NOTES TO F I NANC I AL STATEMENTS Under the Act, the Company is required to prepare Statutory Financial Statements. The Bermuda Statutory accounting regulations allow the recognition of Class C Member Capital as Statutory Capital, as opposed to debt financial liabilities or equity grant under IFRS. The Members’ equity is comprised of the reserve fund, retained earnings and Class C equity grant. The Company’s objectives when managing ‘capital’ are to comply with the minimum capital and surplus requirements of the Act and to safeguard the Company’s ability to continue as a going concern. In disclosure note 10, there is reference to “Financially Unsustainable”, which is a term taken directly from the Company’s Bye-Laws. Financially unsustainable is defined in the Bye-Laws as a reduction of capital which endangers the Company’s capacity to maintain its claim-paying capacity in a financially sustainable manner as measured by the ECR ratio. The ECR ratio is the Enhanced Capital Requirement under Bermuda Insurance regulations. Should the statutory capital of the Company decrease to a level below 150% of the ECR, then this would be deemed “financially unsustainable”. At no point to the date of approval of these financial statements has the Company been Financially Unsustainable, based on the above definition. The difference between the Company’s statutory capital and surplus and Members’ equity as per these financial statements is as shown in the below table. Figures in USD 31 DEC 2023 31 DEC 2022 Statutory capital and surplus 62,811,197 52,120,302 Adjust for: Non-admitted items for statutory purposes Prepaid expenses 348,685 225,843 Deferred policy acquisition costs 140,443 72,285 Adjust for Impact of IFRS 17 application (756,750) (5,987,038) Adjust for: Class C Members’ returnable capital FCDO – Initial contribution treated as equity capital (49,929,600) (49,929,600) Less: FCDO initial contribution treated as equity grant 6,867,167 7,101,264 KfW – Initial contribution treated as equity capital (48,405,000) (48,405,000) Less: KfW initial contribution treated as equity grant 8,736,127 9,509,834 Forex revaluation of GBP capital contribution 11,734,024 13,625,175 Reserve fund – Initial contribution designated as share capital 250,000 250,000 Members’ deficit (8,203,707) (21,416,935) 18.2. Participating African Countries ARC Ltd. has been granted approval for issuance of the Insurance Policies recognised in these Financial Statements in each of the participating Class A Member countries via a written letter of exemption from national insurance laws and regulations. 131
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