BIMB Integrated Annual Report 2019

49 TAKAFUL RISK MANAGEMENT (CONTINUED) (b) General Takaful Fund (continued) Sensitivities The General Takaful claim liabilities are sensitive to the above key assumptions and any changes to these assumptions may impact the liabilities and operating surplus of the General Takaful Fund significantly. It has not been possible to quantify the sensitivity of certain assumptions, such as, legislative changes or uncertainty in the estimation process. The analysis below is performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on gross and net liabilities and operating surplus. The correlation of assumptions will have a significant effect in determining the ultimate claims liabilities. However, in order to demonstrate the impact arising from changes in assumptions, these assumptions had to be changed on an individual basis. It should also be noted that movement in these assumptions are non-linear. The key assumptions to which the estimation of actuarial liabilities is particularly sensitive to the followings: – Fire loss ratio for latest accident year This is significant as Fire portfolio is one of the largest under general business, a change in loss ratio estimate will impact the liabilities significantly. – Motor Act loss ratio for latest accident year Motor Act business is long term in nature, and would take years before experiencing claim incidents. A significant impact may result if the ultimate experience differs from current estimation. – Average claim cost Reserves are based on the assumption that historical average claim cost is reflective of the potential future experience. Increase in average cost will have an impact on future liabilities. – Average claim frequency Reserves are based on the assumption that historical average claim number in each accident year is reflective of the potential future experience. A change in average number of claims will have an impact on future liabilities. – Average claim settlement period Reserves are based on the assumption that claim settlement period is expected to be stable over the years. A change in claim handling practice will have an impact on claim cost and future liabilities. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) 306 Integrated Annual Report 2019 Group Overview Sustaining The Group Management Discussion & Analysis Group Governance