CAPITAL AND REGULATORY REQUIREMENTS

12 Months Ended

Dec. 31, 2022

CAPITAL & REGULATORY REQUIREMENTS

Insurance subsidiary capital requirements

All of Global Atlantic's insurance subsidiaries are subject to minimum capital and surplus requirements. Insurance companies typically operate in excess of such requirements. Failure to maintain such minimum capital will result in regulatory actions, including in certain circumstances regulatory takeover of the insurance company.

In the United States, Global Atlantic's insurance subsidiaries are subject to risk based capital ("RBC") standards and other minimum capital and surplus requirements imposed by state laws. The RBC formula is intended to measure the adequacy of the insurance company’s statutory surplus in relation to the risks inherent in its business. The RBC formula requires higher surplus in relation to items deemed to have higher risk. Regulatory action is triggered beginning at 200% RBC and below.

Global Atlantic's Bermuda insurance subsidiaries are subject to Bermuda Solvency Capital Requirements ("BSCR") standards and other minimum capital and surplus requirements imposed by the BMA. The BMA expects that insurers operate at or above a BSCR ratio of at least 120%.

Each of Global Atlantic’s insurance subsidiaries exceeded the minimum requirements that would trigger regulatory action for all periods presented in this report.

Insurance subsidiary dividend restrictions

Payments of dividends by Global Atlantic's U.S. and Bermuda-domiciled insurance subsidiaries are restricted by insurance statutes and regulations. Global Atlantic's ability to pay dividends out of its U.S.-domiciled insurance companies is limited to the dividend paying capacity of its indirect insurance subsidiary, Commonwealth Annuity and Life Insurance Company. Without prior regulatory approval, and subject to maintaining certain solvency requirements, Global Atlantic's U.S. and Bermuda insurance subsidiaries, may declare ordinary dividends during 2023, as follows:


	Ordinary dividend capacity
($ in thousands)
U.S. domiciled
Commonwealth Annuity and Life Insurance Company	$	69,261

Bermuda domiciled
Global Atlantic Re Limited(1)	$	619,408
Global Atlantic Assurance Limited	313,854

(1)Dividends paid by Global Atlantic Re Limited may be subject to a 30% U.S. withholding tax.

Shareholders’ equity of Global Atlantic's principal U.S.-domiciled insurance subsidiary, Commonwealth Annuity and Life Insurance Company, determined pursuant to statutory accounting rules was approximately $4.2 billion and $3.8 billion as of December 31, 2022 and December 31, 2021, respectively. Statutory surplus computed under those methodologies differ from equity reported in accordance with U.S. GAAP primarily because fixed maturity securities are required to be carried at cost or amortized cost, embedded derivatives on funds withheld reinsurance balances are not recognized, policy acquisition costs are expensed when incurred and asset valuation and interest maintenance reserves are required to be held. Life insurance reserves are calculated based upon different assumptions and the recognition of deferred tax assets is based on different recoverability assumptions.

Combined shareholders’ equity of Global Atlantic's Bermuda-domiciled insurance subsidiaries determined pursuant to statutory accounting rules was approximately $2.2 billion and $3.1 billion as of December 31, 2022 and December 31, 2021, respectively. Bermuda reinsurers file statutory financial statements with the Bermuda Monetary Authority (the "BMA") that may differ from U.S. GAAP. For example, Bermuda statutory surplus differs from U.S. GAAP primarily due to waivers that permit Global Atlantic's Bermuda insurance subsidiaries (i) to not measure the embedded derivative related to the funds withheld coinsurance structure at fair value, and (ii) to value certain synthetic funding agreements as an insurance product rather than as a derivative.