record is unlikely to continue. Nonetheless, we see this as perhaps the best of breed amongst the catastrophe specialists and continue to recommend support for those who appreciate the risks.

Strengths / Opportunities:

Strong performance: Hiscox reinsurance department has outperformed market average loss ratios by an annual average of 15.4% since 2001. Syndicate 6104 has made an average return on capacity of 31.9% since formation for the 2008 account (including open year forecasts).

Part of a sizable and market leading reinsurance business with Hiscox Syndicate 33 writing in partnership with Hiscox Re in Bermuda, as well as utilising insurance linked securities issued by Kiskadee (see below). The business is able to commit the line size (Hiscox Re maximum is $200m) necessary to retain market relevance.

Traditional reinsurance gives reinstatement of cover following a loss. The reinstatement premium is typically deducted from the reinsurance payment. Kiskadee, Hiscox’s collateralised reinsurance fund, cannot usually offer such cover. Hiscox is able to engineer traditional cover by using Kiskadee as the first event reinsurer, with the traditional reinsurance elements of the business providing backup (second event) protection in return for the payment of the reinstatement premium.

Successor years of this syndicate are paid the reinsurance to close premium of closing years. This means that the syndicate gains the investment income on older reserves and also the benefit of any surpluses on those reserves. The RITC paid to close the 2012 account was £12m, with a release from reserves of £1.9m. A further release of £400,000 was forecast for the 2013 account as at 30 June 2015.

Rather than rely on modelling software “out of the box”, Hiscox decomposes modelled output into the “Hiscox view of risk”. This means that it can to add value to the client reinsurance purchase and develops the concept of a reinsurance partnership rather than commodity driven trade on the part of the buyers.

Hiscox proposes to add limited exposures in under-served areas such as terrorism and cyber liabilities as the syndicate diversifies.

Weaknesses / Challenges:

Hiscox has amended the fee structure in each of the past two years and is looking to do so again for 2016. It argues that the expiring fee does not meet the expense base of Syndicate 33, but it is apparent that the business is seeking to maximise fees and over-riders for all outward reinsurance partners.

The absence of major loss since 2013 (to date) is likely to reduce the reinsurance to close premium payable to the 2016 members, in turn reducing investment earnings and potential for reserve releases.

The community of interest between the underwriting and management teams and the capital base is less obvious for this syndicate, as the former have shareholdings and options in Hiscox Limited.

133

Rating (outlook): B+ (stable) Risk Rating: Very High

Return Rating: 9 Capital Rating: 4

Catastrophe Rating: 1 Tail Rating: 9

Cost Rating: 10 Scarcity Rating: 2

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 35 43 45 37 39 66 72 65 50Gross Premiums 22 38 26 20 30 35 32 26 21Net Premiums 20 34 24 19 26 31 28 24 19Pure Year Result 10 25 4 3 13 26 20 6 4Prior Year Result 0 1 0 -3 2 0 0 0 0Operating Expenses 2 -2 -1 0 0 0 0 0 0Investment Return 2 3 2 1 1 2 2 1 1

Result (Est) £m 14 28 4 1 15 28 21 7 4% 41% 64% 8% 3% 39% 42% 29% 11% 9%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryThe inward RITC of £12m gives the syndicate both the advantageof an investment fund and the potential for reserve releases.However, the absence of major cat losses over the period 2013 to2015 (to date) means that the RITC is likely to reduce over thenext few years, limiting the potential for future investmentearnings and minimising the prospect of reserve releases.Business planning loss ratios are pessimistic, and we tend to useloss ratios worse than actual experience but better than theHiscox planning loss ratios. Given the account's volatile nature,actual results in a single year are likely to be very different from the forecasts.

Auction CommentaryAuction Volume and Average Price

Participation on Syndicate 6104 is on annual basis, thereforecapacity is not eligible to be traded at auction. Hiscox is currentlyproposing to reduce the capacity from £65m to £50m and weexpect to reduce incumbent members’ capacity by 23.3%. Wewill write to existing members asking them to reaffirm their line for2016. As is the case with all SPSs, the allocation of any additionalcapacity that becomes available will be determined by reference to Argenta’s policy which is designed to ensure the fair and equitabletreatment of its clients and the operation of which is overseen bythe agency’s conflicts committee. Details of the methodologyapplied will be notified to clients at the appropriate time.

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134

Syndicate 6104 Hiscox Syndicates Limited 33 SPS

Description:

Syndicate 6104 is a Special Purpose Syndicate (‘SPS’) writing a quota share of Hiscox Re reinsurance account. The SPS is the largest reinsurance partner of Syndicate 33, quota share reinsurance having become an increasingly important part of Hiscox’s reinsurance strategy in recent years. Although the most significant exposures are US wind related, there is a good spread of business by type (including catastrophe, aggregate, risk excess, proportional, retro and insurance loss warranty), and by geography.

Syndicate Business Forecast:

Hiscox sees some opportunity in broadening cover away from natural catastrophe to include perils such as cyber and terrorism. Hiscox Re makes great efforts to be seen as relevant to cedant partners. Hiscox is optimistic that rates may have bottomed out in the retro market, and having almost totally withdrawn in recent years, it may start to increase exposures. Nonetheless, its plan is realistic about likely market conditions, with an assumption of a further average rate cut of 8% in 2016. Forecast income is down by around 33% over the most recent (Q2 2015) reforecast. This is in part explained by an expected reduction in the cession from 28% in 2015 to 25% in 2016. Reinsurance purchase is limited to high level industry loss warranties for US windstorm and US earthquake with the intention of bringing these exposures into line with the other main exposures.

Significant Points:

a) Capacity for 2016 will be reduced to £50m, from £65m in 2015 (a reduction of 23.3%)

b) The over-rider and profit commission are payable to Syndicate 33, rather than to the managing agent

c) Hiscox Re uses a number of quota share reinsurance partners, SPS 6104 is the largest. Hiscox has made efforts to increase over-riding commissions and profit commissions charged to all parties and this syndicate is no different. Hiscox has advised that it wishes to review the level of fees payable by the syndicate for 2016. This has been subject to several increases, from 3.94% in 2013 to 8.0% in 2015.

d) Profit commission is set at a level of 23.5%, but is subject to achieving a combined ratio of 92%. We calculate that this is roughly equivalent to a return on capacity of 6%. Once the combined ratio hurdle is achieved, profit commission is charged on all of the profit, less underwriters’ expenses of 7.5%.

e) Each year of account is closed into the successor year (RITC), unlike other SPS where the RITC is paid back to the host syndicate.

The syndicate operates on a funds withheld basis, with syndicate 6104 credited with interest on the balance owed to it by Syndicate 33. As at 30 June 2015, the total amount due from ceding reinsurers was £86.6m.

135

2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - -Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property - - - - -Reinsurance 81.4 104.2 79.6 43.5 31.3Whole Account 81.4 104.2 79.6 43.5 31.3

Gross Net Gross Net Two Events 157% 106% 220% 153% Superstorm Sandy (Oct 2012) 26.8% Japanese Earthquake 72% 67% 101% 95% New Zealand Quake (Feb 2011) 18.3% North East Windstorm 102% 54% 145% 86% New Zealand Quake (Jun 2011) 2.3% Sydney Earthquake 85% 83% California Earthquake - San Francisco 65% 44% 89% 61% Florida Windstorm - Pinellas 85% 38% 109% 61% European Windstorm 55% 51% 60% 54%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity 62.5 87.0 56.9 54.8 77.8Reinsurance Premium % Gross Premiums 6.3 8.9 7.5 8.6 12.2Pure Year Underwriting Result % Capacity 28.4 55.4 21.1 24.9 59.4Prior Years Underwriting Result % Capacity 0.0 3.2 -0.7 -7.0 5.0RITC received % Capacity 0.0 30.4 18.0 53.6 45.1IBNR % Net Outstanding Claims 12.4 1.3 0.0 0.0 0.0Operating Expenses % Capacity -6.8 3.8 2.4 0.5 1.0

2016

Geographic Split

16.5%0.6%

28.4%

0.9%48.8%

Combined Ratio by Class of BusinessClass of Business Split

0.3%4.5%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

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0%10%20%30%40%50%60%70%80%90%

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Accident & Health

% of Business Written2016 2015

136

Syndicate 6105 Ark Syndicate Management Limited Nick Bonnar

Syndicate 6105 is a special purpose syndicate established to write a whole account quota share of Syndicate 4020. Ark has decided that it does not want to continue with the current structure and will not reconstitute a special purpose syndicate for 2016. The form of capital support for next year is still under discussion but is likely to be in the form of limited tenancy participation on Syndicate 4020. For further details, please see the separate profile that we have prepared for Syndicate 4020.

137

Rating (outlook): Risk Rating:

Return Rating: Capital Rating:

Catastrophe Rating: Tail Rating:

Cost Rating: Scarcity Rating:

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) 20 28 30 11 11 19 60 60 -Gross Premiums 18 24 16 5 6 10 33 35 -Net Premiums 18 24 16 5 6 10 33 35 -Pure Year Result 0 8 -1 2 3 3 8 8 -Prior Year Result 0 0 0 0 0 0 0 0 -Operating Expenses 0 -3 0 -1 -1 -2 -5 -6 -Investment Return 1 1 1 0 0 1 1 1 -

Result (Est) £m 0 6 0 1 2 2 3 3 -% 2% 21% 0% 13% 17% 10% 6% 5% -

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts Commentary

Auction CommentaryAuction Volume and Average Price

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138

Syndicate 6107 Beazley Furlonge Limited 623/2623 SPS

Beazley’s version of a catastrophe sidecar, it distinguishes itself from the other SPS by underwriting out of overseas offices - not just London - giving it a broader spread of business than would traditionally come to Lloyd’s. As is to be expected in a vehicle of this nature, the absence of major catastrophes can bring rich rewards but a single major loss or above average attrition could drive the syndicate into loss. The cost structure (by reference to the fees and profit commission) is better than some of the competitors. Terms and conditions in the reinsurance sector are very competitive, but Beazley sets much store by the length of relationships with clients and is successful in retaining clients. As with all SPS, capital requirements are high and any diversification benefit does not go far. We continue to recommend this syndicate to those members who understand the risk profile and are happy with the capital requirements. Strengths/Opportunities

Access to business that does not traditionally come to Lloyd’s via Beazley’s network of offices including Munich, Singapore and Latin America.

The amalgamation of reinsurance purchase with that of Syndicate 623/2623 aligns Syndicate 6107 more closely with the main syndicate where Beazley staff and corporate members participate. Furthermore this has reduced the overall cost to the syndicate significantly.

The fee structure is more attractive than some other SPSs.

Reserving has been prudent; the three closed years to date have been an average of 11.2% of capacity better than the quarter six forecast.

High client retention, with particular attention paid to understanding client needs. Beazley estimates that retention ratios exceed 85%.

Weaknesses/Challenges

Although Beazley is highly respected in property and casualty circles it has a lower profile in the reinsurance sphere than some of the other SPS operators such as Hiscox. The rationale for the SPS is to increase line size and to leverage client relationships and expertise.

The syndicate has high capital requirements. Any diversification benefit seems limited and even a well-diversified portfolio would require marginal capital of 115% (i.e. a member taking an additional line of £10,000 would be required to provide additional FAL of £11,500).

The syndicate is highly aggregational to the other SPSs and also to catastrophe exposures within most investors’ core portfolios.

With limited syndicate funds, major losses are likely to require an early cash call. There was a cash call 47% of capacity to fund losses in the 2010 account.

With a diversified account the syndicate occasionally picks up losses that other syndicates miss. The loss ratio on the 2014 account is noticeably higher than for other SPSs.

139

Rating (outlook): B (stable) Risk Rating: Very High

Return Rating: 10 Capital Rating: 1

Catastrophe Rating: 1 Tail Rating: 9

Cost Rating: 10 Scarcity Rating: 4

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) - - 15 14 10 18 21 29 29Gross Premiums - - 8 8 9 15 16 25 24Net Premiums - - 8 8 7 12 12 21 18Pure Year Result - - -5 2 3 5 7 5 5Prior Year Result - - 0 1 1 0 0 0 0Operating Expenses - - 0 -1 -1 -2 -2 -1 -2Investment Return - - 0 0 0 0 0 0 0

Result (Est) £m - - -6 1 3 3 4 4 3% - - -39% 10% 33% 15% 21% 15% 11%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryAll years to date have improved considerably between Q6 and thefinal result. Beazley builds in substantial catastrophe reserveswhich we think prove to be conservative. 2015 and 2016 forecastloss ratios are higher than the long-term average although there ismuch volatility here. The syndicate does bring in reserves fromclosed years by way of the RITC so there is scope for reservereleases, although we do not build in any long-term releases intoour model. The relative absence of catastrophe losses over thepast few years precludes build up of much in the way of syndicatefunds. We expect further iterations of the plan later in the year.

Auction CommentaryAuction Volume and Average Price

Participation is on an annual tenancy basis so the syndicate is noteligible to be traded in the auctions. Beazley does not anticipatechanging the size of syndicate and we expect to offer participantsthe same share in 2016 as they have in 2015. We will write toexisting members inviting them to renew their participations in theautumn. As is the case with all SPSs, the allocation of anyadditional capacity that becomes available will be determined byreference to Argenta’s policy which is designed to ensure the fairand equitable treatment of its clients and the operation of which isoverseen by the Agency’s Conflicts Committee. Details of themethodology to be applied will be notified to clients at theappropriate time

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Syndicate 6107 Beazley Furlonge Limited 623/2623 SPS

Description

This is a Special Purpose Syndicate writing a quota share reinsurance of Beazley Syndicate 623/2623’s reinsurance account. Although the account is dominated by catastrophe reinsurance, 20% of the book is risk excess and 4% is pro rata. There are small (less than 1%) books of retrocession, terrorism and engineering. The USA is the largest part of the catastrophe book, making up 40% of the whole account; Europe accounts for 18%, Japan for 4% and the balance of the book is catastrophe reinsurance in the rest of the world. Syndicate Business Forecast

The premium income forecast is down by 5% on the most recent re-estimate (made at Q1 2015). The business plan assumes rates will be broadly flat on renewal, so the difference arises over an expectation that only half of the business lost will be replaced by new business. Business is written in London and also in Beazley’s branch network, with the offices in Miami (covering Latin America) and Munich being the most significant with regard to the reinsurance market. Reinsurance purchase is combined with the catastrophe programme of Syndicate 623. Significant Points

a) Capacity is expected to be unchanged at £28.75m for 2016.

b) Beazley presents its accounts in US dollars.

c) The reinsurance to close is written by successor years of this syndicate.

d) The syndicate is managed on a funds withheld basis with premium invested on 6107’s behalf by Syndicate 623/2623. The total amount due from ceding reinsurers (i.e. from 623/2623) as at 30 June 2015 was £12m.

e) Syndicate 6107 is charged an overriding commission of 5% of gross premium income, which is payable to Syndicate 623/2623 and a profit commission of 20%, which is payable to the managing agent.

f) Reinsurance is purchased on a common account basis with Syndicate 623/2623. This is a change implemented for the 2014 year of account. In 2012 and 2013, a single layer of ILW protection was bought. No reinsurance was bought in 2010 or 2011.

141

2010 2011 2012 2013 2014Aviation - - - - -Casualty - - - - -Energy - - - - -Life - - - - -Marine - - - - -Motor - - - - -Property - - - - -Reinsurance 95.3 164.9 79.5 65.1 72.5Whole Account 95.3 164.9 79.5 65.1 72.5

Gross Net Gross Net Two Events 338% 225% 372% 239% Japanese Earthquake (Mar 2011) 39.7% North East Windstorm 190% 132% 216% 141% New Zealand Quake (Feb 2011) 39.4% European Windstorm 163% 112% 172% 118% Superstorm Sandy (Oct 2012) 21.3% Gulf of Mexico Windstorm 171% 109% 182% 116% Thailand Floods - (Oct 2011) 10.8% Florida Windstorm - Pinellas 140% 90% 172% 110% Alberta flooding (June 2013) 2.6% California Earthquake - San Francisco 136% 81% 146% 87% New Zealand Quake (Jun 2011) 1.3% Japanese Typhoon 58% 50% 72% 62% SK Hynix Semiconductor (Sept 2013) 0.6%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity - - 58.1 60.1 85.9Reinsurance Premium % Gross Premiums - - 0.0 0.0 22.1Pure Year Underwriting Result % Capacity - - -27.4 20.7 44.1Prior Years Underwriting Result % Capacity - - 0.0 4.0 6.7RITC received % Capacity - - 0.0 35.4 49.3IBNR % Net Outstanding Claims - - 36.8 52.4 69.3Operating Expenses % Capacity - - 2.7 5.9 5.6

2016

Geographic Split

13.3%0.8%3.0%

6.0%57.8%

Combined Ratio by Class of BusinessClass of Business Split

2.3%16.8%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

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142

Syndicate 6111 Catlin Underwriting Agencies Limited Andrew McMellin

We have been very pleased with the performance of Syndicate 6111 to date. The result for the first year was good and the forecasts for 2013 and 2014 are encouraging. Catlin has been more than helpful in the provision of data and allowing access to underwriters. However, in December it was announced that Catlin Group was to be acquired by XL Limited. This casts some doubt on the future of this Special Purpose Syndicate. XL had a different reinsurance purchase strategy to that of Catlin, and has historically not used pro rata insurance to the same degree. The 2014 contract was cancelled and replaced by a two-year deal covering 2015 and 2016. However, there is a change of control clause within this contract and XL Catlin may elect not to renew. We expect these negotiations to start in earnest as the group considers its reinsurance purchase for 2016 this autumn. We will write to members asking them to reconfirm their lines if appropriate later this year. Strengths/Opportunities

A large and diverse book, less than 50% emanates from the London market. A large part is not replicated elsewhere in members’ portfolios.

A major Lloyd’s franchise, with substantial resources in areas of pricing, actuarial support, research, and claims.

Very high service standards, with a box and separate underwriting office open at least 10 hours a day. The claims service has been ranked as one of the highest quality claims services in the London market by independent research analyst Gracechurch Consulting.

The scale of the business gives access to capital markets in a way not possible for other syndicates. Part of the reinsurance programme is placed by way of a catastrophe bond.

Weaknesses/Challenges

The acquisition of Catlin Group by XL Limited increases uncertainty at a number of levels. There have been a number of underwriting and management changes at Catlin and, even though Catlin had the larger Lloyd’s business, it would appear that former XL executives outnumber former Catlin ones at the very top of the organisation.

Other Lloyd’s and London businesses are using the uncertainties arising from the merger to lure underwriters from the group.

Reinsurance is set at a level to protect capital rather than earnings, with the intention of creating a diversified portfolio of risks. This could introduce volatility, although the breadth of the account should militate towards stability.

Catlin holds reserves at actuarial best estimates rather than at benchmark levels in excess of this. This means reserve surpluses on closed years are unlikely to be substantial. The 2012 account, the syndicate’s first, closed into the 2013 account as at 31 December 2014. As at 30 June 2015, the managing agent is forecasting a small deficit (£184,000) on this prior year.

143

Rating (outlook): B+ (stable) Risk Rating: Medium

Return Rating: 5 Capital Rating: 8

Catastrophe Rating: 5 Tail Rating: 5

Cost Rating: 10 Scarcity Rating: 1

Summary of Results / Forecasts2008 2009 2010 2011 2012 2013 2014 2015 2016

Capacity (£m) - - - - 60 86 106 101 101Gross Premiums - - - - 55 76 92 102 104Net Premiums - - - - 41 58 71 78 80Pure Year Result - - - - 5 14 12 9 8Prior Year Result - - - - 0 0 0 0 0Operating Expenses - - - - -1 -4 -5 -5 -6Investment Return - - - - 1 2 2 2 2

Result (Est) £m - - - - 6 11 10 5 4% - - - - 10% 13% 9% 5% 4%

Estimates in blue are APCL's own forecasts. Please see Appendix A for a full description and the caveats on page 215.

Forecasts CommentaryWe have yet to receive the full information pack for any proposed2016 year of account for this syndicate. This will be provided XLCatlin decide to continue with the SPS. The 2016 forecast istherefore indicative at this stage. Both 2013 and 2014 underwritingyears are comfortably ahead of plan. There is some noise in theold year movement (currently limited to just the 2012 account) asthere was a forecast surplus of £115,000 at quarter one which has deteriorated to a projected deficit of £184,000 at quarter two. Wedo not build any release of surpluses into our model at this stage.

Auction CommentaryAuction Volume and Average Price

Participation on the syndicate has been on a rolling two yeartenancy basis. It is not eligible to be traded at auction. Followingdiscussions with XL Catlin, we hope to be able to confirmallocations for 2016 later this year. There may be additionalcapacity available. As is the case with all SPSs, the allocation ofany additional capacity will be determined by reference toArgenta’s policy, which is designed to ensure the fair and equitable treatment of its clients and the operation of which is overseen bythe agency’s conflicts committee. Details of the methodology to be used will be notified to clients at the appropriate time.

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144

Syndicate 6111 Catlin Underwriting Agencies Limited Andrew McMellin

Description

Syndicate 6111 writes a whole account quota share of Syndicate 2003, which with a capacity of £1.4 billion sits just behind Amlin Syndicate 2001 as the largest at Lloyd’s. Catlin was one of the most advanced at Lloyd’s in developing its overseas network, and more than half of the group’s income is comes from outside the London market. The business is divided into six business units (in declining order of size); reinsurance, casualty, energy & marine, property, specialty, war & political risk and aerospace. Catlin was acquired by XL Group in early 2015 and is going through a process of integration. Syndicate Business Forecast

XL Catlin has yet to provide us with a business plan for the 2016 account. It has historically started this process in September, although has often left it until late October before it determines the exact cession percentage (and hence capacity requirement) to the Special Purpose Syndicate. We will report further in due course.. Significant Points

a) It is expected that XL Catlin will confirm capacity late in October.

b) There is an intragroup stop loss reinsurance that does not apply to Syndicate 6111. The 2012 year of account, reinsured to close into 2013, was added to an adverse development cover protecting both syndicate and company.

c) Catlin Group plc announced in January 2015 that it had reached agreement to be acquired by XL Group plc. The businesses have been merged under the brand XL Catlin. At present, the two Lloyd’s businesses (XL London Market Limited and Catlin Underwriting Agencies Limited) have not been merged, and the two principal syndicates, Catlin 2003 (2015 capacity £1.4 billion) and XL 1209 (2015 capacity £300m) continue to execute their separate plans as agreed with Lloyd’s.

d) Syndicate 2003 has five special purpose quota share syndicates in 2015. These are Syndicate 2088 (capacity £119m, capital provided by China Re), Syndicate 6111 (capacity £104m, capital provided by Lloyd’s members through Hampden and Argenta), Syndicate 6112 (capacity £30m, capital provided by Everest Re), Syndicate 6119 (capacity £13m, capital provided by GIC of India), Syndicate 6121 (capacity £28m, capital provided by an unknown third party). Catlin also reinsures out part of its non-Lloyd’s book by way of a “portfolio participation vehicle” backed by several third-party capital providers.

e) The syndicate operates on a funds withheld basis. As at 30 June 2015 the balance due from ceding insurers and intermediaries under reinsurance agreements (i.e. Syndicate 2003) was £138.8m.

145

2010 2011 2012 2013 2014Aviation 84.5 53.9 70.0 56.6 111.1Casualty 120.7 123.9 93.6 81.5 86.3Energy 81.6 88.6 61.8 72.1 72.3Life - - - - -Marine 101.3 103.4 113.4 105.4 96.9Motor - 115.5 108.6 107.8 109.6Property 93.0 87.2 91.2 92.7 94.0Reinsurance 89.9 109.1 93.7 95.7 89.9Whole Account 95.8 104.3 93.5 93.0 90.9

Gross Net Gross Net Two Events 71% 22% 71% 22% Superstorm Sandy (Oct 2012) 12.8% North East Windstorm 37% 11% 37% 11% Costa Concordia (Jan 2012) 1.6% Florida Windstorm (Miami) 32% 7% 32% 7% Alberta flooding (June 2013) 1.4% Florida Windstorm (Tampa Bay) 38% 7% 38% 7% Tripoli Airport Attack (July 2014) 0.8% Gulf of Mexico Windstorm 50% 7% 50% 7% Typhoon Haiyan (Nov 2013) 0.6% European Windstorm 16% 7% 16% 7% Cyclone Oswald (Jan 2013) 0.6% Japanese Typhoon 10% 7% 10% 7% Hurricane Odile (Sept 2014) 0.5%

UK Europe (ex UK) North America Americas (other) Asia Pacific Middle East & Africa Worldwide

Key Ratios2008 2009 2010 2011 2012

Gross Premiums % Capacity - - - - 92.1Reinsurance Premium % Gross Premiums - - - - 25.9Pure Year Underwriting Result % Capacity - - - - 48.2Prior Years Underwriting Result % Capacity - - - - 0.0RITC received % Capacity - - - - 0.0IBNR % Net Outstanding Claims - - - - 0.0Operating Expenses % Capacity - - - - 1.6

2016

Geographic Split

0.0%0.0%0.0%

0.0%0.0%

Combined Ratio by Class of BusinessClass of Business Split

100.0%0.0%

Realistic Disaster Scenarios Largest Net Losses 2011 to 2015

Net Incurred Loss Ratios

2015

Note: These are annual accounting ratios

0%

10%

20%

30%

40%

50%

60%

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12

2010 2011 2012 2013 2014

0 5 10 15 20 25 30 35 40

UK Motor

Property Treaty

Property

Marine

Life

Liability Treaty

Liability

Energy

Aviation

Accident & Health

% of Business Written2016 2015

146

147

Managing Agent Profiles

148

ANV Syndicates Limited www.anv.eu.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

779, 1861, 1969*, 5820 £498,403,244 (+6.4%) 1.9% Dutch insurance group

Directors

Max Taylor – Non-executive Chairman Adam Barker – Claims Director Lynsey Cross – Director Ben Gilman – Chief Actuary Andrew Hall – Managing Director

Janice Hamilton – Finance Director Tony Hulse – Non-executive Director Nicholas Pawson – Non-executive Director Gerard Van Loon – Director of Underwriting Carin Verhagen – Non-executive Director

Financial Data

2010 2011 2012 2013 2014 Gross Written Premiums (£000) 345,624 343,411 399,990 431,913 604,618

Net Earned Premiums 273,358 296,671 331,538 332,473 417,430 Net Incurred Claims (153,267) (241,802) (176,977) (132,697) (194,629) Net Operating Expenses (128,188) (142,159) (167,084) (180,376) (206,786) Investment Return 10,669 4,222 6,069 1,758 1,828

Profit / Loss 2,573 (83,067) (6,454) 21,158 17,843

Claims Ratio 56% 82% 53% 40% 47% Expense Ratio 47% 48% 50% 54% 50% Combined Ratio 103% 129% 104% 94% 96%

Figures shown are for the former ANV and Jubilee managed syndicates combined.

ANV Holdings BV (‘ANV’), the parent company of ANV Group, is a privately held Dutch registered holding company. Its lead investor is the Canadian pension fund, Ontario Teachers’ Pension Plan.

To build its Lloyd’s business, ANV acquired Flagstone Syndicate Management Limited in August 2012, which it re-named ANV Syndicate Management Limited (‘ASML’). ASML managed Syndicate 1861, which specialises in marine, energy, property, accident & health and professional lines, and provided turnkey services to Apollo Syndicate 1969.

On 16 September 2013, ANV and Ryan Specialty Group, LLC (‘RSG’) announced that they had entered into an agreement to combine their Lloyd’s managing agency operations, ASML and Jubilee Managing Agency Limited (‘Jubilee’). Jubilee managed Life Syndicate 779 and Syndicate 5820, whose specialty account includes consumer products, property, casualty, political risks and term life. The transaction was completed on 6 December 2013 resulting in ASML acquiring Jubilee, and ANV owning 80% of ASML, with RSG owning the remaining 20%. Jubilee’s name was changed to ANV Syndicates Limited (‘ASL’) on the transaction completion date and novation of the ASML managed syndicates was completed in April 2014, thereby moving all the Lloyd’s managing agency operations into a single company, ASL. ASL is now the Managing Agent for Syndicates 779, 1861 and 5820.

*With effect from 1st August 2015, the management of Apollo Syndicate 1969 was transferred to Apollo Syndicate Management Limited.

149

Apollo Syndicate Management Limited www.apollounderwriting.com

Managed syndicate: Managed capacity: (change): Share of Lloyd’s: Owner type:

1969 £159,999,000 (N/A) 0.6% UK Unlisted

Directors

Julian Cusack – Non-executive Chairman Sven Althoff – Non-executive Director Phil Ellis – Chief Risk Officer Tony Hulse – Non-executive Director David Ibeson – Chief Executive Officer

Nick Jones – Director of Underwriting Jamie MacDiarmid – Finance Director Jane Owen – Non-executive Director Simon White – Claims Director

Financial Data

None available.

Company authorised as a standalone Lloyd’s Managing Agency from 1st August 2015.

Apollo Syndicate 1969 was set up for the 2010 year of account and managed under a turnkey arrangement by ANV Syndicates Limited until 1st August 2015, when management was transferred to Apollo Syndicate Management Limited.

Since its formation Apollo has grown from an original team of five, writing two classes of business, to a team of over fifty covering eight classes. All of the senior underwriting team and a number of staff participate in the syndicate through one of two staff schemes.

Apollo’s stated aim is to build a first-class privately owned underwriting platform trading at Lloyd’s and to maintain clear alignment and connection with capital providers and key staff responsible for delivering profits.

‘We are always looking to identify and add specialist classes of business to improve our portfolio and complement our already well-established strong foundation.’

150

Argenta Syndicate Management Limted www.argentaplc.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

2121 £240,000,000 (0%) 0.9% UK Unlisted

Directors

John Whiter – Non-executive Chairman Andrew Annandale – Managing Director Graham Allen – Finance Director Peter Bruin – Operations Director Paul Hunt – Non-executive Director Ian Maguire – Active Underwriter Syndicate 2121 Nick Moore – Chief Actuary

John Mumford – Non-executive Director Trevor Newbery – Non-executive Director Gary Powell – Non-executive Director Matthew Rowan – Risk Management and Compliance Director David Thompson – Claims and Reinsurance Operations Director

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 179,043 222,317 255,102 238,548 217,702

Net Earned Premiums 139,386 175,339 194,974 201,561 181,689 Net Incurred Claims (77,894) (117,229) (111,779) (90,160) (76,492) Net Operating Expenses (57,588) (64,695) (78,794) (85,947) (73,598) Investment Return 2,098 2,040 3,389 2,017 1,902

Profit / Loss 6,002 (4,545) 7,790 27,471 33,501

Claims Ratio 56% 67% 57% 45% 42% Expense Ratio 41% 37% 40% 43% 41% Combined Ratio 97% 104% 98% 87% 83%

Figures shown exclude syndicates managed under ‘turnkey’ arrangements

Argenta Holdings plc is an unlisted holding company with four principal operating companies; Argenta Syndicate Management Limited (ASML, the managing agency), Argenta Private Capital Limited (APCL, a Lloyd’s members’ agency), Argenta Underwriting Asia Pte Limited (an underwriting service company based in Singapore which operates as a cover-holder on the Lloyd’s Asia platform) and Argenta Tax & Corporate Services Limited. ASML was formed in 1999 to act as managing agent to the newly formed Syndicate 2121. 75% of the equity in Argenta Holdings plc is held by three shareholders, with the balance owned by an Employee Benefit Trust.

ASML manages Syndicate 2121 for a range of capital providers including members advised by APCL. ASML has in the past provided managing agency services for third party syndicates (via ‘turnkey’ arrangements) including, most recently, Syndicates 1965 and 1110. ASML may in the future support further turnkey operations and/or Special Purpose Syndicates as opportunities arise.

An orderly run-off of the open years of Syndicate 1965 has taken place since the syndicate ceased underwriting in November 2011 and, as planned, a competitive bid process began in July 2014 to obtain a reinsurance to close (RITC) of all open years. This process was successfully completed with an RITC contract to close the open years of Syndicate 1965 effective 31 December 2014 having been entered into with Shelbourne Syndicate Services Limited.

On 5th March 2015, managing agency responsibility for Syndicate 1110, other than in respect of the financial statements as at 31st December 2014, transferred from ASML to ProSight Specialty Managing Agency Limited.

Andrew Annandale, Group CEO of Argenta Holdings plc and Managing Director of ASML, is a non-executive director of APCL.

151

Argo Managing Agency Limited www.argo-global.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

1200 £350,000,000 (0.0%) 1.3% US Listed

Directors

John Spencer – Chairman Jay Bullock – Group Chief Financial Officer Peter Burrows – Non-executive Director Darren Argyle – Financial Director Philip Grant – Non-executive Director

Kate Nealon – Non-executive Director Bruno Ritchie – Director of Underwriting David Harris – Managing Director Mark E Watson III – Group Chief Executive Officer

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 308,422 337,300 375,500 424,900 380,400

Net Earned Premiums 308,116 271,300 63,100 262,100 258,700 Net Incurred Claims (221,640) (234,000) 65,700 (130,600) (126,300) Net Operating Expenses (117,642) (107,600) (98,000) (113,200) (103,600) Investment Return 14,048 16,500 15,800 1,800 7,400

Profit / Loss (17,118) (53,800) 46,600 20,100 36,200

Claims Ratio 72% 86% -104% 50% 49% Expense Ratio 38% 40% 155% 43% 40% Combined Ratio 110% 126% 51% 93% 89%

Argo Group was formed by the merger of Argonaut Group with PXRE Group in 2007. The merger coincided with the relocation of the head office from San Antonio, Texas to Bermuda, and the launch of a reinsurance company, Argo Re. Argo is now divided into four main operating units, excess and surplus lines, US commercial specialty, international specialty and Syndicate 1200, its Lloyd’s platform. Group gross written premium income was $1.9bn in 2014.

Argo acquired Lloyd’s managing agency, Heritage, in 2008. Since then, the majority of underwriters from Heritage have left and been replaced, a number of accounts have been re-underwritten (in particularly property and personal accident), three new divisions – marine, aerospace and specialty (comprising personal accident, political risks and contingency) – have been created, and the extensive binding authority book rationalised. The 2009 and prior years exposures were reinsured out at the beginning of 2013 by a 100% net whole account quota share reinsurance, in order to remove the legacy exposure from the ‘Heritage years’. The beneficial effect of this transaction is reflected in the 2012 financial data shown above.

During 2013 there were a number of changes to the composition of the Board. Bruno Ritchie, who joined Argo from Hiscox in 2011 as Head of Aerospace, was appointed Director of Underwriting. In this role, he replaced Andrew Carrier, previously Kiln Reinsurance Underwriter, who joined Argo in 2007 and was appointed Director of Underwriting at the managing agency in 2009, becoming Group Chief Underwriting Officer in 2011. In addition, David Harris, who had occupied various senior roles at Amlin, replaced Jeff Radke as Managing Director of Syndicate 1200.

The syndicate benefits from the international network of overseas offices of the Argo Group, ranging from service companies in Paris and Dubai, to a group insurance company in Brazil. The strong group presence in the US also gives the syndicate access to US business. The international network is a focus for future development.

152

Ark Syndicate Management Limited www.arkunderwriting.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

4020, 6105 £400,000,000 (0.0%) 1.5% Bermudian R/I

Directors

Ian Beaton – Chief Executive Nick Bonnar – Chief Underwriting Officer Neil Deshpande – Operations Director David Foreman – Chairman Peter McIntosh – Director

Robin Oakes – Non-executive Director Neil Smith – Finance Director Verner Southey – Non-executive Director Chris Watson – Non-executive Director

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 353,092 319,690 348,548 372,112 375,790

Net Earned Premiums 288,980 278,157 283,896 302,556 290,540 Net Incurred Claims (182,012) (176,539) (169,201) (143,172) (129,593) Net Operating Expenses (90,657) (91,095) (104,239) (117,239) (128,804) Investment Return 7,732 10,972 20,171 12,345 17,796

Profit / Loss 24,043 21,496 30,627 54,490 49,939

Claims Ratio 63% 63% 60% 47% 45% Expense Ratio 31% 33% 37% 39% 44% Combined Ratio 94% 96% 96% 86% 89%

Ark Syndicate Management Limited (‘ASML’) was established in 2007 to manage the newly formed Syndicate 4020. Key personnel include former Wellington Director of Underwriting David Foreman, and former Aspen executives Nick Bonnar and Ian Beaton. Backing was from a private equity consortium led by Aquiline Capital Partners LLC, including Neuberger Berman and Swiss Re Alternative Investments. Aquiline is a New York based private equity firm that was founded by and is chaired by former Marsh & McLennan CEO, Jeff Greenberg.

In April 2013 Aquiline, via a separate investment fund, acquired another Lloyd’s managing agency, Equity Red Star (since re-branded ‘ERS’), which manages ERS Motor Syndicate 218, from Insurance Australia Group (see the separate profile of ERS).

Capital backing for Syndicate 4020 is provided by Group Ark Insurance Holdings Limited (‘GAIH’), via a wholly owned Class III Bermudan reinsurer. In December 2013 agreement was reached for a management buy-out of GAIH to take place between 2014 and 2016. Once completed, ownership of GAIH will be entirely with the management and staff of Syndicate 4020.

Third party capital participated directly on Syndicate 4020 in 2011 and 2012 on a limited tenancy basis, with no auction rights. With effect from the 2013 year of account, third party capital participates on Syndicate 6105, a Special Purpose Syndicate, which underwrites a whole account quota share of Syndicate 4020.

Continuing participation by third party capital is subject to Ark inviting renewal each year.

Ark directors and senior staff participate in the syndicate by way of a mechanism that mirrors an LLP.

153

Asta Managing Agency Limited www.asta-uk.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

1686, 1729, 1897, 1910, 2015, 2357, 2525, 2526, 4242, 6117 £904,687,441 (+15.5%) 3.5% UK Unlisted

Directors

Tom Riddell – Non-executive Chairman Yvonne Bouman - Chief Risk Officer Gilles Erulin – Non-executive Director Lorraine Harfitt – Chief Operating Officer Andrew Hubbard - Non-executive Director

David Hunt – Chief Financial Officer Digby Murphy – Non-executive Director Simon Norton – Director of Underwriting Jim Ramage – Non-executive Director Julian Tighe – Chief Executive Officer

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 229,030 268,964 582,032 567,066 766,414

Net Earned Premiums 176,506 193,058 398,005 422,517 478,641 Net Incurred Claims (68,837) (112,217) (181,311) (157,667) (211,994) Net Operating Expenses (69,504) (93,627) (165,228) (197,147) (222,815) Investment Return 2,931 3,557 3,822 1,341 2,429

Profit / Loss 41,096 (9,229) 55,288 69,044 46,260

Claims Ratio 39% 58% 46% 37% 44% Expense Ratio 39% 48% 42% 47% 47% Combined Ratio 78% 107% 87% 84% 91%

Asta is the re-branded Whittington Group, whose UK business was sold at the beginning of 2012 to a consortium of investors consisting of Paraline, Skuld and Tawa. Whittington was originally a provider of run off services to the Lloyd’s market, and pioneered turnkey start-ups during the late 1990s, bringing new syndicates including Aegis 1225, Nissan 2323 and Samsung 1210 to the Lloyd’s market. It has also provided management services to, and invested in, a number of new syndicates including MAP 2791, Illium 4040, Ark 4020, Barbican 1955 and Alba 4545. In all it has been involved in 18 new syndicate start-ups.

Asta currently has seven syndicates under management, for a range of capital providers. Investors in syndicates managed by Asta include Nephila Capital (Syndicate 2357) and Axis (Syndicate 1686). Some will ultimately progress to having their own independent managing agency company, as did Sirius Syndicate 1945, which migrated on 1st July 2014, while others will remain with Asta for the foreseeable future.

Syndicates 2525 (Dale) and 2526 (Doré), transferred to Asta from Alterra for the 2011 account. Syndicate 2526 has since transferred to AmTrust at Lloyd’s, which manages syndicate 1206, with effect from 1st April 2015.

Asta took over the management of ICAT Syndicate 4242 from Chaucer with effect from 1st January 2013. New for 2014 was Syndicate 1729 (Dale Underwriting Partners) backed by ProAssurance (a US specialty insurer with a background in medical professional liability) and third party capital.

154

Atrium Underwriters Limited www.atrium-uw.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

609 £420,863,106 (+0.2%) 1.6% US Listed

Directors

Paul O’Shea – Chairman Steve Cook – Deputy Chairman James Cox – Compliance Director Toby Drysdale – Deputy Underwriter Syndicate 609 Andrew Elliott - Non-executive Director Gordon Hamilton – Non-executive Director Richard Harries – Active Underwriter Syndicate 609

James Lee – Managing Director Brendan Merriman – Group Chief Financial Officer Stephen Riley – Non-executive Director Nick Packer – Non-executive Director Samit Shah – Chief Risk Officer Kirsty Steward – Finance Director Andrew Winyard – Underwriter Syndicate 609

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 363,229 382,690 385,236 378,544 365,018

Net Earned Premiums 315,444 334,623 329,649 328,590 322,560 Net Incurred Claims (138,537) (188,196) (126,302) (114,878) (131,199) Net Operating Expenses (115,330) (130,254) (133,584) (138,145) (144,124) Investment Return 11,237 9,199 11,467 (231) 5,710

Profit / Loss 72,814 25,372 81,230 75,336 52,947

Claims Ratio 44% 56% 38% 35% 41% Expense Ratio 37% 39% 41% 42% 45% Combined Ratio 80% 95% 79% 77% 85%

Atrium Underwriting Group Limited was acquired by Ariel Holdings of Bermuda in October 2007. Prior to that it had been listed on the London Stock Exchange. In April 2012 Ariel Holdings completed the sale of Ariel Re to the Goldman Sachs Group and the sale of its Credit & Surety reinsurance operations based in Zurich to Arch Capital Group. Following the sales, Ariel Holdings was renamed Arden Holdings Limited, with Atrium as the only remaining operating unit. In June 2013 Enstar Group Ltd entered into a definitive agreement to purchase the Atrium Group from Arden Holdings.

Enstar subsequently announced in July 2013 that affiliates of Stone Point Capital LLC had committed to provide equity capital towards Enstar’s previously announced acquisition of the Atrium Group, so that following the closing of the transaction Enstar would own approximately 60% and Stone Point approximately 40% of Atrium Group. The transaction was completed in November 2013.

Enstar is a publicly traded company (NASDAQ listed) whose principal business to date has been as an acquirer and manager of insurance companies in run-off and a provider of management consultancy services to the global insurance and reinsurance industries. Enstar owns Shelbourne Syndicate Services, a Lloyd’s run-off manager. The acquisition of Atrium was Enstar’s first move into “live” non-life underwriting. In April 2014 Enstar went on to complete the acquisition of Torus Insurance Holdings Limited, which includes Lloyd’s Syndicate 1301 among its insurance vehicles.

Atrium obtained capital providers’ approval to merge Syndicate 570 into Syndicate 609 for the 2012 account. Just under 75% of the capacity for the merged syndicate is provided by third party capital.

Atrium has opened offices in Singapore to access marine, energy, aviation and non-marine short tail business and in North America to support its delegated underwriting portfolio.

Atrium staff and directors participate in Syndicate 609 by way of a staff LLP.

155

Barbican Managing Agency Limited www.barbicaninsurance.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

1955, 6118, 6120 £260,000,000 (+3.9%) 1.0% Private Equity

Directors

Richard Hobbs - Non-executive Chairman David Booth – Underwriter Syndicate 1955 Ben Canagaretna – Chief Actuary Richard Cunningham – Deputy Managing Director Henry Colthurst – Non-executive Director

Jon Godfray – Chief Operating Officer Mark Harrington – Chief Underwriting Officer Lloyd Howson – Finance Director David Reeves – Managing Director

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 201,495 198,977 219,889 302,032 372,882

Net Earned Premiums 128,633 156,020 139,310 203,034 212,014 Net Incurred Claims (89,927) (131,698) (101,523) (115,386) (118,770) Net Operating Expenses (50,533) (55,743) (31,898) (74,367) (85,296) Investment Return 1,288 3,161 2,321 800 1,944

Profit / Loss (10,540) (28,259) 8,210 14,080 9,892

Claims Ratio 70% 84% 73% 57% 56% Expense Ratio 39% 36% 23% 37% 40% Combined Ratio 109% 120% 96% 93% 96%

Barbican Insurance Group is a diverse insurance and reinsurance business formed in 2007 and headquartered in Guernsey. It is majority owned by a US private equity fund, with the management team also having a share.

Barbican Managing Agency Limited was established for the 2011 year of account to take over the management of Syndicate 1955, which started trading in 2008 and had been managed under a third party agreement by Whittington (now Asta). Special Purpose Syndicate (SPS) 6113 was set up for the 2013 year of account to underwrite a quota share reinsurance of parts of Syndicate 1955’s account. It ceased at the end of the 2014 year of account. For 2014, SPS 6118 was set up to underwrite a whole account quota share reinsurance of Syndicate 1955, followed by Syndicate 6120 for the 2015 year of account. Total managed capacity is £260m for the 2015 underwriting year, of which £48.1m is SPS 6118 and £40m SPS 6120. The capacity for SPS 6118 and 6120 is provided by third party capital.

Barbican Insurance Group also has a non-Lloyd’s financial solutions business based in Guernsey, which offers insurance and reinsurance programmes to the global market. Within the Group are a number of service companies including, Barbican Underwriting Limited, Castel Underwriting Agencies Limited, Professional Indemnity Protect Limited and Seacurus Limited.

156

Beaufort Underwriting Agency Limited www.beaufort-group.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

318 £235,044,243 (0.0%) 0.9% European R/I

Directors

Richard Carter – Non-executive Chairman Malcolm Cox – Non-executive Director Colin Czapiewski – Non-executive Director Derek Eales – Underwriter Syndicate 318

Arthur Hoffmann – Managing Director Graham Tuck – Finance Director Carsten Niebuhr – Non-executive Director

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 187,128 181,635 168,993 148,341 135,721

Net Earned Premiums 162,447 150,661 154,568 133,559 120,429 Net Incurred Claims (99,425) (101,506) (73,261) (61,551) (49,760) Net Operating Expenses (46,370) (46,841) (47,604) (42,060) (42,056) Investment Return 1,743 1,259 2,357 1,344 838

Profit / Loss 18,395 3,573 36,060 31,293 29,451

Claims Ratio 61% 67% 47% 46% 41% Expense Ratio 29% 31% 31% 31% 35% Combined Ratio 90% 98% 78% 78% 76%

Beaufort has been owned by Munich Re since 2007. Munich Re is the world’s largest reinsurance company, and reported gross premiums of €48.8 billion (£38.1 billion) across most lines of non-life and life reinsurance products in 2014. Through different operating subsidiaries, Munich Re also owns another Lloyd’s managing agency, Munich Re Underwriting Limited, which manages the wholly aligned Syndicate 457 (2015 capacity £425m).

Following the acquisition by Munich Re, Beaufort launched two new syndicates, 1318 and 2318. Syndicate 1318 was formed for the 2009 account under Active Underwriter Gordon Breslin to underwrite North American commercial and homeowners binding authority business and for the 2011 year of account had capacity of £50m. Syndicate 2318 was formed for the 2010 account to underwrite North American retrocessional business. Munich Re provided 100% of the capacity of each syndicate for the 2011 account. Syndicate 1318 merged into Syndicate 318 for the 2012 year of account and Syndicate 2318 ceased underwriting at the end of 2011.

Having passed the 75% threshold of capacity ownership in 2010, Munich Re was obliged to make a mandatory offer to the remaining non-aligned members of Syndicate 318 in 2011. Munich Re’s share of the syndicate increased to 89.25% of capacity for 2012 and stands at 91.2% in 2015, following further purchases in the capacity auctions.

Michael Pritchard resigned as Active Underwriter of Syndicate 318 on 30 June 2013 and was succeeded by his Deputy Underwriter Derek Eales.

157

Beazley Furlonge Limited www.beazley.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

623, 2623, 3622, 3623, 6107 £1,445,761,006 (-4.5%) 5.6% UK Listed

Directors

Mark Bernacki – Head of Property George Blunden – Non-executive Director Martin Bride – Finance Director Adrian Cox – Head of Specialty Lines Angela Crawford-Ingle – Non-executive Director Nick Furlonge – Non-executive Director

Andrew Horton – Chief Executive Officer Dennis Holt – Chairman Neil Maidment – Active Underwriter Rolf Tolle – Non-executive Director Clive Washbourn – Head of Marine Kevin Wilkins – Non-executive Director

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 1,343,948 1,269,703 1,411,566 1,497,859 1,440,484

Net Earned Premiums 1,084,056 1,022,204 1,105,976 1,203,509 1,181,931 Net Incurred Claims (558,725) (636,417) (576,607) (537,208) (577,587) Net Operating Expenses (388,242) (373,744) (415,989) (442,064) (492,418) Investment Return 25,132 18,033 47,074 28,502 49,640

Profit / Loss 162,221 30,076 160,454 252,739 161,568

Claims Ratio 52% 62% 52% 45% 49% Expense Ratio 36% 37% 38% 37% 42% Combined Ratio 87% 99% 90% 81% 91%

Beazley plc is listed on the London Stock Exchange. The company is domiciled in Jersey but tax resident in Dublin, Republic of Ireland. Syndicates 623 and 2623 operate in parallel, with non-aligned members supporting Syndicate 623 and Beazley Group providing all of the capacity to Syndicate 2623. Any capacity that Beazley acquires at auction is transferred from Syndicate 623 to Syndicate 2623, although in recent years its bids have not been high enough to secure any capacity. Beazley also provides 100% of the capital support to Syndicates 3622 and 3623 which underwrite life and accident & health business respectively. Beazley launched Special Purpose Syndicate 6107 for the 2010 account to underwrite a quota share of the reinsurance account of Syndicates 623/2623. Third party capital provides 100% of the capital of Syndicate 6107.

Beazley acquired the admitted US insurer Omaha P&C in 2005, which has since been renamed Beazley Insurance Company Inc (“BICI”). This gives Beazley access to admitted lines of insurance (i.e. not the Excess and Surplus Lines business normally written by Lloyd’s syndicates). Beazley also accesses Surplus Lines business in the USA via Beazley USA Services Inc (‘BUSA’), based in Farmington, Connecticut with a number of satellite offices throughout the USA. Surplus lines business sourced by BUSA is written by Syndicates 623/2623, whereas BICI is an insurer in its own right and business is retained within the Beazley Group. The Beazley Group has offices in Singapore, France, the UK, Australia, Norway, Germany and Dubai. Beazley established a reinsurance company, Beazley Re Limited, in Dublin in April 2009. Also during 2009, Beazley acquired First State Management Group, (since renamed Beazley E&S) from Hartford Financial Services. This business is written by Syndicates 623/2623.

Substantial community of interest arises from executives’ and directors’ bonuses being deferred into a pool that is used to support underwriting via a LLP on Syndicate 623 (2015 capacity £2.0m). Senior executives are also remunerated in shares that are deferred for a number of years.

158

Canopius Managing Agents Limited www.canopius.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

958, 4444 £925,000,000 (-8.9%) 3.6% Japanese listed

Directors

Ian Owen – Non-executive Chairman Stuart Davies – Chief Executive Officer Michael Watson – Chairman Jock Birney – Non-executive Director Paul Cooper – Finance Director Mike Duffy – Director

Stephen Gargrave - Active Underwriter, Syndicate 4444 Peter Hazell - Non-executive Director Stephen Manning – Chief Operating Officer Gaynore Moss – Actuarial and Risk Director Tim Rolfe – Chief Executive, UK Specialty

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 633,426 654,608 694,845 1,014,376 1,042,874

Net Earned Premiums 561,879 538,006 550,142 750,294 809,758 Net Incurred Claims (389,545) (381,574) (316,976) (373,311) (397,033) Net Operating Expenses (208,267) (210,817) (211,670) (326,236) (333,721) Investment Return 24,090 6,344 30,531 16,528 23,233

Profit / Loss (11,844) (48,041) 52,027 67,275 102,237

Claims Ratio 69% 71% 58% 50% 49% Expense Ratio 37% 39% 38% 43% 41% Combined Ratio 106% 110% 96% 93% 90%

Data to 2010 is Syndicate 4444 only; 2011 includes Syndicate 260; 2012 and 2013 include Syndicate 260 and Syndicate 958 and 2014

includes Syndicate 958 and Syndicate 4444 only.

In December 2013 Canopius Group announced that an agreement had been reached whereby it would be acquired by Sompo Japan Insurance Inc., a subsidiary of NKSJ Holdings, Inc., one of the largest insurance groups in Japan (with c.$85bn total assets). The 100% acquisition was completed on 1 May 2014. Prior to the acquisition Canopius had been 95% owned by private equity firm Bregal Capital LLP, with the balance being owned by the Canopius management team. Canopius was formed in December 2003 via the acquisition of the managing agency and right to manage Syndicate 839. A new syndicate (4444) was formed for the 2004 year of account and the portfolio of Syndicate 839 substantially re-engineered.

Syndicate 4444 writes a broad based composite account comprising property, casualty, marine & energy, specialty lines and treaty reinsurance. Canopius has offices in the UK, Ireland, Netherlands, Switzerland, Bermuda, USA and Singapore.

Canopius acquired the right to manage KGM Motor Syndicate 260 in July 2010. In 2014 Canopius obtained approval from Lloyd’s to cease Syndicate 260 and to transfer this business into Syndicates 4444 and 958 (split in the same proportions as other written business).

In August 2012 Canopius completed the acquisition of Omega Insurance Holdings Limited, and took over the management of Syndicate 958. For the 2014 and 2015 years of account Syndicates 4444 and 958 are underwritten in parallel, split 80% to 4444 and 20% to 958. An application has been made to merge Syndicate 958 into Syndicate 4444 for the 2016 year of account.

159

Cathedral Underwriting Limited www.cathedralcapital.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

2010, 3010 £406,263,935 (+6.9%) 1.6% UK Listed

Directors

Tony South – Chairman Peter Scales – Cathedral Group Chief Executive Lawrence Holder – Managing Director Derek Grainger – Compliance Director John Hamblin – Active Underwriter John Lynch – Finance Director

Alex Maloney – Lancashire Group Chief Executive Anthony Minns - Non-executive Director Robin Oakes - Director Elvin Patrick – Non-executive Director John Tilling – Non-executive Director

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 298,817 303,944 313,783 299,914 264,481

Net Earned Premiums 227,482 224,258 232,442 231,201 204,359 Net Incurred Claims (152,803) (169,358) (117,545) (87,492) (97,365) Net Operating Expenses (63,114) (66,911) (67,643) (77,126) (67,868) Investment Return 4,133 4,003 3,642 2,006 2,239

Profit / Loss 15,699 (8,009) 50,896 68,590 41,365

Claims Ratio 67% 76% 51% 38% 48% Expense Ratio 28% 30% 29% 33% 33% Combined Ratio 95% 105% 80% 71% 81%

Cathedral Capital was formed in 1997. It underwrote on a spread capital basis until the acquisition of the MMO Underwriting Agency in 2000. Syndicate 2010 was established for the 2001 account with a management team drawn largely from the former Bankside and Wren agencies. Initially, Cathedral had a spread portfolio, but as the account of 2010 grew, this was slowly disposed of to focus on Syndicate 2010.

Private equity fund Alchemy Investment Plan acquired a majority stake in Cathedral Capital in 2006, with the balance of the shares held by management and staff.

In August 2013, Lancashire Holdings Limited announced that it had entered into conditional agreements to acquire the entire share capital of Cathedral Capital Limited. The acquisition was completed in November 2013. Lancashire is a global provider of specialty insurance products operating in Bermuda and London. Lancashire focuses on short-tail, mostly direct, specialty insurance risks under four general categories: property, energy, marine, aviation and terrorism/political risk. Gross premium income amounted to $908m in 2014. The acquisition of Cathedral provides Lancashire with a platform in Lloyd’s, which it did not have previously.

Syndicate 3010, which specialises in marine cargo, energy terrorism and direct aviation/aviation war commenced underwriting on 1 July 2007.

John Hamblin is Active Underwriter of both Syndicates 2010 and 3010, although all day to day underwriting for the latter, which has capacity of £100m for the 2015 year of account, is carried out by Alasdair Butler and Lee Aspinall (cargo) and Lancashire underwriters James Flude (energy) and Chris Wilkinson (terrorism) and John Spence and Bruce Carman (direct aviation/aviation war).

160

Catlin Underwriting Agencies Limited www.catlin.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

2003, 2088, 3002 +SPSs £1,606,638,249 (+0.0%) 6.2% UK Listed

Directors

Stephen Catlin – Chairman Paul Jardine – Deputy Chairman Jonathan Gale – Director Owen Whelan – Director Andrew McMellin – Director

Sharon Long – Claims Director Rob Callan – Chief Financial Officer Paul Greensmith – Director Bob Cowdell – Non Executive Director

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 1,686,265 1,731,320 1,996,387 2,115,213 2,214,386

Net Earned Premiums 1,268,229 1,344,403 1,326,056 1,487,559 1,512,396 Net Incurred Claims (753,372) (907,200) (756,537) (801,269) (748,924) Net Operating Expenses (461,852) (494,547) (493,029) (587,604) (620,602) Investment Return 66,722 100,572 74,353 40,256 64,548

Profit / Loss 119,727 45,118 152,789 132,991 224,995

Claims Ratio 59% 67% 57% 54% 50% Expense Ratio 36% 37% 37% 40% 41% Combined Ratio 96% 104% 94% 93% 91%

Catlin Underwriting Agencies Limited (CUAL) is a company within the XL Group (‘XL’). On 1 May 2015 XL completed the acquisition of Catlin Group Limited. The insurance and reinsurance arms of the combined businesses have been re-branded XL Catlin.

XL is a global insurance and reinsurance company providing property, casualty and specialty products to industrial, commercial and professional firms, insurance companies and other enterprises throughout the world. It has more than 60 offices across more than 20 countries, with over 4000 employees. In 2014 gross written premium was $8.09bn.

CUAL manages Syndicate 2003, which has capacity of £1.522bn for 2015, as well as a number of Special Purpose Syndicates, including SPS 6111, where capacity is provided by Argenta and Hampden Agencies (£169m capacity for 2015).

XL previously managed Syndicate 1209 (£300m capacity for 2015), which is now also managed by CUAL.

161

Charles Taylor Managing Agency Limited www.ctplc.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

1884 £36,000,000 (N/A) 0.1% UK Listed

Directors

Barnabas Hurst Bannister – Non-executive Chairman Rob Andrews – Chief Risk Officer Edward Creasy – Non-executive Director Robert Dorey – Active Underwriter

David Marock – Non-executive Director Stephen Riley – Non-executive Director Christian Schirmer – Chief Executive Officer Arjun Thawani – Finance Director

Financial Data

None available.

Company established in 2015.

Charles Taylor plc is a leading international provider of professional services to clients in the global insurance market and has around 1,200 staff in 69 offices, spread across 28 countries in the UK, the Americas, Asia Pacific, Europe and the Middle East. Its history goes back to the 1840s and it has managed the Standard Club since its foundation in 1884.

Charles Taylor Managing Agency Limited (‘CTMA’) was established in 2015 within Charles Taylor’s Insurance Support Services Division in order to manage the Standard Syndicate 1884, which commenced trading on 1 April 2015.

CTMA's strategy is to extend its syndicate management capability to further new Lloyd's start-ups. This will supplement the few managing agents that currently focus on turn-key management.

162

Chaucer Syndicates Limited www.chaucerplc.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

1084, 1176 £791,665,971 (-11.2%) 3.0% US Insurer

Directors

Christopher Stooke – Chairman Bob Stuchbery – Chief Executive Officer Bruce Bartell – Chief Underwriting Officer Tim Carroll – Non-executive Director David Greenfield – Non-executive Director

David Mead – Chief Operating Officer Andrew Robinson – Non-executive Director Penny Shaw – Risk Director Johan Slabbert – Chief Financial Officer

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 1,063,256 1,070,138 1,088,820 914,485 923,125

Net Earned Premiums 794,903 846,969 842,438 748,484 755,109 Net Incurred Claims (517,995) (584,311) (446,730) (367,787) (369,651) Net Operating Expenses (267,829) (304,953) (327,561) (284,313) (290,154) Investment Return 29,435 26,953 43,301 5,334 33,941

Profit / Loss 38,514 (15,342) 111,448 101,718 129,245

Claims Ratio 65% 69% 53% 49% 49% Expense Ratio 34% 36% 39% 38% 38% Combined Ratio 99% 105% 92% 87% 87%

Chaucer Holdings PLC was acquired by The Hanover Group of Worcester Massachusetts in July 2011. The Hanover Group (unrelated to the German reinsurer, Hannover Re) is one of the largest insurance businesses in the USA. The group includes Citizens Insurance Company of America and wrote net premiums of US$4.8 billion in 2014. Until the acquisition, Chaucer had been listed on the London Stock Exchange.

Until April 2013 Chaucer operated both in-house and third party syndicates. Following its acquisition by The Hanover, Chaucer has discontinued its third party turnkey services in order to concentrate on the in-house operations. The management of Syndicate 1301 transferred to the Torus Insurance Group and ICAT Syndicate 4242 to Asta Managing Agency at that time.

The in-house syndicates that Chaucer currently manages are Syndicate 1084, which has capacity of £760m for 2015, and Nuclear Syndicate 1176, with capacity of £31.7m. Syndicate 1084 underwrites a broad based insurance and reinsurance account, including marine, energy, specialty lines, aviation, international property and reinsurance. Until July 2015 it also wrote UK motor business, but this has been transferred to Markerstudy Group, a UK-based insurance provider, via a 100 percent reinsurance arrangement for prior claim liabilities and in-force policies.

163

ERS Syndicate Management Limited www.ers.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

218 £350,099,182 (-20.0%) 1.3% Private Equity

Directors

Patrick O’ Sullivan – Non-executive Chairman Nick Addyman - Non-executive Director Mark Bacon – Active Underwriter Ian Broadwater - Non-executive Director Henry Brunjes – Non-executive Director Bob Gullett – Non-executive Director

Ian Parker – Chief Executive Officer Nicholas Pawson – Non-executive Director Katie Wade – Finance Director Ryan Warren – Chief Risk Officer Chris Watson – Non-executive Director

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 527,592 545,456 449,065 406,253 387,732

Net Earned Premiums 508,962 543,841 464,114 408,186 367,510 Net Incurred Claims (830,635) (379,300) (325,623) (281,426) (232,431) Net Operating Expenses (182,509) (208,708) (176,136) (157,994) (138,718) Investment Return 4,702 5,885 15,102 6,811 11,966

Profit / Loss (499,480) (38,282) (22,543) (24,423) 8,327

Claims Ratio 163% 70% 70% 69% 63% Expense Ratio 36% 38% 38% 39% 38% Combined Ratio 199% 108% 108% 108% 101%

In April 2013 Aquiline Capital Partners LLC (“Aquiline”) completed the acquisition of Equity Insurance Group, of which ERS Syndicate Management Limited (‘ESML’) is a part, from Insurance Australia Group, which had owned Equity since December 2006. Aquiline is a New York-based private equity firm investing in financial services, chaired by Jeff Greenberg, the former CEO of the global brokerage firm Marsh & McLennan. Aquiline has other interests in Lloyd’s managing agents. It was the lead backer to Ark Syndicate Management (see separate Profile) and it has an investment in Talbot Underwriting Limited, which manages Syndicate 1183, through its holding in Bermuda based Validus Group.

In June 2010, Equity announced serious deterioration in claims’ experience, relating principally to bodily injury claims. Given the uncertainties, the 2008 account of Syndicate 218 was left open as at 31 December 2010, but closed a year later, at the same time as the 2009 year of account, once it had been established to a sufficient level of confidence, supported by independent actuarial opinion, that the development of the years of account had stabilised.

Following the acquisition Aquiline appointed a new board for ESML, which includes Ian Parker as Chief Executive Officer of Equity Insurance Group. He was previously Chief Operating Officer at Hardy Underwriting and prior to that had a senior role at Zurich Financial Services. The Chairman of ESML is Patrick O’Sullivan, who has many years’ experience of insurance and financial services. He is currently Chairman of international financial group Old Mutual and was formerly Vice Chairman of Zurich Financial Services.

In April 2014 Equity Group rebranded as ‘ERS’ in order to emphasise the changes that have taken place since Aquiline acquired the business, in particular that 218 is a motor only, broker only, Lloyd’s syndicate, and that the Group no longer owns any broking businesses, nor does it underwrite home or personal accident business.

164

Hiscox Syndicates Limited www.hiscox.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

33, 3624, 6104 £1,415,210,362 (+3.1%) 5.4% UK Listed

Directors

Robert Childs – Non-executive Chairman Bronek Masojada – Chief Executive Officer Stuart Bridges – Chief Financial Officer Caroline Foulger - Non-executive Director Ian Martin – Finance Director Henry Keeling – Non-executive Director Mike Krefta – Joint Active Underwriter, Syndicate 33 and Active Underwriter, Syndicate 6104

Jason Jones – Group Compliance and Audit Director Paul Lawrence – Joint Active Underwriter, Syndicate 33 Jeremy Pinchin – Group Claims Director and CEO Hiscox Re Richard Watson – Group Chief Underwriting Officer Angus Winther – Non-executive Director

Financial Data 2010 2011 2012 2013 2014

Gross Written Premiums (£000) 1,014,350 1,006,855 1,113,755 1,171,463 1,206,237

Net Earned Premiums 724,357 732,996 763,254 809,303 812,150 Net Incurred Claims (373,774) (431,886) (355,533) (317,672) (323,259) Net Operating Expenses (284,385) (264,569) (284,564) (332,530) (336,691) Investment Return 61,741 13,145 40,901 12,194 16,369

Profit / Loss 127,939 49,686 164,058 171,295 168,569

Claims Ratio 52% 59% 47% 39% 40% Expense Ratio 39% 36% 37% 41% 41% Combined Ratio 91% 95% 84% 80% 81%

Listed on the London Stock Exchange and a member of the FTSE250 index, Hiscox has grown from its Lloyd’s roots into an international specialist insurer and reinsurer based in Bermuda. The London market remains the most important part of the group, accounting for more than 60% of the £1.98bn gross premium written in 2014. It now employs more than 1,800 people in 14 countries.

There are three main divisions in the Group - Hiscox London Market, Hiscox Retail and Hiscox Re. Hiscox London Market provides insurance for customers around the world, using Lloyd’s portfolio of licences and its network of brokers. Hiscox Retail comprises Hiscox UK and Europe, which offers a range of specialist insurance for professionals, business customers and high net worth individuals, as well as operations in Bermuda, Guernsey and USA. Hiscox Re was established in July 2013 to merge Hiscox reinsurance functions in London, Paris and Bermuda into a single unit.

Robert Hiscox retired as Chairman in February 2013, and was replaced by Robert Childs, who was Chief Underwriting Officer and former Underwriter of Syndicate 33.

Hiscox at Lloyd’s comprises Syndicates 33, 3624 and 6104, of which 33 is the largest, underwriting a broad based largely short tail insurance and reinsurance account. Syndicate 3624 was established for the 2009 year of account and underwrites US errors and omissions (E&O) business produced by the Hiscox office in Armonk, New York, and includes Technology, Media and Telecoms (TMT) E &O business and airlines. 6104 is a Special Purpose Syndicate (‘SPS’) writing a pro rata reinsurance of Syndicate 33’s non-marine reinsurance account.

Alignment of interest is largely by way of shares and options in the business, with employees also eligible to participate in one or more bonus pools, part of which may be deferred for a number of years. Hiscox believes that employees should be encouraged to own shares, so that their rewards are aligned to the long-term success of the Company. Hiscox operates a Performance Share Plan for senior managers, a UK Save as You Earn scheme and an International Save as You Earn scheme.

165

Managing Agency Partners Limited www.mapunderwriting.co.uk

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

2791, 6103 £412,499,947 (-14.6%) 1.6% UK Unlisted

Directors

David Shipley – Non-executive Chairman James Denoon Duncan – Managing Director Christine Dandridge – Non-executive Director Raymond Dumas – Non-executive Director Andrew Foote – Non-executive Director

Aidan Kong – Underwriter Siobhan McAuley – Compliance Director Chris Smelt – Underwriter Richard Sumner – Finance Director Richard Trubshaw – Active Underwriter

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 301,046 260,778 333,934 281,784 179,283

Net Earned Premiums 271,748 237,301 275,461 240,328 174,077 Net Incurred Claims (60,914) (115,332) (89,225) (62,082) (45,324) Net Operating Expenses (104,536) (77,722) (100,774) (94,941) (76,018) Investment Return 23,133 12,640 22,758 10,672 12,180

Profit / Loss 129,431 56,887 108,220 93,977 64,915

Claims Ratio 22% 49% 32% 26% 26% Expense Ratio 38% 33% 37% 40% 44% Combined Ratio 61% 81% 69% 65% 70%

Managing Agency Partners Limited (‘MAP’) is a subsidiary of MAP Holdings Limited, which in turn is 90% owned by MAP Equity Limited, a company wholly owned by employees and directors of the Managing Agency. Almost all employees participate as owners and capital providers. The capital structure is unusual in that the dedicated vehicle, MAP Capital, is an independent corporate vehicle (i.e. MAP Capital has no shareholding in Managing Agency Partners Ltd and vice versa). MAP Capital is supported by directors, staff and independent third parties, including four investment trusts enhanced by a quota share reinsurance contract. For 2014, MAP Capital underwrites £92.66m on Syndicate 2791 and £1.85m on Syndicate 6103. A number of directors also participate by way of an LLP, giving some very sizeable individual commitments. MAP enjoys the second largest support from the three members’ agents in the market.

MAP launched Special Purpose Syndicate 6103 to write a 30% quota share reinsurance of Syndicate 2791’s US property reinsurance account in 2007, increasing the cession to 40% for 2009 and reducing it back to 30% for the years 2010 to 2013. Due to the reduction in US catastrophe premium income, MAP reduced the cession to 20% for 2014 and to 10% for 2015. Syndicate 2791 has accepted the reinsurance to close of the 2007 to 2012 underwriting years of account of Syndicate 6103. When it was set up MAP expected that Syndicate 6103 would trade only for so long as suitable opportunities in the North American catastrophe sector existed and that it would have a finite life. Although still subject to annual review, MAP now considers Syndicate 6103 to be an intrinsic part of the MAP group.

166

Pembroke Managing Agency Limited www.pembrokeunderwriting.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

2014, 4000 £370,000,000 (+13.2%) 1.4% Bermudian Insurer

Directors

Allan Kaufman – Non-executive Chairman Lorraine Adlam - Non-executive Director Gillian Barnes – Claims Director Christopher Brown – Deputy Active Underwriter Ian Garven – Finance Director

Tim Glover – Active Underwriter Tim Seymour - Non-executive Director Justin Wash – Managing Director Mark Wheeler – Executive Director

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 170,229 182,658 245,049 314,036 312,532

Net Earned Premiums 115,090 135,329 166,228 208,971 228,402 Net Incurred Claims (84,674) (96,605) (85,722) (97,681) (139,066) Net Operating Expenses (48,030) (55,324) (74,453) (94,749) (93,255) Investment Return 992 3,108 2,716 1,749 4,316

Profit / Loss (16,622) (13,492) 8,769 18,289 397

Claims Ratio 74% 71% 52% 47% 61% Expense Ratio 42% 41% 45% 45% 41% Combined Ratio 115% 112% 96% 92% 102%

Pembroke Managing Agency Ltd (PMA) was established in 2007 to take over the management of the Syndicate 4000, which commenced trading during the final quarter of 2004, from Chaucer Syndicates Ltd and to enable the capital base to be diversified. During 2008, the agency group was acquired by Ironshore Inc. In the transaction Chaucer Holdings PLC elected to retain the management and capital provision for the 2008 and prior underwriting years of account. PMA manages only the 2009 and subsequent years of account. Capital is provided by Pembroke’s parent company, Ironshore.

For the 2012 and 2013 years of account Pembroke Syndicate 4000 also underwrote on behalf of a Special Purpose Syndicate 6110, backed by Members of Lloyd’s via Hampden Agencies Limited.

For the 2014 year of account, SPS 6110 became Acappella Syndicate 2014. Acappella is a joint venture between Pembroke and insurance broker Willis and it is anticipated that a separate Acappella managing agency will take over the management of the syndicate during 2016, subject to obtaining the necessary regulatory approvals.

Ironshore is a Bermudian based insurer with nearly $2bn of capital, it provides broker-sourced specialty commercial property and casualty coverage’s for varying risks on a global basis through its platforms in Bermuda, Canada, Ireland, Singapore, Australia, the U.S, and Syndicates 4000 & 6110. The Ironshore group of companies is rated A (Excellent) Positive Outlook by A.M. Best with a Financial Size Category of Class XIV.

In May 2015 it was announced that Ironshore and Fosun International Limited had entered into an agreement for Fosun to acquire the remaining interest in Ironshore that it did not already own. Fosun had acquired 20% of Ironshore in February 2015. Fosun was founded in 1992 in Shanghai and was listed on the Hong Kong Stock Exchange in 2007. It maintains a strong base in China, but sees global insurance investment as a key element of its strategy.

167

QBE Underwriting Limited www.qbeeurope.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

386, 2999 £1,302,529,000 (-11.6%) 5.0% Australian Insurer

Directors

Tim Ingram – Non-executive Chairman Wai Au – Non-executive Director Phillip Dodridge – Chief Risk Officer Colin O’Farrell – Chief Underwriting Officer

Richard Pryce – Chief Executive Officer Stuart Sinclair - Non-executive Director David Winkett – Chief Finance Officer

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 1,470,913 1,559,844 1,598,682 1,567,388 1,220,177

Net Earned Premiums 1,041,077 1,140,196 1,187,193 1,181,097 1,083,956 Net Incurred Claims (472,842) (657,251) (602,525) (543,853) (495,691) Net Operating Expenses (312,477) (394,776) (432,949) (461,291) (356,996) Investment Return 48,158 47,330 67,865 31,757 39,088

Profit / Loss 303,917 135,500 219,584 207,710 270,356

Claims Ratio 45% 58% 51% 46% 46% Expense Ratio 30% 35% 36% 39% 33% Combined Ratio 75% 92% 87% 85% 79%

QBE Insurance Group is an international insurer and reinsurer headquartered in Sydney, Australia, operating in 38 countries with annual gross premiums of £11.4 billion in 2014. 29% of this premium volume emanates from the European office headquartered in London.

QBE European Operations underwent a restructuring in autumn 2013 and now comprises three divisions: QBE Insurance (Europe) Ltd (‘QIEL’), an insurance company split between retail and international markets; a reinsurance company, QBE Re.; and the Lloyd’s managing agent, QBE Underwriting Limited. At Lloyd’s, QBE underwrites through the wholly aligned Syndicate 2999 (with three separate sub-syndicates in different market sectors) and the spread capital Syndicate 386. In all cases, underwriters operate on a dual pen basis, able to commit capacity for the insurance company and the syndicates.

Business is allocated according to a set of protocols, designed to protect the interests of Syndicate 386 members, whilst ensuring a fair allocation of new business between the various entities.

Reinsurance protection is purchased on a product line basis within the insurance division, with the cost and associated recoveries allocated between QIEL and the syndicates. A large part of this is placed with Equator Re, a subsidiary of QBE.

168

R&Q Managing Agency Limited www.rqih.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

1991 £146,200,000 (-37.8%) 0.6% UK AIM Listed

Directors

John Tilling - Chairman Robin McCoy – Chief Executive Officer Philippe Sloan – Director of Underwriting Michael Bell – Finance Director Arthur Chopourian – Operations Director Josephine Fox - Non-executive Director

Michael Gardiner - Non-executive Director Peter Green - Non-executive Director Carrie Hewitt – Group Actuary Heather McKinlay Verzin - Group Non-executive Director Kenneth Randall – Group Non-executive Director

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) - 21,704 52,432 80,660 125,946

Net Earned Premiums - 7,558 27,034 55,178 81,223 Net Incurred Claims - 5,731 (3,684) (40,583) (58,154) Net Operating Expenses - (9,963) (15,998) (28,471) (46,557) Investment Return - 337 1,202 978 960

Profit / Loss - 3,662 8,554 (12,897) (22,528)

Claims Ratio - -76% 14% 74% 72% Expense Ratio - 132% 59% 52% 57% Combined Ratio - 56% 73% 125% 129%

The Randall & Quilter Group (‘R&Q’) is an AIM listed company, domiciled in Bermuda, specialising in a wide variety of insurance products and services. The Group was founded by Ken Randall, Executive Chairman and Chief Executive, and Alan Quilter, Chief Operating Officer, in 1991.

Its activities cover four core areas: insurance acquisitions, insurance services, underwriting management and insurance management.

R&Q employs around 400 insurance professionals based in the UK, US, Bermuda and Continental Europe. It owns and manages a portfolio of insurance companies, both active and in run-off, with net assets of c.£116m as at 31 December 2013.

Syndicate 1991 commenced underwriting from 1 January 2013 and has capacity of £150m for 2015, of which 20% is provided by R&Q.

R&Q also manages RITC (‘run-off’) Syndicate 3330 and owns and operates two Managing General Agent (‘MGA’) business units. It owns a Bermuda Class 3A insurance company which currently supports the Group’s syndicate participations.

169

S A Meacock and Company Limited

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

727 £80,796,753 (0.0%) 0.3% UK Unlisted

Directors

Sir David Thomson Bt – Non-executive Chairman Matthew Bartlett – Underwriter Nicholas Ford – Finance Director Karl Jarvis – Managing Director David Jones – Compliance Director

James Meacock – Non-executive Director Michael Meacock – Active Underwriter Alec Taylor – Deputy Underwriter David Thorp – Non-executive Director David White – Non-executive Director

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 71,858 82,993 92,694 69,583 68,430

Net Earned Premiums 71,968 79,155 87,873 71,166 68,905 Net Incurred Claims (51,172) (69,631) (49,975) (40,199) (29,139) Net Operating Expenses (24,289) (26,309) (29,540) (21,748) (25,685) Investment Return 5,246 1,788 6,792 2,679 2,179

Profit / Loss 1,753 (14,997) 15,150 11,898 16,260

Claims Ratio 71% 88% 57% 56% 42% Expense Ratio 34% 33% 34% 31% 37% Combined Ratio 105% 121% 90% 87% 80%

S.A. Meacock & Company Limited is a small, single syndicate managing agency, reliant on third party capital for much of its capital support. There is a very strong community of interest with traditional members. All executive directors, plus three other staff, are partners in Meacock LLP, which has a capacity of £2.2m allocated to Syndicate 727 for the 2015 year of account. Meacock Capital, which includes directors and Meacock family members has a share of £13.1m. Michael Meacock’s personal share of the syndicate (via all interests including Meacock Capital, Meacock LLP and his unlimited underwriting) exceeds £6.9m. He owns 67.2% of the managing agency business.

Investments are managed in house rather than being outsourced to a fund manager. Syndicate 727 accepted the Reinsurance to Close of Syndicate 138’s 2002 and prior years of account as at 31 December 2008.

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Tokio Marine Kiln Syndicates Limited www.tokiomarinekiln.com

Managed syndicates: Managed capacity: (change): Share of Lloyd’s: Owner type:

308, 510, 557, 1880 £1,490,956,442 (-0.3%) 5.7% Japanese Insurer

Directors

Paul Hewitt – Chairman Richard Bennison - Non-executive Director David Constable - Non-executive Director James Dover – Finance Director Charles Franks – Chief Executive Officer

Denise Garland – Chief Operating Officer Rosie Harris - Non-executive Director Andrew Hitchcox – Chief Risk Officer Richard Lewis – Director of Underwriting

Financial Data

2010 2011 2012 2013 2014

Gross Written Premiums (£000) 1,270,089 1,374,701 1,478,011 1,466,761 1,290,897

Net Earned Premiums 999,015 1,087,556 1,091,569 1,121,122 1,039,197 Net Incurred Claims (544,716) (1,347,563) (597,206) (469,384) (504,987) Net Operating Expenses (338,147) (371,497) (372,668) (424,268) (378,531) Investment Return 29,314 16,859 19,460 10,251 10,522

Profit / Loss 145,467 (614,645) 141,155 237,721 166,201

Claims Ratio 55% 124% 55% 42% 49% Expense Ratio 34% 34% 34% 38% 36% Combined Ratio 88% 158% 89% 80% 85%

Tokio Marine Kiln (‘TMK’) was formed in 2014 through the integration of Kiln, one of the largest managing agents at Lloyd’s, and Tokio Marine Europe. It is part of the Tokio Marine Group, one of the largest insurance groups in the world. Kiln was originally acquired by Tokio Marine in 2008.

Tokio Marine Kiln provides specialist and corporate insurance products and services to the Lloyd’s and Company markets, with separately managed underwriting platforms. Integration into one company coincided with a move to prestigious offices at 20 Fenchurch Street, the ‘Walkie-Talkie’ building. .

TMK has offices in Germany, Belgium, France, Spain, Italy and the Netherlands, as well as Hong Kong, Singapore, China and Brazil, and regional UK offices in Ipswich, Manchester and Leeds. TMK is the largest managing agency by capacity at Lloyd’s, and also enjoys the largest share of third party capital, placed via Members’ Agents.

Syndicate 1880 was launched for the 2009 account, with 100% of capacity provided by Tokio Marine. It provides an intra-group Lloyd's platform for TMK and other Tokio Marine companies. Until the 2014 year of account the syndicate’s main purpose was reinsuring risks from TMK syndicates and other Tokio Marine companies. However, that element reduced to 25% of the total for 2014 and the emphasis has now shifted to specialist third-party business and any business surplus to the requirements of Syndicate 510.

A staff underwriting LLP was set up for the 2010 year of account. For 2015, 18 staff members participate with a total limit of £3.45m allocated to Syndicate 510.

171

Appendices

172

Appendix A – Forecast Results

Managing agents are required to make forecasts for open years after 15 months of the start of the year. These are updated after 18, 21, 24, 27, 30 and 33 months and, subject to the managing agent being able to establish an equitable reinsurance to close, a final result is declared at three years. To enable you to better understand the expected performance of each of the syndicates within your underwriting portfolio, we are providing you with our best estimate of expected syndicate result both before the underwriting year commences and also as it progresses in the months before the first estimates are released by the managing agent at quarter 1 of the second year of the account.

This is necessarily a process that is prone to a great many variables. We are considering business that the syndicate in question has yet to write at terms that will be dictated by market conditions prevailing in up to eighteen months’ time and will be dependent on loss activity in that intervening period. Many managing agents have well deserved reputations for being responsive to opportunities, entering classes when terms and conditions are in their favour and reducing their exposures as competition returns and rates soften. The forecasts therefore represent a steady-state, where no major market dislocations are envisaged and the syndicate continues to follow its more recent strategies.

Our forecast results are based upon calculating realistic assessments of our expectations of the following components:

Net Premium Income – Anticipated Claims + contribution from old years - administrative expenses + investment income

Premium Income

Syndicates provide us with forecast levels of premium income by risk code and the managing agent’s internal categories of business via the business plan. A number of syndicates tend to include elements in their premium budgets for opportunistic underwriting and future growth that may not materialise. Our forecast for the syndicate’s income may therefore be lower than the estimate contained within the business forecast, where we consider that the agent’s forecast is either optimistic, or is set more as a target than a realistic aspiration.

Anticipated Claims

We separate anticipated claims activity into attritional claims and catastrophe claims and calculate both as a proportion of premium. The attritional loss ratio will be relatively stable from year to year, varying according to the level of original premiums, changes in legislation and propensities to make claims, the breadth of the insurance policy language and an element of randomness. As well as syndicate specific data, we have access to a wide range of insurance and reinsurance data, including but not limited to premium and claims data from the Lloyd’s Market Association, Lloyd’s own publication, Statistics Relating to Lloyd’s, and industry surveys from trade associations and rating agents. We can moderate these with the rating movements reported by insurers and brokers, discussions at meetings with syndicate managers and underwriters, and views that we may have on changes in policy wordings and social moves.

The catastrophe budget is set by considering the syndicate’s actual experience in the many recent catastrophe events (such as Hurricanes Katrina, Rita, Wilma, Ike and Gustav, earthquakes in New Zealand, Chile and Japan and man-made events such as the loss of Deepwater Horizon, the Maersk Gryphon FPSO or the Costa Concordia cruise ship) as well as the potential impact as measured by the prescribed Realistic Disaster

173

Scenarios. This will vary more from year to year, especially for shorter tail syndicates and this variability plays a large part in explaining the difference between expected and actual performance.

The expected pure year profit is simply the difference between forecast premium income and expected claims.

Old Years

The forecast result does not include an estimate of any release from reserves held for closed years of account (or any projected shortfall on these reserves) until such time as the immediate predecessor year has closed. This follows from the requirement that the RITC transaction should be made on the basis of equity between the reinsured and the reinsuring members of the syndicate. However, it is apparent that there is a large element of caution built into the reserving practices of a number of syndicates, with reserves within the RITC set at a margin above actuarial best estimates. We consider the overall level of reserves, the proportion of IBNR to outstanding claims by original year of account and historical reserving patterns to establish our view of the likely levels of releases (or of shortfalls).

Administrative Expenses

Syndicates are only required to disclose the aggregate administrative expenses in their quarterly submissions to capital providers. Administrative expenses comprise syndicate expenses, managing agents’ fees and profit commissions, Lloyd’s subscriptions and central fund contributions. They can be offset by foreign exchange gains, as well as profit commissions and overriders on outward reinsurance contracts. We routinely ask for additional information from managing agents to establish the composition of the expenses which can be subject to considerable variability. Where syndicates have inward profit commissions based on the experience of reinsurance programmes, a poor year can sometimes mean an increase in expenses.

Investment Income

Although an underwriting account starts to accrue investment earnings from the time that it starts to receive premiums, the largest part of the investment income is normally earned during the third year of the account, following receipt of the predecessor years’ RITC premium. While we can reach a reasonable estimate of the quantum of fund likely to be available for investment, this depends on the levels of reserving at up to three future closures. The actual return on the funds then depends on investment returns prevailing in three years’ time (i.e. in 2018 in respect of the 2016 underwriting year).

Expected Long Term Average Return

In addition to an expectation for the outcomes of the 2015 and 2016 underwriting years, we have also calculated an expected long term average result. This is our expectation of the long term average profit that the syndicate, as currently constituted, is likely to be able to achieve. Whereas the 2015 and 2016 forecasts have been based on current and projected trading conditions in those markets where the syndicates operate, the LTA is based on the likely result given longer term average loss ratios and expense base. As we believe it will be a number of years before there is a meaningful uplift in yields in US and UK investment markets, the expected investment returns in the model are still low. Where syndicates have a consistent track record of reserve releases, these are included in the model. While we will revise our LTAs periodically this will largely be in consequence of a change in our view of a syndicate’s risk and return characteristics rather in consequence of rating movements or incidence of catastrophic losses, both of which may cause us to change our projections for the currently open and the immediately succeeding year.

174

2013 Account Forecast Results Managing Agent Estimate APCL Estimate

Syndicate Mid-point % Worst / Best % Point % Worst / Best %

33 10.0 5.0 / 15.0 12.9 7.9 / 17.9

218 0.5 -4.5 / 5.5 0.5 -4.5 / 5.5

260 -6.4 -8.9 / -3.9 -5.7 -8.2 / -3.2

308 -1.2 -3.7 / 1.4 -1.2 -3.7 / 1.4

318 12.0 9.5 / 14.5 12.0 9.5 / 14.5

386 6.9 4.4 / 9.4 6.9 4.4 / 9.4

510 9.4 6.9 / 11.9 9.6 7.1 / 12.1

557 13.6 11.1 / 16.1 14.8 12.3 / 17.3

609 11.5 9.0 / 14.0 13.1 10.6 / 15.6

623 7.0 4.5 / 9.5 8.7 6.2 / 11.2

727 8.0 3.0 / 13.0 10.0 5.0 / 15.0

779 1.5 -1.0 / 4.0 1.5 -1.0 / 4.0

958 5.0 2.5 / 7.5 5.0 2.5 / 7.5

1176 42.5 35.0 / 50.0 42.5 35.0 / 50.0

1200 5.2 0.2 / 10.2 5.2 0.2 / 10.2

1969 0.5 -2.0 / 3.0 0.5 -2.0 / 3.0

1991 -7.2 -12.2 / -2.2 -6.9 -11.9 / -1.9

2010 12.5 10.0 / 15.0 14.6 12.1 / 17.1

2121 10.0 7.5 / 12.5 10.0 7.5 / 12.5

2525 12.0 7.0 / 17.0 12.0 7.0 / 17.0

2526 -8.9 -11.4 / -6.4 -8.9 -11.4 / -6.4

2791 10.5 8.0 / 13.0 12.4 9.9 / 14.9

5820 -1.5 -4.0 / 1.0 -1.5 -4.0 / 1.0

6103 34.0 29.0 / 39.0 34.0 29.0 / 39.0

6104 40.0 35.0 / 45.0 41.9 36.9 / 46.9

6105 9.8 7.3 / 12.3 9.7 7.2 / 12.2

6107 15.0 10.0 / 20.0 15.0 10.0 / 20.0

6110 1.4 -1.1 / 3.9 3.4 0.9 / 5.9

6111 13.1 10.7 / 15.7 12.8 10.4 / 15.4

175

2014 Account Forecast Results Managing Agent Estimate APCL Estimate

Syndicate Mid-point % Worst / Best % Point % Worst / Best %

33 5.0 0.0 / 10.0 9.8 4.8 / 14.8

218 -2.8 -7.8 / 2.2 0.1 -4.9 / 5.1

260 -18.0 -20.5 / -15.5 -13.4 -15.9 / -10.9

308 2.9 0.4 / 5.4 2.9 0.4 / 5.4

318 2.1 -0.4 / 4.6 3.4 0.9 / 5.9

386 7.8 5.3 / 10.3 7.8 5.3 / 10.3

510 6.3 3.8 / 8.8 7.7 5.2 / 10.2

557 19.3 16.8 / 21.8 21.8 19.3 / 24.3

609 7.5 2.5 / 12.6 10.0 5.0 / 15.1

623 5.0 0.0 / 10.0 8.3 3.3 / 13.3

727 5.0 -4.0 / 14.0 7.6 -1.4 / 16.6

779 -6.5 -9.0 / -4.0 -6.5 -9.0 / -4.0

958 4.1 1.6 / 6.6 4.1 1.6 / 6.6

1176 30.0 20.0 / 40.0 34.7 24.7 / 44.7

1200 5.5 0.5 / 10.5 5.5 0.5 / 10.5

1729 -3.2 -8.2 / 1.8 -3.2 -8.2 / 1.8

1969 5.0 0.0 / 10.0 5.0 0.0 / 10.0

1991 -3.6 -8.6 / 1.4 -3.6 -8.6 / 1.4

2010 6.3 2.5 / 10.0 7.7 3.9 / 11.4

2014 1.6 -3.5 / 6.6 1.6 -3.5 / 6.6

2121 8.3 4.5 / 12.0 9.1 5.3 / 12.8

2525 2.5 -5.0 / 10.0 9.4 1.9 / 16.9

2526 -7.8 -10.3 / -5.3 -7.8 -10.3 / -5.3

2791 5.5 3.0 / 8.0 10.8 8.3 / 13.3

5820 0.0 -5.0 / 5.0 0.0 -5.0 / 5.0

6103 18.0 13.0 / 23.0 18.0 13.0 / 23.0

6104 25.0 20.0 / 30.0 28.9 23.9 / 33.9

6105 5.5 3.0 / 8.0 5.5 3.0 / 8.0

6107 15.0 5.0 / 25.0 21.0 11.0 / 31.0

6111 9.0 6.3 / 11.7 9.0 6.3 / 11.7

176

APCL 2015 / 2016 Accounts and LTA Forecast Results Syndicate 2015 Estimate % 2016 Estimate % Long Term Average %

33 5.0 5.0 8.0

218 1.0 4.0 4.0

308 2.0 4.0 6.0

318 4.0 4.0 5.0

386 6.0 6.0 10.0

510 6.0 6.0 7.0

557 10.0 8.0 10.0

609 6.0 7.0 9.0

623 6.0 6.0 8.0

727 7.0 7.0 9.0

779 0.0 2.0 1.0

1176 39.0 37.0 35.0

1200 4.0 4.0 4.0

1729 1.0 3.0 4.0

1884 -9.0 -1.0 4.0

1969 4.0 5.0 5.0

1991 0.0 3.0 5.0

2010 6.0 5.0 7.0

2014 1.0 2.0 4.0

2121 5.0 5.0 5.0

2525 6.0 5.0 9.0

2526 -4.0 0.0 0.0

2791 6.0 6.0 10.0

4020 5.0 5.0 6.0

4444 5.0 5.0 5.0

5820 2.0 2.0 2.0

6103 10.0 9.0 15.0

6104 11.0 9.0 13.0

6105 5.0 n/a 6.0

6107 15.0 11.0 15.0

6111 5.0 4.0 6.0

177

Appendix B – Financial Ratios

Syndicate Fees and Profit Commission Terms

This table details the managing agent fee and profit commission and any particular terms which apply to Special Purpose Syndicates.

Average Funds as percentage of Capacity

This is the average fund that the syndicate has available during the calendar year expressed as a percentage of the following year’s capacity. It compares the ability of different syndicates to generate investment income. Note that the larger the fund, the larger the potential impact from the deterioration of prior years on future underwriting profitability. It is also important to consider that some syndicates’ funds are held largely in US Dollars where prevailing rates of interest may differ from those available to Sterling funds.

IBNR percentage of Net Outstanding Claims

This is the ratio of Claims Incurred but not Reported (IBNR) after deduction of anticipated reinsurance recoveries to Net Outstanding Claims. The level of IBNR established represents a measure of reserves that are necessary to run-off the account to extinction. While a high level of IBNR depresses current profitability, it provides a greater possibility of future releases from reserves. No figures are shown for Life Syndicates 308 and 779. This is because in setting the Reinsurance to Close, there is no IBNR. Instead, there is a figure for actuarial liabilities, calculated and signed off by an independent actuary.

RITC received as percentage of Capacity

This is the ratio of Reinsurance to Close (RITC) premium received to each year’s capacity. The ratio provides an indication of the liabilities assumed by the syndicate and gives a rough indication as to the level of investment income that could be generated.

Reinsurance Premium as percentage of Gross Premium

This ratio shows the amount of gross premium that the syndicate spends on reinsurance. It is, therefore, an indicator of the syndicate’s reliance on its reinsurance programme.

Underwriting Account Result as percentage of Capacity

The closed year results for 2006 to 2012 are after illustrative personal expenses but before members’ agent’s fees and profit commission.

Pure Year Underwriting Result as percentage of Capacity

This is the ratio of underwriting profits or losses derived from business written for the year of account expressed as a percentage of that year’s capacity, excluding the contribution (positive or negative) of business reinsured to close into each year. It does not include acquisition costs which can make a significant difference to the bottom line result. Therefore these figures will differ from the figures shown in the individual syndicate profiles.

178

Prior Year Underwriting Result as percentage of Capacity

This is the ratio of underwriting profits or losses derived from business reinsured to close into each year expressed as a percentage of that year’s capacity. A consistent history of releases may be indicative of a prudent reserving policy while the opposite may raise questions of the syndicate’s ability to assess adequately the profitability of the business it has written. Where the prior year did not close after the usual thirty-six months, there will be no prior year result and this is denoted “n/a”.

Operating Expenses as percentage of Capacity

This shows the syndicates expenses, excluding brokerage and commission but including exchange gains or losses, as a percentage of capacity. It is the cost of running the syndicate business.

Average Auction Prices (pence / £1 of Capacity)

This is the average weighted price achieved by each syndicate across the three main Lloyd’s Auctions in each of the last 5 years.

2014 Auction Prices and Volumes by Auction

This shows the individual auction prices and volumes traded across the three main auctions in 2014. Also shown is the prices adjusted for pre-emptions and de-emptions which give the effective average price of capacity purchased for 2015.

Gross Premium Utilisation

This is the ratio of gross premium income, net of acquisition costs, to syndicate capacity. This shows the amount of income written by syndicates relative to their capacity. For the 2013 to 2016 years of account these are our estimates of ultimate gross premiums.

LTA Return and Earnings Ratio

This table shows both the LTAs and Earning Ratios for the last three years. This year’s ratio is the adjusted (for pre-emptions and de-emptions) average 2014 auction price divided by APCL’s expected Long Term Average (LTA) Return (See Appendix A for details). The previous years’ ratios were those calculated in each of the previous two years. They are indicative of the period of time that it would take to earn back (based on the LTA return) the amount spent to purchase capacity. For example an earnings ratio of 2 means that it would take 2 years of LTA returns to pay back the purchase price. Syndicates that are not tradable at auction are shown as "n/a".

Capital Ratios

This table shows three different measures of the capital requirement for each syndicate. The figures represent the amount of capital required, expressed as a percentage of capacity, in each scenario:

1 Year: Assumes a member joins the syndicate for the first time for 2016.

3 Years: Assumes a member has a consistent line on the syndicate for 2014, 2015 and 2016.

Marginal: Assumes a member underwrites a £1,000,000 portfolio with the same allocation split as the Third Party market. It shows the impact to the portfolio of adding a further £25,000 line on a given syndicate.

179

Syndicate Fees and Profit Commission Terms

Syndicate Fee % PC % PC Terms Comment 33 0.60 15.0 15.0% with 7.5% rolling average profit

trigger. If not, PC 12.5%. Plus 5% PRR Deficit clause does not apply to PRR

218 1.00 20.0 Deficit clause 2 years

308 0.75 17.5 Deficit clause 2 years

318 0.65 20.0 Deficit clause 2 years

386 0.60 20.0 Deficit clause 2 years

510 0.75 12.5 Plus 5% PRR Deficit clause 2 years

557 0.75 17.5 Deficit clause 2 years

609 0.70 20.0 Deficit clause 2 years

623 0.60 17.5 Deficit clause 2 years

727 0.60 20.0 20% with a 10.0% 7 year rolling average profit trigger, if not a 17.5% with a 5.0% 7 year rolling average profit trigger. If not, PC is 15.0%

Deficit clause 2 years

779 0.575 19.3 19.3% with a 7.5% 7 year rolling average profit trigger. If not, PC is 17.5%. The calculation of the rolling average starts from 2011 and so will be based on under 7 years until 2017

Deficit clause 2 years

1176 Fixed 15.0 Fixed £ fee set at level of syndicate expenses Deficit clause 3 years

1200 0.60 15.0 15% of profits up to 15% of capacity, 20% on profits over 15%

Deficit clause 3 years

1729 1.25 17.5 Fee of 1.25% on first £75m of capacity, 1.0% on next £75m, 0.75% on the following £50m and 0.5% over £200m. Deficit clause 2 years

1884 1.25 17.5 Two year deficit clause on syndicate result. Capacity fee excluded from calculation.

Fee of 1.25% on first £75m of capacity, 1.0% on next £75m, 0.75% on the following £50m and 0.5% over £200m

1969 0.90 17.5 Deficit clause 2 years

1991 0.75 15.0 15% standard PC; plus PC rate of 2.5% where 7 year rolling average is not less than 10%. Bonus PC will not take effect until closure of the 2016 year of account.

Step up in annual fees for 2014 and 2015 years of account equivalent to 0.5% of 2013 stamp. Deficit clause 2 years

2010 0.65 20.0 20% with a 7.5% 7 year rolling average profit trigger. If not, PC is 17.5%

Deficit clause 2 years

2014 0.75 17.5 Fee will increase to 1% if syndicate is managed by another managing agency Deficit clause 2 years

2121 0.75 17.5 17.5% with a 7.5% 7 year rolling average profit trigger. If not, PC is 15.0%

Deficit clause 2 years

2525 1.00 17.5 17.5% with a 7.5% 7 year rolling average profit trigger. If not, PC is 15.0%

Deficit clause 2 years

2526 1.00 17.5 17.5% with a 7.5% 7 year rolling average profit trigger. If not, PC is 15.0%

Deficit clause 2 years

2791 0.55 20.0 20% with a 7.5% 7 year rolling average profit trigger. If not, PC is 17.5%

Deficit clause 2 years

4020 0.75 17.5 17.5% if the profits up to 10% of members syndicate PIL, 20% on profits over 10%

Deficit clause 2 years. Note that discussions on fee/PC are ongoing

180

Syndicate Fees and Profit Commission Terms

Syndicate Fee %

PC %

PC Terms Comment 4444 0.75 20.0 Deficit clause 2 years

5820 0.75 17.5 Entry fee of 1% of PIL payable for each of the first 5 years (2015 to 2017). Deficit clause 2 years

6103 - 15.0 Payable to managing agent SPS: Over-rider 5% of gross premiums plus 1% to cover Lloyd’s charges Deficit clause 2 years

6104 0.50 23.5 Only payable if combined ratio of 92% is achieved.

SPS: Over-rider 8% of gross premiums

6107 - 20.0 SPS: Over-rider 5% of gross premiums Deficit clause 2 years

6111 1.00 20.0 Payable to the managing agent SPS: Over-rider 10% of net premiums Deficit clause 2 years

181

Average Funds as a percentage of Capacity Syndicate 2010 / 2011 2011 / 2012 2012 / 2013 2013 / 2014 2014 / 2015

33 171.2 145.3 132.1 120.3 129.6

218 50.3 66.3 87.1 95.0 122.8

308 34.9 39.1 30.5 24.0 18.6

318 76.8 86.0 90.0 82.6 81.5

386 366.2 302.2 276.3 253.5 287.2

510 83.1 70.7 69.3 77.1 85.0

557 134.9 109.1 102.1 119.7 148.8

609 128.9 88.9 95.9 104.1 125.6

623 170.3 177.9 171.3 161.4 177.8

727 312.2 316.7 305.2 298.8 301.9

779 199.8 167.7 162.1 134.5 102.3

958 114.2 107.9 122.1 135.0 120.6

1176 118.3 111.0 120.9 141.3 162.7

1200 126.6 134.7 138.2 124.4 107.0

1729 - - - - -

1969 16.3 39.8 46.9 21.4 58.6

1991 - - - - -

2010 79.6 79.7 72.1 71.6 91.8

2014 - - - - -

2121 75.1 87.3 100.2 90.1 96.8

2525 306.7 282.8 263.2 237.4 216.3

2526 130.3 111.1 115.8 109.0 103.8

2791 138.4 133.3 125.3 121.8 124.0

5820 68.1 61.4 45.2 40.7 51.1

6103 - - - - -

6104 - - - - -

6105 - - - - -

6107 - - - - -

6111 - - - - -

182

IBNR percentage of Net Outstanding Claims Syndicate 2008 2009 2010 2011 2012

33 61.1 62.1 60.2 80.7 99.4

218 2.6 -7.6 -19.9 2.6 9.7

308 n/a n/a n/a n/a n/a

318 55.3 58.5 49.0 58.2 70.7

386 70.0 68.4 57.6 61.9 59.9

510 42.8 44.7 41.2 50.0 61.0

557 69.5 69.9 26.5 46.0 52.1

609 96.8 130.0 97.6 119.3 145.7

623 * 186.9 184.1 188.0 172.3

727 248.4 269.3 282.6 267.9 303.5

779 n/a n/a n/a n/a n/a

958 21.7 37.6 41.8 65.8 68.7

1176 239.9 683.5 156.7 177.7 227.7

1200 58.4 67.0 96.4 92.0 71.6

1729 - - - - -

1969 - - - 18.8 40.5

1991 - - - - -

2010 55.8 59.0 45.4 56.3 49.8

2014 - - - - -

2121 65.2 60.1 61.0 61.3 65.9

2525 33.8 38.8 33.3 33.7 18.6

2526 48.1 57.1 50.8 45.2 75.8

2791 112.4 124.3 117.3 132.0 136.9

5820 - - 148.4 120.1 599.1

6103 60.1 78.9 132.4 21.8 100.2

6104 12.4 1.3 - - -

6105 64.7 122.5 64.6 91.4 -

6107 - - 36.8 52.4 69.3

6111 - - - - -

* Information not provided by syndicate

183

RITC In as percentage of Capacity Syndicate 2008 2009 2010 2011 2012

33 104.1 97.2 66.2 70.3 60.7

218 17.1 - 51.4 49.7 54.3

308 25.5 21.3 12.6 5.3 2.8

318 39.0 44.2 39.1 34.0 27.8

386 219.1 212.8 185.9 173.4 149.0

510 50.2 50.5 36.0 37.0 35.3

557 7.5 8.6 8.9 45.3 33.3

609 68.4 79.3 53.0 59.2 69.5

623 117.1 142.3 97.7 98.9 103.7

727 175.7 237.2 226.3 218.8 219.9

779 127.6 111.4 119.0 - 71.5

958 53.9 55.6 61.1 76.6 83.7

1176 59.4 37.9 38.2 59.9 65.4

1200 59.6 80.5 86.5 28.5 37.0

1729 - - - - -

1969 - - - 16.4 16.6

1991 - - - - -

2010 23.5 28.0 27.0 27.3 27.1

2014 - - - - -

2121 44.0 42.3 39.3 41.8 41.4

2525 206.7 202.4 184.5 166.6 147.2

2526 84.1 101.8 127.8 79.1 81.3

2791 67.5 67.9 50.5 45.4 43.0

5820 - - 32.1 - -

6103 0.0 0.0 0.0 0.0 0.0

6104 0.0 30.5 18.0 53.6 45.1

6105 0.0 29.9 49.3 0.0 -

6107 - - 0.0 35.3 49.3

6111 - - - - -

184

Reinsurance Premium as percentage of Gross Premium Syndicate 2008 2009 2010 2011 2012

33 32.4 39.7 36.9 41.1 38.5

218 8.3 8.0 7.6 8.7 5.2

308 13.5 14.8 38.7 8.6 8.5

318 24.1 24.5 21.3 19.3 16.4

386 10.7 11.9 18.4 18.6 17.9

510 33.0 35.3 31.7 29.5 30.3

557 11.9 12.9 14.2 14.9 19.1

609 21.2 24.6 22.0 23.6 17.4

623 20.9 38.1 25.0 24.0 25.9

727 1.6 2.6 2.9 2.7 2.1

779 37.7 46.2 46.5 40.9 39.9

958 37.8 38.6 37.8 45.3 34.5

1176 15.3 16.2 20.2 13.8 0.0

1200 16.7 21.2 104.8 31.6 47.6

1969 - - - 23.2 16.5

1991 - - - - -

2010 31.4 32.7 35.8 31.1 31.0

2014 - - - - -

2121 24.7 20.2 24.0 22.9 26.0

2525 18.9 20.8 20.7 19.5 19.7

2526 19.7 21.8 20.8 25.9 31.1

2791 18.6 23.1 19.0 20.1 22.6

5820 - - 17.2 18.4 15.4

6103 0.0 0.0 0.0 0.0 7.6

6104 6.3 8.9 7.5 8.6 12.2

6105 0.0 0.0 0.0 0.0 0.0

6107 - - 0.0 0.0 22.1

6111 - - - - 25.9 Note: The figure for Syndicate 1200’s 2010 account includes the premium paid to reinsure out the 2009 and prior years of account.

185

Underwriting Account Result as percentage of Capacity Syndicate 2006 2007 2008 2009 2010 2011 2012

33 36.8 31.7 15.3 31.6 7.2 7.9 16.8

218 5.6 0.1 -59.2 -28.0 -20.8 -12.6 0.3

308 9.9 5.2 17.5 6.4 13.4 9.2 6.3

318 16.5 -2.8 -6.5 11.2 4.2 9.3 12.2

386 56.0 66.5 54.4 43.1 28.9 21.1 9.4

510 25.6 13.2 16.8 19.1 2.7 7.5 8.5

557 40.4 16.6 14.3 15.4 -25.4 10.2 5.8

609 25.0 6.5 20.7 28.9 16.7 14.6 17.7

623 18.6 14.6 13.5 21.0 6.1 10.3 13.6

727 16.6 17.1 15.0 15.6 11.5 10.5 11.6

779 10.4 11.4 18.6 7.8 -3.2 -2.5 -2.9

958 23.4 16.4 3.5 8.3 -15.1 -12.0 0.1

1176 73.3 54.4 72.6 52.5 32.3 17.1 62.4

1200 20.9 14.7 -4.1 3.3 0.8 2.1 7.1

1969 - - - - -15.1 -0.7 9.1

1991 - - - - - - -

2010 24.8 9.9 10.6 16.1 2.2 3.4 19.0

2014 - - - - - - -

2121 21.7 11.9 5.1 11.2 -4.4 4.4 13.5

2525 36.7 40.9 26.1 29.8 32.2 25.3 22.7

2526 29.8 24.2 14.5 -6.9 7.0 -9.9 -38.1

2791 44.9 27.8 15.6 32.1 17.7 13.4 11.7

5820 -17.6 -15.8 -3.6

6103 - 40.8 7.7 61.5 38.0 20.4 25.5

6104 - - 42.5 64.7 8.9 3.4 39.0

6105 - - 2.2 20.6 0.4 13.1 -

6107 - - - - -39.4 10.1 32.8

6111 - - - - - - 9.5

186

Pure Year Underwriting Result as percentage of Capacity Syndicate 2008 2009 2010 2011 2012

33 38.0 53.1 19.2 22.5 34.1

218 13.3 11.6 20.1 27.4 31.8

308 54.0 51.1 47.6 52.1 50.9

318 6.2 24.2 12.2 22.0 25.3

386 37.4 45.5 54.3 51.4 46.8

510 30.6 47.8 25.9 34.9 36.2

557 18.1 27.0 -17.8 13.9 8.9

609 30.4 53.5 30.3 28.6 43.2

623 43.3 50.8 28.3 32.3 41.3

727 22.0 33.2 16.3 18.6 27.2

779 39.7 15.0 42.1 52.5 -2.8

958 20.5 38.9 17.5 11.0 16.1

1176 60.2 59.4 33.3 12.4 68.1

1200 30.4 43.2 17.5 30.2 31.7

1969 - - - 40.4 45.3

1991 - - - - -

2010 22.5 33.5 13.4 17.8 33.8

2014 - - - - -

2121 29.3 53.7 26.8 33.8 53.9

2525 14.8 21.5 20.1 22.3 11.7

2526 39.9 27.8 35.1 21.1 19.3

2791 29.1 49.0 27.3 25.0 25.8

5820 - - 22.3 53.3 78.1

6103 9.80 72.1 47.5 28.1 33.2

6104 49.0 55.5 21.1 24.9 59.4

6105 11.9 33.0 0.0 35.6 25.8

6107 - - -27.4 20.6 44.1

6111 - - - - 48.2

187

Prior Year Underwriting Result as percentage of Capacity Syndicate 2008 2009 2010 2011 2012

33 0.3 11.2 7.6 5.6 5.9

218 -33.1 - - -4.8 2.8

308 4.7 2.3 5.4 2.8 1.3

318 4.0 7.0 7.3 4.0 5.5

386 27.6 24.3 2.7 5.7 -3.9

510 5.7 4.0 3.4 2.6 2.9

557 1.0 0.9 0.3 1.6 1.3

609 4.9 9.0 7.5 9.1 9.3

623 7.9 6.9 4.7 7.8 6.2

727 9.8 12.7 23.4 22.2 14.8

779 33.1 26.7 -1.4 - 55.9

958 3.2 1.3 -0.7 -0.3 8.6

1176 26.1 8.4 9.2 12.9 12.6

1200 -0.3 -1.4 13.3 3.3 3.2

1969 - - - -2.6 0.0

1991 - - - - -

2010 1.6 3.3 5.4 4.0 3.3

2014 - - - - -

2121 4.9 0.9 4.2 5.3 0.9

2525 31.6 36.8 42.8 35.4 43.7

2526 0.2 -7.8 1.1 -4.7 -32.4

2791 2.5 5.1 4.8 3.5 2.0

5820 - - 8.7 - -

6103 - - - - -

6104 - 3.2 -0.7 -7.0 5.0

6105 - 0.6 0.0 0.0 0.0

6107 - - - 4.0 6.7

6111 - - - - -

188

Operating Expenses as percentage of Capacity Syndicate 2008 2009 2010 2011 2012

33 6.9 10.6 5.6 4.6 6.9

218 2.3 3.4 2.4 4.0 4.0

308 6.9 11.7 8.3 12.7 13.4

318 1.9 3.6 2.9 4.4 4.9

386 -0.6 12.3 15.3 19.6 14.1

510 -10.7 -2.1 2.5 3.9 2.9

557 1.6 5.9 3.0 4.5 3.6

609 -1.3 9.9 5.1 4.9 10.0

623 9.2 8.9 6.7 9.2 12.5

727 1.2 6.8 8.6 6.9 8.7

779 13.4 5.1 8.1 7.2 13.4

958 -2.0 6.1 9.8 5.1 7.6

1176 16.9 15.1 11.9 7.8 20.9

1200 -3.5 3.5 7.2 9.7 5.2

1969 - - 3.4 5.8 31.5

1991 - - - - -

2010 4.0 5.4 5.1 4.8 5.8

2014 - - - - -

2121 -2.8 7.1 5.5 4.6 8.4

2525 5.7 10.6 12.6 17.4 16.2

2526 5.7 4.6 6.3 9.2 9.7

2791 5.1 9.2 7.2 5.9 4.9

5820 - - 9.4 10.6 12.1

6103 -1.4 14.8 12.0 8.6 8.9

6104 -6.8 3.8 2.4 0.5 1.0

6105 1.9 12.3 1.2 9.5 -

6107 - - 2.7 5.9 5.6

6111 - - - - 1.6

189

Average Auction Prices (pence / £1 of Capacity) Syndicate 2010 2011 2012 2013 2014

33 40.6 42.9 47.2 62.2 58.8

218 7.5 0.8 0.6 0.8 4.0

308 15.0 17.6 18.0 20.8 22.1

318 3.3 10.0 10.0 10.9 12.9

386 104.0 89.8 92.1 104.2 70.8

510 14.8 13.5 16.2 28.3 22.4

557 10.0 1.4 0.4 0.3 0.1

609 35.8 38.1 41.4 57.2 47.1

623 33.0 28.7 35.9 55.5 61.0

727 47.3 41.0 42.3 56.6 57.3

779 4.6 1.7 6.5 0.1 8.7

958 27.5 1.0 2.7 7.4 15.4

1176 228.2 160.2 161.2 173.1 186.3

1200 5.9 7.4 0.1 10.8 15.8

1969 0.9 0.2 1.6 14.9 21.7

1991 - - - 0.7 0.1

2010 38.8 41.1 37.7 48.1 48.7

2014 - - - - -

2121 1.1 0.2 0.7 2.5 6.6

2525 33.8 9.6 16.3 37.7 70.3

2526 30.1 4.3 1.0 2.7 3.0

2791 26.5 27.5 36.9 56.5 51.1

5820 - - - 0.1 0.1

6103 - - - - -

6104 - - - - -

6105 - - - - -

6107 - - - - -

6111 - - - - -

190

2014 Auction Prices and Volumes Auction 1 Auction 2 Auction 3 Totals

Synd Price (p)

Volume (£m)

Price (p)

Volume (£m)

Price (p)

Volume (£m)

Price (p)

Volume (£m)

Pre/(De)- Emption

(%)

Effective Price (p)

33 62.0 4.48 55.9 2.89 51.1 0.82 58.8 8.19 - 58.8

218 2.9 4.79 4.0 1.59 6.1 2.46 4.0 8.83 -20.0 5.0

308 22.3 0.47 22.0 0.24 21.4 0.06 22.1 0.77 - 22.1

318 11.5 0.33 13.6 0.13 15.9 0.12 12.9 0.58 - 12.9

386 78.0 1.30 69.0 1.47 64.1 1.01 70.8 3.78 -14.6 82.9

510 24.1 7.60 19.9 4.18 21.6 3.87 22.4 15.65 - 22.4

557 0.2 0.44 0.0 0.20 0.1 0.53 0.1 1.17 - 0.1

609 51.1 4.66 44.7 3.65 41.1 1.66 47.1 9.97 - 47.1

623 61.4 2.40 62.0 1.75 58.0 0.87 61.0 5.03 -6.8 65.5

727 56.2 0.83 60.0 0.57 55.9 0.47 57.3 1.87 - 57.3

779 5.2 0.06 9.3 0.20 9.1 0.21 8.7 0.48 - 8.7

958 10.8 1.97 18.0 1.04 20.2 1.32 15.4 4.33 5.7 14.6

1176 184.3 0.18 197.7 0.02 190.2 0.03 186.3 0.24 - 186.3

1200 15.1 0.30 17.1 0.08 17.1 0.09 15.8 0.46 - 15.8

1729 - - - - - - - - - -

1884 - - - - - - - - - -

1969 20.9 0.84 23.6 0.56 20.8 0.36 21.7 1.76 14.3 19.0

1991 0.3 1.38 0.1 2.14 0.0 0.37 0.1 3.89 - 0.1

2010 48.9 1.21 48.8 0.84 48.2 0.68 48.7 2.73 -12.5 55.7

2014 - - - - - - - - - -

2121 5.0 1.32 6.6 0.94 9.8 0.66 6.6 2.92 - 6.6

2525 60.6 0.26 76.8 0.19 80.5 0.13 70.3 0.57 - 70.3

2526 3.0 15.05 3.0 0.20 3.0 0.01 3.0 15.26 - 3.0

2791 55.3 4.72 46.3 2.90 44.9 0.89 51.1 8.51 -11.7 57.9

5820 0.1 0.34 0.0 0.08 0.1 2.71 0.1 3.12 - 0.1

6103 - - - - - - - - -

6104 - - - - - - - - -

6105 - - - - - - - - -

6107 - - - - - - - - -

6111 - - - - - - - - -

191

Gross Premium Utilisation as percentage of Capacity Syndicate 2012 2013 2014 2015 2016

33 71.5 69.2 68.4 62.7 69.2

218 68.3 65.6 62.8 73.5 97.3

308 92.5 80.0 72.2 81.3 85.3

318 53.6 48.8 46.8 47.9 53.1

386 95.9 83.5 77.6 85.1 87.0

510 78.0 75.7 78.9 79.9 91.0

557 56.1 61.1 52.9 49.7 46.3

609 70.8 71.8 63.8 59.5 72.4

623 77.9 78.0 75.6 82.6 80.7

727 74.6 66.7 58.3 54.6 59.6

779 68.3 64.3 61.9 76.0 88.6

958 62.8 56.5 80.7 97.8 -

1176 79.4 78.6 73.3 80.3 80.2

1200 92.6 87.4 91.7 92.3 92.5

1729 - - 48.2 88.9 81.4

1884 - - - - 95.7

1969 86.6 81.9 86.5 95.2 91.0

1991 - 60.6 67.3 95.1 81.5

2010 68.4 66.0 54.8 60.0 58.6

2014 66.8 68.2 68.1 93.5 93.3

2121 95.3 87.9 70.3 77.6 83.6

2525 69.4 76.2 77.6 86.9 80.0

2526 61.6 63.7 65.7 63.9 82.1

2791 46.5 36.3 32.1 33.3 33.9

4020 - - - - 63.2

4444 - - - - 98.7

5820 66.6 66.2 79.8 76.2 82.5

6103 79.2 44.9 29.3 32.0 29.3

6104 68.5 51.4 52.4 36.0 42.4

6105 46.0 36.9 35.2 50.7 -

6107 81.3 78.3 75.8 81.3 82.2

6111 92.6 89.7 83.3 83.3 83.3

192

Long Term Average Returns and Earnings Ratios 2013 2014 2015

Syndicate LTA Earnings Ratio LTA Earnings Ratio LTA Earnings Ratio

33 7.0 6.7 8.0 7.4 8.0 7.3

218 2.0 0.3 4.0 0.2 4.0 1.3

308 8.0 1.9 6.0 2.9 6.0 3.7

318 4.0 2.5 5.0 2.2 5.0 2.6

386 10.0 9.2 10.0 10.4 10.0 8.3

510 8.0 2.0 7.0 4.0 7.0 3.2

557 8.0 0.1 10.0 0.1 10.0 0.0

609 8.0 5.2 9.0 6.4 9.0 5.2

623 8.0 4.3 8.0 6.4 8.0 8.2

727 9.0 4.7 9.0 6.3 9.0 6.4

779 -3.0 n/a 1.0 0.1 1.0 8.7

958 5.0 0.7 5.0 1.9 n/a n/a

1176 32.0 5.0 35.0 4.9 35.0 5.3

1200 5.0 0.1 4.0 2.7 4.0 4.0

1729 - - 4.0 n/a 4.0 n/a

1884 n/a n/a n/a n/a 4.0 n/a

1969 4.0 0.3 5.0 2.3 5.0 3.8

1991 7.0 n/a 5.0 0.1 5.0 0.0

2010 8.0 4.7 7.0 6.9 7.0 8.0

2014 4.0 n/a 4.0 n/a 4.0 n/a

2121 4.0 0.2 5.0 0.4 5.0 1.3

2525 8.0 2.0 9.0 4.2 9.0 7.8

2526 -1.0 n/a 0.0 n/a 0.0 n/a

2791 7.0 5.3 10.0 6.4 10.0 5.8

4020 n/a n/a n/a n/a 6.0 0.0

4444 n/a n/a n/a n/a 5.0 2.9

5820 0.0 n/a 2.0 0.1 2.0 0.0

6103 15.0 n/a 15.0 n/a 15.0 n/a

6104 14.0 n/a 13.0 n/a 13.0 n/a

6105 6.0 n/a 6.0 n/a 6.0 n/a

6107 18.0 n/a 15.0 n/a 15.0 n/a

6111 5.0 n/a 6.0 n/a 6.0 n/a

193

Capital Ratios Syndicate 1 Year Capital 3 Year Capital Marginal Capital

33 35.0 46.8 28.6

218 51.1 63.5 20.4

308 51.3 51.3 n/a

318 53.6 68.6 40.9

386 137.9 143.3 49.1

510 47.8 57.9 32.7

557 172.4 196.5 106.5

609 48.8 60.1 32.7

623 57.7 68.3 32.7

727 70.2 89.4 49.1

779 49.8 49.8 n/a

1176 273.7 347.4 65.5

1200 55.8 67.2 45.0

1729 86.2 125.1 36.8

1884 101.1 n/a 36.8

1969 45.5 65.1 32.7

1991 69.8 81.4 40.9

2010 57.3 69.2 45.0

2014 62.6 86.2 36.8

2121 44.0 58.9 28.6

2525 126.8 144.0 45.0

2526 138.6 156.3 45.0

2791 54.6 65.5 40.9

4020 34.1 46.3 24.5

4444 43.0 51.1 32.7

5820 63.5 70.6 20.4

6103 217.8 257.8 131.1

6104 149.0 171.4 86.0

6107 177.1 220.8 114.7

6111 53.3 71.0 32.7 * Lloyd’s does not provide a 1 year capital number for life syndicates

194

Appendix C – Business Forecast Ratios

Split of Account by Category of Business

We have tabulated the percentage split of business for each syndicate in order that a ready comparison between syndicates can be made. The percentages shown represent the business that each syndicate anticipates writing for the 2016 year of account as provided in their latest 2016 business forecasts. A “0” indicates that the amount of business written in that class is less than 0.5% of the total for that syndicate.

Source of Business as percentage of Gross Income

This provides the estimated breakdown of the source of business for each syndicate by method of acceptance as supplied by syndicates in their 2016 business forecasts. Of particular interest is the percentage of business written by way of Binders and Lineslips. These are where a syndicate delegates underwriting authority to a third party, sometimes known as “giving the pen away”.

Geographic Split as percentage of Gross Income

This gives a breakdown of each syndicate’s premium income by geographic location and provides a useful insight as to where in the world the syndicate’s exposures lie. In addition, it also provides an indication of a syndicate’s possible exposure to US situs funding issues in the event of US losses.

Gross Realistic Disaster Scenarios

We have tabulated the gross RDS percentages for each syndicate in order that a ready comparison between syndicates can be made. The percentages shown represent each syndicate’s anticipated exposures for the 2016 year of account as provided in their latest 2016 business forecasts. A “0” indicates that the RDS is less than 0.5% for that syndicate.

For the purposes of this table we have standardised the RDS. Where a prescribed scenario has more than one sub-set (e.g. two Florida Windstorm scenarios; three Political Risks scenarios; seven liability scenarios) we have taken the largest within each, thereby giving a worst case position.

Net Realistic Disaster Scenarios

We have tabulated the net RDS percentages for each syndicate in order that a ready comparison between syndicates can be made. The percentages shown represent each syndicate’s anticipated exposures for the 2016 year of account as provided in their latest 2016 business forecasts. A “0” indicates that the RDS is less than 0.5% for that syndicate.

For the purposes of this table we have standardised the RDS. Where a prescribed scenario has more than one sub-set (e.g. two Florida Windstorm scenarios; three Political Risks scenarios; seven liability scenarios) we have taken the largest within each, thereby giving a worst case position.

195

Split of Account by Category of Business S

yndi

cate

Acc

iden

t & H

ealth

Avi

atio

n

Avi

atio

n R

eins

uran

ce

Ene

rgy

Life

Mar

ine

Mar

ine

Rei

nsur

ance

Non

-Mar

ine

Liab

ility

(ex

US

)

Non

-Mar

ine

Liab

ility

(inc

US

)

Non

-Mar

ine

Liab

ility

Rei

nsur

ance

Non

-Mar

ine

Pro

perty

(Non

-US

$)

Non

-Mar

ine

Pro

perty

(US

$)

Non

-Mar

ine

Pro

perty

Rei

nsur

ance

Pec

unia

ry L

oss

/ Pol

itica

l Ris

ks

Pro

fess

iona

l Ind

emni

ty (e

x U

S)

Pro

fess

iona

l Ind

emni

ty (i

nc U

S)

Spa

ce &

Sat

ellit

e

UK

Mot

or

33 7 0 0 8 12 3 0 3 2 6 31 19 3 1 4 2

218 1 99

308 100

318 12 2 0 13 73

386 3 0 76 1 0 0 0 0 18 1

510 9 5 0 4 9 1 10 6 11 28 8 4 1 3 1 2

557 0 0 0 2 8 90 0

609 7 7 2 8 14 3 6 10 1 10 21 2 1 0 6 2

623 0 2 4 10 0 1 23 1 5 20 7 5 4 17 0 0

727 10 0 1 1 3 0 13 8 15 21 17 0 2 8

779 100

958

1176 0 24 67 9

1200 8 4 0 10 0 10 0 9 1 2 5 31 2 4 13 1 0

1729 1 0 1 2 2 1 15 20 4 28 17 1 2 3 3

1884 29 42 1 4 16 5 3 0

1969 2 3 0 14 0 9 0 5 19 0 5 36 5 1 0 0 1 0

1991 2 0 37 7 0 17 36 0 3 0

2010 0 1 8 1 0 0 0 0 10 28 49 2 1 0

2014 1 0 9 0 7 11 11 2 16 23 3 13 2

2121 3 0 17 18 0 7 7 15 28 4 0 0 1 0 0

2525 0 98 1

2526 15 16 9 15 4 40 0

2791 4 0 0 7 5 0 0 2 3 9 25 41 1 0 3 0 0

4020 9 3 1 14 0 16 0 0 11 2 3 16 6 5 1 11 1 0

4444 3 0 0 8 8 3 5 10 1 13 21 14 3 2 1 1 7

5820 7 0 1 0 0 35 21 19 16 0 0 0

6103 100

6104 0 1 1 0 0 3 2 4 89 0 1

6107 1 3 96

6111 4 2 12 16 3 4 9 4 14 19 7 2 2 2 0

196

Source of Business as percentage of Gross Income Direct Reinsurance

Syndicate Binders & Lineslips

Service Companies

Other Facultative Proportional Excess of Loss

33 39.4 5.9 21.9 5.5 3.1 24.2

218 20.3 79.7 - - - -

308 58.5 - 13.8 9.0 4.4 14.3

318 28.0 - 31.1 40.9 - -

386 29.2 25.2 36.2 9.4 - -

510 61.5 7.0 11.8 6.9 5.0 7.8

557 - 0.4 - - 9.3 90.3

609 57.5 3.9 11.6 16.9 3.3 6.8

623 21.8 25.6 38.5 - 5.9 8.2

727 65.1 - 1.3 1.1 2.6 30.0

779 90.4 - 4.6 2.5 2.5 -

1176 91.2 - - - 1.3 7.5

1200 46.6 8.0 32.0 2.4 4.0 7.0

1729 43.9 - 11.2 2.2 18.8 24.0

1884 8.5 37.0 44.6 8.1 - 1.8

1969 36.7 - 34.2 21.8 1.4 6.0

1991 51.9 48.1 - - - -

2010 18.1 - 13.9 9.8 1.4 56.8

2014 37.0 - 15.2 3.3 4.2 40.4

2121 54.2 8.7 19.7 14.0 0.2 3.1

2525 79.8 - 20.2 - - -

2526 55.3 1.8 19.3 16.2 3.6 3.8

2791 34.6 - 9.7 4.2 2.4 49.1

4020 53.2 - 22.4 11.2 0.7 12.5

4444 46.2 1.9 19.3 11.0 4.2 17.4

5820 72.5 - 15.0 2.2 10.1 0.2

6103 - - - - 100.0 -

6104 - - - - - 100.0

6107 - - - - 100.0 -

6111 - - - - 100.0 -

197

Geographic Split as percentage of Gross Income Syndicate UK Europe

(ex UK) North

America Americas

(other) Asia

Pacific Middle

East/Africa Worldwide

33 1.4 3.2 38.8 3.8 4.5 2.1 46.3

218 99.5 0.5 - - - - -

308 55.8 17.1 5.7 4.6 6.8 2.3 7.8

318 1.7 5.5 63.0 16.5 10.0 3.3 -

386 57.7 11.3 14.1 3.0 10.1 3.9 -

510 3.7 6.2 46.5 4.5 10.2 2.7 26.3

557 3.5 4.5 53.3 2.0 4.4 0.2 32.2

609 2.5 6.3 48.4 5.1 6.7 3.6 27.4

623 7.2 8.9 55.3 5.2 6.2 2.3 14.9

727 9.9 3.5 72.2 4.2 1.6 1.5 7.2

779 85.5 8.2 - 4.0 - 2.3 -

1176 5.5 34.3 32.3 0.9 24.9 2.1 -

1200 13.6 5.4 44.9 4.6 12.1 2.0 17.4

1729 1.3 0.9 84.1 4.0 2.0 0.2 7.4

1884 6.2 47.9 17.8 1.6 20.9 3.6 2.0

1969 2.8 7.0 63.7 9.1 7.6 3.5 6.4

1991 35.1 9.7 43.4 1.1 4.5 1.1 5.1

2010 2.6 4.7 46.8 9.0 9.1 1.3 26.4

2014 11.1 12.5 64.4 4.0 6.3 1.5 0.2

2121 19.1 5.4 39.0 5.9 15.4 2.5 12.7

2525 79.0 2.5 4.2 2.6 4.0 4.4 3.4

2526 25.0 33.7 16.1 5.6 9.9 5.3 4.5

2791 1.1 8.6 73.8 1.9 3.3 2.2 9.2

4020 2.5 4.3 47.6 5.7 5.9 4.7 29.3

4444 24.2 2.6 25.4 2.4 - 1.5 43.9

5820 40.7 13.0 16.0 5.6 17.9 5.3 1.5

6103 - - 100.0 - - - -

6104 0.3 4.5 48.8 0.9 16.5 0.6 28.4

6107 2.3 16.8 57.8 6.0 13.3 0.8 3.0

6111 100.0 - - - - - -

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Gross Realistic Disaster Scenarios S

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318 19 39 3 42 42 8 1 23 17 5 45 1 16

386 10 10 7 4 28 10 57 9

510 11 43 19 42 49 8 5 8 8 51 18 7 24 2 19 92 10 13

557 92 93 92 135 29 17 165 68 58 226 44 34

609 25 27 12 18 27 12 7 4 21 23 18 22 7 20 39 5 5

623 9 51 23 41 40 20 11 9 11 37 28 7 13 2 17 70 8 13

727 8 23 17 23 23 17 17 19 23 11 42 8 5

779 1 5 1 1 3

1176 2 2 771 1

1200 17 37 8 47 45 8 2 16 5 25 13 10 10 16 60 4 11

1729 9 49 20 60 42 13 13 5 32 22 4 27 70 22 13

1884 15 10 10 25 6 12 3 26 8 7 30 18 15 13 5

1969 14 51 29 49 51 32 12 9 49 37 19 29 84 21 17

1991 46 21 46 39 7 39 46 85 21 8

2010 35 49 47 59 50 24 14 61 2 1 2 6 112 7 22

2014 58 34 58 58 21 19 33 27 58 53 27 17 46 100 31 13

2121 32 19 25 28 12 10 7 19 28 24 13 11 48 12 10

2525 60

2526 17 20 6 20 4 20 6 25 4 2

2791 5 55 19 55 55 16 19 8 5 55 37 5 2 5 25 101 5 14

4020 7 24 9 18 28 11 5 0 15 22 9 22 6 17 36 2 7

4444 4 47 39 50 59 12 8 9 18 45 21 17 6 6 21 81 9 18

5820 0 27 6 26 26 8 5 0 26 27 18 21 52 5 8

6103 139 139 139 139 139 139 279 31

6104 72 60 109 100 101 46 145 46 18 220 31 35

6107 123 172 172 182 87 72 216 80 72 372 52 122

6111 25 41 16 32 50 24 10 13 20 37 17 15 14 1 17 71 6 4

199

Net Realistic Disaster Scenarios S

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386 10 10 7 4 21 10 25 9

510 3 8 4 7 8 4 2 0 4 8 7 3 11 1 8 16 4 4

557 56 60 55 67 27 16 96 55 47 152 42 25

609 12 17 7 14 17 9 5 2 6 17 13 7 7 9 29 3 4

623 6 17 13 17 2 12 8 2 6 20 14 2 7 2 10 35 7 9

727 7 21 15 21 21 15 15 17 20 10 33 8 5

779 1 2 1 1 2

1176 2 2 771 1

1200 8 12 7 21 21 7 2 6 1 10 9 3 7 7 30 3 7

1729 7 10 7 18 9 6 6 2 8 7 4 20 17 7 4

1884 3 2 2 3 2 2 1 3 2 2 4 4 3 4 1

1969 1 12 14 8 13 13 5 4 8 9 2 11 15 7 7

1991 18 1 18 10 1 10 18 33 1 4

2010 17 15 17 15 12 10 7 20 11 1 2 6 28 3 7

2014 22 12 14 13 11 9 10 9 13 19 9 13 12 24 11 6

2121 10 8 6 8 4 2 1 4 6 7 3 3 17 6 5

2525 2

2526 5 4 2 4 2 4 1 5 2 1

2791 5 19 13 19 19 13 13 8 5 19 13 5 2 5 20 38 5 6

4020 7 6 3 2 6 4 3 0 2 6 6 3 5 2 14 1 4

4444 4 21 22 18 23 9 7 6 13 16 13 9 5 6 12 35 9 8

5820 0 8 4 7 7 5 3 0 7 8 9 15 11 4 4

6103 125 125 125 125 125 125 250 29

6104 46 54 61 4 95 42 86 41 16 153 29 29

6107 67 118 110 116 62 62 141 54 52 239 48 74

6111 7 7 7 7 7 7 7 7 7 11 7 4 7 1 7 22 5 4

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Appendix D – Class of Business Descriptions

Accident & Health

This category includes travel, accident and medical expenses policies and is largely written through schemes and binding authorities. Specialist insurances for sports stars and entertainers are also written. Policies are typically on a defined benefit basis. They are thus not contracts of indemnity, but pay a set amount for a given injury. Kidnap and ransom is also included under this heading, although term life business is written separately by the Life syndicates.

Aviation

Aviation policies provide cover for replacement or repair to damage to aircraft hulls, spares and engines caused by impact, fire or natural perils. Aircraft range from wide-bodied airliners to light aircraft and helicopters. Liability sections include liability to passengers, crew, third parties (including other aircraft) and cargo. Other liability policies include products, aviation premises, hangars, airports and refuellers. Insurances of satellite launch and in-orbit cover also fall into the aviation category.

Energy

The category includes most aspects of oil and gas exploration and production, including physical damage to structures such as oil rigs, pipelines and equipment, and any ensuing loss of operating profit, as well as liabilities arising out of the operation of energy facilities. An important element is the cost of securing and capping well blow outs and making them safe.

Liability

This is perhaps the broadest of all categories and many syndicates specialise in only a handful of the various types of cover. Sub-divisions include insurance of financial institutions against theft, infidelity, fraud, computer crime and similar risks. General Non-marine Liability provides against claims by customers or other third parties for damages potentially including environmental pollution and industrial diseases; Employers’ Liability provides cover for similar risks to employees; Professional Indemnity Insurance gives cover against Errors and Omissions (E&O) on the part of professional firms including lawyers, architects, accountants and others that may result in damages incurred by a client. Medical Malpractice is an important sub-sector. Directors’ and Officers’ (D&O) protects against suit from shareholders for malfeasance by company officers. Syndicates also specialise by territory, with a large number of syndicates avoiding exposure to the US legal environment.

Liability Treaty

Liability business as above but written on a reinsurance basis.

Marine

Marine business is broadly divided into three main classes: Hull, Cargo and Marine Liabilities. Hull policies cover damage to vessels ranging from tankers to yachts and fishing boats and also include shipbuilding and marine property, such as bridges, jetties, tunnels and dams. Other specialist classes within the Hull category include loss of hire and total loss only. Marine War risks cover acts of war or sabotage either to aircraft or shipping. Acts

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of war between the permanent members of the UN Security Council (USA, UK, Russia, China and France) are not generally insurable.

Cargo includes the insurance of goods of any sort being transported by sea, land or air and is often extended to include the storage of these goods. Specie is the insurance of gold, bullion, currency, diamonds and valuable papers against fire, theft and robbery. These are typically held in vaults or safes. Fine Arts may include private collections and museums, which may include exhibitions and transit. Policies for Marine legal liabilities protect ship-owners and operators against liabilities to third parties arising out of their activities. This class also includes the liabilities of more specialist groups in maritime industries such as ship repairers and stevedores. Pollution liabilities arising from tanker spills are also written in the Marine market. Much of the Marine Liability account arises out of the reinsurance of the International Group of Protection & Indemnity Clubs – not for profit pools which issue primary policies for most types of marine liability.

Property

This covers insurances against fire and allied perils such as windstorm, earthquake and flood for buildings and their contents. It includes both homeowners and commercial policies; the latter may often be extended to include loss of profits for businesses which are out of action following physical damage to buildings or machinery (Business Interruption).

Property Treaty

The class protects insurance companies and other Lloyd’s syndicates against losses arising out of property damage. Protection may be on an event basis, against an aggregation of claims arising out of a single catastrophe (examples include windstorms, earthquakes and floods) or, on a per risk basis, protecting against an unexpectedly large loss to a single risk (from, say, a large fire).

UK Motor

UK Motor includes insurance as required by law for cars used for private and business purposes, including liabilities to third parties. Many owners include cover for damage to their own vehicles. The class also includes commercial vehicles (from small vans to major road haulage), public transport and coaches, as well as smaller sub-classes such as taxis and motorcycles.

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Appendix E – Glossary of Terms Acquisition Costs Costs incurred by an insurer in writing new or renewal business. The largest

single part of these is the commission paid to brokers, but acquisition costs also include items such as inspection and engineering reports.

Actuarial Best Estimate the actuary's expectation of future experience for a risk factor given all available information and experience pertaining to the assumption being estimated and set such that there is an equal likelihood of the actual value being greater than or less than the expected value.

Admitted An insurance company licensed and authorised to do business in a particular state in the USA. See also Surplus Lines.

Affinity Schemes The provision of insurance products to membership organisations, including trade associations, trade unions, charities and professional bodies.

Aggregate Exceedance Probability (AEP)

The probability of total annual losses of a particular amount or greater. For example an AEP loss figure for a 1 in 30 year loss is the amount of loss that is not expected to be exceeded in aggregate for a particular scenario.

Aggregation The process of the accumulation of exposures by an insurer or reinsurer.

Allocated Capacity / Stamp The maximum amount of gross premium income which a syndicate may underwrite (prior to the application of any Qualifying Quota Share arrangements). It represents the sum of the allocated premium limits of the individual Members of that syndicate.

Alternative Risk Transfer (ART)

An umbrella term describing various alternative methods of reinsurance - ranging from captives, through financial/finite risk reinsurance to securitisation.

A. M. Best A rating agency of all life, property, and casualty insurers domiciled in the United States as well as U.S. branches of foreign property insurer groups active in the United States.

Announced Auction Offer In the Lloyd’s auctions, the mechanism whereby, rather than making a capacity offer outside the auction process, the offeror may subscribe for capacity in one or more auctions, having previously made known to all members of a syndicate its intentions regarding the auction(s) in which it intends to participate, the amount of capacity it wishes to acquire and the cash price to be offered for the capacity sought.

Annual Accounting A basis of accounting for general insurance business whereby a result is determined at the end of the accounting period reflecting the profit or loss from providing insurance cover during the period (including the anticipation of losses arising on cover to be provided in subsequent periods in respect of commitments entered into prior to the end of the accounting periods).

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Arbitrage Practice of exploiting the difference between pricing of reinsurers.

Practitioners are able to sell their capacity at one price, but protect their exposure at a lower price, thus producing a return, while bearing little or no underwriting risk. Exposure to bad debt and to reinsurance disputes can undermine such strategies.

Assumed Reinsurance

See Retrocessional Reinsurance.

Attritional Losses Losses associated with ordinary insurance and reinsurance operations, i.e. losses other than a major loss.

Auction General A system whereby capacity on syndicates can be bought and sold on an auction basis of “matching” bids and offers. This system has been introduced to give monetary value to syndicate participations.

Weighted Price The average price at which a syndicate’s capacity was traded in an auction season. This is calculated by averaging the cost of the total capacity traded at all the auctions in each calendar year (excluding Auction 4).

Banks and Financial Institutions Insurance of such institutions against theft, infidelity, fraud, computer crime and other similar risks.

Bilateral Arrangements An arrangement whereby two parties agree to transfer a specific amount of capacity between themselves at an agreed price. Such amounts interact with the Lloyd’s auction process. The minimum amount of capacity that can be transferred in this way is £250,000.

Binding Authorities / Binders An agreement under which a “coverholder” (usually a firm of insurance brokers) is authorised, in accordance with the terms and conditions laid down in the agreement, both to accept risks and issue documents of cover on behalf of the underwriters subscribing to the agreement.

Capacity The total amount of premium income a syndicate may underwrite. It is made up of the individual shares of all participants on the syndicate. Also known as “stamp”.

Capacity Offer An offer to purchase syndicate capacity for cash outside the Lloyd’s auction process. Sometimes the cash offer has a share alternative which may be restricted to UK residents only.

Captive An insurance company established by a group of non-insurance entities, to insure certain risks of that entity, or group, rather than purchasing conventional cover in the open market.

Cash Call Provision whereby large losses can be collected from reinsurers, rather than paid by the insurer on an account or from funds withheld.

Casualty US terminology for liability insurance which covers an insured’s liabilities to others. By their nature liability classes are nearly always “long tail”.

Catastrophe (or cat) load An estimated amount of premium that is required to cover an expected level of exposure to catastrophes that are established before an underwriting account commences and should diminish as an account matures as business becomes off risk.

Cession A particular risk exposure that is transferred under a reinsurance treaty.

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Claims Made A wording of an insurance or reinsurance policy which limits the period during

which a claim can be made, usually to the policy period. This has the effect of limiting the aggregate of exposure. See also “losses occurring”.

Class 3 Reinsurer Classified as a Bermudian reinsurance company writing more than 20 percent

of its business unrelated to the owner of the business, and not conducting property catastrophe reinsurance or excess liability insurance.

Closed Year A year of account for which the financial outcome has been assessed, following the reinsurance of all underwriting liabilities into a succeeding year or another Lloyd’s syndicate, usually at the end of the third year of the account.

Co-Insurance The proportion of any insurance or reinsurance risk which the insured or reinsured retains for its own account.

Combined Ratio A measure of underwriting performance using annual accounting data. It is calculated by adding claims and expenses, including acquisition costs, and dividing this sum by net written premium. The lower the ratio, the better the comparative performance. A ratio less than 100% indicates an underwriting profit.

Composite Refers to a syndicate which does not restrict the classes of business it underwrites to any one of the Lloyd’s classifications of marine, non-marine, aviation or motor, but underwrites a mix of these. However, life business remains a separate category.

Consortium Underwriting A facility by which a syndicate undertakes to underwrite business on behalf of other insurers/syndicates to a fixed level of income, or a fixed proportion of overall income. Unlike proportional reinsurance/quota share this is regarded as direct underwriting and not reinsurance.

Contingency A general term describing insurances where the amount of money payable as a claim corresponds not to the value of an item of property (or to the amount of an insured’s legal liability) but to the financial loss suffered by an insured if a certain insured event or circumstance occurs.

Corporate Member A member of the Society of Lloyd’s which is a body corporate at law.

Corporate Syndicates Syndicates whose capacity is provided by limited liability companies and have no natural Names participating.

Coverholder See “Managing General Agent”.

Credit for Reinsurance Trust Fund (CRTF)

One of two trust funds for US Dollars. Syndicates must deposit US Dollars in this account equivalent to the gross (i.e. before reinsurance recoveries) amount of US situs liabilities written by way of reinsurance acceptance.

Creditor Insurance Covers those who borrow money from a finance house, banks etc. and who agree to repay the loan normally by monthly instalments over a fixed period. The insurance pays in the event of disability following an accident or illness and usually includes cover for redundancy or unemployment.

Deductible See Retention.

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Dedicated Vehicle A corporate vehicle dedicated to supplying capacity to a single syndicate or syndicates within the same managing agency, or managing agency grouping.

De-Emption An obligatory pro-rata decrease in all capital providers’ participations for the following year, usually in order to improve capacity utilisation.

Delegated Underwriting Authority

Delegation of underwriting authority to a third party, usually by means of binders or lineslips (see definitions).

Difference in conditions An insurance policy that provides expanded coverage for some perils, such as those that are infrequent or severe, that are not covered by standard insurance policies.

Direct Insurance A contract between insured and insurer, in contrast to either reinsurance or delegated underwriting authority to intermediaries.

Directors’ & Officers’ (D & O) Insurance

An insurance policy which protects individual directors and officers of a company against suit by, usually, aggrieved shareholders.

Economic Capital Assessment (ECA)

Replaces Risk Based Capital (RBC). Based on syndicate’s Individual Capital Assessment, it is the level of capital required to support underwriting at Lloyd’s as calculated by Lloyd’s ECA model. This takes account of both the perceived risk of underwriting for the coming year and the reserving risk for the portfolio underwritten in previous years. The object of the ECA model is to equalise the threat to the Lloyd’s Central Fund from all trading members.

Employers Liability (EL) Liability imposed by law upon an employer in relation to accidents or illness suffered by his employees arising in the course of their employment. A compulsory obligation also known as Workers’ Compensation Act (WCA) in certain States within the USA.

Energy Insurance of installations connected with the oil and gas industry, including refineries, rigs, pipelines and terminals. Apart from the physical insurances, personal accident and liability risks may also be covered. It is generally sub-divided into ‘offshore’ and ‘onshore’, the latter including power stations, chemical installations and certain mining operations.

Equitas A reinsurance company accepting the reinsurance of all (except life) Syndicates’ for 1992 and prior years of account at 31 December 1995. This is intended to ensure that the market is free from the risk of liability for past year problems.

Errors & Omissions (E & O) Insurance

An insurance policy purchased by organisations which protects them against suit for negligence or other errors committed during the normal course of their work. A similar policy purchased by the medical profession is known as medical malpractice insurance.

Excess and Surplus Lines (E&S) Also known as “Surplus Lines”, insurance business written in the USA and placed with a non-admitted insurer.

Excess of Loss (XL) A reinsurance which pays that amount of a loss which exceeds a specified amount (the excess) up to a further specified limit.

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Extended Warranty An additional guarantee which purchasers of a product (e.g. a car) can buy once the manufacturer’s original one year (normally) guarantee has expired. Extended warranty can normally be purchased for 3 or 5 years beyond the original guarantee.

Facultative Reinsurance Reinsurance by offer and acceptance of individual risks, the reinsurer retaining the option to accept, or reject, each risk.

Financial / Finite Risk Reinsurance

A reinsurance policy in which the investment income generated from the premium paid is explicitly, or implicitly, accounted for in the terms offered. Typically such a reinsurance would limit the reinsurer’s exposure by means of an aggregate limit, in return for which there might be a profit sharing mechanism where the reinsured receives a profit commission if the loss experience is better than expected.

Financial Conduct Authority (FCA)

The regulatory organisation that supervises, inter alia, the conduct of UK registered insurers including Lloyd’s.

Flat Fee A combined managing agency fee and syndicate expense charge (excluding Lloyd’s levies). This is expressed either as a percentage of syndicate capacity or as a monetary amount.

Forced placed See Lender placed

Fortune 500 The Fortune 500 is an annual list compiled and published by Fortune Magazine that ranks the top 500 US public companies by revenue. Insurers refer to Fortune 500 or 1,000 to give an indication of the type of company they insure or avoid.

Franchise Performance Directorate

The position of the Franchise Performance Director was created in December 2002 as part of the market’s reform programme. The Franchise Performance Director and his team are responsible for working with individual Lloyd’s businesses – the franchisees – to improve the commercial performance of the market. This includes monitoring each franchisee’s performance against its business plan and ensuring that the new underwriting and service guidelines for franchisees are adhered to. It is to be renamed the Underwriting Performance Directorate.

Fronting The acceptance of risks with the intention of reinsuring them 100%.

Gross Premium The full amount of premium before deductions for reinsurance purchase. In Lloyd’s terms, Gross Premium is stated net of brokerage paid to intermediaries.

ILS Insurance Linked Securities (ILS) – a collective term covering products such as catastrophe bonds, industry loss warranties (ILW) and collateralised reinsurance investments (CRI). ILS are referred to as alternative or non-traditional products and are not generally offered by the traditional insurance and reinsurance markets (including Lloyd’s). ILS allow insurance risk to be sold to institutional investors. For example, a catastrophe bond is a risk linked security which is designed to raise money for the issuer, usually an insurance or reinsurance company, in the event of a catastrophe such as a hurricane.

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Incurred But Not Reported (IBNR) Losses which have occurred during a stated period, usually a calendar year, but have not yet been reported to the insurer/ reinsurer because they are either not known about or the full extent of them is unknown. An estimate is made in the RITC for IBNR losses.

Incurred Claims Losses arising during a period, both paid and outstanding.

Independent Financial Advisors (IFAs)

Financial advisors registered by the FSA who are able to advise private individuals on the purchase of financial products from a number of suppliers. These products include term life policies underwritten by Life Syndicates at Lloyd’s.

Industry Loss Warranty (ILW) Industry Loss Warranties are a type of reinsurance or derivative contract through which one party will purchase protection based on the total loss arising from an event to the entire insurance industry, rather than their own losses.

International Underwriting Association (IUA)

The International Underwriting Association was formed by the merger of the Institute of London Underwriters (ILU) and the London Insurance and Reinsurance Market Association (LIRMA). It is the market association for the vast majority of the non-Lloyd’s insurance companies operating in the London market and provides common services as well as a forum for debate and for lobbying.

LASPO The 2013 Legal Aid, Sentencing and Punishment of Offender Act (LASPO) which brought in changes to contingent fee civil compensation rules and introduced a ban on referral fees in personal injury cases

Layer An insurance policy providing a tranche of cover within specified limits.

Lead Underwriter / Leader The underwriter who negotiates the terms, conditions and premium rates and writes the first line on a slip; underwriters who subsequently accept those terms and conditions are called following underwriters.

Lender placed Lender-placed insurance, also known as “creditor-placed” or “force-placed” insurance is an insurance policy placed by a bank or mortgage servicer on a home when the homeowners’ own property insurance may have lapsed or where the bank deems the homeowners’ insurance insufficient

Letter of Credit (L.O.C) Typically provided by a bank or other financial institution to guarantee the creditworthiness of an individual or business; default by the individual/business will result in the holder of the LOC drawing down on it.

Liability The insurance of legal liabilities to others, arising from such things as personal injury, property damage, products or financial loss. Known as “casualty” in North America and usually classified as “long-tail”.

Limited Tenancy Capacity (LTC) Capacity allocated on a syndicate for a defined period, under contract, rather than via the Standard Agency Agreement.

Lineslip A facility placed in the market where recognised leaders for certain classes of business have the power to bind risks on behalf of other underwriters.

LLP Limited Liability Partnership. A business partnership in which some or all of the partners have limited liability.

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London Market Excess of Loss (LMX)

A term referring to all excess of loss reinsurance protecting Lloyd’s and London reinsurance companies.

LMX “Spiral” A feature of the London Market Excess of Loss, or LMX, reinsurance market. The effect is that losses are passed by underwriters to their reinsurers who, after retaining a relatively small portion, pass it to their reinsurers and so on, all within the LMX market. This process is designed to spread the cost of major losses but it does mean that it can take many years for a major loss to pass right through the reinsurance market and for syndicates to establish for certain whether they have sufficient reinsurance protection. Therefore, it can result in syndicates reinsuring themselves as their liabilities go round in an ever diminishing circle of syndicates. From 1992 onwards, very little LMX “Spiral” business has been written in Lloyd’s.

Long Tail Business where claims may arise long after the period of cover has expired (e.g. products liability).

Loss Ratios These ratios compare claims against premiums and are produced on a “gross” basis (before reinsurance) or a “net” basis (after reinsurance) for either individual accounts, sectors of business, or a syndicate’s whole account on an underwriting year. They are used to provide indications on the profitability of the business. The “settled (or paid) Loss Ratio” figures are claims that have been paid against premiums received. The “Incurred Loss Ratio” figures are paid claims plus outstanding claims against premiums received.

Losses Occurring A type of policy wording under which a loss has to occur during the policy period, but in respect of which notification may be made at any time, subject to any limitations contained in the policy.

Managing General Agent (MGA)

A person or firm authorized by an insurer or a Lloyd’s syndicate to transact insurance business who may have authority to bind the insurer, issue policies, appoint producers, adjust claims and provide administrative support. Sometimes known as a Coverholder.

Mandatory Offer The process by which a Managing Agent having acquired 75% or more of a syndicate’s capacity is required to make an offer to all members holding the remaining capacity of the syndicate. There is no obligation to accept the offer.

MAPA Members’ Agents’ Pooling Arrangement – an arrangement (introduced for the 1994 account) which allows pooled underwriting participation by a number of clients on a programme managed by the MAPA manager.

Medical Expenses The insurance of schemes such as BUPA and PPP in the UK (but more commonly similar schemes in the USA) which provide cover for hospital treatment, doctors’ fees etc. To be distinguished from medical malpractice.

Medical Malpractice Insurance for claims against doctors, technicians and nurses for professional negligence.

Minority Buy-Out The process by which a managing agent, having given notice in accordance with the terms of the Agency Agreement and received approval from Lloyd’s, may acquire compulsorily the remaining capacity on a syndicate, once it has acquired 90%.

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Nameco A company that is a corporate member, whose members consist of a single individual or a group of connected individuals or their nominees. Many Namecos were formed by Names who wished to cease underwriting on an unlimited liability basis.

Net Claims Claims after actual and potential reinsurance recoveries.

Net Line Business / Unreinsured Risks written which do not have the benefit of any reinsurance/retrocessional protection, i.e. the level of liability retained by the insurer, or reinsurer.

Net Premium The amount of premium left after reinsurance and any other deductions such as brokerage.

Non-Aligned The portion of a syndicate’s capacity owned by Capital Providers not associated with the Managing Agent.

Open Year This is a year of account which has not yet reached its natural date of closure, generally the third year. However, the term is also used to describe a year of account which, although it has reached its natural date of closure, is unable to be reinsured to close, as an equitable RITC premium is unable to be quantified (technically a Run-Off year), or because there is no successor year (an Orphan year).

Opening Cash Call A call made in the early weeks of a year of account predominantly for reasons not to do with the immediate payment of claims. Usually such calls are for working capital purposes.

Orphan Syndicate A syndicate whose final year of account cannot be closed in the normal way as the syndicate is not trading forward. In this instance, a commercial quote for the reinsurance to close will have to be sought from another syndicate.

Original Loss Warranty (OLW) A condition contained in some reinsurances that a global insured loss from a single event has to exceed a pre-determined figure before the reinsurance will pay out; it is an additional form of excess point. Normally, an outside agency is used to establish the size of loss.

Outstanding Claims / Losses

The total of losses or claims which have been advised but at a given time are yet to be paid and as such are only estimated claims.

Outstanding Claims Advance (OCA)

Reference to an arrangement whereby reinsurers provide funding to ease an insurer’s cash flow strain (for example when complying with gross reserving regulations).

Overrider Commission paid by a reinsurer to a ceding company/syndicate on reinsurance (normally a quota share/proportional reinsurance treaty) to cover the running costs of the ceding company/syndicate in writing the income ceded to the reinsurer. This is normally based on a fixed commission determined in advance but may have an element of profit commission built-in for the ceding company/syndicate.

Percentile A statistical measure used to indicate the value below which a given percentage of outcomes fall. For example, if reserves for a syndicate’s ultimate liabilities are in the 70th percentile, only 30% of the range of outcomes indicate that the reserves will be inadequate.

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Personal Accident (PA) Covers death and disability insurance, including travel policies bought when travelling abroad. Such policies usually have a fixed limit per injury. The classification may also cover medical expenses.

Personal Lines Insurances such as Fire, Motor, Household Comprehensive, sold to individuals rather than to companies.

Pre-Emption Any syndicate that wishes to increase its capacity for the following year has to offer the existing capacity providers (both Corporate and Names) the relevant pro-rata increase, be they on the syndicate through a MAPA or on a bespoke basis.

Premium Trust Fund (PTF) The Trust Fund into which all premium monies received by a syndicate must be placed (PTF), for the payment of claims and expenses. Syndicates operate four separate Trust Funds; sterling, US dollars, Canadian dollars and Euros. There are stringent regulations over the operations of the Fund and the Trustees of the fund. Profits are paid from the PTF to Names on the closure of the year of account.

Proportional Reinsurance / Quota Share

A reinsurance agreement whereby the reinsured cedes a predetermined proportion of all business (or specified part thereof) to his reinsurers.

Pro-rata Reinsurance A term describing all forms of proportional reinsurance. Under pro-rata reinsurance, the reinsurer shares losses in the same proportion as it shares premiums and policy amounts. Quota share and surplus share are the two major types of pro-rata reinsurance.

Protection and Indemnity Risks (P&I)

Ship owners have formed mutual associations (clubs) for certain risks and buy reinsurance cover for the larger losses. Protection risks include liability to crews, collision and third parties. Indemnity risks include loss of cargo, damage and fines.

Pure Year A single year of account's premiums, claims and adjustments, excluding any transfers in from previous years.

QMR Quarterly Mandatory Reporting.

Qualifying Quota Share (QQS) A Quota Share reinsurance placed by a Lloyd’s syndicate, the income in respect of which is permitted by Lloyd’s to be excluded from a syndicate’s gross income for premium income monitoring purposes. Historically, the maximum percentage for a QQS has been 30% of capacity. At present, QQS are not permitted other than in exceptional circumstances.

Quota Share Reinsurance A reinsurance agreement whereby an insured passes a predetermined proportion of all business (or specified part thereof) to his reinsurers. The reinsurers accept a like share of both premium and claims.

Real Estate Owned (REO) Real estate owned or REO is a term used in the USA to describe a class of property owned by a lender - typically a bank - after an unsuccessful sale at a foreclosure auction.

Realistic Disaster Scenarios (RDS)

Scenarios prescribed by Lloyd's and used for comparing the cost of significant catastrophe losses e.g. the impact of an earthquake, USA windstorm, marine event, etc.

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Reconstruction and Renewal (R&R)

A Business Plan adopted by the Council of Lloyd's in May 1995 which aimed to resolve the problems of the past and to build a strong market for the future.

Reinstatement A facility in Excess of Loss reinsurance whereby the reinsured purchases the same layer of cover again, once the original cover has been exhausted. Reinsurers may offer free reinstatements, or may charge an additional premium.

Reinsurance The reinsurance of an insured risk. The 'laying-off' of a risk by an insurer to protect his particular liability and to maintain liquidity. A contract of reinsurance is between the insurer and reinsurer only and legally there is no direct link between the original insured and any reinsurer.

Reinsurance to Close (RITC) The sum paid by an underwriting account (usually at the end of the third year) to a later account (usually of the same syndicate), the latter assuming all the outstanding liabilities.

Retention The amount of risk retained by an insurer/reinsurer before effecting reinsurance cover. Also known as Excess Point or Deductible.

Retrocessional Reinsurance The reinsurance of a reinsurance risk. There is no direct link between original insured or insurer and the retrocessional underwriter. This type of business is considered high risk.

Rig Account Insurance of land and sea-based oil rigs. Apart from physical insurance of the rig itself, Personal Accident and Liability risks relating to the oil rigs may also be covered.

Risk Based Capital (RBC) Replaced by Economic Capital Assessment (ECA).

Risks Attaching A wording of an insurance or reinsurance policy which allows claims to be made at any time provided the policy under which the claim is made incepted during the policy period.

Run-Off Account A year of account, of a Lloyd's syndicate, which has been left open after the date at which the account would normally have been closed by reinsurance.

SBF Syndicate Business Forecast.

Securitisation A developing form of reinsurance (usually for natural catastrophes) whereby investors purchase bonds issued by a special purpose vehicle established for that purpose, and also to issue a reinsurance policy for which the reinsured pays a premium. The proceeds of the bond issue and the reinsurance premium are invested in order to pay interest to the investors. In the event of the insured event occurring, the interest payments are stopped and the funds are made available to the reinsured.

Service Company A company set up by a syndicate (or group of syndicates) in order to write business without having to resort to the Lloyd's broker network for distribution. These companies often target the high volume, low premium business that has not traditionally been placed in Lloyd's.

Short Tail A term used to describe insurance business where claims are likely to be advised within the period of cover or shortly thereafter, e.g. fire losses.

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Sidecar Reinsurance sidecars, conventionally referred to as Sidecars, are financial structures which are created to allow investors to take on the risk and return of a book of business written by an insurer or reinsurer and earn the risk and return that arises from that business. These structures have become quite prominent in the aftermath of Hurricane Katrina as a vehicle for re/insurers to add risk-bearing capacity, and for investors to participate in the potential profits resulting from sharp price increases in re/insurance.

Signed Premium The amount of premium actually received by the syndicate. Signed premium may be less than written premium due to "signing down" of lines and also slow payment by intermediaries.

SLP A Scottish Limited Partnership consists of a general partner bearing unlimited liability and a number of limited liability partners, set up under the law of Scotland. The first SLPs to be admitted as members of Lloyd’s wrote business for the 1997 underwriting year

SME Small to Medium sized Enterprises.

Solvency II Solvency II is a fundamental review of the capital adequacy regime for the European insurance industry. It aims to establish a revised set of EU-wide capital requirements and risk management standards that will replace the current Solvency I requirements.

Special Purpose Syndicate (SPS) Lloyd’s syndicate established expressly to underwrite a quota share contract of either a single syndicate’s whole book of business or sometimes just specific classes within a syndicate. Capacity on a SPS may be negotiated by Members’ Agents from time to time and will usually be limited tenancy in nature.

Specie The insurance of currency, gold, diamonds, jewellery, bonds and fine art against theft and robbery, either in safes and vaults or in transit or at exhibitions.

Standard & Poor’s A US financial services company and rating agency.

Stop Loss A form of reinsurance that protects a syndicate’s Gross Premium Income or Net Premium Income for a class/classes of business, or for its whole account. The reinsurance reimburses the syndicate up to a certain proportion of its overall losses. The cover is normally in excess of a figure or percentage which the syndicate has to retain for its own account, and normally has benefit of any normal reinsurance programme purchased when the cover is bought against net loss ratios. Some contracts also contain a “pay-back” to reinsurers after a certain period or may pay profit commissions (including investment income) back to the syndicate in the event of a good loss record.

Subscription Market Traditional feature of Lloyd's insurance market where a number of different insurers (Syndicates and companies) subscribe to a policy, taking a set proportion of the risk in return for the same proportion of the premium.

Substandard life Substandard life insurance coverage for risks deemed uninsurable at standard rates by normal standards (persons whose medical histories include serious illness such as heart disease or whose physical conditions are such that they are rated below standard.)

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Surplus lines Direct (i.e. non-reinsurance) business written in the United States and placed with a non-admitted insurer. Lloyd's syndicates have non-admitted status in all states of the USA except Illinois and Kentucky.

Surplus Lines Trust Fund (SLTF) One of two trust funds for US Dollars. Syndicates must deposit US dollars in this account equivalent to 30% of the gross (i.e. before reinsurance recoveries) amount of US situs liabilities written by way of surplus lines acceptance. The funding requirement has twice been reduced, from 100% to 50% and from 50% to 30%.

Swing Plan Type of policy whereby the ultimate premium paid is adjusted according to the claims development.

Tail A term used to describe the length of time within which claims will be settled. For example, a UK Motor syndicate will normally have a “short tail” as claims are settled in a relatively short period of time, whereas for a syndicate writing US liability, or “long tail” business, claims are unlikely to be settled for a number of years.

Transition An arrangement whereby the Member transfers the whole of his continuing underwriting business at Lloyd’s (by the reinsurance of all open years and run-off years) to a Corporate Member.

Treaty A reinsurance contract usually effected to cover the whole or a certain section of the reinsured’s business. Business, which falls within the treaty terms, is automatically reinsured under the contract. It is the opposite of a facultative placement.

Turnkey The provision of managing agency services for third party syndicates. This arrangement is commonly used by new syndicates in their formative years. An existing managing agent will provide 'turnkey' managing agency services to the new syndicate (and sometimes a proportion of the capital), following which, when ready to do so, the syndicate will transfer to its own independent managing agent.

US Situs Business subject to US jurisdiction.

Utilised Capacity The amount of premium written in relation to a syndicate's allocated capacity.

Willis 360 Willis 360 is a broker led market facility providing insurance cover for Medium sized UK companies

Workers’ Compensation Act (WCA)

Liability imposed by law in the USA upon an employer in relation to accidents suffered by his employees which arise solely out of their employment.

Written Premium The total amount of premium which a syndicate anticipates receiving on business underwritten. Where a popular risk is over-subscribed, the syndicate's written line may be “signed down" pro-rata.

WTC World Trade Center loss of 11 September 2001.

Year of Account The basic accounting period at Lloyd's.

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CAVEATS

This document is issued for general information purposes only and should not be construed as an invitation or inducement to engage in underwriting activity. The document has nevertheless been prepared in accordance with the requirements of the Financial Conduct Authority (FCA) financial promotion rules, in addition to those stipulated by the Code for Members’ Agents: Responsibilities to Members.

Underwriting at Lloyd’s involves a significant degree of risk and those participating in the market will be exposed to the risk of underwriting losses. In addition, they will remain liable for losses until the liabilities of all syndicates participated upon have been reinsured to close, subject to there being no reinsurance failure. Any persons wishing to invest in Lloyd’s should understand that risk is the nature of insurance business and is inherent in the business underwritten at Lloyd’s and should seek the necessary independent professional advice.

Whilst all reasonable care has been taken to ensure that the information contained in this document is accurate at the time of publication, Argenta does not make any representations as to the accuracy or completeness of such information. Further, Argenta does not represent, warrant or promise (whether express or implied) that any information is or remains accurate, complete and up-to-date, or fit or suitable for any purpose. This document provides information about syndicates' past performance. Past performance is not a guarantee for future performance. Any forward-looking statements in this document are subject to uncertainties and inherent risks that could cause actual results to differ materially from those contained in any forward-looking statement. Argenta undertakes no duty to update publicly any forward-looking statements contained herein, in light of new information.

Products and services offered by Argenta Private Capital Limited will only be offered publicly in those jurisdictions where it is lawful to do so and such products and services are only directed at persons in such jurisdictions. You agree that you will make yourself aware of and adhere to any restrictions there may be in your jurisdiction relating to such products and services. For the avoidance of doubt, any information contained herein does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States of America, or for the benefit of, United States Persons (being resident in the United States of America or partnerships or corporations organised under the laws of the United States of America or any state, territory, or possession thereof).

Unauthorised use, disclosure or copying of the document is strictly prohibited and may be unlawful.

Argenta Private Capital Limited is authorised and regulated by the Financial Conduct Authority.

Argenta Insurance Research Limited is a wholly owned subsidiary of Argenta Private Capital Limited.

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