Beazley : Syndicate 6107 Annual Report 2023

Beazley Furlonge Limited | Syndicate 6107 at Lloyd's Annual report and accounts 2023

Welcome to our Annual report 2023

As a leading global specialist insurer, Beazley are passionate about bringing an innovative and progressive approach to helping our clients mitigate the risks of the world.

Contents

• Highlights

• Strategic report of the managing agent

• Managing agent's report

• Statement of managing agent's responsibilities

10 Independent auditor's report to the members of Syndicate 6107

1. Statement of comprehensive income
2. Statement of changes in members' balances
3. Balance sheet
4. Cash flow statement
5. Notes to the syndicate annual accounts

1. 2021 underwriting year of account for Syndicate 6107
2. Managing agent's report
3. Statement of managing agent's responsibilities
4. Independent auditor's report to the members of Syndicate 6107 - 2021 closed year of account

1. Profit or loss account
2. Statement of changes in members' balances
3. Balance sheet
4. Cash flow statement
5. Notes to the 2021 syndicate underwriting year of account

1. Seven-yearsummary of closed year results at 31 December 2023
2. Managing agent's corporate information

Highlights

Syndicate capacity		Profit for the financial year		Combined ratio
£43.3m		$25.9m	61%
(2022: £67.4m)		(2022: $22.7m)	(2022: 79%)
Gross premiums written		Rate increase on renewals		Claims ratio
$43.5m	0%	34%
(2022: $80.4m)	(2022: 30%)	(2022: 53%)
Expense ratio		Earned premiums, net of reinsurance
27%		$57.3m
(2022: 26%)		(2022: $95.1m)

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Beazley | Syndicate 6107 Annual report 2023

01

Strategic report of the managing agent

Overview

Syndicate 6107 ('the syndicate') continued to reinsure a proportion of certain property and cyber business written by syndicates 623 and 2623. There was a reduction in the reinsurance business written during 2023 as syndicates 623 and 2623 retained more of the underlying risks.

The capacities of the syndicates managed by Beazley Furlonge Limited ('BFL') are as follows:

	2023	2022
	£m	£m
2623	3,794.5	2,679.0
623	818.6	587.2
5623	339.8	204.4
6107	43.3	67.4
3623	-	41.2
3622	33.8	29.7
4321	33.1	29.0
Total	5,063.1	3,637.9

Year of account results

The 2021 underwriting year has closed with a profit of $27.2m, which represents a return on capacity of 30.8% attributable strong premium growth and rate increases on the Cyber Risks portfolio. The 2022 underwriting year is currently forecast to close with a return on capacity of 20.0%. The 2023 underwriting year is currently profitable.

Rating environment

Premium rates for the underlying reinsured business increased slightly during 2023 (2022: increase of 30%). Rates increased on Property Risks and decreased on Cyber Risks.

Combined ratio

The combined ratio is a measure of operating performance and represents the ratio of the syndicate's total costs (excluding foreign exchange movements) to total net earned premium. The syndicate's combined ratio for 2023 improved to 61% (2022: 79%). This is due to an improving claims ratio.

Claims

The claims ratio is a measure of the syndicate's claims experience and represents the ratio of its net insurance claims to net earned premium. The claims ratio of syndicate 6107 has improved to 34% in 2023 (2022: 53%) mostly due to a relatively quiet weather related natural catastrophe season during the year.

Net operating expenses

Net operating expenses, including business acquisition costs, administrative expenses and profit commissions were $15.3m (2022: $24.6m). The breakdown of these costs is shown below:

	2023	2022
	$m	$m
Brokerage costs	7.9	13.2
Administrative and other expenses	6.4	10.5
Profit commission	1.0	0.9
Net operating expenses1	15.3	24.6

1 A further breakdown of net operating expenses can be seen in note 4.

Brokerage costs as a percentage of net earned premium were approximately 14% (2022: 14%). Brokerage costs are deferred and expensed over the life of the associated premiums in accordance with accounting guidelines. Administrative expenses comprise primarily an overrider commission charged by the host syndicates. The expense ratio is a measure of the net operating expenses to net earned premium. The expense ratio for 2023 is 27% (2022: 26%).

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Outlook

The 2022 underwriting year is currently forecast to close with a strong return on capacity of approximately 20.0%. This has been predominantly driven by rate increases on the cyber book. This positive expected return is despite claims events such as Hurricane Ian and Storm Elliott.

The 2023 underwriting year is developing well and is forecasting a positive return on capacity despite claims events such as the Hawaiian Wildfires in 2023.

Looking ahead to 2024, the syndicate will increase its participation with syndicates 2623 and 623 on the Cyber Risks portfolio and cease to reinsure on the Property Risks portfolio. This change in portfolio mix was driven by the changes in portfolio mix in syndicates 623 and 2623 following a rebalance of the business written by these syndicates. Specifically, business written domestically by Beazley's US-based underwriters has been removed from syndicates 623 and 2623 and the revised syndicate 623 and 2623 portfolio was rebalanced to cover a larger share of Beazley's existing wholesale business written in London, Miami and Singapore. Consequently, Syndicate 6107 will be ceded proportionally more of syndicate 623 and 2623's Cyber Risks portfolio.

A P Cox

Chief Executive Officer

28 February 2024

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Beazley | Syndicate 6107 Annual report 2023

03

Managing agent's report

The managing agent presents its report for the year ended 31 December 2023.

This annual report is prepared using the annual basis of accounting as required by Statutory Instrument No 1950 of 2008, the Insurance Accounts Directive (Lloyd's Syndicate and Aggregate Accounts) Regulations 2008 and applicable United Kingdom Accounting Standards, including Financial Reporting Standard 102: The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland and Financial Reporting Standard 103: Insurance Contracts.

Principal activity

The principal activity of Syndicate 6107 is the transaction of property reinsurance and cyber reinsurance business with syndicates 623 and 2623 at Lloyd's.

Business review

A review of the syndicate's activities and future outlook is included in the strategic report.

Risk governance and reporting

BFL's Board of Directors has the responsibility for defining and monitoring the risk appetite within which BFL and the syndicates operate (collectively, 'Beazley'), with key individuals and committees accountable for day-to-day management of risks and controls. Regular reporting by the risk management team in Board meetings and senior management committees ensures that risks are monitored and managed as they arise.

Climate change/Responsible business

Led by Beazley plc's Board and supported by the Boards of BFL, Beazley Insurance dac, and Beazley Insurance Company Inc, Environmental, Social and Governance ('ESG') issues and climate related risks have become regular agenda items throughout 2023. In March 2021 Beazley launched our first Responsible Business Strategy. This document, and the subsequent update which is published alongside the Beazley plc annual report and accounts ('ARA'), sets out the goals and targets across a wider range of ESG issues, including climate change.

In addition to the summary Responsible Business report, Beazley plc discloses its compliance with the Task Force on Climate- Related Disclosures recommendations at the consolidated group level in the Beazley plc annual report and accounts produced annually. The 2023 Beazley plc ARA has not been published as at the date of this report but is expected to be available on the Group's website in March 2024.

Although not specifically listed in the risk categorises detailed further in this report, the Board of BFL deems climate risk to be inherently embedded within all risks managed across the syndicate.

Risk management

Beazley prides itself on understanding the drivers of risk, supporting and challenging management in managing those risks for the syndicate and its clients. During the year, Beazley continued to enhance and roll out elements of the risk management framework. Beazley has continued to work with colleagues across the first and second lines of defence to support the syndicate strategy, including challenging the oversight of climate-related risks (covering physical, transition and litigation) and journey in digitisation. The details of the performance of the risk management framework are further in this report.

Control statement

The Chief Risk Officer's latest report to the Board confirmed that the control environment identified no significant failings or weaknesses in key processes. The report confirmed that the syndicate was operating within risk appetite as at 31 December 2023 and the systems have been in place for the entirety of 2023.

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Risk management oversight and framework

The Beazley plc Board delegates direct oversight of the risk management function and framework to its Risk Committee, and the primary regulated subsidiary Boards and their (audit and) Risk Committees. The Board delegates executive oversight of the risk management function and framework to the Executive Committee, which fulfils this responsibility primarily through its risk and Regulatory Committee.

Beazley takes an enterprise-wide approach to managing risk. The risk management framework establishes the approach to identifying, measuring, mitigating, monitoring, and reporting on principal risks. The risk management framework supports the strategy and objectives.

Beazley leverages the 'three lines of defence' model, in which the risk management function is part of the second line of defence. The ongoing communication and collaboration across the three lines of defence ensures that the syndicate identifies and manages risks effectively.

A suite of reports from the risk management function support senior management and the Board in discharging their oversight and decision-making responsibilities throughout the year. The risk management function's reports include updates on risk appetite, risk profiles, stress and scenario testing and analysis, reverse stress testing, emerging and heightened risks, a report to the Remuneration Committee, and the Own Risk and Solvency Assessment (ORSA) report.

The Board approves the risk appetite statements at least annually and receives updates on monitoring against risk appetite throughout the year. This includes an assessment of principal risks.

The business operates a control environment which supports mitigating risks to stay within risk appetite. The risk management function reviews and challenges the control environment through various risk management activities throughout the year. In addition, the risk management function works with the capital model and exposure management teams, particularly in relation to validation of the internal model, preparing the ORSA, monitoring risk appetite and the business planning process.

The risk management plan considers, among other inputs, the inherent and residual risk scores for the risks in the registers. The risk management function also includes results from internal audits into its risk assessment process. The internal audit function considers the risk management framework in its audit universe to derive a risk-based audit plan.

The approach to identifying, managing and mitigating emerging risks includes inputs from the business, analysis of lessons learned post risk incidents and industry thought leadership. The approach considers the potential materiality and likelihood of impacts, which helps prioritise emerging risks which the syndicate monitors or undertakes focused work on. Key emerging risks in 2023 included geopolitical, artificial intelligence, large cyber attack, legal and regulatory risk, human capital, and climate change. The Board carries out a robust assessment of emerging risks at least annually.

Principal risks the syndicate faces

Beazley assess carefully the principal risks the syndicate faces. Our principal risks are under continuous review with ongoing risk assessments. Consideration is given to new regulations including Consumer Duty, and the Digital Operational Resilience Act. Insurance, Strategic and Operational risks outlook increases from macroeconomic changes, enhancements in technology, people and processes which deliver great benefit, but also introduce risk during and post implementation. The table below summarises the principal risks the syndicate faces, the control environment, governance and oversight that mitigate these risks.

Legend for the principal risks table on the following page

Risk appetite
Within	Trending outside	Outside
Risk outlook
Increasing	Stable	Decreasing

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Beazley | Syndicate 6107 Annual report 2023

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Managing agent's report continued

Principal risks and summary descriptions	Mitigation and monitoring
Insurance	Beazley uses a range of techniques to mitigate insurance risks such
The risk arising from the inherent uncertainties about the	as pricing tools, analysis of macro trends and claim frequency,
occurrence, amount and timing of insurance premium, and	including alignment with pricing and ensuring exposure was not
claims liabilities. This includes risk from underwriting such	overly concentrated in any one area, especially lines of business
as market cycle, catastrophe, reinsurance and reserves.	with higher risk.
• Market cycle: potential systematic mispricing of medium	The strategic approach to exposure management and a
comprehensive internal and external reinsurance programme helped
or long-tailed business that does not support revenue to
to reduce volatility of profits in addition to managing net exposure
invest and cover future claims;
with the transfer of risk.
• Catastrophe: one or more large events caused by nature	The prudent and comprehensive approach to reserving helped
(e.g., hurricane, windstorm, earthquake and / or wildfire)
ensure that claims covered by the policy wording were paid,
or mankind (e.g., coordinated cyber-attack, global
delivering good customer outcomes. High calibre claims and
pandemic, losses linked to an economic crisis, an act of
underwriting professionals deliver expert service and claims
terrorism or an act of war and / or a political event)	handling to insureds. The Underwriting Committee oversees these
impacting a number of policies, and therefore giving rise	risks.
to multiple losses;	Beazley carries out periodic analysis to identify significant areas of
• Reinsurance arrangements: reinsurance may not be
concentration risk across our business and monitors solvency
available or purchases not made to support the business
regularly to ensure the syndicate is adequately capitalised.
(i.e., mismatch); and	Insurance risk outlook continues to be stable as Beazley manages
• Reserving: reserves may not be sufficiently established to
reflect the ultimate paid losses.	the market cycle across all the lines of business.
Credit	Beazley trades with strategic reinsurance partners over the long
This risk of failure of another party to perform its financial or	term to support the syndicate through the insurance cycles despite
contractual obligations in a timely manner. Exposure to	potentially catastrophic claim events. The syndicate ensures
credit risk from its reinsurers, brokers, and coverholders, of	reinsurers meet internal approval criteria overseen by the
which the reinsurance asset was the largest exposure for	reinsurance security committee. Credit risk arising from brokers and
the syndicate.	coverholders continues to be low as the syndicate relies on robust
	due diligence processes, credit monitoring and ongoing monitoring
	of aged debts.
	Credit risk outlook continues to be stable as Beazley manages
	ceded reinsurance, broker and coverholder credit risks with low
	levels of aged and bad debt.
Group	Risk culture centres on principles of transparency, accountability,
The risk of an occurrence in one area of Beazley, which	and awareness. This helps maintain a strong risk culture that
adversely affects another area in the syndicate resulting in	supports an embedded risk management framework. An effective
financial loss and / or reputational damage. This also	risk culture reflects a maturing risk management framework,
includes a deterioration in culture which leads to	encourages sound risk taking, creates an awareness of risks and
inappropriate behaviour, actions and / or decisions including	emerging risks. The executive committee and the Board oversee this
dilution of culture or negative impact on the brand.	risk.
	Group risk outlook continues to be stable as the Executive
	Committee manages culture through continuous improvement and
	monitoring.
Regulatory and legal	The control environment supports the nature, exposure, scale and
Non-compliance with regulatory and legal requirements,	complexity of the business overseen by the risk and Regulatory
failing to operate in line with the relevant regulatory	Committee. The syndicate maintains a trusting and transparent
framework in the territories where the syndicate operates.	relationship with regulators, ensuring coordinated communication
This may lead to financial loss (fines, penalties), sanctions,	and robust process, policies and procedures being followed in the
reputational damage, loss of confidence from regulators,	business. In addition, key staff, particularly those who held defined
regulatory intervention, inability to underwrite or pay claims.	roles with regulatory requirements, are experienced and maintained
	regular dialogue with regulators. The syndicate horizon scans for
	regulatory and legal matters and considers their potential impacts
	on the business.
	Beazley considers the needs of our clients in everything our
	business does. Beazley delivers good customer outcomes to our
	clients throughout the product lifecycle. The Conduct Review Group
	oversees this risk. Beazley aims to do the right thing to minimise
	reputational risk via stakeholder management and oversight through
	governance.
	Regulatory and legal risk outlook continues to increase as Beazley
	manages evolving regulatory requirements and legislative changes
	globally.

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Principal risks and summary descriptions	Mitigation and monitoring
Operational	Beazley attracts and nurtures talented colleagues who champion
Failures of people, processes and systems or the impact of	diversity of thought, creating a culture of empowerment,
an external event on operations (e.g., a cyber-attack having a	collaboration and innovation to build an environment of employee
detrimental impact on operations) including transformation	wellbeing. The managing agent employs high calibre, motivated,
and change related risks.	loyal, and productive people with sufficient competence to perform
	their duties.
	Beazley invests in technology and re-engineering processes to
	support the operation of activities which are overseen by the
	Operations Committee. Beazley has policies and procedures across
	the organisation which ensure effective and efficient operations.
	This drives productivity and quality across our people, processes
	and systems to continue to enable scalable growth.
	The business continuity, disaster recovery and incident response
	plans, help ensure that processes and systems enable our people
	to deliver the right outcomes for clients and overall productivity.
	During 2023, there were effective controls in the day-to-day
	operations around information security, data management,
	operational resilience including cyber resilience, etc. to mitigate the
	damage that loss of access to data or the amendment of data can
	have on the ability to operate.
	Operational risk outlook continues to be stable as Beazley manages
	evolving manual processes and controls into digitised processes
	along with technological and cyber resilience which are continuously
	evolving risks.
Strategic	Beazley continuously addresses key strategic opportunities and
Events or decisions that potentially stop the syndicate from	challenges itself to be the highest performing sustainable specialist
achieving its goals or danger of strategic choices being	insurer. Beazley ensures it recognises, understands, discusses, and
incorrect, or not responding effectively to changing	develops a plan of action to address any significant strategic
environments in a timely manner leading to inadequate	priorities in a timely fashion whilst ensuring continuity of operational
profitability, insufficient capital, financial loss or reputational	effectiveness and brand reputation.
damage. Pervasive risks impacting multiple areas (e.g.,
reputation, and ESG) occurring through real or perceived	Beazley creates an environment that attracts, retains and develops
action, or lack of action taken by a regulatory body, market	high performing talent with diversity of thought to explore, create
and/or third-party used by the business. A negative change	and build, through investing in understanding the complexity of the
to Beazley's reputation would have a detrimental impact to	risks clients face and deploying expertise to create value. The
syndicate profitability and public perception.	executive committee and the Board oversee these risks.
	The syndicate aims to strategically create a sustainable business
	for our people, partners and planet through its responsible business
	goals. Beazley embeds ESG principles and ambitions and it focuses
	on reducing its carbon footprint, contributing appropriately to its
	social environment, and enhancements to governance. Note that
	while Beazley considers market practice, it does not necessarily
	move with every prevailing market trend, considering these for
	potential opportunities and risks.
	Strategic risk outlook continues to be stable as Beazley embeds its
	achievements from 2023.

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Beazley | Syndicate 6107 Annual report 2023

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Managing agent's report continued

Directors

A list of directors of the managing agent who held office during the year can be found on page 45 of this syndicate annual report.

Syndicate annual general meeting

In accordance with the Syndicate Meetings (Amendment No. 1) Byelaw (No. 18 of 2000) the managing agent does not propose to hold a syndicate annual meeting this year. Members may object to this proposal within 21 days of this notice. Any objections must be made in writing to the managing agent.

Disclosure of information to the auditor

The directors of the managing agent who held office at the date of approval of this managing agent's report confirm that, so far as they are each aware, there is no relevant audit information of which the syndicate's auditor is unaware; and each director has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the syndicate's auditor is aware of that information.

Auditor

Pursuant to Section 14(2) of Schedule 1 of the Insurance Accounts Directive (Lloyd's Syndicate and Aggregate Accounts) Regulations 2008, the auditor will be deemed to be reappointed and Ernst & Young LLP will therefore continue in office.

On behalf of the Board

S M Lake

Finance Director

28 February 2024

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