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Annual venture The system used for running a Lloyd’s syndicate under which each ‘year of account’ is treated separately. Members own capacity on a syndicate for a ‘year of account’ and the results are declared when the year is closed by the RITC mechanism, usually after three years. Claims ratio Net claims incurred, including IBNR, as a percentage of net earned premiums. Combined ratio The total of the claims, expenses and impact of foreign exchange ratios. Expenses ratio Expenses as a percentage of net earned premiums. Funds at Lloyd’s The amount of assets, which can be cash, investments or Letters of Credit, that a syndicate member has to deposit with Lloyd’s to support his share of the capacity on a syndicate. The minimum amount is 40% of the capacity

• wned by the member.

Gross written premium Premiums contracted for before any deductions. Group controlled The total gross written premium controlled by the Group including the 27% of the Syndicate 33 capacity not owned by Hiscox in 2014 (27% in 2013). IBNR Incurred but not reported. An estimate made at the end of each accounting period to cover the expected cost of losses that have occurred but have not yet been reported to the insurer or reinsurer. ILS Insurance-linked securities (ILS) are financial instruments whose values are driven by insurance loss events. Incurred loss ratio Paid and outstanding losses as a percentage of premiums. Gross incurred loss ratio is before deducting any reinsurance and net is after deducting reinsurance. Long-tail A term used to describe an insurance risk that has the potential for claims development or new claims to be reported a number of years after expiry of the term of the policy.

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Member or Name The companies or individuals who own the capacity of a syndicate and who belong to the membership of the Society of Lloyd’s. Net premiums earned Premiums received after the cost of reinsurance and adjustment for unearned premium. Unearned premium covers the future period of risk of an insurance policy. Net premiums written Premiums contracted for after deduction of reinsurance. Open year A year of account of a syndicate which has not been closed by reinsurance to close (RITC). RITC usually occurs at the end of the third

• year. A year of account can be left open beyond the third year if the

extent of the future liability cannot be accurately quantified. Qualifying quota share These are quota share reinsurance policies, which Lloyd’s allows in certain circumstances, that enable a syndicate to write gross premiums in excess of its capacity. Reinsurance to close – RITC The reinsurance to close comprises a premium payable by the closing year to the members on the next open year of account and a contract which transfers the liability for all claims in respect of the closing year to the next open year. Run-off account At Lloyd’s, a year of account which is kept open after the date on which it would normally have been closed. Subrogation The right of the underwriter to ‘stand in the shoes of the insured’ and take over the insured's rights, following payment of a claim, to recover the payment of an incurred loss from a third party responsible for the loss. It is limited to the amount of loss paid by the insurance policy. Syndicate capacity Also referred to as the ‘stamp’. The maximum amount of business that a syndicate in Lloyd’s can write per year, aggregated from all its members.

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