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2. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
2.4 Summary of significant accounting policies (cont’d)
(l) Insurance/Takaful contract liabilities (cont’d)
(i) Premium/Contribution liabilities (cont’d)
Unearned premium/contribution reserves
UPR/UCR represent the portion of the net premiums/contribution of insurance/Takaful policies written that
relate to the unexpired periods of policies at the end of the financial year. In determining the UPR/UCR at the
balance sheet date, the following methods are used:
– In respect of short term comprehensive policies, 75% of the premium/contribution is recognised in
the financial year in which the policies are issued. The remaining 25% of the premium/contribution
is transferred to the unearned premium/contribution reserves and is recognised in the following
financial year.
– In respect of medium and long term policies, the premium/contribution is recognised over the period of risk
on a straight-line basis.
Unexpired risk reserves
At each reporting date, the Group and the Bank review the unexpired risks and a liability adequacy test is
performed by an independent actuarial firm. URR is the prospective estimate of the expected future payments
arising from future events insured under policies in force as at the valuation date and also includes allowance
for the insurer’s expenses, including overheads and cost of reinsurance/retakaful, expected to be incurred
during the unexpired period in administering these policies and settling the relevant claims, and expected
future premium/contribution refunds.
(ii) Claims liabilities
Claims liabilities are recognised when a claimable event occurs and/or the Group and the Bank are notified. The
amount of outstanding claims provision are based on the estimated ultimate cost of all claims incurred but not
settled at the end of the reporting period, whether reported or not, together with related claims handling costs
less other recoveries. Delays can be experienced in the notification and settlement of certain types of claims,
therefore, the ultimate cost of these claims cannot be known with certainty at the end of reporting period.
The liability is calculated at the reporting date by an independent actuarial firm using projection techniques
that included risk margin for adverse deviation. The liabilities are derecognised when the contract expires, is
discharged or cancelled.
(m) Deferred income arising from guarantee facility
Income arising from guarantee facility is recognised over the period of risk on a straight-line basis. Should a claim
be paid or provided for in respect of such policies, the balance of the premium shall be recognised in the financial
year in which the claim is made.
NOTESTOTHEFINANCIALSTATEMENTS
31 DECEMBER 2013
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EXIM Bank Annual Report 2013