Page 133 - EXIM-Bank_Annual-Report-2023

Management Discussion and Analysis Ensuring Sustainability Commitment to Lead Upholding Accountability Financial Statements 131

Notes to the fiNaNcial statemeNts

2. MATErIAL ACCouNTING PoLICy INForMATIoN (cont’d)
2.4 Summary of material accounting policy information (cont’d)

(m) Insurance contracts/takaful certificates and reinsurance contracts
The Group issues contracts/certificates to customers that contain insurance/takaful risk, financial risk or a
combination thereof. A contract/certificate under which the Group accepts significant insurance/takaful risk
from another party by agreeing to compensate that party on the occurence of a specified uncertain future event,
is classified as an insurance contract/takaful certificate.

The Group also cedes out insurance/takaful risk in the normal course of its business. Ceded reinsurance/
retakaful arrangements do not relieve the Group or the Bank from its obligations to policyholders/participants.
Reinsurance/retakaful arrangements entered into by the Group are measured consistently with the amounts
associated with the underlying insurance/takaful certificates, according to the terms of the relevant reinsurance/
retakaful arrangement.

(i) Recognition
Insurance contracts/takaful certificates are recognised from the earliest of the following:
- The beginning of coverage periof of the group of contracts/certificates;
- The date when the first payment from a policyholder/participant is due, or when the first payment is received
when there is no due date; or
- For a group of onerous contracts/certificates, as soon as facts and circumstances indicate that the group of
contracts/certificates are onerous.

Reinsurance contracts/retakaful certificates are recognised from the earliest of the following:
- The beginning of the coverage period of the group of reinsurance contracts/retakaful certificates held; or
- The date the Group recognises an onerous group of underlying insurance contracts/takaful certificates if the
Group entered into the related reinsurance contracts/retakaful certificates held in the group of reinsurance
contracts/retakaful certificates held at or before that date.
(ii) Measurement
The Group and Bank applies the following measurement models in measuring various insurance contracts/
takaful certificates it issues:-
General Measurement Model (‘’GMM’’)

- GMM is the default measurement model for policies/certificates valued using fulfilment cash flows
(the present value of expected cash flows, plus a risk adjustment), offset by the contractual service margin
which represents unearned profit the Group and Bank recognises as it provides services under the contract.
- Upon initial recognition, the Group and Bank will estimate the Liabilities for Remaining Coverage (“LRC”)
using the fulfilment cash flow requirements consisting of the following components:

- Estimates of the future cash flows
- Time value of money
- Risk adjustment for non-financial risk; and
- Contractual Service Margin (“CSM”) representing the unearned profits as services are provided or loss
component representing the net cash outflow.