BIMB Integrated Annual Report 2019

48 FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 48.3 Credit risk (continued) (b) Takaful Credit risk is the potential financial loss resulting from the failure of a customer, an intermediary or counterparty to settle its financial and contractual obligations to the Takaful Malaysia Group as and when they fall due. The Takaful Malaysia Group’s portfolio of Islamic debt instruments, and to a lesser extent short-term and other investments, are subject to credit risk. This risk is defined as the potential loss resulting from adverse changes in a borrower’s ability to repay the debt. The Takaful Malaysia Group’s objective is to earn competitive relative returns by investing in a diversified portfolio of securities. Management has an investment credit risk policy in place. Limits are established to manage credit quality and concentration risk. Takaful Malaysia has takaful and other receivable balances that are subject to credit risk. Among the most significant of these are retakaful recoveries. To mitigate the risk of the counterparties not paying the amount due, Takaful Malaysia has established certain business and financial guidelines for retakaful approval, incorporating ratings by major agencies and considering currently available market information. Takaful Malaysia also periodically review the financial stability of brokers/retakaful companies from public and other sources and the settlement trend of amounts due from retakaful companies. Cash and deposits are generally placed with banks and financial institutions licensed under the Financial Services Act 2013 and Islamic Financial Services Act 2013 which are regulated by Bank Negara Malaysia and Sharia Insurance Regulation in Indonesia. Takaful Malaysia manage individual exposures as well as concentration of credit risks. There are no significant changes as compared to prior periods. At end of the reporting period, there were no significant concentration of credit risks, other than investments in Islamic debts instruments issued by single issuer and investment in Institutional Trust Account. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 272 Integrated Annual Report 2019 Group Overview Sustaining The Group Management Discussion & Analysis Group Governance