Forecasts & Results

Atrium’s updated forecast for the 2021 and 2022 years of account

Posted 02/02/2024 – Quick takes

Atrium has released an updated forecast for the 2021 and 2022 years of account for syndicate 609.

Syndicate 609

We have been advised that the Board of Atrium syndicate 609 has made the decision to leave the 2021 year of account open as at 31st December 2023. The current forecast range remains at a profit of between +5.0% and +15.0% of capacity, midpoint +10.0% but there will be no release of any profits recognised to date.

The 2021 year of account is materially exposed to possible claims arising out of the western leased aircraft in Russia, due to the war in Ukraine. The situation remains complex and one in which the evidential picture continues to develop due to multiple ongoing litigations in a number of different jurisdictions. The following factors: (i) whether the loss is an all-risks or war peril loss, (ii) when it occurred, (iii) whether it’s a single loss event or multiple loss events and (iv) how sanctions impact the same, all result in considerably different ultimate outcomes to the syndicate. In arriving at the reserving position for this loss, the financial implications of multiple scenarios have been modelled, taking account of the uncertainties listed above and utilising a probabilistic framework. In arriving at the reserving position, the likelihood of these scenarios occurring was established using current expert judgement. This reserving approach is consistent with that taken for the year ended 31 December 2022 and reflects updates affecting expert judgment in the year since. Whilst there has been no change in Atrium’s view over coverage, the probabilities assigned to the multiple scenarios listed above have been reviewed and there remains significant reliance on highly subjective expert judgments. The directors of Atrium, in conjunction with the relevant subject matter experts, continue to monitor the situation closely, taking legal advice and meeting with market participants on a regular basis to ensure that the most up to date information is reflected within the syndicate reserves. The outcome of this reserving exercise is included within the +5.0% to +15.0% forecast range. Due to the nature of the circumstances, the potential for variation to the booked reserves is considerably greater than the normal level of reserve sensitivity to downside risk and the actual outcome of the loss could be in a particularly wide range with greater than usual variability. As a result, the 2021 year of account will remain open until the level of reserve sensitivity to downside risk normalises.

The 2022 forecast remains unchanged at a profit in the range of between +7.5% and +17.5% of capacity, midpoint +12.5%.

Alpha comment

It is not unexpected that the significant uncertainty surrounding the outcome of the trapped aircraft in Russia has led to the 2021 year of account of syndicate 609 being left open. We understand that reserves for direct and indirect losses arising from the war in Ukraine have been increased at this year end (on a gross and net basis) but this has been partially offset by additional investment income forecast to be earned. A recent meeting with Atrium suggested the management are hopeful that some clarity on the position may be gained during 2024, as several court cases are expected to be heard throughout the year which may lead to the closure of the year as at 31st December 2024.

 

The midpoint profit forecast for the 2022 year of account takes account of the fact that this will not benefit from the reinsurance to close of the 2021 year of account, including estimates of prior year development and investment return associated with prior years’ reserves.

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