BIMB Integrated Annual Report 2019

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.14 Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The provisions are reviewed at each reporting date and if it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed. 2.15 General Takaful Fund The General Takaful Fund is maintained in accordance with the Islamic Financial Services Act, 2013. Included in General Takaful Fund are funds arising from: • General Takaful; and • General retakaful funds The General Takaful underwriting results are determined for each class of takaful business after taking into account retakaful, unearned contributions, claims incurred and administrative fees. Contribution liabilities Contribution liabilities represent the future obligations on takaful contracts as represented by contributions received for risks that have not yet expired. The movement in contribution liabilities is released over the term of the takaful contracts and recognised as earned contribution income. Contributions liabilities are reported at the higher of the aggregate of the unearned contribution reserves (“UCR”) respectively for all lines of business or the best estimate value of the unexpired risk reserves (“URR”) and a provision of risk margin for adverse deviation (“PRAD”) calculated at 75% confidence level at the end of the financial year. (i) Unexpired risk reserves The URR is prospective estimate of the expected future payments arising from future events insured or covered under contracts in force as at the end of the financial year and also includes allowance for expenses, including overheads and costs of retakaful, expected to be incurred during the unexpired period in administering these policies or contracts and settling the relevant claims, and shall allow for expected future contributions refunds. URR is estimated via an actuarial valuation performed by qualified actuary, using a mathematical method of estimation similar to Incurred But Not Reported (“IBNR”) claims. (ii) Unearned contribution reserves The Unearned Contribution Reserves (“UCR”) represent the portion of the net contributions of takaful certificates written that relate to the unexpired periods of the certificates at the end of the financial year. In determining the UCR at the end of the reporting period, the method that most accurately reflects the actual unearned contributions is used, as follows: a) 1/365 th method for all General Takaful business b) 1/8 th method for all classes of General Treaty Inward Retakaful business NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 201 BIMB HOLDINGS BERHAD 199701008362 (423858-X) Shareholders’ Information Financial Statements Additional Information Disclosure Summary