NOTES TO FINANCIAL STATEMENTS NOTES TO F I NANC I AL STATEMENTS 19. MANAGEMENT OF INSURANCE AND FINANCIAL RISK The Company is exposed to a range of risks through its financial assets, financial liabilities and insurance liabilities. This section summarises these risks and the way the Company manages them. 19.1. Insurance risk The risk under an insurance contract is the risk that an insured event will occur, including the uncertainty of the amount of any resulting claim. The principal risk the Company faces under such contracts is that provisions for claims liabilities are estimates which are subject to variability, and the variability could be material in the near term. The variability arises because the amount of rainfall, which impacts on the ultimate settlement of claims, has not yet been fully determined as it is a future event. Provision for claims liabilities are based on all relevant information available to the Company. Methods of estimation are used which the Company believes produce reasonable results given current information. Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk, geographical location and type of industry covered. The Company only insures the drought risks of participating African member states, therefore, there is a concentration of insurance risk within the industry sector and broadly within the territories the Company serves. The variability of risks is improved by the use of reinsurance arrangements. Similar to other insurance companies, in order to minimise financial exposure arising from large claims (from, for example, correlated drought events affecting multiple insured countries), the Company, in the normal course of business, will enter into agreements with other parties for reinsurance purposes. To minimise its exposure to significant losses from reinsurer insolvencies, the Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers. Furthermore, the financial strength and managerial and technical expertise as well as historical performance, wherever applicable, are thoroughly reviewed by the Company. Reinsurance ceded contracts do not relieve the Company from its obligations to policyholders and as a result the Company remains liable for the portion of outstanding claims reinsured to the extent that the reinsurer fails to meet the obligations under the reinsurance agreements. Amounts recoverable from reinsurers are estimated in a manner consistent with the assumptions used for ascertaining the underlying policy benefits and are presented in the Statement of Financial Position as reinsurance assets. The following tables show the concentration of net insurance contract liabilities/assets by type of contract: DECEMBER 31, 2023 DECEMBER 31, 2022 Figures in USD INSURANCE REINSURANCE HELD NET INSURANCE REINSURANCE HELD NET Drought 12,522,694 (436,584) 12,086,110 26,721,335 (529,371) 26,191,963 Tropical cyclone 2,889,672 (57,811) 2,831,861 136,793 354,775 491,528 NSB 11,593,999 (2,201,294) 9,392,705 20,752 (63,036) (42,284) O&E 503,576 (460,454) 43,122 503,563 2,459 506,023 Total net insurance 27,509,941 (3,156,143) 24,353,799 27,382,443 (235,173) 27,147,230 132
RkJQdWJsaXNoZXIy MTM3NDM0