Page 134 - EXIM-Bank_Annual-Report-2022

132 eXIM BANK MALAYsIA ANNUAL REPORT 2022

Notes to the fiNaNcial statemeNts

3. sIGNIFICANt ACCouNtING estIMAtes AND JuDGeMeNt (cont’d.)
3.2 estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date,
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year, are described below. The Group and the Bank based its assumption and estimates on parameters
available when the financial statements were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or circumstances arising that are beyond the control of
the Group and the Bank. Such changes will be reflected in the assumptions when they occur.
(a) Uncertainty in accounting estimates for credit insurance/takaful business (Note 45)
The principal uncertainty in the credit insurance/Takaful business arises from the technical provisions which include
the premium/contribution liabilities, claims liabilities and expense liabilities. The premium/contribution liabilities
comprise unearned premium reserves and unexpired risk reserves while claim liabilities comprise provision for
outstanding claims. The estimation bases for unearned premium/contribution reserves and unexpired risk reserves
are explained in the related accounting policy statement.
Generally, claim liabilities are determined based upon previous claims experience, existing knowledge of events,
the terms and conditions of the relevant policies and interpretation of circumstances. Particularly relevant is past
experience with similar cases, historical claims development trends, legislative changes, judicial decisions and
economic conditions. It is certain that actual future premiums/contribution and claims liabilities will not exactly
develop as projected and may vary from the projections.
The estimates of premiums/contribution and claims liabilities are therefore sensitive to various factors and
uncertainties. The establishment of technical provisions in an inherently uncertain process and, as a consequence
of this uncertainty, the eventual settlement of premiums/contribution and claims liabilities may vary from the initial
estimates.

There may be significant reporting lags between the occurrence of an insured event and the time it is actually
reported. Following the identification and notification of an insured loss, there may still be uncertainty as to the
magnitude of the claim. There are many factors that will determine the level of uncertainty such as inflation,
inconsistent judicial interpretations, legislative changes and claims handling procedures.

(b) Management overlays for ECL (Note 9(x))
As the current MFRS 9 models are not expected to generate levels of ECL with sufficient reliability in view of the
unprecedented and ongoing COVID-19 pandemic, overlays and post-model adjustments have been applied to
determine a sufficient overall level of ECL as at 31 December 2022.
These overlays and post-model adjustments were taken to reflect the latest macroeconomic outlook not captured
in the modelled outcome and the potential impact to delinquencies and defaults when the various relief and
support measures expire.
The overlays and post-model adjustments involved significant level of judgement and reflect the management’s
views of possible severities of the pandemic and paths of recovery in the forward-looking assessment for ECL
estimation purposes.
The borrowers or customers who have received repayment supports remain in their existing stages unless they have
been individually identified as not viable or with subsequent indicators of significant increase in credit risk from
each of their pre- COVID-19 status. The overlays and post-model adjustments were generally made at portfolio
level in determining the sufficient level of ECL overlay.
The impact of these post-model adjustments were estimated at both portfolio and vulnerable obligors level
amounting to RM66.37 million (2021: RM180.21 million) for the Group and the Bank as at 31 December 2022.