LLM2070 | Syndicate accounts: run-off syndicates

Run-off syndicates

Risks may be uncertain at the 36-month point such that reinsurance is not an economically practical option.

With Lloyd’s permission, the managing agent can leave the syndicate accounts open until outstanding claims are settled or are sufficiently certain that they can be reinsured.

In these circumstances, the syndicate’s year of account is described as in ‘run off’. Underwriting year accounts drawn up at the 36-month point include a provision known as an estimate of future liabilities (’EFL’). The EFL is revisited each year until the syndicate is able to pay an RITC premium and close the open year.

Orphan syndicates

Sometimes reinsurance to close is not feasible because there is no successor syndicate year of account. This may occur if the syndicate is unable to attract enough capital from members to continue. The managing agent has a duty of care to the members of the syndicate under Lloyd’s rules. It could not, for example, pay an RITC premium to another numbered syndicate if this were felt to be too expensive.

Such syndicate years of account may also go into run-off therefore and may be profitable even though they are running off. As with other run-off syndicates, accounts are drawn up at the 36-month point with an EFL which is revisited annually thereafter until the run-off is complete.