QBE Syndicate 2999 Annual Report and Accounts 2009

QBE Syndicate 2999 

Annual report 2009

01 QBE Syndicate 2999 highlights 

02 QBE European Operations overview 

04 What makes QBE different? 

06 Syndicate performance and strength 

07 Business of the syndicate 

08 QBE Reinsurance Syndicate 566 

09 QBE Marine and Energy Syndicate 1036 

10 QBE Syndicate 1886 

QBE Insurance Group 

The Americas 

QBE Insurance (Europe) Limited 

QBE Reinsurance 

Syndicate 566 

11 QBE Property Syndicate 2000 

12 QBE Aviation Syndicate 5555 

13 Report of the directors of the 

managing agent 

20 Managing agency – corporate information 

21 Risk management 

22 Independent auditors’ report to the 

member of QBE Syndicate 2999 

QBE Underwriting Limited 

QBE Marine 

and Energy 


European Operations 


QBE Syndicate 

1886 

23 Profit and loss account: 

technical account – general business 

24 Profit and loss account: 

non-technical account 

25 Balance sheet 

27 Statement of cash flows 

28 Notes to the financial statements 

42 Glossary of insurance terms 

44 QBE Syndicate 2999 contacts 

Australia Asia Pacific 


(Europe) Limited 

QBE Casualty 


QBE Property 


QBE Aviation 

Syndicate 5555

QBE Syndicate 2999 highlights 

QBE Syndicate 2999 has delivered another 

strong result in the face of challenging 

market conditions and absence of significant 

catastrophe losses. 

Gross written premium (GWP) £million 

09 

08 

Net earned premium (NEP) £million 

09 

08 

09 

08 

Combined operating ratio (COR) % 

09 

08 

117 

852 

588 

Net underwriting profit (NUP) £million 

1,040 

728 

174 

85.9 

79.7 

GWP : £1,040m : +22% 

NEP : £728m : +24% 

NUP : £174m : +49% 

COR : 85.9% 

01 



QBE European Operations overview 

European Operations (EO) has produced another strong 

result despite challenging conditions in both underwriting 

and investment markets. 


09 

08 


09 

08 

09 

08 

Combined operating ratio (COR) £million 

09 

08 

02 


Annual report 2009 

141 

2,552 

2,298 

2,179 


2,508 

215 

91.3 

85.6 

Average calendar year rates of exchange 2008 £1: AUS$2.181 

2009 £1: AUS$1.996 

Far left 

Frank O’Halloran 

Chief Executive Officer, QBE Insurance Group 

Left 

Steven Burns 

Chief Executive Officer, QBE European Operations 

GWP : £2,552m : +11% 

NEP : £2,508m : +15% 

NUP : £141m : –34% 

COR : 91.3%

Major events in 2009 

• Growth achieved with financial 

performance maintained in challenging 

market conditions, notably via our 

distribution channels of UK National 

and Europe coupled with some small, 

bolt-on acquisitions. 

• QBE became the official insurance 

partner of both England RFU and the 

Guinness Premiership, the world’s 

most competitive domestic rugby 

union competition. These sponsorships 

will help drive an increase in brand 

awareness and enhance the growth 

potential of our distribution channels. 

European markets 

Lloyd’s security 

Ireland 

Casualty 

& energy 

Marine 

and Motor 

and Energy 

2009 GWP 

£2.6 

billion 

and Specialist 

London market 

Reinsurance 

Property 

QBE Company security 

• Leveraged Lloyd’s licences to start up 

new local offices in Dubai and Canada. 

• Embedded advanced risk management 

activities in readiness for Solvency II. 

• Planned and initiated a substantial, 

multi-year programme of change 

and rationalisation of our IT and 

operational landscape, designed to 

put us at the forefront of delivering 

a market leading service proposition 

to our brokers and clients. 

• Substantial investment in our 

in-house talent and leadership 

and OpenUp programmes. 

UK National 

EO’s product focused underwriting divisions 

allow it to leverage the breadth and depth 

of its capabilities in a coordinated and 

focused way. 

This means brokers and clients have access to: 

• A wider distribution network 

• All expertise in one place 

• A choice of Lloyd’s paper or 

company paper 

• The strength and size of QBE 

• The individuals who understand 

their business 

03 



What makes QBE different? 

The QBE European 

Operations brand 

promise strives for 

excellence in five 

core areas. 

04 



1. Strong and growing 

market presence 

QBE is one of the world’s top 25 insurers 

and reinsurers and has been established in 

the UK since 1904. At QBE we understand the 

importance of security in the insurance decision 

making process and the strength of our ratings 

and financial backing gives us a real advantage 

in the market. 

QBE is one of the world’s leading insurers and 

reinsurers with offices in 47 countries, backed 

by A+ ratings by S&P and Fitch. Our approach 

is one of leading not following, so when it 

comes to product design or setting the terms 

and conditions we take the initiative. 

2. Entrepreneurial 

solutions to business risk 

We are always looking for solutions to business 

risks which means working closely with all 

parties to understand their business and creating 

the right product for them. 

Based upon an appetite for tripartite 

partnerships with brokers and clients, built 

around shared information, our aim is always 

to find a competitive and effective solution 

looking far beyond the initial relationship. But 

just don’t take our word for it, in 2009 we won 

a number of awards including best insurance 

company – Underwriting Casualty and best 

Reinsurance company* and underwriting team 

of the year**.

3. Empowers through 

a collaborative can do 

spirit across the business 

and with all business 

partners 

At every stage of the relationship we encourage 

a can do spirit, which means everyone benefits 

from quicker decision making and faster solutions. 

We emphasise the importance of cooperation 

across all departments and this in turn enables 

us to provide a bespoke service and excellent 

customer relations management programme 

to our clients. 

* Reactions London Market awards. 

** Insurance Day London Market awards. 

*** Gracechurch survey. 

4. Delivers reliable 

and responsive service 

at every stage of the 

stakeholder experience 

By understanding the market better and in 

particular the risks associated with that product, 

we are more responsive and able to deliver 

solutions to everyone’s requirements. 

We place a great emphasis on risk management, 

with regular newsletters and forums held 

addressing the key risk issues facing our clients. 

Our approach when managing claims is always 

sympathetic and understanding of our client’s 

needs. The high level of claims service we provide 

is recognised by winning in 2009 the Global 

Broker insurance claims award and being rated 

second highest in the market for claims service***. 

5. Specialist in every 

business line and 

consistently across 

all disciplines 

Our teams are specialists in every business 

line, which means they give equal importance 

to the generation of new business as they do to 

supporting the retention of key existing business. 

Our underwriters are readily accessible and their 

skills and in depth product knowledge of their 

sector enable them to provide an answer straight 

away. The sheer number of underwriters allows 

us to have specialists for individual subclasses of 

product and, if an answer is not readily available, 

then we are always looking for creative solutions. 

So whether it’s cover for a sports venue or a 

catering company or anything in between, we 

can provide a competitive and effective outcome. 

05 



Syndicate performance and strength 

QBE Syndicate 2999 continues 

to provide a scalable and efficient 

operating structure which enables 

the specialist product lines to adapt 

to prevailing market conditions. 


09 

08 


09 

08 

09 

08 

09 

08 

06 



117 

Combined operating ratio (COR) % 

852 

588 


1,040 

728 

174 

85.9 

79.7 

Strengths of the syndicate 

• Flexible sub-syndicate structure permitting a high degree 

of autonomy for each of the underlying sub-syndicates 

• Service excellence and provision of innovative solutions – 

each sub-syndicate has experienced and dedicated 

specialist underwriting and support teams 

• S&P Lloyd’s Syndicate Assessment of “3+” – reflects the 

strength of support provided by QBE and its superior 

operational management 

• Total syndicate funds of £1.4 billion 

• Part of QBE Underwriting Limited, one of the largest managing 

agents at Lloyd’s 

• QBE (main underwriting entities rated S&P “A”) as the 

ultimate parent company and provider of 100% of 2010 

underwriting capital 

• Lloyd’s security – policies issued by the sub-syndicates 

benefit from the security, expertise and brand of the 

Lloyd’s insurance market (S&P, “A+” (strong)/A M Best, 

“A” (Excellent))

Business of the syndicate 

QBE Syndicate 2999 comprises five 

sub-syndicates and is the primary 

entity from a Lloyd’s reporting and 

regulatory perspective. 

Under this arrangement, sub-syndicate 

underwriters retain a high degree of autonomy 

to determine and fulfil their underwriting 

strategies, whilst benefiting from the 

combined size, strength and capital base 

of the umbrella syndicate. 

In 2009, Syndicate 2999’s total 

gross written premium was £1,040 million 

3 

4 

5 

£1,040 

million 

2 

Syndicate 2999 is a wholly aligned syndicate, 

whereby 100% of its capital is provided by 

QBE Insurance Group. Sub-syndicate capacity 

allocations are not restrictive and may 

be adjusted within the overall umbrella 

allocation. This means the team can respond 

to underwriting opportunities as they arise, 

whilst minimising the cost of capital provision. 

1 

Each of the sub-syndicates (referred to herein 

as syndicates) have established licences and 

premium trust funds under their own number for 

the specific types of business they underwrite. 

Where necessary they are licensed and 

accredited to underwrite both surplus lines 

and reinsurance business in the United States 

and have funded trust funds in accordance 

with local regulatory requirements. 

1. QBE Reinsurance 


£372 million (36%) 

Managing Director – Jonathan Parry 

2. QBE Marine and Energy 


£353 million (34%) 

Managing Director – Colin O’Farrell 

3. QBE Syndicate 1886 

£135 million (13%) 

Managing Director – John Neal 

4. QBE Property Syndicate 2000 

£94 million (9%) 

Managing Director – Bernard Mageean 

5. QBE Aviation Syndicate 5555 

£86 million (8%) 

Managing Director – Emilio Di Silvio 

07 






QBE Reinsurance Syndicate 566 is a leading 

excess of loss reinsurance syndicate 

specialising in non-marine property, aviation, 

marine, North American and International 

casualty treaty and personal accident in the 

Lloyd’s market. 

Underwriting reinsurance treaties from most 

parts of the world, 566’s underwriters have 

an in depth knowledge of their clients and the 

territories in which they operate. 

The use of sophisticated catastrophe models 

enables us to estimate the magnitude and 

frequency of large events and to analyse and 

understand our clients’ portfolios effectively. 

International Property Treaty 

Ulrich Loessl 

The international property portfolio is heavily biased 

towards catastrophe excess of loss reinsurance. 

Less than 5% of the portfolio is single risk exposed. 

The account is exceptionally well spread 

geographically, with the United Kingdom, Europe, 

Japan, Australasia and Latin America comprising 

the major focus. Much of the portfolio is written 

in a lead position. Property is the main focus of 

the portfolio but the account also includes 

agricultural and engineering portfolios. 

North American Property Treaty 

Paul Horgan 

Over 90% of the North American portfolio 

emanates from the US, with the remainder from 

Canada. Of the combined book, the majority is 

written on a catastrophe excess of loss basis 

with risk exposed programmes comprising less 

than 5%. Historically the account has focused 

on those regional companies operating in single 

or limited number of states, but more recently 

the account has expanded to afford cover to the 

large stock companies operating on a nationwide 

basis. The portfolio also includes a specialised 

agricultural account. 

International Casualty Treaty 

Richard Fothergill 

Syndicate 566 is a recognised market leader 

in this class. The account is written on both 

an excess of loss and proportional basis. 

Geographically, the syndicate focuses on all 

territories with the exception of the US. Incidental 

exposures in the US can be accommodated. 

Syndicate 566 underwrites a diverse book 

encompassing most liability classes. 

08 



Jonathan Parry 

Managing Director 

Aviation 

Richard Sammons 

The syndicate’s aerospace focus is on nonproportional 

aviation treaty reinsurance. The 

major part of the portfolio comprises excess of 

loss treaties, protecting insurers and reinsurers 

of the world’s major airlines, airports and 

aerospace product manufacturers. The account 

also targets insurers and co-insurers writing 

general aviation and hull liability for smaller planes. 

Syndicate 566 is a member of the SATEC Pool 

providing cover on satellite launch and in-orbit 

risks on a proportional basis. 

Marine 

Jonathon Dean 

The syndicate’s marine portfolio covers all 

aspects of marine business and also includes 

third party coverages such as P&I and pollution. 

We write the account on a risk and catastrophe 

excess of loss basis and the syndicate has the 

ability and capacity to act as a lead reinsurer. 

It focuses on middle to high layers avoiding 

attritional levels. The portfolio currently consists 

of business emanating from over 50 countries. 

Personal Accident 

Peter Wilkins 

The personal accident account written by the 

syndicate is split almost equally between risk 

and catastrophe excess of loss business and 

primary direct and facultative insurance including 

lineslips and binders. In addition to PA business, 

the account also comprises life and travel 

reinsurance business. 

Worldwide and Retrocession 


This is the longest established portfolio in 

Syndicate 566. The account comprises 

catastrophe retrocession, catastrophe 

protections of direct and facultative accounts, 

and tier 1 and tier 2 risk excess business. The 

syndicate leads over 80% of the account written 

and has a significant impact in the quoting 

process of the remainder. Syndicate 566 targets 

business with a high risk to reward ratio whilst 

positioning itself away from attritional loss 

activity. The syndicate values continuity and has 

been trading with its core clients for many years. 

2009 Portfolio split 

7 

6 

5 

8 

£372 

million 

4 

3 

1 

2 

1 International Property 

Treaty 18% 

2 North American 

Property Treaty 20% 

3 International Casualty 

Treaty 15% 

4 Aviation 5% 

5 Marine 6% 

6 Personal Accident 7% 

7 Worldwide and 

Retrocession 20% 

8 North American 

Casualty Treaty 9% 

North American Casualty Treaty 

Tony Clayton 

This account is biased toward risk and 

catastrophe excess of loss treaty, but most 

reinsurance structures will be entertained. 

We split the account between standard lines 

and professional lines. Historically, professional 

lines have comprised errors and omissions, 

healthcare, fidelity and directors’ and officers’ 

covers. From January 2008 the decision was 

taken to focus exclusively on healthcare 

business in this sector. Standard lines comprise 

general liability, WCA, clash and motor covers. 

The syndicate tends to target small to medium 

sized regional portfolios. 

Claims 

Mark Wilson 

Our adjusters are authorised to handle all 

classes of business. Technical strengths are 

combined with a pragmatic claims handling 

philosophy, which recognises the need for 

proactive and flexible claims management.

QBE Marine and Energy 



QBE Marine and Energy Syndicate 1036 is 

a leading marine syndicate specialising in 

hull, energy, liability, specie, cargo, war and 

allied risks. 

Established in 1987, the syndicate underwrites 

a worldwide account, requiring underwriters to 

have a comprehensive knowledge of their 

clients’ businesses and the territories in which 

they operate. 

The use of sophisticated software, combined with 

extensive travel, enables the syndicate to analyse 

and understand its clients’ needs effectively. 

Cargo 

Tim Pembroke 

We write a high quality portfolio of cargo 

business and are recognised as a leader in 

high-tech, pharmaceutical and manufactured 

goods as well as excess cargo business. We 

emphasise the value of long term relationships 

with our clients and work with them to develop 

mutually beneficial risk control programmes. 

Marine Liability 

Daryl Ewer 

We are a major leading underwriter in the global 

liability market, with an account produced from 

all the major brokers worldwide and from 

industry specialists. The account comprises 

pure marine coverages such as P&I, pollution, 

charterers, stand alone energy liabilities and 

package policies. 

Working closely with our colleagues in hull and 

energy, particularly offshore, we specialise in 

tailoring complex and unusual coverages to 

clients’ needs and requirements. We are the 

leading underwriter to many International Group 

P&I associations, providing extended coverages, 

over and above those offered by club rules, 

as well as reinsurance capacity solutions. 

Energy Offshore 

Sam Harrison 

Writes a portfolio of risks worldwide, from 

dedicated upstream entities to fully integrated 

energy companies. 

We insure offshore risks for oil and gas 

companies worldwide, specialising in offshore 

insurance for assets located in the North Sea and 

the Far East, particularly China. Approximately 

60% of the business written is in a lead capacity. 

Colin O’Farrell 


Energy Onshore 

Stephen Saunders 

A wide range of onshore assets for oil and gas 

companies worldwide are insured, from well 

heads to refineries and petro-chemical plants, 

with particular dominance in the Middle East 

and Indonesia. Approximately 75% is written 

in a lead capacity. To complement the above 

we also underwrite an onshore construction 

account focusing on erection all risks and 

associated lines of third party liability. 

Specie 

Ryan Joseph 

We underwrite a worldwide account specialising 

in the areas of armoured car, general specie, 

fine art and jewellers’ block. Business is written 

to all the major brokers, dealing with some of the 

most prominent institutions in the financial sector 

and art world. We lead approximately 40% of the 

business we write. 

Hull 

Haydn Costin 

We write an established high quality hull 

account. The portfolio, which principally consists 

of bluewater vessels, includes a significant 

proportion of builders’ risks, short-tail total loss 

only, increased value and mortgagees’ interest 

risks. Risks of physical damage to ports, 

worldwide are also included. Recognised as 

leaders in all aspects of the account, we are 

supported by all the major hull brokers. We 

maintain a significant presence on market wide 

initiatives, for example the Joint Hull Committee, 

which complement our underwriting. 

Marine War 

Haydn Costin 

We write a maritime war account, which 

includes war risks on vessels, cargo, floating 

energy risks and maritime liabilities. We are 

an established leader in the class and are 

instrumental in setting terms and conditions 

which are followed worldwide. 


5 

4 

6 

7 8 

1 

£353 

million 

3 

2 

1 Cargo 5% 

2 Marine Liability 21% 

3 Energy Offshore 35% 

4 Energy Onshore 15% 

5 Specie 6% 

6 Hull 10% 

7 Marine War 2% 

8 Political Risk and Terrorism 6% 

Political Risk and Terrorism 

Nicky Ablett 

Through a specialist underwriting team, we 

have developed a political risk and terrorism 

portfolio of broad based, worldwide business. 

This account complements existing areas of 

the book, but particularly onshore energy, cargo 

and specie. 

Claims 

Gary Crowley 

Our well respected claims team works closely 

with our underwriters to ensure claims are 

managed to an extremely high standard. The 

claims team have long standing relationships 

with surveyors, loss adjusters, lawyers and other 

professional advisers whose expertise can be 

brought to bear on our response to a claim. We 

enjoy a good working relationship with brokers 

and London insurance market organisations. 

09 



QBE Syndicate 1886 


QBE Syndicate 1886 was established for 

the 2006 year and specialises in non-marine 

casualty and specialty. 

The business is focused into a number of areas, 

each with a specialist underwriting team 

responsible for its account. The underwriters 

have dual underwriting authorities allowing them 

access to Lloyd’s or company paper. 

By operating on this basis, Syndicate 1886 

enables QBE company underwriters to 

participate in previously inaccessible markets 

and provides existing Lloyd’s underwriters with 

additional capacity. This adds significantly to the 

company’s underwriting capabilities and brings 

new business to the Lloyd’s market. 

General Liability 

Ash Bathia 

We offer a broad spectrum of insurance and 

reinsurance products backed by extensive 

experience in all classes. We have dedicated 

professionals specialising in public liability, 

product liability, medical malpractice, product 

recall, directors’ and officers’ liability, professional 

indemnity and construction all risks. 

Professional and Financial Lines 

David Harries 

We underwrite a broad spectrum account 

specialising in leading middle market financial 

institutions and all commercial crime business. 

This includes comprehensive crime, professional 

indemnity, directors’ and officers’ liability and 

commercial crime. 

Motor 

This division comprises the following portfolios: 

Overseas Motor 

Dan Carroll 

Aiming to underwrite personal lines portfolios, 

the overseas motor team targets well managed 

and administered coverholders with good local 

knowledge and high integrity anywhere in the 

world, outside North America. 

Product Protection 

Shaqeel Hussain 

We have developed a reputation for delivering 

successful insurance programmes covering 

extended warranty, GAP insurance and creditor 

insurance. 

10 



John Neal 


Specialty 

This account comprises the following portfolios: 

Kidnap and Ransom 

Jonathan Beck 

Offering worldwide cover for kidnap, extortion, 

hijacking and wrongful detention. 

Bloodstock 

Phil Needham 

Offering worldwide insurance products for 

bloodstock and equine, livestock, aquaculture, 

all risks of mortality, infertility, theft and 

associated risks. 

Structured Trade and Political Risk 

Joe Blenkinsopp 

Structured Trade & Political Risk (STPR) is 

part of QBE’s Credit and Surety international 

network. It is a global product group providing 

risk transfer solutions to a global client base. 

STPR is headquartered in New York with offices 

in London and Singapore. 

Marine Liability 

Robert Johnston 

We offer intermodal and professional indemnity 

insurance to companies in the shipping/transport 

fields. Cover is offered on a worldwide basis, 

including the US. 

Claims 

Andrew McBride 

The team is focused on delivering outstanding 

levels of service and expertise to clients across 

all lines of business. This embedded customer 

service ethic is supported by innovation and 

transparency in claims handling and 

management. The team is also proactive in 

supporting and embracing new technologies 

and market initiatives, including the use of 

electronic claims files. 


3 

2 

4 5 

£135 

million 

1 

1 General Liability 46% 

2 Professional and 

Financial Lines 35% 

3 Motor 11% 

4 Specialty 7% 

5 Marine Liability 1%

QBE Property Syndicate 2000 


QBE Property Syndicate 2000 is a leading 

syndicate operating in the Lloyd’s market, 

specialising in direct property and accident 

and health. 

Dedicated professionals within specialist expert 

underwriting teams have full authority to trade 

and clear accountability and responsibility for 

each account. 

As part of the product and distribution 

reorganisation undertaken in 2008, Syndicate 2000 

has become the exclusive vehicle for property 

and all accident and health insurance business 

within umbrella syndicate 2999. 

Property Direct and Facultative 

Mark Abrahams 

We have a worldwide property account 

predominantly at present in North America, 

for business ranging from small surplus lines 

commercial and light industrial risks to larger 

Fortune 1000 type accounts. We are still willing, 

and have the capacity, to write catastrophe 

exposed business worldwide. 

Property Binders 

Martin Rowling 

We underwrite a select number of property 

related and commercial vehicle facilities, 

enabling agents to bind, on underwriters’ behalf, 

a comprehensive portfolio of business in the 

agent’s office. Business under these contracts, 

predominantly for US based agents, ranges from 

small to medium sized commercial and industrial 

risks, homeowner/condominium and real estate 

type risks and selective catastrophe peril 

facilities. 

Bernard Mageean 


Accident and Health 

John Moffatt 

Syndicate 2000 has developed a broad range 

of insurance products supported by extensive 

experience in all classes. The syndicate has 

dedicated professionals specialising in general 

personal accident, high risk personal accident, 

sports personal accident and film and contingency. 

Claims 


We provide a professional, effective and 

efficient claims service to our clients and their 

agents. Our claims handling expertise is used 

by our underwriters to ensure our future 

underwriting success. 


2 

3 

£94 

million 

1 

1 Property Direct and 

Facultative 66% 

2 Property Binders 27% 

3 Accident and Health 7% 

11 



QBE Aviation Syndicate 5555 


QBE Aviation Syndicate 5555 was launched 

in September 2006 and began writing 

business incepting 1 October 2006. 

The objective continues to be to develop a balanced 

portfolio across all classes of business namely 

general aviation, airlines, products and airports. 

We will continue to focus on growing the general 

aviation portfolio which will reduce the volatility in 

the major classes of our business which is in line 

with our long term strategy of balance across the 

account. We have reduced our airline portfolio for 

the second year running because although rates 

are improving the premium increases on some 

accounts have not been what was required by us. 

We have increased our position as lead 

underwriter within our General Aviation portfolio 

which enables us to have greater influence on 

the market and manage claims more effectively. 

The recent period of worldwide recession has 

magnified our clients’ focus on price being the 

major purchasing criteria, but our approach 

has been to promote the additional services, 

coverage and security we are able to offer as 

the incentive to insure with us. 

General Aviation 

Anthony Prokopiou 

We lead over 40% of the risks written which 

enables us to influence much of the business 

offered to us. 

The portfolio is divided into three sections: 

Private Business and Pleasure, which is 

essentially light aircraft owned by private 

individuals and flying clubs. 

Industrial Aid, which consists of fixed wing 

aircraft and helicopters owned or operated by 

corporations for the transport of their executives 

and employees. 

Commercial, which we categorise as aircraft with 

a maximum of 50 seats conducting revenue 

earning flights. 

The portfolio is internationally spread although 

the greater share of our business emanates from 

Europe and Asia. The majority of our business is 

written through brokers although we do generate 

income through branch offices which deal 

directly with the insured. 

12 



Emilio Di Silvio 


We are looking to develop our business through 

QBE’s extensive branch network and have 

recently opened operations in Norway and France. 

Airlines 

Dan Boultwood 

Our airline business is written on a co-insurance 

basis within the international subscription 

market. All risks are written through brokers. 

We have the capacity to underwrite all classes 

of airline business worldwide ranging from 

international, national and regional carriers 

to charter and cargo airlines. 

Our focus has been on the major flag carriers 

although our book is constantly under review and 

during the early years of the Syndicate we have 

made sweeping changes to the portfolio in line 

with our strict underwriting approach to the class. 

Our long term objective is to become an 

influential market leader demonstrating our 

knowledge, skills and expertise in this sector. 

Products and Airports 

Graham Daldry 

Our portfolio consists of an international book of 

products and airport business written predominantly 

through London based insurance brokers. The 

business is spread over all sectors including 

airframe engine and component manufacturers 

in addition to airport and airport related servicing 

risks which include refuelling operations. 

We have experience in all sectors and in a short 

period have gained a significant participation in 

each of these sectors of the aerospace market. 

We continue to expand our underwriting and claims 

services that we offer directly to the brokers and 

to our mutual clients. Our long term aim is to 

position ourselves as a recognised market leader. 

Claims 

Jerry Flaxman 

Our primary purpose is to provide our customers 

with an efficient, sympathetic and speedy resolution 

to their claims, as this is when the insurance policy 

and our promises come to life. Our claims handling 

philosophy focuses on being prepared and 

proactive in providing an effective and professional 

claims handling service to our clients. 

We adopt a sympathetic approach to determining 

any claims issues and with our breadth of 

expertise and experience can manage the 

simplest to the most complex and potentially 

costly claims, fairly and in a timely fashion. 


3 

£86 

million 

2 

1 

1 General Aviation 30% 

2 Airlines 37% 

3 Products and Airports 33%

Report of the directors 

of the managing agent 

The directors of QBE Underwriting Limited (QUL), the managing agent for Syndicate 2999, present the syndicate’s annual report and audited financial 

statements for the year ended 31 December 2009. 

This annual report is prepared using the annual basis of accounting as required by regulation 5 of the Insurance Accounts Directive (Lloyd’s Syndicate and 

Aggregate Accounts) Regulations 2008 (the 2008 Regulations). 

Principal activity 

Syndicate 2999 is an umbrella syndicate with John Neal as Active Underwriter. For 2009, it comprised the following five actively trading sub-syndicates: 

Sub-syndicate Managing Director Classes of business 

566 Jonathan Parry Reinsurance: property; aviation; casualty treaty; personal accident; and marine 

1036 Colin O’Farrell Marine insurance: hull; energy; liability; specie; cargo; war; and political risks 

1886 John Neal Non-marine: general liability; professional and financial lines; motor; specialty; and marine liability 

2000 Bernard Mageean Non-marine property insurance: property direct and facultative; property binders; and accident and health 

5555 Emilio Di Silvio Aviation insurance: general aviation; airlines; and products and airports 

Business review and future developments 

For the 2009 financial year Syndicate 2999 produced a combined operating ratio of 85.9% (2008 79.7%) and an insurance profit for the financial year 

of £133.7 million (2008 £166.4 million), analysed by sub-syndicate as follows: 

2999 2009 2008 

566 1036 1886 2000 Group 5555 Total Total 

£000 £000 £000 £000 £000 £000 £000 £000 

Gross written premium 372,682 352,771 135,186 93,918 – 85,928 1,040,485 852,267 

Net earned premiums 300,410 191,416 91,785 72,373 – 71,716 727,700 588,404 

Net claims (159,887) (88,021) (45,729) (23,180) – (64,378) (381,195) (316,865) 

Acquisition costs (45,720) (52,619) (29,489) (26,542) – (17,906) (172,276) (154,267) 

Net underwriting profit 94,803 50,776 16,567 22,651 – (10,568) 174,229 117,272 

Profit/(loss) on exchange (13,559) 10,067 170 1,293 – 626 (1,403) 99,591 

Other net operating expenses (21,304) (22,322) (7,344) (14,602) – (4,429) (70,001) (97,147) 

Investment return 5,264 7,678 2,510 14,590 57 814 30,913 46,638 

Total profit/(loss) for the year 65,204 46,199 11,903 23,932 57 (13,557) 133,738 166,354 

Claims ratio 53.2% 46.0% 49.8% 32.0% – 89.8% 52.4% 53.9% 

Combined operating ratio 80.0% 79.9% 89.8% 87.1% – 120.0% 85.9% 79.7% 

The reinsurance to close premium received from Syndicate 566, 2000 and previous years of account of £67.5 million is treated as gross and earned 

premium in the above table under sub-syndicate 566. This was the last open year of Syndicate 566 as a separate syndicate. 

The investment return shown as 2999 Group income above relates to US trust funds, and is not allocated by sub-syndicate. 

On analysis of the account on an underwriting year basis, the 2009 year produced a profit in the financial year of £25.0 million, relative to a loss of 

£12.2 million for the 2008 year, reflecting an improved trading environment. The overall 2009 financial profit of £133.7 million was achieved following a 

strong prior year performance and resultant reserve releases. 

13 





continued 

The Managing Director comments for each sub-syndicate are as follows: 

Jonathan Parry – QBE Reinsurance Syndicate 566 

Gross written premium £million Net earned premium £million Net underwriting profit £million Combined operating ratio % 

09 

08 

We are pleased to report a profit of £65.2 million for the 2009 financial year, which represents a combined operating ratio of 80% (78.1% in 2008). This 

result was assisted by there being a relatively benign year for natural catastrophes with the largest loss to the syndicate being US$8.1 million gross and 

net from the Australian bush fires. There was a degree of loss activity within the Aviation account with the largest loss being the Air France crash off Brazil 

and the syndicate was also affected by the Coogee/West Atlas oil rig loss near Australia which impacted the Marine account. Thankfully the syndicate’s 

philosophy of avoiding attritional losses has paid dividends and this has been the main driver behind a very pleasing result. 

The reinsurance market as a whole had a good year in 2009 and this has led to increased competition for business in 2010. We have seen some price 

reductions at the important 1 January renewal season which has led to the syndicate declining an element of the renewal portfolio, but on the whole, 

terms and conditions have remained at an acceptable level. 

With the spread of different classes of business within the reinsurance portfolio, we believe the syndicate is well set to steer through a difficult period 

of the market cycle and well positioned to take advantage of the next hard market. 

Colin O’Farrell – QBE Marine and Energy Syndicate 1036 

It is pleasing to be able to report that the syndicate has again delivered another excellent result, with a combined operating ratio of 79.9% and a profit 

for the year of £46.2 million (84.5% and £34.9 million in 2008). 

This has been achieved in a year that, whilst proving to be free from significant natural catastrophes, has been characterised by an abundance of risk 

losses across the insurance market, far in excess of normal activity. In addition, competition has increased in most lines of business throughout 2009 

leading to significant downward pressure on rating levels. Given these facts, the result is all the more impressive. 

Of course, premium and rates are just one side of the equation. As we have noted already, there were a great many risk losses over the course of the 

year. The vast majority affected the energy account but given the rating changes they are still performing ahead of plan. In fact the market absorbed the 

impact of the total loss of a North Sea platform (Ekofisk 2/4W in the joint UK/Norwegian sector) without jeopardising the syndicate’s underwriting plans. 

Once again we must pay testament to the diversity of our product offering. We are not beholden to the performance of any one portfolio and the resultant 

stability provides an excellent platform for profitable and controlled growth. Last year we noted the performance of the political accounts which have once 

again delivered an exceptional performance in what is a very challenging environment. This year we note the performance of the Burnett MGA, which was 

absorbed into the portfolio for the 2009 underwriting year. While the London insurance market has proved to be challenging in the latter part of the year, 

Burnett has been operating within a difficult market all year, with the added pressure of defending our business from previous underwriters. That they 

have performed better than plan is a sign of the quality of their staff and affirmation of the decision to buy the business. In 2010 we intend to further 

develop this platform. 

Many other accounts have delivered very good results. In a catastrophe-free year the Offshore Energy account would be expected to perform well and so 

their contribution is not surprising. However, more impressive is the result from the Hull and Liability accounts. Between them they have generated in 

excess of £20 million of profit in sectors where, disappointingly, competition is keen. 

14 



293 

373 

09 

08 

207 

300 


09 

08 

282 

353 

09 

08 

158 

191 

09 

08 

09 

08 

41 

31 

95 

51 

09 

08 

09 

08 

80.0 

78.1 

79.9 

84.5

During 2009 we installed a new Head of Business Unit in Singapore, to oversee our Asian platform. In a fiercely competitive market the benefits of having 

an experienced underwriter with authority in situ are beginning to pay dividends and we will use 2010 to further consolidate our influence in the region. 

As usual, another important contributor to the result has been the development of our prior years. After a torrid 2008, the 2007 underwriting year has had 

significantly reduced activity and the 2008 underwriting year has also performed well after a difficult first year. The robust reserving policy the syndicate 

has always adopted has once again stood us in good stead. As usual, thank you to the claims team for an exceptional performance. 

At the risk of dampening expectation for 2010, although some of the challenges we anticipated for 2009 above have stabilised, the difficulty of our current 

trading environment cannot be understated. It would truly be an impressive performance to even match 2009 next year! 

Finally, a personal note of thanks to all the syndicate staff for their continued application, tenacity and endurance in delivering the result. 

John Neal – QBE Syndicate 1886 


09 

08 

92 

135 

Syndicate 1886 remains a cornerstone in enabling QBE European Operations’ underwriters to deliver its products to brokers and clients around the globe. 

During 2009, the growth in income to Syndicate 1886 continued, with gross written income increasing by 47% from £92 million in 2008 to £135 million for 2009. 

This was principally from the International Liability and the Financial and Professional Lines accounts. Overall the 2009 financial year produced an underwriting 

profit of £17 million (2008 £29 million) and a combined operating ratio of 89.8% (70.9%), the largest contribution arising from the International Liability 

account. The 2008 and prior underwriting year contribution to the 2009 financial year result was a profit of £7 million, £8.8 million of which was from 

Syndicate 980 prior year releases following the continuation of a case estimate review. The small prior year deterioration on the pure 1886 account was 

largely in respect of International Liability and Overseas Motor accounts where claims experience over the year resulted in a strengthening of reserves. 

The syndicate continues to add to both its product range and its geographical reach, by further increasing its presence in Canada and expanding 

existing portfolios. 

Bernard Mageean – QBE Property Syndicate 2000 

09 

08 

Property 

The absence of a major natural catastrophe and a reduction in the number of major losses in the market place were key factors for 2009, albeit offset 

by reduced net earned premium. The opening quarter saw good rate increases in the USA, especially the natural catastrophe sector. Unfortunately owing 

to depressed mineral pricing and reduced business interruption values from individual clients, premium volumes did not increase as much as may have 

been expected. The rest of the year still saw increases but not as dramatic as seen in the first quarter. The rates outside of the US, bar the mineral and 

mining industries, were disappointing and struggled to achieve good increases. 

The outlook for 2010 is potentially more stable, with certain carriers looking to offload catastrophe aggregate in the USA but there seems to be a 

reasonable appetite within the market place to take up this shortfall. 

Accident and Health 

The Accident and Health portfolio experienced a good year in 2009 which was benign to large loss frequency and to price reductions. Pricing has been 

static on the professional sports business with the general business being more susceptible to competition in the US domiciled market. 

2010 should follow 2009 in relation to pricing as a large proportion of the book has already been renewed at expiring rates. 

70 

92 


09 

08 

86 

94 

09 

08 

72 

82 

09 

08 

09 

08 

17 

23 

29 

36 

09 

08 

09 

08 

45.5 

70.9 

89.8 

87.1 

15 





continued 

Emilio Di Silvio – QBE Aviation Syndicate 5555 

Gross written premium £million Net earned premium £million Net underwriting loss £million Combined operating ratio % 

09 

08 

Gross written premium for 2009 was down by £21.8 million, representing 20% of plan. This reflects our cautious approach to the airline and general aviation 

sectors of our portfolio which have experienced rate increases but not to our required level given the continued underwriting loss being experienced. 

During 2009, airline rates increased significantly as the year progressed although there was a softening in the last month when approximately 50% of the 

global income renews. 

As a result of this softening, we elected to further reduce our exposure in this area and either did not renew, or reduced our participation in a number 

of airline accounts which has resulted in reduction of our planned income. The rate increases has meant that even with the reduction in exposure we 

have retained a similar income base to the previous underwriting year. We believe this to be the correct strategy until the market further improves. We 

anticipate further rate increases during 2010. 

The most noticeable incidents in the year were Colgan Air and Yemenia Airways which together resulted in deterioration in the projected financial year 

result of our airline account. We declined the Air France renewal and therefore missed any loss falling under the airline placement. 

Our General Aviation business has fallen short of our plan due to the anticipated recovery of the market being slower than we expected. As a result 

our premium base is lower than we had planned, but we believe the portfolio now to be less volatile having focused on proven business. 

On a positive note, the market is beginning to show further signs of improvement which we believe will place us in a better position for 2010. 

Our Products and Airports portfolio continues to be profitable and is producing a result in line with plan. During the year we have been able to improve 

our position on some core/profitable accounts. 

The past year has been another challenging one but we believe that we have turned the corner. The market continues to improve and our portfolio 

is better balanced which should give us the opportunity to achieve our plan and result for 2010. 

Investment policy 

QBE European Operations operates an investment committee which is responsible for developing and monitoring the company’s investment policy and 

strategy, subject to UL Board approval. The committee also monitors the syndicate’s investment managers performance and their compliance with the 

internal guidelines set by the committee and external regulation. The investment policy is designed to ensure that appropriate levels of liquidity, credit and 

investment risk are maintained. 

Syndicate investments are currently limited to fixed income bonds and money market instruments. The majority of portfolios have an average credit rating 

equivalent to or better than Standard & Poor’s “AA”. The minimum permitted credit quality per the guidelines is “A-” grade instruments. The performance 

of the investment managers is monitored against an absolute return mandate, using other reference benchmarks or peer group performance used as key 

performance indicators. 

Management of the investment portfolios for the syndicate is delegated, under an arm’s length agreement, to Minster Court Asset Management (UK) Ltd, 

(the investment manager), a wholly owned subsidiary of the QBE Group. The activities of the investment manager are regulated by the Financial Services 

Authority (FSA). 

The syndicate operates a policy to minimise foreign exchange risk by holding assets in foreign currencies in order to match underwriting liabilities in such 

currencies where size is deemed material. The syndicate also holds foreign exchange derivatives in order to minimise foreign exchange risk. In order to 

reduce volatility of investment return in each financial year, the syndicate holds investments with shorter, average durations than would normally be 

expected if it were matching the duration of liabilities relating to long-tail classes of business. 

16 



86 

99 

09 

08 

72 

72 

09 

08 

11 

20 

09 

08 

120.0 

121.4

Investment performance 

The total investment returns achieved for each financial year are set out below. These include income earned on funds which are not managed by the 

investment manager, such as short term liquid deposits and certain regulatory overseas deposits. The combined total currency return for the year was 

2.4% (2008 3.8%). 

2009 2009 2009 2008 2008 2008 

Average Average Target Average Average Target 

funds return return funds return return 

Portfolio currency £000 % % £000 % % 

Canadian dollar 221,365 1.2 2.5 183,311 5.0 4.3 

Euro 49,657 3.4 2.9 46,770 1.9 4.0 

Sterling 171,322 4.0 2.8 228,482 6.9 5.2 

US dollar 1,681,339 2.2 1.8 1,643,560 3.0 4.6 

The benchmark target for fixed income portfolios is an absolute return yield to be agreed for each currency on an annual basis by the QBE European 

Operations executive board. Targets for each currency agreed for each financial year are shown above. 

Individual currency investment returns varied in performance when compared to their respective currency targets for the year. Outperformance was 

achieved in all currencies except Canadian dollars which fell short of the benchmark. Overall performance for the syndicate was ahead of the annual 

weighted target return of 2.0% and compared favourably to cash and industry benchmarks. The outperformance of investment return predominately 

relates to the significant narrowing or corporate credit spreads which occurred during the year. 

During 2009, the syndicate’s fixed income portfolios were managed conservatively with average duration of less than one year. As a result of the fund 

manager’s cautious stance, the syndicate incurred no credit defaults or write downs in any of its fixed interest portfolios. 

After taking account of the investment return, profit payments and significant exchange rate movements, overall syndicate funds closed the year in line 

with the forecast target. 

Managing agency board 

The board is committed to high standards of corporate governance and has established a practical governance framework which includes the delegation 

of considerable authority to divisional product management committees and a number of other authorised committees. All of the committees comprise 

appropriately skilled and experienced members, and operate under formal terms of reference. 

Divisional product management committees 

These committees are responsible for the reporting and review of all aspects of the division’s day to day management of underwriting. Each committee 

is chaired by the divisional Managing Director and comprises senior underwriting and management representatives of the division, together with 

representatives of the managing agency board. 

QBE Management Services (UK) Limited board 

This is a service company specifically established to provide key services to support the day to day management of the business, including: accounting, 

actuarial, claims, human resources, information technology, operations services, technical support and such other services as may be agreed. The board 

monitors and reports on the levels of service as set out in the respective customer services agreements. 

Other committees 

• Strategic underwriting committee: the committee is responsible for developing the business strategy of the syndicate. The committee is chaired by 

the Chief Underwriting Officer. 

• General business committee: the committee reviews and approves routine matters and regulatory returns which do not require board approval; 

reviews and approves matters where the board has delegated authority to the committee; and makes recommendations as such where board 

approval is required. The committee is chaired by the Compliance and Governance Director. 

• Group security committee: the committee is responsible for establishing and monitoring procedures and systems for the evaluation of all reinsurance 

security and outwards reinsurance intermediaries to be utilised by the syndicate. The committee is chaired by the Group Chief Risk Officer. 

• Investment committee: the committee is responsible for making recommendations to the board as to the appropriate investment policy and 

guidelines for each of the syndicates’ funds and to take responsibility for the day to day implementation and monitoring of the agreed strategy. 

The committee is chaired by the Chief Financial Officer. 

17 





continued 

• Underwriting and reinsurance review committee: the committee provides assurance that the control framework is appropriate and functioning 

in the mitigation of underwriting and reinsurance risk. The committee reviews the consistency of the framework with that of Group, the syndicate’s 

policies and procedures as well as legislative and regulatory requirements. It also contributes to change management projects, to ensure control 

weaknesses are properly identified, quantified and managed. The committee is chaired by a non-executive director. 

• Audit committee: the committee, which is constituted solely by non-executive directors, is responsible for assisting the boards in discharging 

their oversight responsibilities, by overseeing the financial reporting process and reviewing the effectiveness of the internal financial control and risk 

management system, the effectiveness of the internal audit function, the independent audit process including recommending the appointment and 

assessing the performance of the external auditor, and the process for monitoring compliance with laws and regulations. The committee is chaired 

by a non-executive director. 

The following three committees report to the audit committee: 

• Reserving committee: the committee is primarily responsible for undertaking a review of the reserve information in support of the accounts and 

solvency returns, and the calculation of total reserves ensuring consistency with the standards required to attain satisfactory audit and actuarial 

opinions. The committee is chaired by the Chief Risk Officer. 

• Risk and capital committee: the committee is responsible for ensuring an embedded framework to manage risk and capital is in place to support 

the strategic objectives. The committee ensures that all risks to the syndicate’s objectives are identified, assessed and monitored in accordance 

with the risk policies and to provide guidance and review on risk management and capital assessment issues. The committee is chaired by a 

non-executive director. 

• Internal audit committee: the committee provides assurance that an appropriate control framework is in place to mitigate business risk and 

that these controls are both functioning in practice and consistent with QBE Group and QUL procedures together with legislative and regulatory 

requirements. The committee also provides assurance that compliance and monitoring procedures are operating effectively. The committee is 

chaired by a non-executive director. 

Solvency II 

Solvency II will replace the existing solvency regime across Europe with all insurance companies expected to adhere to a single set of regulations and 

principles to assess their risk and capital requirements. QBE has been developing its risk and capital capabilities in preparation for this, and meeting the 

specific requirements of Solvency II is one component of this work. Within QBE, the risk and capital committee has specific responsibility for Solvency II, 

and is supported by a steering group to direct implementation in the context of details plans. 

Internal audit 

An independent internal audit function provides assurance to the internal audit committee chaired by a non-executive director as to the effectiveness 

of internal systems and controls. Internal audit makes recommendations for improvement and monitors progress towards completion via management 

action plans. Internal audit also provides independent feedback on the risk management process. 

Other governance issues 

QUL has adopted a code of conduct which outlines a set of general business ethics that apply to all employees when conducting any activity on behalf 

of the syndicate. The code of conduct requires employees to carry on business in an open and honest manner with customers, shareholders, employees, 

regulatory bodies, outside suppliers, intermediaries and the community at large. The code also deals with a number of other requirements including 

whistle-blowing, confidentiality, disclosure of information, conflicts of interest and treating customers fairly. Other policies are in place to cover areas 

such as health and safety, harassment, equal opportunities and financial crime. 

Directors 

Details of the directors of the managing agent that served during the year are shown on page 20. 

Creditor payment policy 

The managing agent’s policy on the payment of creditors is to abide by London insurance market practices, including those of Lloyd’s and the 

International Underwriting Association. The managing agent agrees terms with its other suppliers when it enters into binding purchase contracts. The 

managing agent seeks to abide by the payment terms agreed with these suppliers whenever it is satisfied that the supplier has provided the goods or 

services in accordance with the agreed terms and conditions. 

18 



Statement of managing agent’s responsibilities 

The Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 require the managing agent to prepare syndicate annual 

accounts at 31 December each year which give a true and fair view of the state of affairs of the syndicate as at that date and of its profit or loss for that year. 

In preparing the syndicate annual accounts, the managing agent is required to: 

• select suitable accounting policies which are applied consistently, subject to changes arising on the adoption of new accounting standards in the year 

• make judgements and estimates that are reasonable and prudent 

• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial 

statements; and 

• prepare the financial statements on the basis that the syndicate will continue to write future business unless it is inappropriate to presume that the 

syndicate will do so. 

The directors of the managing agent confirm that they have complied with the above requirements in preparing the annual accounts for Syndicate 2999. 

The directors of the managing agent are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the 

financial position of the syndicate and enable it to ensure that the syndicate annual accounts comply with the 2008 Regulations. They are also 

responsible for safeguarding the assets of the syndicate and hence for taking reasonable steps for prevention and detection of fraud and other 

irregularities. 

Statement of disclosure of information to auditors 

Each of the persons who is a director of the managing agent at the date of this report confirms that: 

• so far as each of the directors is aware, there is no information relevant to the audit of the syndicate’s financial statements for the year ended 

31 December 2009 of which the auditors are unaware; and 

• the director has taken all the steps that he/she ought to have taken in his/her duty as a director in order to make himself/herself aware of any relevant 

audit information and to establish that the syndicate’s auditors are aware of that information. 

Auditors 

The directors of the managing agent intend to reappoint PricewaterhouseCoopers LLP as the syndicate’s auditors. 

D J Winkett 

Director 

QBE Underwriting Limited 

Plantation Place 

30 Fenchurch Street 

London 

EC3M 3BD 

18 March 2010 

19 



Managing agency – 

corporate information 

Directors 

A M Bathia 

I D Beckerson 

S P Burns 

D A Constable resigned 10 March 2010 

M F Crane resigned 10 March 2010 

E Di Silvio resigned 10 March 2010 

P A Dodridge 

D Grossman resigned 10 March 2010 

P E Grove ** 

R Johnston appointed 10 March 2009, resigned 10 March 2010 

K M Lisson appointed 1 June 2009 

B Mageean 

V McLenaghan*** 

J D Neal 

C R O’Farrell 

F M O’Halloran 

P V Olsen* 

J W Parry 

B W Pomeroy * 

H M Posner * 

G S Rayner resigned 10 March 2010 

T J Whittaker 

D J Winkett 

* non-executive director 

** non-executive director from 1 January 2010, previously an executive director 

*** appointed alternate director to Frank O’Halloran from 10 March 2010, previously an executive director 

Directors’ interests 

None of the directors were members of the syndicate for the years of account open during the period of these accounts. 

Secretary 

S M Boland 

Registered office 



London 

EC3M 3BD 

Auditors 

PricewaterhouseCoopers LLP 

Chartered Accountants and Statutory Auditors 

Hay’s Galleria 

1 Hay’s Lane 

London 

SE1 2RD 

20 



Risk management 

The syndicate’s activities expose the business to a number of key risks which have the potential to affect the syndicate’s ability to achieve its business 

objectives. The board, supported by the risk and capital committee, is responsible for ensuring that an appropriate structure for managing these risks 

is maintained. The board’s appetite reflects the fact that it is not realistic or desirable to eliminate risk entirely, and therefore seeks to ensure that the 

appropriate controls are in place to effectively manage risks in line with the agreed tolerance. 

The syndicate continues to develop its risk management capability to ensure that an effective framework exists to support the management of all types 

of risk both currently and in the future under the Solvency II regime. Elements of this framework include the regular identification and assessment of the 

key risks and controls as well as clearly defined ownership of both the risks and controls. 

Risk groups 

The key risks can be grouped under the following headings: 

Insurance risk 

Credit risk 

Capital and liquidity risk 

Market risk 

Operational risk 

The syndicate’s business is to accept insurance risk, which is appropriate to enable it to meet its 

objectives. In line with the QBE Group risk strategy, the syndicate seeks to balance insurance risk 

with reward. All underwriting divisions are set specific and measurable performance targets, which 

they are expected to achieve by operating within the parameters of the approved business plan. 

In addition to the insurance terms of trade offered as standard, a certain amount of credit risk is 

unavoidable, as it can arise as a result of the inability or slow payment of any of the syndicate’s 

counterparties. The syndicate therefore seeks to limit exposure as far as is practical and has 

established detailed guidelines, procedures, limits and monitoring requirements to mitigate credit risk. 

The objective of the syndicate’s capital and liquidity risk management is to ensure that; capital is 

optimally managed; that the syndicate remains solvent by a significant margin and all withdrawals 

and funding requirements can be met out of readily available sources of funding. The syndicate 

seeks to maintain a strong liquidity position by holding its assets predominantly in liquid funds. 

Exposure to market risk is managed through the investment strategy, which reflects the appetite of 

the board. The strategy is deliberately conservative in order to eliminate potential volatility to market 

fluctuations as much as possible. 

The syndicate seeks to mitigate exposure to operational risks through ensuring that an effective 

infrastructure, robust systems and controls and appropriately experienced and qualified individuals 

are in place throughout the organisation. 

Group risk The syndicate seeks to align objectives to QBE Group strategy as well as to relevant Group policies, 

guidelines and reporting requirements. The CEO monitors and manages Group risks with the other 

Divisional CEOs within the Group through the Group Operations Executive. 

21 



Independent auditors’ report to the 

member of Syndicate 2999 

We have audited the syndicate annual accounts of Syndicate 2999 for the year ended 31 December 2009 which comprise the profit and loss account, 

the balance sheet, the statement of cash flows, and the related notes. These accounts have been prepared under the accounting policies set out therein. 

Respective responsibilities of managing agent and auditors 

The managing agent’s responsibilities for preparing the syndicate annual accounts in accordance with the Insurance Accounts Directive (Lloyd’s 

Syndicate and Aggregate Accounts) Regulations 2008 and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting 

Practice) are set out in the statement of managing agent’s responsibilities. 

Our responsibility is to audit the syndicate annual accounts in accordance with relevant legal and regulatory requirements and International Standards 

on Auditing (UK and Ireland). This report, including the opinion, has been prepared for and only for the syndicate’s members as a body and for no other 

purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown 

or in to whose hands it may come save where expressly agreed by our prior consent in writing. 

We report to you our opinion as to whether the syndicate annual accounts give a true and fair view and are properly prepared in accordance with the 

Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and United Kingdom Generally Accepted Accounting 

Practice. We also report to you whether, in our opinion, the information given in the report of the directors of the managing agent is consistent with the 

syndicate annual accounts. 

In addition we report to you if, in our opinion, the managing agent has not kept adequate accounting records in respect of the syndicate, if the syndicate 

annual accounts are not in agreement with the accounting records, if we have not received all the information and explanations we require for our audit or if 

information specified by law regarding remuneration of the directors of the managing agent and the active underwriter and other transactions is not disclosed. 

We read the other information attached to the syndicate annual accounts and consider whether it is consistent with the audited syndicate annual 

accounts. This other information comprises only the report of the directors of the managing agent and the information on pages 1 to 12 and 20 to 21. 

We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the syndicate annual 

accounts. Our responsibilities do not extend to any other information. 

Basis of audit opinion 

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit 

includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the syndicate annual accounts. It also includes an 

assessment of the significant estimates and judgements made by the directors of the managing agent in the preparation of the syndicate annual 

accounts, and of whether the accounting policies are appropriate to the syndicate’s circumstances, consistently applied and adequately disclosed. 

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with 

sufficient evidence to give reasonable assurance that the syndicate annual accounts are free from material misstatement, whether caused by fraud or 

other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the syndicate annual accounts. 

Opinion 

In our opinion: 

• the syndicate annual accounts give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state 

of the syndicate’s affairs as at 31 December 2009 and of its profit and cash flows for the year then ended; 

• the syndicate annual accounts have been properly prepared in accordance with the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate 

Accounts) Regulations 2008 and United Kingdom Generally Accepted Accounting Practice; and 

• the information given in the report of the directors of the managing agent is consistent with the syndicate annual accounts. 

Nigel Terry (Senior Statutory Auditor) 

For and on behalf of PricewaterhouseCoopers LLP 

Chartered Accountants and Statutory Auditors 

London 

18 March 2010 

22 



Profit and loss account: 

technical account – general business 

For the year ended 31 December 2009 

2009 2008 

Notes £000 £000 £000 £000 

Earned premiums, net of reinsurance 

Gross premiums written 

Continuing operations 3 1,041,277 851,963 

Discontinued operations (792) 304 

3 1,040,485 852,267 

Outward reinsurance premiums (285,506) (217,767) 

Net premiums written 754,979 634,500 

Changes in the provision for unearned premiums 

Gross amount (46,418) (49,975) 

Reinsurers’ share 19,139 3,879 

Change in the net provision for unearned premiums (27,279) (46,096) 

Earned premiums, net of reinsurance 727,700 588,404 

Investment return transferred from the non-technical account 30,913 46,638 

Claims incurred, net of reinsurance 

Claims paid 

Gross amount (573,841) (458,859) 

Reinsurers’ share 206,614 144,759 

Net claims paid (367,227) (314,100) 

Change in the provision for claims 

Gross amount 11,865 (55,371) 

Reinsurers’ share (25,833) 52,606 

Change in the net provisions for claims (13,968) (2,765) 

Claims incurred, net of reinsurance 4 (381,195) (316,865) 

Net operating expenses 5 (243,680) (151,823) 

Balance on technical account for general business 

Continuing operations 95,666 119,523 

Discontinued operations 38,072 46,831 

Balance on technical account – general business 133,738 166,354 

The notes set out on pages 28 to 41 form an integral part of these financial statements. 

23 



Profit and loss account: 

non-technical account 


24 




Notes £000 £000 £000 £000 

Balance on technical account – general business 133,738 166,354 

Investment income 8 30,827 50,400 

Unrealised gains on investments 1,514 – 

Investment expenses and charges 8 (1,428) (1,317) 

Unrealised losses on investments – (2,445) 

Investment return 30,913 46,638 

Investment return transferred to the general business technical account (30,913) (46,638) 

Continuing operations 95,666 119,523 

Discontinued operations 38,072 46,831 

Profit for the financial year 133,738 166,354 

The results above are all derived from continuing operations. 

There are no recognised gains or losses for the current and preceding year other than those included in the profit and loss account above and therefore 

no statement of recognised gains and losses has been presented. 

The notes set out on pages 28 to 41 form an integral part of these financial statements.

Balance sheet 

As at 31 December 2009 


Assets Notes £000 £000 

Investments 

Other financial investments 9 1,288,089 1,414,383 

Reinsurers’ share of technical provisions 

Provision for unearned premiums 56,365 37,226 

Claims outstanding 641,811 743,313 

698,176 780,539 

Debtors 

Debtors arising out of direct insurance operations 11 357,553 367,450 

Debtors arising out of reinsurance operations 11 269,424 242,249 

Other debtors 1,377 875 

628,354 610,574 

Other assets 

Cash at bank 21,794 10,136 

Overseas deposits 12 86,635 69,768 

108,429 79,904 

Prepayments and accrued income 

Accrued interest 3,626 15,287 

Other prepayments and accrued income 80 89 

Deferred acquisition costs 80,385 71,618 

84,091 86,994 

Total assets 2,807,139 2,972,394 


25 



Balance sheet 

continued 

As at 31 December 2009 


Liabilities Notes £000 £000 

Capital and reserves 

Member’s balance 13 130,274 172,318 

Technical provisions 

Provision for unearned premiums 403,982 357,564 

Claims outstanding 1,931,192 2,098,100 

26 



2,335,174 2,455,664 

Creditors 

Creditors arising out of direct insurance operations 14 126,420 109,952 

Creditors arising out of reinsurance operations 166,805 143,085 

Other creditors 45,678 91,290 

338,903 344,327 

Accruals and deferred income 2,788 85 

Total liabilities 2,807,139 2,972,394 

These financial statements on pages 23 to 41 were approved by the board of QBE Underwriting Limited on 18 March 2010 and were signed on 

its behalf by 

D J Winkett 

Director 

The notes set out on pages 28 to 41 form an integral part of these financial statements.

Statement of cash flows 



Notes £000 £000 

Net cash inflow from operating activities 173,855 129,861 

Transfer to members in respect of underwriting participations 

Distribution of profits (169,207) (19,950) 

Open year profit release (6,491) (79,624) 

Financing 

Cash calls received 26 40 

(1,817) 30,327 

Cash flows were invested as follows: 

Increase/(decrease) in cash holdings 15 12,094 (5,382) 

Increase/(decrease) in overseas deposits 15 18,433 (5,909) 

Net portfolio (disinvestment)/investment 15 (32,344) 

Net (disinvestment)/investment of cash flows (1,817) 30,327 


£000 £000 

Reconciliation of operating profit/(loss) to net cash flow from operating activities 

Operating profit on ordinary activities 133,738 166,354 

Realised and unrealised investment losses/(gains) 95,952 (306,672) 

(Decrease)/increase in net technical provisions (38,127) 289,235 

(Increase) in debtors (14,877) (146,318) 

(Decrease)/increase in creditors (2,721) 127,190 

Other (110) 72 

Net cash inflow from operating activities 173,855 129,861 


27 



Notes to the financial statements 


1 Accounting policies 

a) Basis of preparation 

These financial statements have been prepared in accordance with regulation 5 of the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate 

Accounts) Regulations 2008, and applicable Accounting Standards in the United Kingdom and comply with the Statement of Recommended Practice 

on Accounting for Insurance Business issued by the Association of British Insurers in December 2005 (as amended in December 2006), except that 

foreign exchange gains and losses are taken to the profit and loss technical account. 

The accounts incorporate all transactions committed to by the 2009 year of account and prior years of account. 

The directors of the managing agent have prepared the financial statements on the basis that the syndicate will continue to write future business. 

The ability of the syndicate to meet its obligations as they fall due is underpinned by the support provided by Lloyd’s solvency process and its chain 

of security for any members who are unable to meet their underwriting liabilities. Members’ funds at Lloyd’s are further explained in note 2. 

b) Insurance 

The result is determined on an annual basis whereby the incurred cost of claims, commission and related expenses are charged against the earned 

portion of premiums, net of reinsurance, as described below. 

i) Premiums written 

Premiums written comprise premiums on contracts incepted during the financial year, together with adjustments made in the year to premiums written 

in prior years. Premiums are shown gross of commissions payable to intermediaries and exclude taxes and duties levied on them. Estimates are included 

for premiums due but not yet received or notified, less an allowance for cancellations. 

ii) Unearned premiums 

Unearned premiums represent the proportion of premiums written in the year that relate to unexpired terms of policies in force at the balance sheet date, 

calculated on the basis of established earnings patterns which reflects the incidence of risk. 

iii) Reinsurance premium ceded 

Outwards reinsurance premiums are accounted for in the same accounting period as the premiums for the related direct or inwards business 

being reinsured. 

iv) Claims provisions and related recoveries 

Claims incurred comprise claims and related expenses paid in the year and changes in provisions for outstanding claims, including provisions for claims 

incurred but not reported and related expenses, together with any other adjustments to claims from previous years. Where applicable, deductions are 

made for salvage and other recoveries. 

Provision is made at the year end for the estimated cost of claims incurred but not settled at the balance sheet date, including the cost of claims incurred 

but not yet reported to the syndicate. The estimated cost of claims includes expenses to be incurred in settling claims and allows for the expected value 

of salvage and other recoveries. 

Outstanding claims and reinsurance recoveries are estimated by reviewing individual claims and making allowance for claims incurred but not reported 

using past experience and trends adjusted for foreseeable events. 

28 



1 Accounting policies continued 

b) Basis of accounting for insurance continued 

iv) Claims provisions and related recoveries continued 

Case estimates are set by experienced claims technicians, applying their skill and specialist knowledge to the circumstances of individual claims. The 

ultimate cost of outstanding claims, including claims incurred but not reported, is estimated by the syndicate actuaries who apply recognised actuarial 

techniques considered appropriate for each portfolio, such as the Chain Ladder and Bornhuetter-Ferguson methods. These methods take into account, 

amongst other things, statistical analysis of the development of the value and frequency of past claims and the results of analyses undertaken at the point 

of underwriting. Techniques considered appropriate for specific portfolios include contract by contract analysis, segmentation by subclass, and stochastic 

analysis. Classes of business are analysed at a level of detail appropriate to their materiality. Allowance is made for changes or uncertainties which may 

create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or decrease when compared with the cost of 

previously settled claims, for example, one-off occurrences and changes in mix of business, policy conditions or the legal environment. 

The syndicate actuaries produce an estimate of reserves, which is reviewed by an independent actuarial firm, and is then assessed by QBE management 

with input from the syndicate underwriting and claims experts. 

As provisions for claims outstanding are based on information which is currently available, the eventual outcome may vary from the original assessment 

depending on the nature of information received or developments in future periods. For certain classes of business including liability and other long-tail 

classes written by the syndicate, claims may not be apparent for many years after the event giving rise to the claim has happened. These classes will 

typically display greater variation between initial estimates and final outcomes. Differences between the estimated cost and subsequent re-estimation 

or settlement of claims are reflected in the technical account for the year in which these claims are re-estimated or settled. 

Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from reinsurers based 

upon the gross provisions and having due regard to collectability. 

v) Unexpired risks provision 

Provision is made for any deficiencies arising when unearned premiums, net of associated acquisition costs, are insufficient to meet expected claims 

and expenses after taking into account future investment return on the investments supporting the unearned premiums provision and unexpired risks 

provision. The expected claims are calculated having regard to events that have occurred prior to the balance sheet date. 

Unexpired risks surpluses and deficits are offset where business classes are managed together. 

vi) Reinsurance to close (“RITC”) 

Following the end of the third year, the underwriting account of each Lloyd’s syndicate is normally closed by reinsurance into the following year of 

account. The amount of the RITC premium is determined by the managing agent, generally by estimating the cost of claims notified but not settled 

together with the estimated cost of claims incurred but not reported at that date and claims handling costs. 

The payment of an RITC premium does not eliminate the liability of the closed year for outstanding claims. If the reinsuring syndicate was unable to meet 

its obligations, and other elements of Lloyd’s chain of security were to fail, then the closed underwriting account would have to settle the outstanding 

claims. The directors consider that the likelihood of such a failure of the RITC is remote, and consequently the RITC has been deemed to settle liabilities 

outstanding at the closure of an underwriting account. 

As the RITC is concluded after the balance sheet date, this is a non-adjusting event under FRS 21, “Events after balance sheet date”, and recognised 

in the period in which it is concluded. 

vii) Acquisition costs 

Acquisition costs, which represent commission and other costs related to the acquisition of new insurance contracts, are deferred subject to recoverability 

and amortised over the period to which the related premiums are earned. 

29 




continued 



c) Foreign currency transactions 

Transactions denominated in foreign currencies are translated into sterling, the functional currency, at the rate of exchange prevailing at the time of 

the transaction. 

Assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange prevailing at the balance sheet date with 

the exception of non-monetary assets and liabilities which are maintained at historic rates. 

Exchange differences are included in the technical account. 

d) Financial assets 

Financial assets are managed on a fair value basis in accordance with the syndicate’s investment strategy. The syndicate has therefore elected 

to measure all financial assets at fair value through the profit and loss non-technical account, except where noted below. 

Listed investments are stated at fair value on current bid prices quoted by the relevant exchanges. Unlisted investments are carried at the directors’ 

estimate of the current fair value, except as stated below. 

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently stated at fair value obtained 

from quoted market prices in active markets. 

Financial assets are derecognised when the right to receive future cash flows from the assets has expired, or has been transferred, and the syndicate 

has transferred substantially all the risks and rewards of ownership. 

e) Investment return 

Investment return comprises all investment income, realised investment gains and losses and movements in unrealised gains and losses, net of 

investment expenses, charges and interest. 

Realised gains and losses on investments carried at fair value are calculated as the difference between net sale proceeds and purchase price. 

Unrealised gains and losses on investments represent the difference between the valuation at the balance sheet date and their purchase price, or if they 

have previously been valued, their valuation at the previous balance sheet date, together with a reversal of unrealised gains and losses recognised in 

earlier accounting periods in respect of investment disposals in the current year. 

Investment return is initially recorded in the non-technical account. A transfer is made from the non-technical account to the general business technical 

account. Investment return has been wholly allocated to the technical account as all investments related to the technical account. 

f) Taxation 

Under Schedule 19 of the Finance Act 1993 managing agents are not required to deduct basic rate income tax from trading income. In addition, all UK 

basic rate income tax deducted from syndicate investment income is recoverable by managing agents and consequently the distribution made to the 

member is gross of tax. Capital appreciation falls within trading income and is also distributed gross of tax. 

No provision has been made for any United States Federal Income tax payable on underwriting results or investment earnings. Any payments on account 

made by the syndicate during the year are included in the balance sheet under the heading “member’s balance”. 

No provision has been made for any overseas tax payable by the member on underwriting results. 

30 




g) Administrative expenses 

Administrative expenses are taken into account on an accruals basis. These recharged expenses include the costs of staff, who are employed by QBE 

Management Services (UK) Limited. QBE Management Services (UK) Limited operates both defined benefit and defined contribution pension schemes, 

the expense of which is included in the recharges. 

h) Profit commission 

Profit commission is recognised on the basis of the annual accounting result for each year of account, and charged to the syndicate as incurred. 

From the 2008 year of account, no profit commission has been charged by the managing agent. For prior years of account profit commission was 

charged by the managing agent at a rate of 20% of profit subject to the operation of a deficit clause. 

2 Capital 

Each syndicate in Lloyd’s is required to carry out a self assessment of the capital it requires, the Individual Capital Assessment (ICA). This is required 

to reflect the level of capital needed to ensure that the syndicate will remain solvent for the next 12 months in 99.5% of future foreseeable scenarios. 

QBE has developed a sophisticated stochastic risk-based capital model over the past three years, which incorporates the key risks being faced by each 

of the legal entities. The output from this model, which is tailored to QBE’s risk profile, is reported to the Capital Committee, which in turn recommends 

it to the relevant QBE Boards for adoption. The ICAs have been reviewed by Lloyd’s, and form the basis of the minimum capital required by the syndicate. 

Every member is required to hold capital at Lloyd’s which is held in trust and known as Funds at Lloyd’s (FAL). These funds are intended primarily to cover 

circumstances where syndicate assets prove insufficient to meet participating members’ underwriting liabilities. 

The level of FAL that Lloyd’s requires a member to maintain is determined by Lloyd’s based on FSA requirements and resource criteria. FAL has regard 

to a number of factors including the nature and amount of risk to be underwritten by the member and the assessment of the reserving risk in respect 

of business that has been underwritten. Since FAL is not under the management of the managing agent, no amount has been shown in these financial 

statements by way of such capital resources. However, the managing agent is able to make a call on the member’s FAL to meet liquidity requirements 

or to settle losses. 

All externally imposed capital requirements have been complied with during the year. 

QBE’s capital model has been embedded in the business, and as well as assessing minimum capital requirements for QBE entities, it has also been 

used to: 

• allocate capital to class of business for business planning and performance monitoring; 

• assess the effectiveness of existing reinsurance protections and new reinsurance strategies; and 

• consider the implications of Solvency II on the business. 

31 




continued 


3 Segmental analysis 

Gross Gross Gross Net 

premiums premium claims operating Reinsurance 

written earned incurred expenses balance Total 

2009 £000 £000 £000 £000 £000 £000 

Accident and health 16,417 17,013 (5,795) (7,387) (3,251) 580 

Motor (third party liability) 16,265 14,834 376 (5,074) (3,202) 6,934 

Marine, aviation and transport 122,769 116,868 (66,806) (28,560) (15,157) 6,346 

Fire and other damage to property 98,870 91,326 (48,169) (34,460) (31,077) (22,380) 

Third party liability 176,810 154,174 (84,743) (43,241) (11,051) 15,140 

Credit and suretyship 18,523 18,966 (4,018) (5,019) (7,549) 2,380 

Miscellaneous 4 4 (34) (4) 24 (10) 

449,658 413,186 (209,189) (123,744) (71,263) 8,990 

Reinsurance acceptances 590,827 580,882 (352,787) (119,935) (14,323) 93,837 

Total 1,040,485 994,067 (561,976) (243,680) (85,586) 102,825 

Gross Gross Gross Net 

premiums premium claims operating Reinsurance 

written earned incurred expenses balance Total 

2008 £000 £000 £000 £000 £000 £000 

Accident and health 15,669 12,132 (4,186) (3,019) (2,707) 2,220 

Motor (third party liability) 11,142 5,245 (3,669) (2,034) 119 (339) 

Marine, aviation and transport 113,079 107,325 (93,643) (21,624) (207) (8,149) 

Fire and other damage to property 80,931 81,921 (52,954) (29,012) (9,659) (9,704) 

Third party liability 136,129 146,638 (139,520) (25,049) 33,442 15,511 

Credit and suretyship 18,042 13,971 1,452 (5,324) (6,235) 3,864 

Miscellaneous (4) (4) 1,733 (11) (1,400) 318 

374,988 367,228 (290,787) (86,073) 13,353 3,721 

Reinsurance acceptances 477,279 435,064 (223,443) (65,751) (29,876) 115,993 

Total 852,267 802,292 (514,230) (151,824) (16,523) 119,714 

Operating expenses includes standard personal expenses and reinsurance related expenses. 

The geographical analysis of gross premiums written by destination of risk is as follows: 

32 




£000 £000 

UK 93,664 83,776 

Other EU 70,979 78,740 

USA 241,137 191,909 

Other 634,705 497,842 

1,040,485 852,267 

The above includes the effects of RITC accepted as per note 18, which is wholly included in the “reinsurance acceptances” segment. All premiums were 

concluded in the UK.

4 Claims outstanding 

During the year a positive net run-off development of £27,740,000 (2008 £126,187,000), of which the main contributors were Casualty with a positive 

development of £10,343,000 and Property with a negative development of £10,535,000 (2008 reinsurance accepted £97,123,000). 

5 Net operating expenses 


£000 £000 

Acquisition costs – direct commission 135,605 126,871 

Acquisition costs – other 42,908 36,693 

Changes in deferred acquisition costs (6,002) (8,509) 

Administrative expenses 70,001 97,147 

Reinsurance commission revenue (235) (788) 

(Profit)/loss on exchange 1,403 (99,591) 

243,680 151,823 

Administrative expenses include auditors’ remuneration: 

Fees payable to the syndicate’s auditor for the audit of the syndicate’s annual accounts 297 336 

Other services pursuant to legislation 294 288 

6 Employees 

All staff are employed by QBE Management Services (UK) Limited, a wholly owned subsidiary of QBE Insurance Group Limited. 

The average number of staff represented by the above recharge for the period was: 


Number Number 

Underwriting 167 137 

Claims 56 52 

Administration 266 249 

Total employee costs for the year were: 

489 438 


£000 £000 

Wages and salaries 52,653 46,979 

Social security costs 6,273 5,606 

Pension costs 3,785 3,466 

7 Directors’ emoluments 

62,711 56,051 

The directors of QUL and the Active Underwriter received the following aggregate remuneration charged to the syndicate and included within net 

operating expenses: 


£000 £000 

Directors of the managing agent 7,481 5,895 

Active Underwriter 175 142 

Further information in respect of the directors of QUL is provided in that company’s financial statements. 

33 




continued 


8 Investment income, expenses and charges 

Income from investments 

34 




£000 £000 

Income from investments 24,542 46,590 

Gains on the realisation of investments 6,285 3,810 

Investment expenses and charges 

30,827 50,400 


£000 £000 

Investment management expenses 1,428 1,317 

9 Other financial investments 

a) Designated at fair value through profit and loss 

Cost Fair value 

2009 2008 2009 2008 

£000 £000 £000 £000 

Shares and other variable yield securities and units in unit trusts 89,876 66,075 89,876 66,075 

Debt securities and other fixed income securities 1,126,818 1,286,232 1,128,312 1,283,884 

Participation in investment pools 60,968 57,078 60,968 57,078 

Deposits with credit institutions 8,507 7,346 8,507 7,346 

Derivatives – – 426 – 

None of the above investments are quoted on recognised stock exchanges. 

1,286,169 1,416,731 1,288,089 1,414,383 

b) Derivative financial instruments 


Fair value 

Foreign currency derivatives 

£000 £000 

Other investments 426 – 

Other creditors (6,969) (30,891) 

Foreign currency derivatives 

The syndicate uses forward foreign exchange derivatives in order to hedge its exposure to foreign currencies. These are valued using the underlying 

foreign exchange rates at the year end. Contractual amounts for foreign currency exchange derivatives outstanding at the balance sheet date include 

foreign exchange contracts to transact the net equivalent of £6,543,000 (2008 £30,891,000). 

The forward foreign exchange derivatives outstanding at year end expired by 5 February 2010 (2008 5 February 2009). 

During the year an unrealised loss of £6,542,000 (2008 £30,891,000) relating to such contracts was recognised. This is included in the net foreign 

exchange loss of £1,403,000 (2008 gain £99,591,000) in the profit and loss technical account.

9 Other financial investments continued 

c) Valuation hierarchy 

The table below shows the financial instruments carried at fair value by valuation method. 

Level 1 Level 2 Level 3 Total 

2009 2009 2009 2009 

£000 £000 £000 £000 

Overseas deposits – 86,635 – 86,635 

Debt securities and other fixed income securities – 1,128,311 – 1,128,311 

Derivatives – 427 – 427 

– 1,128,738 – 1,128,738 

Notes: 

Level 1 Valued using unadjusted quoted prices in active markets for identical financial instruments. This category includes listed equity shares, certain exchange-traded 

derivatives, G10 government securities and certain US agency securities. 

Level 2 Valued using techniques based significantly on observable market data. Instruments in this category are valued using: 

a) quoted prices for similar instruments or identical instruments in markets which are not considered to be active; or 

b) valuation techniques where all the inputs that have a significant effect on the valuation are directly or indirectly based on observable market data. 

The type of instruments that trade in markets that are not considered to be active, but are based on quoted market prices, broker dealer quotations, or alternative 

pricing sources with reasonable levels of price transparency and those instruments valued using techniques include most government agency securities, 

investment-grade corporate bonds, less liquid listed equities, state and municipal obligations, and certain money market securities and loan commitments and 

most OTC derivatives. 

Level 3 The syndicate has no financial instruments in level 3, which is the category where instruments have been valued using a valuation technique where at least one 

input (which could have a significant effect on the instrument’s valuation) is not based on observable market data. Where inputs can be observed from market data 

without undue cost and effort, the observed input is used. Otherwise, the syndicate determines a reasonable level for the input. 

10 Financial risk 

The activities of the syndicate expose it to financial risks such as market risk (including currency risk, cash flow and fair value interest rate risk and price 

risk), credit risk and liquidity risk. The syndicate’s risk management framework recognises the unpredictability of financial markets and seeks to minimise 

potential adverse effects on the financial performance of the syndicate. 

The key objectives of the syndicate’s asset and liability management strategy are to ensure sufficient liquidity is maintained at all times to meet the 

syndicate’s obligations, including its settlement of insurance liabilities and, within these parameters, to optimise investment returns for the syndicate. 

35 




continued 


10 Financial risk continued 

i) Market risk 

Currency risk 

The syndicate is exposed to foreign currency risk in respect of its foreign currency exposures and forward foreign exchange derivatives are used to 

protect the currency positions. 

The risk management process covering forward foreign exchange derivatives involves close senior management scrutiny, including regular board and 

other management reporting. All forward foreign exchange derivatives are subject to delegated authority levels provided to management, and levels 

of exposure are reviewed on an ongoing basis. 

The table below shows the impact on profit/(loss) and equity of changes in the value of the syndicate’s financial instruments as a result of movements 

in foreign exchange rates. 


Movement in Profit/(loss) Equity Profit/(loss) Equity 

variable % £000 £000 £000 £000 

US dollar +10 (16,485) (16,485) (8,415) (8,415) 

–10 20,148 20,148 10,284 10,284 

Canadian dollar +10 (1,591) (1,591) (701) (701) 

–10 1,944 1,944 856 856 

Euro +10 (1,659) (1,659) 105 105 

–10 2,027 2,027 (128) (128) 

The syndicate manages its exposure to foreign currencies based on the balance sheet by currency which also includes insurance assets and liabilities. 

Interest rate risk 

The syndicate is exposed to interest rate risk arising on interest bearing assets. Assets with floating interest rates expose the syndicate to cash flow 

interest rate risk. Fixed interest rate assets expose the syndicate to fair value interest rate risk. The syndicate’s strategy is to invest in high quality, liquid 

fixed interest securities and cash and to actively manage duration. The investment portfolios are actively managed to achieve a balance between cash 

flow interest rate risk and fair value interest rate risk bearing in mind the need to meet the liquidity requirements of the business. 

The syndicate’s exposure to interest rate risk and the effective weighted average interest rates for each significant class of interest bearing financial assets 

and liabilities is as follows: 

Fixed interest rate maturing in 

Floating One year One to Two to 

interest rate or less two years three years Total 

2009 £000 £000 £000 £000 £000 

Interest bearing assets 969,383 302,562 59,884 64,263 1,396,092 

Financial liabilities – – – – – 

Net interest bearing financial assets 969,383 302,562 59,884 64,263 1,396,092 

Fixed interest rate maturing in 

Floating One year One to Two to 

interest rate or less two years three years Total 

2008 £000 £000 £000 £000 £000 

Interest bearing assets 429,960 1,042,048 2,466 19,813 1,494,287 

Financial liabilities – – – – – 

Net interest bearing financial assets 429,960 1,042,048 2,466 19,813 1,494,287 

36 




i) Market risk continued 

Interest rate risk continued 

The syndicate’s sensitivity to movements in interest rates in relation to the value of fixed interest securities is shown in the table below. 


Movement in Profit/(loss) Equity Profit/(loss) Equity 

variable % £000 £000 £000 £000 

Interest rate movement – fixed interest securities +1.5 (7,754) (7,754) (13,234) (13,234) 

–1.5 7,754 7,754 13,234 13,234 

Price risk 

Price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than 

those arising from interest rate or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, 

or factors affecting all similar financial instruments traded on the market. 

The syndicate holds no equity investments and so has a low exposure to price risk. 

ii) Credit risk 

Credit risk is the risk that one party to a financial instrument will cause financial loss to the other party by failing to discharge an obligation. 

Credit risk exposures are calculated regularly and compared with authorised credit limits before further transactions are undertaken with counterparties. 

100% (2008 99.6%) of total fixed interest and cash investments are with counterparties having a Moody’s rating of Aa or better. The syndicate does 

not expect any investment counterparties to fail to meet their obligations given their strong credit ratings. The syndicate only uses derivatives in highly 

liquid markets. 

The reinsurers’ share of claims outstanding is also exposed to credit risk. 92.6% (2008 94.9%) of the balance is with reinsurers with an S&P rating of “A-” 

or greater. 

The following table provides information regarding the carrying value of the syndicate’s financial assets, excluding amounts in respect of insurance 

contracts. All amounts are neither past due nor impaired at the balance sheet date. 


£000 £000 

Cash 21,794 10,136 

Interest bearing investments 1,374,724 1,484,151 

Other receivables 5,370 16,456 

1,401,888 1,460,743 

37 




continued 



iii) Liquidity risk 

In addition to the treasury cash held for working capital requirements, a minimum percentage of the syndicate’s total financial assets is held in liquid, 

short term money market securities to ensure there are sufficient liquid funds available to meet current obligations. 

The table below summarises the maturity profile of all financial liabilities based on the remaining contractual obligations. 

38 




Within Over Within Over 

one year one year one year one year 

£000 £000 £000 £000 

Trade and other payables 293,183 42 252,976 61 

Derivative financial instruments 6,969 – 30,891 – 

Borrowings – – 14,394 – 

The syndicate has no significant concentration of liquidity risk. 

11 Debtors 

i) Debtors arising out of direct insurance operations 

300,152 42 298,261 61 


£000 £000 

Due within one year 

Due from policyholders 1,247 1,384 

Due from intermediaries 355,855 365,460 

Due after one year 

Due from intermediaries 451 606 

ii) Debtors arising out of reinsurance operations 

357,553 367,450 


£000 £000 

Due within one year 268,380 242,249 

Due after one year 1,044 – 

269,424 242,249

12 Overseas deposits 

These are lodged as a condition of conducting underwriting business in certain countries. 


£000 £000 

Joint Asset Trust Funds 7,419 8,025 

Canadian Margin Fund 19,329 14,147 

Kentucky Trust Funds 4,382 4,153 

Australian Trust Funds 29,201 18,205 

South African Trust Funds 8,265 9,423 

ASL Overseas deposit 9,246 4,355 

Additional Securities Illinois Deposit 8,793 11,460 

The deposits with Additional Securities Limited are required to allow names to write business in various overseas countries. 

13 Reconciliation of member’s balance 

86,635 69,768 


£000 £000 

At 1 January 172,318 105,426 

Profit for the financial year 133,738 166,354 

Payments out of profit to member’s personal reserve funds (169,207) (99,574) 

Open year profit release (6,491) – 

Other (84) 112 

At 31 December 130,274 172,318 

Members participate on syndicates by reference to years of account and their ultimate result, assets and liabilities are assessed with reference to policies 

in that year of account in respect of their membership of a particular year. 

14 Creditors arising out of direct insurance operations 


£000 £000 

Due within one year 

Due to policyholders 1,263 1,277 

Due to intermediaries 125,115 108,650 

Due after one year 

Due to intermediaries 42 25 

126,420 109,952 

39 




continued 


15 Movement in opening and closing portfolio investments net of financing 

40 




£000 £000 

Net cash inflow for the year: 

Increase/(decrease) in cash holdings 12,094 (5,382) 

Increase/(decrease) in overseas deposits 18,433 (5,909) 

Net portfolio (disinvestments)/investments (32,344) 41,618 

Movement arising from cash flows (1,817) 30,327 

Changes in market value and exchange rates (95,952) 306,672 

Total movement in portfolio investments, net of financing (97,769) 336,999 

At 1 January, net of financing 1,494,287 1,157,288 

At 31 December, net of financing 1,396,518 1,494,287 

Movement in cash, portfolio investments and financing 

Changes 

to market At 31 

1 January value and December 

2009 Cash flow currencies 2009 

£000 £000 £000 £000 

Cash at bank and in hand 10,136 12,094 (436) 21,794 

Overseas deposits 69,768 18,433 (1,566) 86,635 

Shares and other variable yield securities and units in unit trusts 66,075 26,794 (2,993) 89,876 

Debt securities and other fixed income securities 1,283,884 (65,082) (90,490) 1,128,312 

Participations in investment pools 57,078 4,096 (206) 60,968 

Deposits with credit institutions 7,346 1,848 (687) 8,507 

Derivatives – – 426 426 

Total cash, portfolio investments and financing 1,494,287 (1,817) (95,952) 1,396,518 

16 Cash flows invested in portfolio investments 


£000 £000 

Purchase of shares and other variable yield securities (957,070) (1,035,357) 

Purchase of debt securities and other fixed income securities (1,829,662) (3,198,645) 

Purchase of participations in investment pools (40,394) (115,385) 

Sale of shares and other variable yield securities 930,276 1,094,211 

Sale of debt securities and other fixed income securities 1,894,744 3,074,612 

Sale of participations from investment pools 36,298 131,211 

Amount owed to credit institutions (1,848) 7,735 

Net cash inflow(outflow) on portfolio investments 32,344 (41,618)

17 Related parties 

The managing agent of the syndicate, QUL, and the corporate member that provides capital to the syndicate, are wholly owned subsidiaries of their 

ultimate parent company, QBE Insurance Group Limited. 

All transactions between the syndicate and companies within the QBE Insurance Group are conducted on normal market terms on an arm’s length basis. 

The syndicate is exempt under the terms of FRS 8 from disclosing related party transactions. 

18 Reinsurance to close accepted 

In early 2009, the syndicate agreed to accept the RITC of Syndicate 566’s 2000 and prior years of account, following a successful consultation with 

members’ agents. 

The effect of this in these accounts is to increase gross written premiums by £67,458,000, gross claims outstanding by £143,350,000, and reinsurers’ 

share of claims outstanding by £75,892,000, a net effect of £nil. 

41 



Glossary of insurance terms 

Broker One who negotiates contracts of insurance 

or reinsurance on behalf of an insured party, 

receiving a commission from the insurer or reinsurer 

for placement and other services rendered. 

Capacity In relation to a Lloyd’s member, it is 

the maximum amount of insurance premiums 

(gross of reinsurance but net of brokerage) 

which a member can accept. In relation to a 

syndicate it is the aggregate of each member’s 

capacity allocated to that syndicate. 

Casualty insurance Insurance that is primarily 

concerned with the losses caused by injuries 

to third persons or their property (i.e. not the 

policyholder) and the resulting legal liability 

imposed on the insured. It includes, but is not 

limited to, general liability, employers’ liability, 

workers’ compensation, professional liability 

and public liability insurance. 

Catastrophe reinsurance A form of excess of 

loss reinsurance that, subject to specified limits, 

indemnifies the insured for the amount of loss 

in excess of a specified retention with respect 

to an accumulation of claims resulting from a 

catastrophe event or series of events. 

Claim The amount payable under a contract 

of insurance or reinsurance arising from a loss 

relating to an insured event. 

Claims incurred The aggregate of all claims 

paid during an accounting period adjusted 

by the change in the claims provision for that 

accounting period. 

Claims outstanding The amount of provision 

established for claims and related claims expenses 

that have occurred but have not been paid. 

Claims provision The estimate of the most 

likely cost of settling present and future claims 

and associated claims adjustment expenses 

plus a risk margin for the possible fluctuation 

of the liability. 

42 



Claims ratio Claims incurred as a percentage 

of net earned premium. 

Combined operating ratio The sum of the 

claims ratio, commission ratio and expense ratio. 

A combined operating ratio below 100% indicates 

profitable underwriting results. A combined 

operating ratio over 100% indicates unprofitable 

underwriting results. 

Commission ratio Net commission expense 

as a percentage of net earned premium. 

Deferred acquisition costs Acquisition costs 

relating to the unexpired period of risk of 

contracts in force at the balance sheet date 

which are carried forward from one accounting 

period to subsequent accounting periods. 

Earned premium The proportion of written 

premium (including where relevant those of prior 

accounting periods) attributable to the risks borne 

by the insurer during the accounting period. 

Equalisation provision Amounts set aside in 

accordance with the Financial Services Authority 

Handbook for the purpose of mitigating 

exceptionally high loss ratios in future years. 

The amounts provided are not liabilities because 

they are in addition to the provisions required to 

meet the anticipated ultimate cost of settlement 

of outstanding claims at the balance sheet date. 

Notwithstanding this, they are required by the 

Companies Act 2006 to be included within 

technical provisions. 

Excess of loss reinsurance A form of 

reinsurance in which, in return for a premium, 

the reinsurer accepts liability for claims settled 

by the original insurer in excess of an agreed 

amount, generally subject to an upper limit. 

Expense ratio Underwriting and administrative 

expenses as a percentage of net earned premium. 

Facultative reinsurance The reinsurance of 

individual risks through a transaction between 

the reinsurer and the cedant (usually the primary 

insurer) involving a specified risk. 

General insurance Used to describe non-life 

insurance business including property and 

casualty insurance. 

Gross claims incurred The amount of claims 

incurred during an accounting period before 

deducting reinsurance recoveries. 

Gross earned premium The total premium on 

insurance earned by an insurer or reinsurer during 

a specified period on premiums underwritten in 

the current and previous underwriting years. 

Gross written premium The total premium on 

insurance underwritten by an insurer or reinsurer 

during a specified period, before deduction of 

reinsurance premium. 

Incurred but not reported (IBNR) Claims 

arising out of events that have occurred before 

the end of an accounting period but have not 

been reported to the insurer by that date. 

Insurance profit The sum of the underwriting 

profit/(loss) and investment income on 

policyholders’ funds. 

Inward reinsurance The reinsurance or 

assumption of risks written by another insurer. 

Net claims incurred The amount of claims 

incurred during an accounting period after 

deducting reinsurance recoveries. 

Net claims ratio Net claims incurred 

as a percentage of net earned premium. 

Net earned premium Net written premium 

adjusted by the net change in unearned 

premium for a year.

Net investment income Gross investment 

income net of finance costs, foreign exchange 

gains and losses and investment expenses. 

Net written premium The total premium on 

insurance underwritten by an insurer during a 

specified period after the deduction of premium 

applicable to reinsurance. 

Policyholders’ funds Those financial assets 

held to fund the insurance provisions of the 

consolidated entity. 

Premium Amount payable by the insured 

or reinsured in order to obtain insurance 

or reinsurance protection. 

Proportional reinsurance A type of reinsurance 

in which the original insurer and the reinsurer 

share claims in the same proportion as they 

share premiums. 

Recoveries The amount of claims recovered 

from reinsurance, third parties or salvage. 

Reinsurance An agreement to indemnify a 

primary insurer by a reinsurer in consideration of 

a premium with respect to agreed risks insured 

by the primary insurer. The enterprise accepting 

the risk is the reinsurer and is said to accept 

inward reinsurance. The enterprise ceding the 

risks is the cedant or ceding company and is 

said to place outward reinsurance. 

Reinsurance to close A reinsurance agreement 

under which members of a syndicate for a 

year of account to be closed are reinsured 

by members who comprise that or another 

syndicate for a later year of account against 

all liabilities arising out of insurance business 

written by the reinsured syndicate. 

Reinsurer The insurer that assumes all or 

part of the insurance or reinsurance liability 

written by another insurer. The term includes 

retrocessionaires, being insurers that assume 

reinsurance from a reinsurer. 

Retention That amount of liability for which an 

insurance company will remain responsible after 

it has completed its reinsurance arrangements. 

Syndicate A member, or group of members, 

underwriting insurance business at Lloyd’s 

through the agency of a managing agent. 

Treaty reinsurance Reinsurance of risks in 

which the reinsurer is obliged by agreement 

with the cedant to accept, within agreed limits, 

all risks to be underwritten by the cedant within 

specified classes of business in a given period 

of time. 

Underwriting The process of reviewing 

applications submitted for insurance or 

reinsurance coverage, deciding whether to 

provide all or part of the coverage requested 

and determining the applicable premium. 

Underwriting expenses The aggregate of policy 

acquisition costs, excluding commissions, and 

the portion of administrative, general and other 

expenses attributable to underwriting operations. 

Underwriting profit/(loss) The amount of 

profit/(loss) from insurance activities exclusive 

of net investment income and capital gains 

or losses. 

Underwriting year The year in which the 

period of cover commences under a contract 

of insurance. 

Unearned premium The portion of a 

premium representing the unexpired portion 

of the contract term as of a certain date. 

Written premium Premiums written, whether 

or not earned, during a given period. 

43 



QBE Syndicate 2999 contacts 

QBE Reinsurance Syndicate 566 



jonathan.parry@uk.qbe.com 

tel +44 (0)20 7105 4077 

Head of Reinsurance Operations 

Steve Edwards 

steven.edwards@uk.qbe.com 

tel +44 (0)20 7105 4686 

QBE Marine and Energy Syndicate 1036 


Colin O’Farrell 

colin.o’farrell@uk.qbe.com 

tel +44 (0)20 7105 4073 

Head of Operations 

David Herridge 

david.herridge@uk.qbe.com 

tel +44 (0)20 7105 4753 

Head of Claims 

Gary Crowley 

gary.crowley@uk.qbe.com 

tel +44 (0)20 7105 4792 

QBE Syndicate 1886 


John Neal 

john.neal@uk.qbe.com 

tel +44 (0)20 7105 4054 

Operations Manager 

Roger French 

roger.french@uk.qbe.com 

tel +44 (0)20 7105 4401 

Claims Director 


andrew.mcbride@uk.qbe.com 

tel +44 (0)20 7105 4050 

44 



QBE Property Syndicate 2000 


Bernard Mageean 

bernard.mageean@uk.qbe.com 

tel +44 (0)20 7105 5621 

Head of Operations 

Martin Alderman 

martin.alderman@uk.qbe.com 

tel +44 (0)20 7105 5409 

Claims Director 


andrew.mcbride@uk.qbe.com 

tel +44 (0)20 7105 4050 

QBE Aviation Syndicate 5555 


Emilio Di Silvio 

emilio.disilvio@uk.qbe.com 

tel +44 (0)20 7105 5714 

Operations Manager 

Ken Limber 

ken.limber@uk.qbe.com 

tel +44 (0)20 7105 5707 

Claims and Business Development Manager 

Jerry Flaxman 

jerry.flaxman@uk.qbe.com 

tel +44 (0)20 7105 5706

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OFFICIAL INSURANCE PARTNER 




London EC3M 3BD 

tel +44 (0)20 7105 4000 

fax +44 (0)20 7105 4019 

For more information: 

e-mail enquiries@uk.qbe.com 

or visit www.QBEeurope.com 

QBE Syndicate 2999 is managed by QBE Underwriting Limited (no. 01035198), registered office Plantation Place, 30 Fenchurch Street, London, EC3M 3BD, a Lloyd’s managing agent authorised and 

regulated by the Financial Services Authority. 

QBE Syndicate 2999 Annual report 2009

QBE Syndicate 2999 Annual Report and Accounts 2009

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