BIMB Integrated Annual Report 2019

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 2.16 Family Takaful Fund (continued) Actuarial reserves Actuarial reserves comprise the Prospective Actuarial Valuation, Cash Flow Projection Valuation and Unearned Contribution Valuation as explained below: (i) Prospective Actuarial Valuation For credit-related products, the liabilities of Family Takaful Fund shall be valued based on the sum of present value of future benefits and any expected future expenses payable from the takaful funds, less the present value of future gross tabarru’ arising from the certificate, discounted at the appropriate risk discount rate as defined in the valuation guidelines. For a credit-related takaful certificate whose sustainability of tabarru’ deductions is dependent on the performance of Participants Investment Fund (“PIF”), the calculation is subject to adjusting the future gross tabarru’ cash flow such that it is limited to the period where the PIF can sustain the tabarru’ and assuming that the takaful coverage is in force for the full duration of the takaful contract. (ii) Cash Flow Projection Valuation For products with PIF other than credit-related products, the liabilities shall be valued by projecting future cash flows to ensure that all future obligations can be met without recourse to additional finance or capital support at any future time during the duration of the certificate. The cash flow projection shall use a basis that is consistent with the requirements of the valuation guidelines. (iii) Unearned Contribution Valuation Yearly renewable products or extensions shall be valued according to the following: (a) For a certificate covering death or survival, the liabilities shall be valued on an unexpired risk basis using a prospective estimate of expected future payments arising from future events covered as at the valuation date. These future payments shall include allowance for direct claims related expenses, direct investment-related expenses, cost of retakaful and expected future contribution refunds expected during the unexpired period. (b) For a certificate covering contingencies other than death or survival the net liability is the maximum of unexpired risk reserve or unearned contribution reserve. Provision for outstanding claims Claims and provisions for claims arising on family and group family takaful certificates, including settlement costs, are accounted for using the case basis method and for this purpose the benefits payable under a family takaful certificate are recognised as follows: (a) Maturity or other policy benefit payments due on specified dates are accounted for as claims payable on the due dates. (b) Death, surrender and other benefits without due dates are treated as claims payable on the date of receipt of intimation of death of the participant or occurrence of contingency covered. (c) For individual family, group health and medical business, provision is made for the cost of claims (together with related expenses) and IBNR at the end of the reporting period, using a mathematical method of estimation by a qualified internal actuary where historical claims experience are used to project future claims. The provision includes a risk margin for adverse deviation. As with all projections, there are elements of uncertainty and the projected claims may be different from actual. These uncertainties arise from changes in underlying risk, changes in spread of risks, claim settlement pattern as well as uncertainties in the projection model and underlying assumptions. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 203 BIMB HOLDINGS BERHAD 199701008362 (423858-X) Shareholders’ Information Financial Statements Additional Information Disclosure Summary