NTUC Income AR 2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017 3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) Insurance Contract Provisions for General Insurance (continued) Assumptions The key assumptions of the actuarial valuation models include: – chain ladder claim development factors; – loss ratios; – expense ratios; – reinsurance recovery ratios. These assumptions are derived based on the Group’s historical and emerging underwriting experience. For the valuation as at 31 December 2017, the basis of liability valuation assumptions has not been changed as compared to previous annual valuation. Effect of Changing Assumptions used for General Insurance Changes Change in Gross Claim Liability $’000 % Increase / (decrease) in Gross Claim Liability Change in assumptions and experience (116,155) -31.3% The table above summarises the effect of changing assumptions has on 2016 and prior accident years’ claim liabilities where comparisons can be made to last year’s year-end liability valuation. The claim liabilities are gross of reinsurance recoveries and it is inclusive of claims handling expenses and provision for adverse deviation. Margins for adverse deviation In accordance with the insurance regulations, the insurance liabilities include a risk margin to ensure a minimum 75% probability of adequacy. The risk margin is determined to allow for the uncertainty and volatility of the claims experience. Effects of diversification are also allowed for at the fund level. Discounting The general insurance liabilities are not discounted. Gross liabilities The gross claims liability as at 31 December 2017 is $476 million (2016: $485 million) as compared to net claims liability of $445 million (2016: $451 million). The gross premium liability as at 31 December 2017 is $188 million (2016: $178 million) as compared to net premium liability of $188 million (2016: $177 million). ANNUAL REPORT 2017 EVERY DAY MADE DIFFERENT 65