The following commentaries have been prepared based on information contained in the Managing Agents Report and Accounts as at 31 December 2010.

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Syndicate 218 was unable to close the 2008 year of account at 31 December 2010.

The managing agent in the Report and Accounts at 31 December 2010 has reported a loss of 56.7% before members agents fees and will make a cash call of 37.5% of capacity due for settlement on 16 June 2011.  Equity Motor Syndicate 218 is the largest motor syndicate at Lloyd’s and its book of business covers a wide range of motor insurances.  In addition it does write a proportion of non motor account which includes, household, caravan, personal accident and a small commercial property book.

The 2010 calendar year has proved to be an extremely difficult year in relation to underwriting performance coupled with the substantial deterioration in claims reserves held for prior years the combined effect of which has led to the managing agent to come to the conclusion that the syndicate should remain open as at 31 December 2010. 

The underwriter reports that during the twelve months to 31 December 2010 a significant strengthening of claims reserves of the syndicate was needed, due primarily to an unprecedented increase in third party bodily injury claims fuelled largely by the growth of “claims farmers”, an activity where legal firms capture non-fault claims and claims management companies.  These developments have occurred at the same time as the syndicate has revised its claims handling and reserving methodologies.  As a consequence the managing agent considers the significant uncertainty over the financial development of the syndicate’s 2008 and prior years considers that it was not possible to calculate a reinsurance to close with sufficient accuracy to preserve equity between paying and receiving Names accordingly the 2008 account was left open and the managing agent will reconsider the position in 12 months time. 

At this stage it is not possible to say whether they will be in a position to effect a reinsurance to close at 31 December 2011.

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Syndicate 260 left the 2008 year of account open at 31 December 2010.

The managing agent in the Report and Accounts as at 31 December 2010 has reported the 2008 year of account suffered significant deterioration during the previous 18 months and has regrettably reported a loss at 36 months of £20.7Million which represents a loss on capacity of 39.6%.  A cash call for this outstanding balance will be called for settlement on 16 June 2011.

The syndicate has remained open due to the continuing uncertainty in being able to determine the ultimate result of the 2008 year of account.  The managing agent makes reference to the following reasons for the adverse result of this year of account:-

 1.  Changes in the nature of the motor insurance market in the past three to four years with an increasing   propensity to claim.  The number of claimants per accident and claims inflation.

2.    Changes in the claims team have led to uncertainty over development patterns.

3.  Finally there are some data issues which do not allow complete interpretation of the data. 

The loss is principally as a result of claims inflationary factors from changes in the motor claims environment which has had an impact across the entire motor insurance market.  The key drivers of the changes in claims inflation are bodily injury settlements, associated legal costs and credit hire, which have resulted in unprecedented claims inflation.  The principal source of these drivers is “claims farming” an activity where legal firms capture non-fault claims.  The UK economic environment is likely to be a contributory factor in the success rate of legal firms capturing these claims in a potentially fraudulent activity.  This is indicated by the increase in the number of claimants per claim compared to historical data, which is in contrast to the overall reduction in the frequency of road accidents, through improved road safety and motor vehicle technology.

Canopius Managing Agents Ltd has advised that the claims strategy of the syndicate has undergone a comprehensive review in order to deliver a function that can deal with the changed claims environment and drive down the inflationary factors and improve efficiency.  It is intended that the implication of this strategy will be fully complete by the third quarter of 2011 and will benefit the run-off and open years.

At the time of writing the managing agent has not given an indication when this year of account is likely to close but in the circumstances it may well be unlikely that the syndicate will be in a position to close at 31 December 2011.                                                                   

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Syndicate 340 closed the 2000 and 2001 years of account at 31 December 2010.

Names will be aware from our Memorandum of 7 January 2011 that Travelers Syndicate Management Limited recommended the approval of a quotation they had received from Berkshire Hathaway to effect a reinsurance to close.  The quotation was met with overwhelming approval by capital providers, the closing results of both years of account are reported above. 

It can be seen that both years have seen a significant reduction to the loss position reported at 31 December 2009.  Further in relation to the 2000 year of account the ultimate loss when compared with the cash calls made to date will mean a surplus of approximately 29% will be made to Names in June of this year.

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Syndicate 529 closed the 1998 and 1999 years of account at 31 December 2010.

Names will recall from our Memorandum of 28 July 2010 that the managing agents RITC Committee were in the final stages of agreeing a reinsurance to close all run-off years of account of Syndicate 529.  The contract to close was signed at 30 June 2010 but under Lloyd's requirements the syndicate was required to prepare closing report and accounts as at 31 December 2010.

It can be seen from the above results that cash calls exceeded the declared result the surplus was credited initially to Lloyd's Distribution Account to off-set against any outstanding debt position.  The balance was transferred to Names Personal Reserve Funds as indicated in our Memorandum of 5 October 2010.

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Syndicate 1007 closed the 2002 year of account at 31 December 2010. 

The original reasons for putting this year of account into run-off included uncertainty over the eventual outcome of liability reinsurance business and in respect of certain high profile US issues involving investment banks.  In recent years with the uncertainty in respect of liability reinsurance business has been progressively diminished.  This coupled with the reduction in exposure through commutation has placed the syndicate in a better position to achieve closure.

Names will be aware from previous Newsletters there has been considerable progress in resolving various investment bank's issues in a number of instances on terms better than the specific reserves the syndicate was carrying for such claims.

The closing result is a loss of 9.8%, calls to date amount to 8.5% the balance of the deficit will be called for settlement on 16 June 2011.

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Syndicate 1171 has been unable to close the 1998 and 1999 years of account at 31 December 2010. 

The managing agent reports that for the calendar year ending 31 December 2010 the 1998 and 1999 run-off years of account produced a surplus of 1% and 2% respectively, this position is reflected in the above figures.  It can be seen from the level of cash calls previously made that the syndicate is maintaining significant surpluses however, the managing agent does not consider it prudent to distribute any proportion of the cumulative surplus pending closure of the run-off years of account.

Syndicate 1171 is a Life syndicate and can only be reinsured under Lloyd's current regulations into another Lloyd's Life syndicate.  As there are only three other Life syndicates trading at Lloyd's the opportunities are very limited to complete a reinsurance to close. 

It is unlikely that the syndicate will close at 31 December 2011.

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