appropriateness. Insurance risk for contracts disclosed in this note is also affected by the contract holders’ right to terminate the contract completely. As a result, the amount of insurance risk is also subject to contract holder behaviour. On the assumption that contract holders will make decisions rationally, overall insurance risk can be assumed to be aggravated by such behaviour. For example, it is likely that contract holders whose health has deteriorated significantly will be less inclined to terminate contracts insuring death benefits than those contract holders remaining in good health. This results in an increasing trend of expected mortality, as the portfolio of insurance contracts reduces due to voluntary terminations. The Group has factored the impact of contract holders behaviour into the assumptions used to measure these liabilities (refer note 13). b. Sources of uncertainty in the estimation of future benefit payments and premium receipts Uncertainty in the estimation of future benefit payments and premium receipts for long-term insurance contracts arises from the unpredictability of long-term changes in overall levels of mortality and morbidity and the variability in contract holder behaviour. The Group uses appropriate base tables of standard mortality and morbidity rates. An investigation into the actual experience of the Group over the last or previous year is carried out, to produce a best estimate of the expected morbidity and mortality for the future. The best estimate of future mortality is based on standard industry tables adjusted for the Group’s overall experience and where no such table exists, tables are developed specifically on PPS historic experience. Lapse experience can have a significant impact on the Group. To manage lapse risk, the Group conducts monthly lapse analyses for each of the product lines. Where experience is worse than long-term valuation expected lapse experience management intervention is taken, over and above normal ongoing retention efforts to reduce overall lapse and exits. Risk exposure and concentrations of risk The following table shows the Group’s exposure to insurance risk (based on the carrying value of the long-term insurance liabilities at the reporting date) per category of business. The table also shows the extent to which the Group has mitigated this risk by reinsurance: Non-DPF DPF Group component of component of 2022 insurance insurance R'm liabilities liabilities Total South Africa Gross 4 931 30 755 35 686 Net of reinsurance 5 016 30 755 35 771 Namibia Gross 297 1 277 1 574 Net of reinsurance 305 1 277 1 582 39. Management of risks (continued) 39.2 Insurance product risk management (continued) 175 Notes to the Consolidated Financial Statements
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