BIMB Integrated Annual Report 2017

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.15 Family Takaful Fund (continued) 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. Expense reserves The expense reserves is reported as a liability in Shareholder’s Fund. Expense reserves consists the followings: (a) Expense liabilities The method used to value expense liabilities shall be consistent with the method used to value takaful liabilities of the corresponding family takaful certificate (for example, for a long-term ordinary takaful certificate, the valuation method for expense liabilities should also be long-term in nature). (b) Deficiency Reserve for Skim Anuiti Takaful KWSP In addition to the expense liabilities above, an additional requirement is also complied as stipulated below: If PIF is expected to be insufficient to meet future annuity certain benefit and/or future life annuity tabarru’, another provision shall be set aside that is in line with requirement of the valuation guideline. Upon PIF insufficiency, the Shareholders’ Fund shall honour the annuity certain benefit payment to participants as well as the tabarru’ to Participant Risk Fund (“PRF”). 2.16 Product classification The Family Takaful Fund and General Takaful Fund consist of certificate contracts that transfer takaful risk. Takaful contracts are those contracts that transfer significant takaful risk. A takaful contract is a contract under which the fund has accepted significant takaful risk from another party (the certificate holders) by agreeing to compensate the participants if a specified uncertain future event (the takaful event) adversely affects the participants. As a general guideline, to determine whether a contract has significant takaful risk, benefits paid are compared with benefits payable if the takaful event did not occur. Investment contracts are those contracts that do not transfer significant insurance risk. There are no contracts that are classified as investment contracts in the Family and General Takaful Funds. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 188 BIMB HOLDINGS BERHAD Integrated Annual Report 2017