NOTES TO F I NANC I AL STATEMENTS NOTES TO FINANCIAL STATEMENTS 1. THE COMPANY AND ITS ACTIVITIES ARC Ltd. (“the Company”) was incorporated under the laws of Bermuda on November 27, 2013 and is registered as a Class 2 insurer under The Insurance Act 1978, amendments thereto and related regulations (“The Act”). On November 18, 2022, the Company registered as a Segregated Account Company under the Segregated Accounts Companies Act 2000, as amended (“SAC Act”). The Company is managed in Hamilton, Bermuda by Marsh Management Services (Bermuda) Ltd. and has its place of business in Bermuda. The Company’s registered address is 7 Par-la-Ville Road, Hamilton, Bermuda. ARC Ltd. was established under the remit of the African Risk Capacity Agency (“ARC Agency”), which was established as a Specialised Agency by the African Union (“AU”). The Company is part of the African Risk Capacity (“ARC”) initiative of the AU, an initiative designed to improve current responses to drought food security emergencies and other natural catastrophes. The aim of ARC is to improve the timeliness of responses and build capacity within AU Member States to manage drought and other catastrophe risks by directly linking funds to defined contingency plans. ARC is an African continentwide, index-based weather risk insurance pool and early response mechanism, which offers an African solution to one of the continent’s most pressing challenges. There is a Memorandum of Understanding and Cooperation between ARC Agency and ARC Ltd. ARC Ltd. is a mutual insurance company that provides drought, flood, tropical cyclone, outbreaks and epidemics (“O&E”) and non-sovereign (“NSB”) insurance cover to participating African countries and replica partners, which are specified as Class A Members of the Company, upon participation. Under the Bye-Laws of the Company, Class A Members are those ARC Agency Member States holding a Certificate of Good Standing from the ARC Agency and which have purchased a current policy. The Bye-Laws also define the other class members of the Company: Class B Members are those who provide capital to the Company without expectation of re-payment, Class C Members are those that provide capital with a maximum fixed term of twenty years with no interest but expectation of the capital being returned (“Returnable Capital”) and Class D Members are those who provide capital with an expectation of investment return. Class C members are the only members that have rights to company surplus. The current Members of this mutual insurance company consist of fifteen Class A Members and two Class C Members. There are no Class B or D members during the year end, or at the date of approval of these financial statements. During the year, there were three participants in the Replica Insurance Program namely, the United Nations World Food Programme, Save the Children Fund and The Office of the United Nations High Commissioner for Refugees (“UNHCR”). The replica partners hold insurance policies not as Class A Members per the Company Bye- Laws, but acquire insurance policies for the benefit of African countries some of which are current Class A members. The Class A Members participating in the insurance risk pool in the current financial period are Burkina Faso, Comoros, Cote d’Ivoire, Gambia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Senegal, Somalia, Tchad, Togo, Zambia and Zimbabwe, each having taken out at least one insurance policy. The Class C Members are donor entities: - the UK’s Foreign, Commonwealth and Development Office (“FCDO”), and - KfW, a German state-owned investment and development bank who has been committed to improving economic, social and environmental living condition across the globe.. For coverages written under the Company’s drought, flood, tropical cyclone and NSB insurance contracts, the Company purchased an umbrella excess of loss reinsurance contract and proportional facultative reinsurance contracts for the 2023/24 policy periods. For the 2022/23 policy periods the Company purchased a stop loss reinsurance contract. The Company’s O&E insurance contracts are fully reinsured. The average number of employees of the Company during the year was thirteen (2022: twelve). 94
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