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ANNUAL REPORT 2021 209

Notes to the fiNaNcial statemeNts

43. insUrance risks (cOnt’D.)

Claim liability sensitivity analysis (cont’d.)
d. Change in PRAD %
Assumed a claim Provision of Risk Margin for Adverse Deviation (“PRAD”) of 25%. Changing this by 10% (to 27.5% and
22.5% respectively) gives the following result:
2021 2020
Net Net
RM’000 RM’000 RM’000 RM’000
high Low high Low
+10% -10% +10% -10%

Estimated claim liabilities 43,911 42,189 52,736 50,668

2021 2020
Net Net
RM’000 RM’000

Estimated premium 12,061 9,870

Premium/contribution liability sensitivity analysis
a. Change in probability of default

Management has assumed 1-year probability of default of ranging from 0.5% to 5% for short-term contracts, depending on
the type of contract. For the medium long term (“MLT”) policies, all 1-year probabilities were assumed to have a B rating
which equated to a 3.2% 1-year probability of default. Changing this rating assumption to B- rating (less trustworthy -
for the “High” Scenario) and B+- rating (more trustworthy - for the “Low” Scenario) gives the following result:
2021 2020
Net Net
high Low high Low
B- rating B+ rating B- rating BBB- rating
points points points points

Estimated premium/contribution 18,580 10,233 12,650 8,989

b. Change in recovery rates
On the premium liability front, some of the MLT policies have reinsurance cover. For the “High” Scenario, management
has reduce all of these by 10%. For the “Low” scenario management has increase them by 10%.
2021 2020
Net Net
RM’000 RM’000 RM’000 RM’000
high Low high Low
+10% -10% +10% -10%
Estimated premium liabilities/contribution 14,700 9,422 11,494 8,245