NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2022 Contracts with non-DPF Impact on profit/(loss) before movement in insurance policy holder liability 2022 2021 Group R'm R'm Interest rate risk Decrease of 1% in Yield Curve (1 475) (1 272) Increase of 1% in Yield Curve 1 193 1 570 The effect of changes in the net capital value of non-DPF contracts due to market movements are fully absorbed by adjusting the net capital value of DPF contracts resulting in a zero impact on total net capital of the Group. Assumptions, methodology and limitations of sensitivity analysis The effects of the specified changes in factors are determined using actuarial and statistical models, as relevant. The level of movements in market factors on which the sensitivity analysis is based were determined based on economic forecasts and historical experience of variations in these factors. The sensitivity table demonstrates the effect of a change in a key assumption while other assumptions remain unchanged. However, the occurrence of a change in a single market factor may lead to changes in other market factors as a result of correlations. The sensitivity analyses do not take into consideration that the Group’s assets and liabilities are actively managed. Additionally, the sensitivity analysis is based on the Group’s financial position at the reporting date and may vary at the time that any actual market movement occurs. As investment markets move past predetermined trigger points, management action would be taken which would alter the Group’s position. Underwriting risk: Long-Term Insurance Underwriting risk is the risk that the actual exposure to mortality, disability and medical risks in respect of policyholder benefits will exceed prudent exposure. Underwriting risk is controlled by underwriting principles. The underwriting process takes into account actual and prospective mortality, morbidity and the expense experience. The Head of Actuarial Function (‘HAF’) reviews and attests annually on the reliability and adequacy of technical provisions and the Solvency Capital Requirement. The HAF expresses an opinion on the Underwriting Policy as well as the soundness of the premium rates in use and the profitability of the business, taking into consideration the reasonable benefit expectation of policyholders. All new rate tables are approved and authorised by the Executive: Actuarial Services prior to being issued. Regular investigations into the mortality and morbidity experience are conducted. All risk-related mortality lump sum, disability and critical illness liabilities in excess of specified monetary limits are reinsured. A sickness experience report is annually presented analysing claim patterns and trends. The latest report indicated no significant deterioration in claim patterns. Reinsurance outwards: Long-Term Insurance 39. Management of risks (continued) 39.3 Financial risk management (continued) 190 Notes to the Consolidated Financial Statements
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