My first Publication ocbc_ar17_fullreport_english | Page 247

39. RISK MANAGEMENT (continued)
39.5 INSURANCE-RELATED RISK MANAGEMENT (continued)
Market and credit risk (continued)
(f) Commodity risk
GEH Group does not have a direct or significant exposure to commodity risk.
(g) Liquidity risk
Liquidity risk arises when a company is unable to meet the cash flow needs of its financial liabilities, or if the assets backing the
liabilities cannot be sold quickly enough without incurring unreasonable losses. For an insurance company, the greatest liquidity needs
typically arise from its insurance liabilities. Demands for funds can usually be met through ongoing normal operations, premiums
received, sale of assets or borrowings. Unexpected demands for liquidity may be triggered by negative publicity, deterioration of
the economy, reports of problems in other companies in the same or similar lines of business, unanticipated policy claims, or other
unexpected cash demands from policyholders.
Expected liquidity demands are managed through a combination of treasury, investment and asset-liability management practices,
which are monitored on an ongoing basis. Actual and projected cash inflows and outflows are monitored and a reasonable amount of
assets are kept in liquid instruments at all times. The projected cash flows from the in-force insurance policy contract liabilities consist
of renewal premiums, commissions, claims, maturities and surrenders. Renewal premiums, commissions, claims and maturities are
generally stable and predictable. Surrenders can be more uncertain although these have been quite stable over the past several years.
 nexpected liquidity demands are managed through a combination of product design, diversification limits, investment strategies
U
and systematic monitoring. The existence of surrender penalty in insurance contracts also protects GEH Group from losses due to
unexpected surrender trends as well as reduces the sensitivity of surrenders to changes in interest rates.
The following tables show the expected recovery or settlement of financial and insurance-related assets and maturity profile of GEH
Group’s financial and insurance contract liabilities which are presented based on contractual undiscounted cash flow basis, except for
insurance contract liabilities which are presented based on net cash outflows resulting from recognised liabilities.
$ million
Less than
1 year 1 to 5
years Over 5
years No specific
maturity Total
–
1,191
– –
13,377
– –
44,262
– 14,320
–
6,929 14,320
58,830
6,929
–
137
– –
565
– –
867
– 2,536
–
2,431 2,536
1,569
2,431
2017
Available-for-sale securities
Equity securities
Debt securities
Other investments
Securities at fair value through profit or loss
Equity securities
Debt securities
Other investments
Financial instruments held-for-trading
Equity securities
Debt securities
Loans
Insurance receivables
Other debtors and interfund balances
Cash and cash equivalents
Financial and insurance-related assets 5
81
198
331
3,642
5,365
10,950 3
1,311
1,059
(1)
4
–
16,318 4
649
263
(#)
18
–
46,063 –
–
–
2,371
67
–
28,654 12
2,041
1,520
2,701
3,731
5,365
101,985
Other creditors and interfund balances
Insurance payables
Provision for agents’ retirement benefits
Debt issued
General insurance fund contract liabilities
Life assurance fund contract liabilities
Financial and insurance-related liabilities 4,217
3,247
93
18
205
7,948
15,728 50
866
57
446
4
10,810
12,233 2
4
126
–
(#)
43,472
43,604 35
7
–
–
22
–
64 4,304
4,124
276
464
231
62,230
71,629
(1)

# represents amounts less than $0.5 million.
BUILDING ON OUR CORPORATE STRATEGY FOR SUSTAINABLE GROWTH
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