Page 201 - EXIM-BANK-AR20

Section 06 Financial Statements
199

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:

2020 2019
Net Net
RM’000 RM’000 RM’000 RM’000
High Low High Low
+10% -10% +10% -10%

Estimated claim liabilities 52,736 50,668 49,678 48,050

2020 2019
Net Net
RM’000 RM’000

Estimated premium 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:

2020 2019
Net Net
High Low High Low
B- rating B+ rating B- rating BBB- rating
points points points points

Estimated premium/contribution 12,650 8,989 9,773 7,065

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%.
2020 2019
Net Net
RM’000 RM’000 RM’000 RM’000
High Low High Low
+10% -10% +10% -10%

Estimated premium liabilities/contribution 11,494 8,245 7,065 7,065