BIMB Integrated Annual Report 2019

48 FINANCIAL RISK MANAGEMENT POLICIES (CONTINUED) 48.4 Market risk (continued) (b) Takaful The key features of Takaful Malaysia’s market risk management practices and policies are as follows: – A group-wide market risk policy setting out the evaluation and determination of components of market risk for the Takaful Malaysia Group. Compliance with the policy is monitored and reported monthly to Takaful Malaysia’s Risk Management Committee (“RMC”) and exposures and breaches are reported as soon as practicable. – Set asset allocation, portfolio limit structure and diversification benchmark to ensure that assets back specific contract liabilities and that assets are held to deliver income and gains for certificate holders in line with terms of the respective contracts expectations of policies. Takaful Malaysia’s policies on asset allocation, portfolio limit structure and diversification benchmark have been set in line with Takaful Malaysia’s risk management policy after taking cognisance of the regulatory requirements in respect of maintenance of assets and solvency. Takaful Malaysia also issue unit-linked investment certificates. In the unit-linked business, the certificate holders bear investment risk on the assets held in the unit-linked funds as the certificate benefits are directly linked to value of the assets in the funds. Takaful Malaysia’s exposure to market risk on this business is limited to the extent that income arising from asset management charges is based on the value of the assets in the funds. (i) Profit yield risk Profit yield risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market profit yield. Floating rate/yield instruments expose Takaful to cash flow risk, whereas fixed rate/yield instruments expose Takaful to fair value risk. Takaful Malaysia’s profit risk policy requires its Management to manage the risk by maintaining an appropriate mix of fixed rate/yield instruments. The policy also requires Takaful management to manage the maturities of profit-bearing financial assets and liabilities. Floating rate/yield instruments will be re-priced at intervals of not more than one (1) year. Profit on fixed rate/yield instruments is priced at inception of the financial instrument and is fixed until maturity. The profit yield profile of the Takaful Malaysia Group and its subsidiaries’ significant profit-bearing financial instruments, based on carrying amounts as at the end of the reporting period is as follows: Takaful Takaful Family General Malaysia Operator Takaful Takaful Group Fixed rate instruments RM’000 RM’000 RM’000 RM’000 2019 FVTPL financial assets 61,610 356,115 15,199 432,924 FVOCI financial assets 584,698 3,908,919 356,748 4,850,365 Amortised cost 732,187 1,816,032 371,977 2,920,196 1,378,495 6,081,066 743,924 8,203,485 2018 FVTPL financial assets 63,111 503,886 51,757 618,754 FVOCI financial assets 493,490 3,498,323 391,126 4,382,939 Amortised cost 598,975 1,263,770 260,499 2,123,244 1,155,576 5,265,979 703,382 7,124,937 Takaful Malaysia has no significant concentration of profit yield risk. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 290 Integrated Annual Report 2019 Group Overview Sustaining The Group Management Discussion & Analysis Group Governance