ALBERTA MUNICIPAL INSURANCE EXCHANGE

Notes to the Financial Statements

Year ended December 31, 2022, with comparative information for 2021

7. Financial risk management (continued):

Capital Risk Management (continued):

The Exchange is regulated by the Alberta Superintendent of Insurance and the Alberta Insurance Act. Accordingly, in addition to subscribers’ surplus, the Exchange is required by the Alberta Superintendent of Insurance to maintain an excess of cash and securities over the Reserve and Guarantee Fund.

The Reserve and Guarantee Fund has three components: a reserve fund which consists of 50% of premiums collected in the current fiscal year; a guarantee fund which consists of the Exchange’s total liabilities; and a $50,000 statutory margin. If the Exchange experiences a shortfall of cash and securities over the Reserve and Guarantee Fund, the Alberta Superintendent of Insurance requires the Exchange to produce a plan to eliminate the shortfall. As at December 31, 2022, the Exchange has an excess of cash and securities over the Reserve and Guarantee Fund of $21,916,000 (December 31, 2021 - $28,869,000).

8. Reinsurance:

During the year ended December 31, 2022, the Exchange ceded coverage on an “excess-of-loss” basis to registered reinsurers for premiums of $962,500 (2021 - $923,640) and as identified in Note 6, claims and claims expenses included in the statement of comprehensive income were decreased by $2,190,950 (2021 - increased by $20,898). Such reinsurance arrangements limit the Exchange’s liability in the event of large losses. Notwithstanding the reinsurance arrangements, the Exchange maintains the primary liability to the subscribers.

9. Related party transactions:

The affairs of the Exchange are governed by the Advisory Board. The majority of the board members are also directors of ABmunis, and all the subscribers to the Exchange are also members of ABmunis. As such, all of the entities that operate under the auspices of ABmunis are considered related parties to the Exchange. This includes AMSCIS, who acts as agent for the Exchange, and Alberta Municipal Services Corporation (“AMSC”), also a wholly owned subsidiary of ABmunis, who is the administrator of a high interest savings account in which the Exchange invests.

The Exchange does not employ any individuals directly. Agency and administrative services are provided to the Exchange by ABmunis, for which fees are charged. Of the total agency and administration fees, $1,956,000 relate to the salaries and benefits of employees (2021$2,012,254).

The following balances with the related parties are outstanding as at December 31:

Alberta Municipal Insurance

Notes to the Financial Statements