Page 201 - CJ 2019 INTEGRATED REPORT

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3 (c) NOTES TO THE FINANCIAL
STATEMENTS 31 DECEMBER 2019 (CONTINUED)
MANAGEMENT OF INSURANCE RISK (CONTINUED)
Long term insurance contracts (Continued)
Process used to decide on on on assumptions
(Continued)
• Uncertainty in in in premium income The LABS’s actuary builds in in in in provision for non-receipts of of future premiums (arising from deaths withdrawals surrenders defaults etc )
due in in in in in his his valuation basis basis This basis basis is is is is is is is is used to determine determine the the the the the position of of of of the the the the the life fund every year Further cost of of of all new products is is is is is is determined by the the the the the actuary after thorough consideration of of of the the the the the key assumptions
• Uncertainty in in payment of benefits
Uncertainty in in in in in in benefit payments arises from changes in in in in in in underlying mortality mortality trends (e g g g g mortality mortality improvement increasing life expectancies) and the economic environment The actuary builds in in in in margins in in in in his valuation assumptions
that reflect mortality improvements/deterioration as as warranted by the particular policy being valued For example for for endowment plans higher higher deaths than expected will be be be a a a a a a a a a a a a a a a a source of uncertainty uncertainty in in in in benefit payouts while for for annuities uncertainty uncertainty arises from higher higher life expectancy Bonus Bonus rates rates are are are used to to reduce uncertainty in in in in in payouts due to to changes in in in in in the economic environment Bonus Bonus rates rates are are are not guaranteed and and are are reviewed in in in in in line with current and and future market prospects Sensitivity analysis
At 31 December 2019 the the the the actuarial liability in in respect of the the the the business issued by by the the the the LABS LABS amounted to 1 1 1 1 1 1 1 1 119 517 000 000 (2018: Rs 1 1 1 033 376 000) as as assessed by the the the LABS’s actuary The following table presents the the the the sensitivity of of of the the the the value of of of insurance insurance liabilities liabilities to movements in in in in in the the the the assumptions
used in in in the the estimation of insurance liabilities (d)
Assumptions Worsening of mortality Drop in in in interest rate on investments Worsening of renewal expense rate Worsening of lapse rate Change in Variable
+ 5% p a - 2% p a + 10% p a + 10% p a Change in liability Change in liability 2018 Rs’000
(218) 153 752 7 7 847
(8 083)
2019 Rs’000
(1 891)
159 545
12 446
(21 503)
INTEGRATED REPORT 2019 The The LABS’s LABS’s activities expose it it it to a a a a a a a a a a a a a a a a variety of of financial risks including the effects of of changes fin in in in in debt and and equity market prices foreign currency exchange rates rates and and and interest rates rates The The LABS’s LABS’s overall risk risk management program focuses on on the the the unpredictability of of financial financial markets and and seeks to minimise potential adverse effects on on the the the financial financial performance of the the LABS