| Notes forming part of accounts [line items] | | |
| Disclosure of notes and other explanatory information [text block] | | |
| Disclosure of general information about reporting entity [abstract] | | |
| Disclosure of general information about reporting entity [text block] | Wataniya Insurance Company (the “Company”) is a Saudi Joint Stock Company incorporated in the Kingdom of Saudi Arabia under Commercial Registration No. 4030200981 dated 1 Jumada II 1431H (corresponding to May 15, 2010) and Ministry of Commerce and Industry’s Resolution number 158/K dated Jumad-ul-Awal 12, 1431H (corresponding to April 26, 2010). The Registered Office address of the Company is Juffali Building, Madina Road, Jeddah, Saudi Arabia.The Company is licensed to conduct insurance business in Saudi Arabia under Cooperative insurance principles in accordance with Royal Decree No M/53 dated Shawwal 21, 1430H (corresponding to October 10, 2009) pursuant to Council of Ministers’ Resolution No. 330 dated Shawwal 16,1430H (corresponding to October 5, 2009). The Company has obtained Saudi Central Bank (“SAMA”) license number TMN/29/20106 valid up to Rajab 3,1443H (corresponding to February 5, 2022). The Company was listed on the Saudi Arabian stock market (Tadawul) on June 6, 2010. The objectives of the Company are to provide general insurance and related services in accordance with its by-laws and applicable regulations in Saudi Arabia. | 1 |
| Disclosure of basis of preparation of financial statements [text block] | (a)Statement of complianceThese financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) that are endorsed in the Kingdom of Saudi Arabia (“KSA”), and other standards and pronouncements that are endorsed by Saudi organization for Certified Public Accountants (‘SOCPA”) (referred to as “IFRS as endorsed in KSA”). (b) Basis of presentation and measurementThe financial statements have been prepared under the going concern basis and the historical cost convention, except for the measurement at fair value of investment held as fair value through statement of income (FVSI) and measurement of employees defined benefit obligations at present value using projected credit unit method. The Company’s statement of financial position is not presented using a current/non-current classification. However, the following balances would generally be classified as non-current: Investments, Deferred policy acquisition costs, Property and equipment, Intangible assets, Outstanding claims and Technical reserves. All other financial statement line items would generally be classified as current unless stated otherwise.As required by the Saudi Arabian Insurance Regulations “SAMA Implementation Regulations”, the Company maintains separate books of accounts for “Insurance Operations” and “Shareholders’ Operations”. SAMA Implementation Regulations require a clear segregation of assets, liabilities, income and expenses of the insurance and shareholders operations. Accordingly, assets, liabilities, revenues and expenses attributable to either operation are recorded in the respective accounts. Note 29 to these financial statements provides the statement of financial position, statements of income, comprehensive income and cash flows of the insurance operations and shareholders operations, separately.In preparing the Company’s financial statements in compliance with IFRS as endorsed in KSA, the balances and transactions of the insurance operations are amalgamated and combined with those of the shareholders’ operations. Interoperation balances, transactions and unrealized gains and losses, if any, are eliminated in full during amalgamation. The accounting policies adopted for the insurance operations and shareholders’ operations are uniform for like transactions and events in similar circumstances.(c) Functional and presentation currencyThese financial statements have been presented in Saudi Arabian Riyals (SAR), which is also the functional currency of the Company. All financial information presented in SAR has been rounded to the nearest thousands, except where otherwise indicated.(d) Fiscal yearThe Company follows a fiscal year ending December 31.(e) Critical accounting judgments estimates and assumptions The preparation of these financial statements requires the use of estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Although these estimates and judgments are based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates. Estimates and judgments are continuously being evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Following are the accounting judgments and estimates that are critical in preparation of these financial statements:i)The ultimate liability arising from claims made under insurance contractsThe estimation of the ultimate liability arising from claims made under insurance contracts is the Company’s most critical accounting estimate. There are several sources of uncertainty that need to be considered in the estimate of the liability that the Company will ultimately pay for such claims. Estimates are made at the end of the reporting year both for the expected ultimate cost of claim reported and for the expected ultimate costs of claims incurred but not reported (“IBNR”). Liabilities for unpaid reported claims are estimated using the input of assessments for individual cases reported to the Company. At the end of each reporting year, prior year claims estimates are reassessed for adequacy and changes are made to the provision.The provision for claims incurred but not reported (IBNR) is an estimation of claims which are expected to be reported subsequent to the date of statement of financial position, for which the insured event has occurred prior to the date of statement of financial position. The primary technique adopted by management in estimating the cost of notified and IBNR claims, is that of using the past claims settlement trends to predict future claims settlement trends. A range of methods such as Chain Ladder Method, Bornhuetter-Ferguson Method and Expected Loss Ratio Method are used by the actuaries to determine these provisions. Underlying these methods are a number of explicit or implicit assumptions relating to the expected settlement amount and settlement patterns of claims.ii)Impairment of available-for-sale financial assetsThe Company determines that financial assets are impaired when there has been a significant or prolonged decline in the fair value of the financial assets below its cost. The determination of what is significant or prolonged requires judgment. A year of 12 months or longer is considered to be prolonged and a decline of 30% from original cost is considered significant as per Company policy. In making this judgment, the Company evaluates among other factors, the normal volatility in share price, the financial health of the investee, industry and sector performance, changes in technology, and operational and financing cash flows. iii)Impairment of receivablesA provision for impairment of receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the receivable is impaired.iv)Fair value of financial instrumentsFair values of equity investments are based on quoted prices for marketable securities or estimated fair values based on the latest available net assets value of the mutual funds. The fair value of commission-bearing items is estimated based on discounted cash flows using commission for items with similar terms and risk characteristics.The fair value of financial instruments where no active market exists or where quoted prices are not otherwise available are determined by using valuation techniques. In these cases, the fair values are estimated from observable data in respect of similar financial instruments or using models. Where market observable inputs are not available, they are estimated based on appropriate assumptions. Where valuation techniques (for example, models) are used to determine fair values, they are validated and periodically reviewed by qualified personnel independent of those that sourced them. All models are certified before they are used, and models are calibrated to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use only observable data; however, areas such as credit risk (both own credit risk and counterparty risk), volatilities and correlations require management to make estimates. | 2 |
| Disclosure of new standards and amendments in standards [text block] | The accounting policies, estimates and assumptions used in the preparation of these financial statements are consistent with those used in the preparation of the annual financial statements for the year ended December 31, 2019 except for the adoption of the following:3.1 New IFRS, International Financial Reporting and Interpretations Committee’s interpretations (IFRIC) and amendments thereof, adopted by the CompanyThe Company has adopted the following amendments, interpretations and revisions to existing standards, which were issued by the IASB and are applicable from January 1, 2020:Standard / AmendmentsDescriptionAmendments to IAS 1 and IAS 8Definition of MaterialAmendments to IFRS 3Definition of a BusinessAmendments to IFRS 7, IFRS 9 and IAS 39Interest Rate Benchmark ReformConceptual Framework Revised Conceptual Framework for Financial ReportingAmendments to IFRS 16Covid-19-related Rent ConcessionsThe adoption of the above amendments to standards and interpretations did not have any significant impact on these financial statements.3.2 Standards issued but not yet effectiveStandards issued but not yet effective up to the date of issuance of the Company’s financial statements are listed below. The listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt these standards when they become effective.Standard/InterpretationDescriptionEffective from periods beginning on or after the following dateIFRS 9 Financial InstrumentsSee note belowAmendments to IAS 1Classification of Liabilities as Current or Non-currentJanuary 1, 2022Amendments to IAS 16Property, Plant and Equipment: Proceeds before intended useJanuary 1, 2022Amendments to IFRS 3Reference to the Conceptual FrameworkJanuary 1, 2022Amendments to IAS 37Onerous Contracts – Cost of Fulfilling a Contract January 1, 2022Annual Improvements to IFRS Standards 2018–2020Improvements relating to:-IFRS 9 Financial Instruments-IFRS 16 Leases-IFRS 1 First-time Adoption of IFRSJanuary 1, 2022Interest rate benchmark (IBOR) reform Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16January 1, 2021IFRS 17Insurance Contracts January 1, 2023There are no other relevant IFRS or IFRS interpretations that are not yet effective that would be expected to have a material impact on the Company’s financial statements except for IFRS 9 and IFRS 17 as explained below.IFRS 9 – Financial instrumentsThis standard was published on July 24, 2014 and has replaced IAS 39. The new standard addresses the following items related to financial instruments:a) Classification and measurementIFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss. A financial asset is measured at amortized cost if both:i. the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; andii. the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (“SPPI”).The financial asset is measured at fair value through other comprehensive income and realized gains or losses would be recycled through profit or loss upon sale, if both conditions are met:i. the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows and for sale; andii. the contractual terms of cash flows are SPPI.Assets not meeting either of these categories are measured at fair value through profit or loss. Additionally, at initial recognition, an entity can use the option to designate a financial asset at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch.For equity instruments that are not held for trading, an entity can also make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of the instruments (including realized gains and losses), dividends being recognized in statement of income.Additionally, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in statement of income.b) ImpairmentThe impairment model under IFRS 9 reflects expected credit losses, as opposed to incurred credit losses under IAS 39. Under the IFRS 9 approach, it is no longer necessary for a credit event to have occurred before credit losses are recognized. Instead, an entity always accounts for expected credit losses and changes in those expected credit losses. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition.c) Hedge accountingIFRS 9 introduces new requirements for hedge accounting that align hedge accounting more closely with Risk Management. The requirements establish a more principles-based approach to the general hedge accounting model. The amendments apply to all hedge accounting with the exception of portfolio fair value hedges of interest rate risk (commonly referred to as “fair value macro hedges”). For these, an entity may continue to apply the hedge accounting requirements currently in IAS 39. This exception was granted largely because the IASB is addressing macro hedge accounting as a separate project.Effective dateThe published effective date of IFRS 9 was January 1, 2018. However, amendments to IFRS 4 – Insurance Contracts: Applying IFRS 9 – Financial Instruments with IFRS 4 – Insurance Contracts, published on September 12, 2016, changes the existing IFRS 4 to allow entities issuing insurance contracts within the scope of IFRS 4 to mitigate certain effects of applying IFRS 9 before the IASB’s new insurance contract standard (IFRS 17 – Insurance Contracts) becomes effective. The amendments introduce two alternative options:1.apply a temporary exemption from implementing IFRS 9 until the earlier of:a)the effective date of a new insurance contract standard; orb)annual reporting periods beginning on or after January 1, 2021. The IASB extended the effective date of IFRS 17 and the IFRS 9 temporary exemption in IFRS 4 to January 1, 2023. Additional disclosures related to financial assets are required during the deferral period. This option is only available to entities whose activities are predominately connected with insurance and have not applied IFRS 9 previously; or2.adopt IFRS 9 but, for designated financial assets, remove from profit or loss the effects of some of the accounting mismatches that may occur before the new insurance contract standard is implemented. During the interim period, additional disclosures are required.The Company has performed a detailed assessment beginning January 1, 2017: (1) The carrying amount of the Company’s liabilities arising from contracts within the scope of IFRS 4 (including deposit components or embedded derivatives unbundled from insurance contracts) were compared to the total carrying amount of all its liabilities; and (2) the total carrying amount of the company’s liabilities connected with insurance were compared to the total carrying amount of all its liabilities. Based on these assessments the Company determined that it is eligible for the temporary exemption. Consequently, the Company has decided to defer the implementation of IFRS 9 until the effective date of the new insurance contracts standard. Disclosures related to financial assets required during the deferral period are included in the Company’s financial statements.Impact assessmentAs at December 31, 2020, the Company has total financial assets and insurance related assets amounting to SAR 592 million (2019: SAR 678 million) and SAR 774 million (2019: SAR 717 million), respectively. Currently, financial assets held at amortized cost consist of cash and cash equivalents and certain other receivables amounting to SAR 592 million (2019: SAR 678 million). Investments are carried currently at fair value through statement of income at SAR 162 million (2019: SAR 110 million). Credit risk exposure, concentration of credit risk and credit quality of the company’s receivables portfolio are mentioned in notes 6 and 7. The Company’s financial assets have low credit risk as at December 31, 2020 and 2019. The above is based on high-level impact assessment of IFRS 9. This preliminary assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional reasonable and supportable information being made available to the Company in the future. Overall, the Company expects some effect of applying the impairment requirements of IFRS 9. However, the impact of the same is not expected to be significant. At present it is not possible to provide reasonable estimate of the effects of application of this new standard as the Company is yet to perform a detailed review. IFRS 17 – Insurance contractsOverviewThis standard has been published on May 18, 2017, it establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4 – Insurance contracts.The new standard applies to insurance contracts issued, to all reinsurance contracts and to investment contracts with discretionary participating features provided the entity also issues insurance contracts. It requires to separate the following components from insurance contracts:i.embedded derivatives, if they meet certain specified criteria;ii.distinct investment components; andiii.any promise to transfer distinct goods or non-insurance services.These components should be accounted for separately in accordance with the related standards (IFRS 9 and IFRS 15). MeasurementIn contrast to the requirements in IFRS 4, which permitted insurers to continue to use the accounting policies for measurement purposes that existed prior to January 2015, IFRS 17 provides the following different measurement models:1)The General Measurement Model (GMM) is based on the following “building blocks”:a)the fulfilment cash flows (FCF), which comprises:probability-weighted estimates of future cash flows;an adjustment to reflect the time value of money (i.e. discounting) and the financial risks associated with those future cash flows; and a risk adjustment for non-financial risk.b)the Contractual Service Margin (CSM). The CSM represents the unearned profit for a group of insurance contracts and will be recognized as the entity provides services in the future. The CSM cannot be negative at inception; any net negative amount of the fulfilment cash flows at inception will be recorded in profit or loss immediately.At the end of each subsequent reporting period the carrying amount of a group of insurance contracts is remeasured to be the sum of:the liability for remaining coverage, which comprises the FCF related to future services and the CSM of the group at that date;and the liability for incurred claims, which is measured as the FCF related to past services allocated to the group at that date.The CSM is adjusted subsequently for changes in cash flows related to future services but the CSM cannot be negative, so changes in future cash flows that are greater than the remaining CSM are recognized in profit or loss. Interest is also accreted on the CSM at rates locked in at initial recognition of a contract (i.e. discount rate used at inception to determine the present value of the estimated cash flows). Moreover, the CSM will be released into profit or loss based on coverage units, reflecting the quantity of the benefits provided and the expected coverage duration of the remaining contracts in the group.2)The Variable Fee Approach (VFA):VFA is a mandatory model for measuring contracts with direct participation features (also referred to as ‘direct participating contracts’). This assessment of whether the contract meets these criteria is made at inception of the contract and not reassessed subsequently. For these contracts, the CSM is also adjusted for in addition to adjustment under general model:i.changes in the entity’s share of the fair value of underlying items;ii.changes in the effect of the time value of money and financial risks not relating to the underlying items.In addition, a simplified Premium Allocation Approach (PAA) is permitted for the measurement of the liability for the remaining coverage if it provides a measurement that is not materially different from the general model or if the coverage period for each contract in the group is one year or less. With the PAA, the liability for remaining coverage corresponds to premiums received at initial recognition less insurance acquisition cash flows. The general model remains applicable for the measurement of incurred claims. However, the entity is not required to adjust future cash flows for the time value of money and the effect of financial risk if those cash flows are expected to be paid/received in one year or less from the date the claims are incurred.Effective dateThe IASB issued an Exposure Draft Amendments to IFRS 17 during June 2019 and received comments from various stakeholders. The IASB is currently re-deliberating issues raised by stakeholders. For any proposed amendments to IFRS 17, the IASB will follow its normal due process for standard-setting. The effective date of IFRS 17 and the deferral of the IFRS 9 temporary exemption in IFRS 4, is currently January 1, 2021. Under the current exposure draft, it is proposed to amend the IFRS 17 effective date to reporting periods beginning on or after January 1, 2023. This is a deferral of 2 years compared to the previous date of January 1, 2021. Earlier application is permitted if both IFRS 15 – Revenue from Contracts with Customers and IFRS 9 – Financial Instruments have also been applied. The Company intend to apply the standard on its effective date.TransitionRetrospective application is required. However, if full retrospective application for a group of insurance contracts is impracticable, then the entity is required to choose either a modified retrospective approach or a fair value approach.Presentation and disclosuresThe Company expects that the new standard will result in a change to the accounting policies for insurance contracts together with amendments to presentation and disclosures. Impact assessmentThe Company is currently assessing the impact of the application and implementation of IFRS 17. As of the date of the publication of these financial statements, the financial impact of adopting the standard has yet to be fully assessed by the Company. The Company has undertaken a Gap Analysis and the key areas of Gaps are as follows: Impact areaSummary of impactFinancial impactA limited financial impact review was done, as required by the SAMA, for under writing during the year 2018. The financial impact of applying requirements of IFRS 17 compared to IFRS 4 was not significant. A more detailed review is planned for the last quarter of 2021.Data impactThe Company believes that the data impact is not likely to be significant as a major proportion of the Company’s business would qualify for measurement under the premium allocation approach.IT systemsOracle Financial Analyzer tool (OFSAA) has been procured by the Company to implement IFRS 17. Oracle Corporation has been awarded the contract to implement the OFSAA tool. Technical discussions between the Source core systems and the impacted systems have started. The impact analysis is in progress including the data benchmarking to comply IFRS 17 standards and reporting.Process impactThe process impact is under evaluation, but no significant process changes are anticipated. However, should the Company shift its focus to majority long term business, the process impact would be significant.Impact on reinsurance arrangementsThe Company’s reinsurance arrangements have been evaluated under the requirements of the IFRS 17 standard. The initial conclusion is that the reinsurance arrangements qualify for the PAA assessment. The initial conclusion is under constant review.Impact on policies & control’s frameworksThe Company is in the process of updating Accounting and Finance Policies and Procedures to cover the new and additional requirement:UnbundlingLevel of aggregationMeasurement modelsRisk Adjustment MethodologiesNew presentation and disclosure requirementThe revised manual will be followed by Finance function to ensure that financial statements are in conformity with IFRS 17 on the effective date..Human resources The Company has recruited several key personnel, including the Deputy CFO, Chief Technical Officer, who will play a key role in the IFRS 17 implementation. It has alsodeveloped a training plan and 3 training sessions have already been completed:1-IFRS 17 overview to all stake holders2-PAA Measurement Model3-GMM Measurement ModelRemaining sessions are planned to be competed in 2021.The Company has started with their implementation process and have set up a proper team, supervised by a steering committee.The significant accounting policies used in preparing these financial statements are set out below:a)Insurance contractsThe Company issues insurance contracts that transfer insurance risk. Insurance contracts are those contracts where the insurer accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. As a general guideline, the Company defines significant insurance risk as the possibility of having to pay benefits on the occurrence of an insured event that are at least 10% more than the benefits payable if the insured event did not occur.Marine insurance is designed to compensate contract holders for damage and liability arising through loss or damage to marine craft and accidents at sea resulting in the total or partial loss of cargoes. For marine insurance, the main risks are loss or damage to marine craft and accidents resulting in the total or partial loss of cargoes. Property insurance contracts mainly compensate the Company’s customers for damage suffered to their properties or for the value of property lost. Customers who undertake commercial activities on their premises could also receive compensation for the loss of earnings caused by the inability to use the insured properties in their business activities (business interruption cover). For property insurance contracts, the main risks are fire, business interruption and burglary.Motor insurance is designed to compensate contract holders for damages suffered to their vehicles or liability to third parties arising through accidents. Contract holders could also receive compensation for fire or theft of their vehicles. In Saudi Arabia, it is compulsory for all vehicles to have minimum third party cover. The Company also issues comprehensive motor policies. Such motor policies cover damages to vehicles due to storm, tempest, flood, fire, theft and personal accident.Accident insurance includes money insurance, fidelity guarantee insurance, business all risk insurance, business travel insurance and exhibition insurance. Liability insurance includes general third-party liability, product liability, workmen’s compensation/employer’s liability and professional indemnity cover protecting the insured’s legal liability arising out of acts of negligence during their business operations.Engineering insurance covers two principal types (a) “Contractors all risk” insurance offering cover during erection or construction of buildings or civil engineering works such as houses, shops, blocks of flats, factory buildings, roads, buildings, roads, bridges, sewage works and reservoirs. (b) “Erection all risk” insurance offering cover during the erection or installation of plant and machinery such as power stations, oil refineries, chemical works, cement works, metallic structures or any factory with plant and machinery. The Engineering line of business also includes machinery breakdown insurance and electronic equipment insurance.Extended Warranty insurance commences when the manufacturer warranty expires and covers all electrical and mechanical damages occurring to the vehicles, as covered in the original manufacturer warranty. Term Life insurance is a policy that pays a pre-determined amount of money called "sum insured" at the time of the insured's death. It covers the insured for a period of time. At the expiration of the policy term no refunds or returns are allowed.Claim and loss adjustment expenses are charged to income as incurred based on the estimated liability for compensation owed to contract holders or third parties damaged by the contract holders. They include direct and indirect claims settlement costs and arise from events that have occurred up to the balance sheet date even if they have not yet been reported to the Company. The Company does not discount its liabilities for unpaid claims. Liabilities for unpaid claims are estimated using the input of assessments for individual cases reported to the Company and statistical analyses for the claims incurred but not reported and to estimate the expected ultimate cost of more complex claims that may be affected by external factors such as court decisions.b) Revenue recognitionRecognition of premium and commission revenuePremiums and commission are recorded in the statement of income based on straight line method over the insurance policy coverage year except for long term polices (construction and engineering) and marine cargo. Unearned premiums are calculated on a straight-line method over the insurance policy coverage except for: Last three months premium at a reporting date is considered as unearned in respect of marine cargo; and Pre-defined calculation for Engineering class of business for risks undertaken that extend beyond a single year. In accordance with this calculation, lower premiums are earned in the first year which gradually increases towards the end of the tenure of the policy.Unearned premiums represent the portion of premiums written relating to the unexpired year of coverage. The change in the provision for unearned premium is taken to the statement of income in the same order that revenue is recognised over the year of risk.Reinsurance contracts that do not transfer significant insurance risk are accounted for directly through the statement of financial position. These are deposit assets or financial liabilities that are recognised based on the consideration paid or received less any explicit identified premiums or fees to be retained by the reinsured. Commission incomeCommission income is recognized on an effective yield basis taking account of the principal outstanding and thecommission rate applicable.c)ClaimsClaims consist of amounts payable to policyholders and third parties and related loss adjustment expenses, net of salvage and other recoveries.Gross outstanding claims comprise the gross estimated cost of claims incurred but not settled at the statement of financial position date together with related claims handling costs, whether reported by the insured or not. Provisions for reported claims not paid as of the statement of financial position date are made on the basis of individual case estimates. In addition, a provision based on management’s judgment and the Company’s prior experience is maintained for the cost of settling claims incurred but not reported including related claims handling costs at the statement of financial position date. The outstanding claims are shown on a gross basis and the related share of the reinsurers is shown separately. Further, the Company does not discount its liability for unpaid claims as substantially all claims are expected to be paid within one year of the statement of financial position date.d)Salvage and subrogation reimbursementSome insurance contracts permit the Company to sell (usually damaged) assets acquired in settling a claim (for example, salvage). The Company may also have the right to pursue third parties for payment of some or all costs (for example, subrogation).Estimates of salvage recoveries are included as an allowance in the measurement of the outstanding claims liability. The allowance is the amount that can reasonably be recovered from the disposal of the asset.Subrogation reimbursements are also considered as an allowance in the measurement of the outstanding claims liability. The allowance is the assessment of the amount that can be recovered from the third party.e)Reinsurance contracts heldReinsurance is distributed between treaty, facultative and excess of loss reinsurance contracts. Contracts entered into by the Company with reinsurers under which the Company is compensated for losses on one or more contracts issued by the Company and that meet the classification requirements for insurance contracts in Note 3(a) are classified as reinsurance contracts held. Contracts that do not meet these classification requirements are classified as financial assets. An asset or liability is recorded in the statement of financial position representing payments due from reinsurers, the share of losses recoverable from reinsurers and premiums due to reinsurers. Amounts receivable from reinsurance is estimated in a manner consistent with the claim liability associated with the insured parties. Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expire or when the contract is transferred to another party.An impairment review is performed at each reporting date or more frequently when an indication of impairment arises during the reporting year. Impairment occurs when objective evidence exists that the Company may not recover outstanding amounts under the terms of the contract and when the impact on the amounts that the Company will receive from the reinsurer can be measured reliably. The impairment loss is recorded in the statement of income as incurred. For details please refer 3(m).Ceded reinsurance arrangements do not relieve the Company from its obligations to policyholders. Premiums and claims on assumed reinsurance are recognised as income and expenses in the same manner as they would be if the reinsurance were considered direct business, taking into account the product classification of the reinsured business.f)Deferred policy acquisition costsCommissions and other costs directly related to the acquisition and renewal of insurance contracts are deferred and amortized over the terms of the insurance contracts to which they relate, similar to premiums earned. All other acquisition costs are recognized as an expense when incurred. Amortization is recorded in the “Policy acquisition costs” in the statement of income.Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization year and are treated as a change in accounting estimate.An impairment review is performed at each reporting date or more frequently when an indication of impairment arises. If the assumptions relating to future profitability of these policies are not realized, the amortization of these costs could be accelerated, and this may also require additional impairment write-offs in the statement of income. Deferred policy acquisition costs are also considered in the liability adequacy test at each reporting date.g)Liability adequacy testAt each statement of financial position date, liability adequacy tests are performed to ensure the adequacy of the insurance contracts liabilities net of related deferred policy acquisition costs. In performing these tests management uses current best estimates of future contractual cash flows and claims handling and administration expenses. Any deficiency in the carrying amounts is immediately charged to the statement of income by establishing a provision for losses arising from liability adequacy tests accordingly.h)ReceivablesPremiums receivable are stated at gross written premiums receivable from insurance contracts, less an allowance for any uncollectible amounts. Premiums and reinsurance balances receivable are recognised when due and measured on initial recognition at the fair value of the consideration received or receivable. The carrying value of receivable is reviewed for impairment and whenever events or circumstances indicate that the carrying amount may not be recoverable, the impairment loss is recorded as “Allowance for impairment of doubtful debts” in the statement of income. Receivable balances are derecognised when the Company no longer controls the contractual rights that comprise the receivable balance, which is normally the case when the receivable balance is sold, or all the cash flows attributable to the balance are passed through to an independent third party. Receivables disclosed in note 6 and 7 fall under the scope of IFRS 4 “Insurance contracts”.i)InvestmentsAvailable-for-sale investments Available-for-sale financial assets are those non-derivative financial assets that are neither classified as held for trading or held to maturity or loans and receivables, nor are designated at fair value through profit or loss. Such investments are initially recorded at cost, being the fair value of the consideration given including transaction costs directly attributable to the acquisition of the investment and subsequently measured at fair value. Cumulative changes in fair value of such investments are recognized in other comprehensive income in the statement of comprehensive income under “Net change in fair value – Available for sale investments”. Realized gains or losses on sale of these investments are reported in the related statements of income under “Realized gain / (loss) on investments available-for-sale investments.”Dividend, commission income and foreign currency gain/loss on available-for-sale investments are recognized in the related statements of income or statement of comprehensive income - shareholders operations, as part of the net investment income / loss.Any significant or prolonged decline in fair value of available-for-sale investments is adjusted for and reported in the related statement of comprehensive income, as impairment charges.Fair values of available-for-sale investments are based on quoted prices for marketable securities or estimated fair values. The fair value of commission-bearing items is estimated based on discounted cash flows using commission for items with similar terms and risk characteristics.For unquoted investments, fair value is determined by reference to the market value of a similar investment or where the fair values cannot be derived from active markets, they are determined using a variety of valuation techniques. The input to these models is taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values.Reclassification:The Company evaluates whether the ability and intention to sell its AFS financial assets in the near term is still appropriate. When, in rare circumstances, the Company is unable to trade these financial assets due to inactive markets, the Company may elect to reclassify these financial assets if management has the ability and intention to hold the assets for the foreseeable future or until maturity. Reclassification to loans and receivables is permitted when the financial asset meets the definition of loans and receivables and management has the intention and ability to hold these assets for the foreseeable future or until maturity. The reclassification to HTM is permitted only when the entity has the ability and intention to hold the financial asset until maturity. For a financial asset reclassified out of the available-for-sale category, the fair value at the date of r | 3 |
| Disclosure of issued IFRS not yet adopted [text block] | The accounting policies, estimates and assumptions used in the preparation of these financial statements are consistent with those used in the preparation of the annual financial statements for the year ended December 31, 2019 except for the adoption of the following:3.1 New IFRS, International Financial Reporting and Interpretations Committee’s interpretations (IFRIC) and amendments thereof, adopted by the CompanyThe Company has adopted the following amendments, interpretations and revisions to existing standards, which were issued by the IASB and are applicable from January 1, 2020:Standard / AmendmentsDescriptionAmendments to IAS 1 and IAS 8Definition of MaterialAmendments to IFRS 3Definition of a BusinessAmendments to IFRS 7, IFRS 9 and IAS 39Interest Rate Benchmark ReformConceptual Framework Revised Conceptual Framework for Financial ReportingAmendments to IFRS 16Covid-19-related Rent ConcessionsThe adoption of the above amendments to standards and interpretations did not have any significant impact on these financial statements.3.2 Standards issued but not yet effectiveStandards issued but not yet effective up to the date of issuance of the Company’s financial statements are listed below. The listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt these standards when they become effective.Standard/InterpretationDescriptionEffective from periods beginning on or after the following dateIFRS 9 Financial InstrumentsSee note belowAmendments to IAS 1Classification of Liabilities as Current or Non-currentJanuary 1, 2022Amendments to IAS 16Property, Plant and Equipment: Proceeds before intended useJanuary 1, 2022Amendments to IFRS 3Reference to the Conceptual FrameworkJanuary 1, 2022Amendments to IAS 37Onerous Contracts – Cost of Fulfilling a Contract January 1, 2022Annual Improvements to IFRS Standards 2018–2020Improvements relating to:-IFRS 9 Financial Instruments-IFRS 16 Leases-IFRS 1 First-time Adoption of IFRSJanuary 1, 2022Interest rate benchmark (IBOR) reform Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16January 1, 2021IFRS 17Insurance Contracts January 1, 2023There are no other relevant IFRS or IFRS interpretations that are not yet effective that would be expected to have a material impact on the Company’s financial statements except for IFRS 9 and IFRS 17 as explained below.IFRS 9 – Financial instrumentsThis standard was published on July 24, 2014 and has replaced IAS 39. The new standard addresses the following items related to financial instruments:a) Classification and measurementIFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss. A financial asset is measured at amortized cost if both:i. the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; andii. the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (“SPPI”).The financial asset is measured at fair value through other comprehensive income and realized gains or losses would be recycled through profit or loss upon sale, if both conditions are met:i. the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows and for sale; andii. the contractual terms of cash flows are SPPI.Assets not meeting either of these categories are measured at fair value through profit or loss. Additionally, at initial recognition, an entity can use the option to designate a financial asset at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch.For equity instruments that are not held for trading, an entity can also make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of the instruments (including realized gains and losses), dividends being recognized in statement of income.Additionally, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in statement of income.b) ImpairmentThe impairment model under IFRS 9 reflects expected credit losses, as opposed to incurred credit losses under IAS 39. Under the IFRS 9 approach, it is no longer necessary for a credit event to have occurred before credit losses are recognized. Instead, an entity always accounts for expected credit losses and changes in those expected credit losses. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition.c) Hedge accountingIFRS 9 introduces new requirements for hedge accounting that align hedge accounting more closely with Risk Management. The requirements establish a more principles-based approach to the general hedge accounting model. The amendments apply to all hedge accounting with the exception of portfolio fair value hedges of interest rate risk (commonly referred to as “fair value macro hedges”). For these, an entity may continue to apply the hedge accounting requirements currently in IAS 39. This exception was granted largely because the IASB is addressing macro hedge accounting as a separate project.Effective dateThe published effective date of IFRS 9 was January 1, 2018. However, amendments to IFRS 4 – Insurance Contracts: Applying IFRS 9 – Financial Instruments with IFRS 4 – Insurance Contracts, published on September 12, 2016, changes the existing IFRS 4 to allow entities issuing insurance contracts within the scope of IFRS 4 to mitigate certain effects of applying IFRS 9 before the IASB’s new insurance contract standard (IFRS 17 – Insurance Contracts) becomes effective. The amendments introduce two alternative options:1.apply a temporary exemption from implementing IFRS 9 until the earlier of:a)the effective date of a new insurance contract standard; orb)annual reporting periods beginning on or after January 1, 2021. The IASB extended the effective date of IFRS 17 and the IFRS 9 temporary exemption in IFRS 4 to January 1, 2023. Additional disclosures related to financial assets are required during the deferral period. This option is only available to entities whose activities are predominately connected with insurance and have not applied IFRS 9 previously; or2.adopt IFRS 9 but, for designated financial assets, remove from profit or loss the effects of some of the accounting mismatches that may occur before the new insurance contract standard is implemented. During the interim period, additional disclosures are required.The Company has performed a detailed assessment beginning January 1, 2017: (1) The carrying amount of the Company’s liabilities arising from contracts within the scope of IFRS 4 (including deposit components or embedded derivatives unbundled from insurance contracts) were compared to the total carrying amount of all its liabilities; and (2) the total carrying amount of the company’s liabilities connected with insurance were compared to the total carrying amount of all its liabilities. Based on these assessments the Company determined that it is eligible for the temporary exemption. Consequently, the Company has decided to defer the implementation of IFRS 9 until the effective date of the new insurance contracts standard. Disclosures related to financial assets required during the deferral period are included in the Company’s financial statements.Impact assessmentAs at December 31, 2020, the Company has total financial assets and insurance related assets amounting to SAR 592 million (2019: SAR 678 million) and SAR 774 million (2019: SAR 717 million), respectively. Currently, financial assets held at amortized cost consist of cash and cash equivalents and certain other receivables amounting to SAR 592 million (2019: SAR 678 million). Investments are carried currently at fair value through statement of income at SAR 162 million (2019: SAR 110 million). Credit risk exposure, concentration of credit risk and credit quality of the company’s receivables portfolio are mentioned in notes 6 and 7. The Company’s financial assets have low credit risk as at December 31, 2020 and 2019. The above is based on high-level impact assessment of IFRS 9. This preliminary assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional reasonable and supportable information being made available to the Company in the future. Overall, the Company expects some effect of applying the impairment requirements of IFRS 9. However, the impact of the same is not expected to be significant. At present it is not possible to provide reasonable estimate of the effects of application of this new standard as the Company is yet to perform a detailed review. IFRS 17 – Insurance contractsOverviewThis standard has been published on May 18, 2017, it establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4 – Insurance contracts.The new standard applies to insurance contracts issued, to all reinsurance contracts and to investment contracts with discretionary participating features provided the entity also issues insurance contracts. It requires to separate the following components from insurance contracts:i.embedded derivatives, if they meet certain specified criteria;ii.distinct investment components; andiii.any promise to transfer distinct goods or non-insurance services.These components should be accounted for separately in accordance with the related standards (IFRS 9 and IFRS 15). MeasurementIn contrast to the requirements in IFRS 4, which permitted insurers to continue to use the accounting policies for measurement purposes that existed prior to January 2015, IFRS 17 provides the following different measurement models:1)The General Measurement Model (GMM) is based on the following “building blocks”:a)the fulfilment cash flows (FCF), which comprises:probability-weighted estimates of future cash flows;an adjustment to reflect the time value of money (i.e. discounting) and the financial risks associated with those future cash flows; and a risk adjustment for non-financial risk.b)the Contractual Service Margin (CSM). The CSM represents the unearned profit for a group of insurance contracts and will be recognized as the entity provides services in the future. The CSM cannot be negative at inception; any net negative amount of the fulfilment cash flows at inception will be recorded in profit or loss immediately.At the end of each subsequent reporting period the carrying amount of a group of insurance contracts is remeasured to be the sum of:the liability for remaining coverage, which comprises the FCF related to future services and the CSM of the group at that date;and the liability for incurred claims, which is measured as the FCF related to past services allocated to the group at that date.The CSM is adjusted subsequently for changes in cash flows related to future services but the CSM cannot be negative, so changes in future cash flows that are greater than the remaining CSM are recognized in profit or loss. Interest is also accreted on the CSM at rates locked in at initial recognition of a contract (i.e. discount rate used at inception to determine the present value of the estimated cash flows). Moreover, the CSM will be released into profit or loss based on coverage units, reflecting the quantity of the benefits provided and the expected coverage duration of the remaining contracts in the group.2)The Variable Fee Approach (VFA):VFA is a mandatory model for measuring contracts with direct participation features (also referred to as ‘direct participating contracts’). This assessment of whether the contract meets these criteria is made at inception of the contract and not reassessed subsequently. For these contracts, the CSM is also adjusted for in addition to adjustment under general model:i.changes in the entity’s share of the fair value of underlying items;ii.changes in the effect of the time value of money and financial risks not relating to the underlying items.In addition, a simplified Premium Allocation Approach (PAA) is permitted for the measurement of the liability for the remaining coverage if it provides a measurement that is not materially different from the general model or if the coverage period for each contract in the group is one year or less. With the PAA, the liability for remaining coverage corresponds to premiums received at initial recognition less insurance acquisition cash flows. The general model remains applicable for the measurement of incurred claims. However, the entity is not required to adjust future cash flows for the time value of money and the effect of financial risk if those cash flows are expected to be paid/received in one year or less from the date the claims are incurred.Effective dateThe IASB issued an Exposure Draft Amendments to IFRS 17 during June 2019 and received comments from various stakeholders. The IASB is currently re-deliberating issues raised by stakeholders. For any proposed amendments to IFRS 17, the IASB will follow its normal due process for standard-setting. The effective date of IFRS 17 and the deferral of the IFRS 9 temporary exemption in IFRS 4, is currently January 1, 2021. Under the current exposure draft, it is proposed to amend the IFRS 17 effective date to reporting periods beginning on or after January 1, 2023. This is a deferral of 2 years compared to the previous date of January 1, 2021. Earlier application is permitted if both IFRS 15 – Revenue from Contracts with Customers and IFRS 9 – Financial Instruments have also been applied. The Company intend to apply the standard on its effective date.TransitionRetrospective application is required. However, if full retrospective application for a group of insurance contracts is impracticable, then the entity is required to choose either a modified retrospective approach or a fair value approach.Presentation and disclosuresThe Company expects that the new standard will result in a change to the accounting policies for insurance contracts together with amendments to presentation and disclosures. Impact assessmentThe Company is currently assessing the impact of the application and implementation of IFRS 17. As of the date of the publication of these financial statements, the financial impact of adopting the standard has yet to be fully assessed by the Company. The Company has undertaken a Gap Analysis and the key areas of Gaps are as follows: Impact areaSummary of impactFinancial impactA limited financial impact review was done, as required by the SAMA, for under writing during the year 2018. The financial impact of applying requirements of IFRS 17 compared to IFRS 4 was not significant. A more detailed review is planned for the last quarter of 2021.Data impactThe Company believes that the data impact is not likely to be significant as a major proportion of the Company’s business would qualify for measurement under the premium allocation approach.IT systemsOracle Financial Analyzer tool (OFSAA) has been procured by the Company to implement IFRS 17. Oracle Corporation has been awarded the contract to implement the OFSAA tool. Technical discussions between the Source core systems and the impacted systems have started. The impact analysis is in progress including the data benchmarking to comply IFRS 17 standards and reporting.Process impactThe process impact is under evaluation, but no significant process changes are anticipated. However, should the Company shift its focus to majority long term business, the process impact would be significant.Impact on reinsurance arrangementsThe Company’s reinsurance arrangements have been evaluated under the requirements of the IFRS 17 standard. The initial conclusion is that the reinsurance arrangements qualify for the PAA assessment. The initial conclusion is under constant review.Impact on policies & control’s frameworksThe Company is in the process of updating Accounting and Finance Policies and Procedures to cover the new and additional requirement:UnbundlingLevel of aggregationMeasurement modelsRisk Adjustment MethodologiesNew presentation and disclosure requirementThe revised manual will be followed by Finance function to ensure that financial statements are in conformity with IFRS 17 on the effective date..Human resources The Company has recruited several key personnel, including the Deputy CFO, Chief Technical Officer, who will play a key role in the IFRS 17 implementation. It has alsodeveloped a training plan and 3 training sessions have already been completed:1-IFRS 17 overview to all stake holders2-PAA Measurement Model3-GMM Measurement ModelRemaining sessions are planned to be competed in 2021.The Company has started with their implementation process and have set up a proper team, supervised by a steering committee.The significant accounting policies used in preparing these financial statements are set out below:a)Insurance contractsThe Company issues insurance contracts that transfer insurance risk. Insurance contracts are those contracts where the insurer accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. As a general guideline, the Company defines significant insurance risk as the possibility of having to pay benefits on the occurrence of an insured event that are at least 10% more than the benefits payable if the insured event did not occur.Marine insurance is designed to compensate contract holders for damage and liability arising through loss or damage to marine craft and accidents at sea resulting in the total or partial loss of cargoes. For marine insurance, the main risks are loss or damage to marine craft and accidents resulting in the total or partial loss of cargoes. Property insurance contracts mainly compensate the Company’s customers for damage suffered to their properties or for the value of property lost. Customers who undertake commercial activities on their premises could also receive compensation for the loss of earnings caused by the inability to use the insured properties in their business activities (business interruption cover). For property insurance contracts, the main risks are fire, business interruption and burglary.Motor insurance is designed to compensate contract holders for damages suffered to their vehicles or liability to third parties arising through accidents. Contract holders could also receive compensation for fire or theft of their vehicles. In Saudi Arabia, it is compulsory for all vehicles to have minimum third party cover. The Company also issues comprehensive motor policies. Such motor policies cover damages to vehicles due to storm, tempest, flood, fire, theft and personal accident.Accident insurance includes money insurance, fidelity guarantee insurance, business all risk insurance, business travel insurance and exhibition insurance. Liability insurance includes general third-party liability, product liability, workmen’s compensation/employer’s liability and professional indemnity cover protecting the insured’s legal liability arising out of acts of negligence during their business operations.Engineering insurance covers two principal types (a) “Contractors all risk” insurance offering cover during erection or construction of buildings or civil engineering works such as houses, shops, blocks of flats, factory buildings, roads, buildings, roads, bridges, sewage works and reservoirs. (b) “Erection all risk” insurance offering cover during the erection or installation of plant and machinery such as power stations, oil refineries, chemical works, cement works, metallic structures or any factory with plant and machinery. The Engineering line of business also includes machinery breakdown insurance and electronic equipment insurance.Extended Warranty insurance commences when the manufacturer warranty expires and covers all electrical and mechanical damages occurring to the vehicles, as covered in the original manufacturer warranty. Term Life insurance is a policy that pays a pre-determined amount of money called "sum insured" at the time of the insured's death. It covers the insured for a period of time. At the expiration of the policy term no refunds or returns are allowed.Claim and loss adjustment expenses are charged to income as incurred based on the estimated liability for compensation owed to contract holders or third parties damaged by the contract holders. They include direct and indirect claims settlement costs and arise from events that have occurred up to the balance sheet date even if they have not yet been reported to the Company. The Company does not discount its liabilities for unpaid claims. Liabilities for unpaid claims are estimated using the input of assessments for individual cases reported to the Company and statistical analyses for the claims incurred but not reported and to estimate the expected ultimate cost of more complex claims that may be affected by external factors such as court decisions.b) Revenue recognitionRecognition of premium and commission revenuePremiums and commission are recorded in the statement of income based on straight line method over the insurance policy coverage year except for long term polices (construction and engineering) and marine cargo. Unearned premiums are calculated on a straight-line method over the insurance policy coverage except for: Last three months premium at a reporting date is considered as unearned in respect of marine cargo; and Pre-defined calculation for Engineering class of business for risks undertaken that extend beyond a single year. In accordance with this calculation, lower premiums are earned in the first year which gradually increases towards the end of the tenure of the policy.Unearned premiums represent the portion of premiums written relating to the unexpired year of coverage. The change in the provision for unearned premium is taken to the statement of income in the same order that revenue is recognised over the year of risk.Reinsurance contracts that do not transfer significant insurance risk are accounted for directly through the statement of financial position. These are deposit assets or financial liabilities that are recognised based on the consideration paid or received less any explicit identified premiums or fees to be retained by the reinsured. Commission incomeCommission income is recognized on an effective yield basis taking account of the principal outstanding and thecommission rate applicable.c)ClaimsClaims consist of amounts payable to policyholders and third parties and related loss adjustment expenses, net of salvage and other recoveries.Gross outstanding claims comprise the gross estimated cost of claims incurred but not settled at the statement of financial position date together with related claims handling costs, whether reported by the insured or not. Provisions for reported claims not paid as of the statement of financial position date are made on the basis of individual case estimates. In addition, a provision based on management’s judgment and the Company’s prior experience is maintained for the cost of settling claims incurred but not reported including related claims handling costs at the statement of financial position date. The outstanding claims are shown on a gross basis and the related share of the reinsurers is shown separately. Further, the Company does not discount its liability for unpaid claims as substantially all claims are expected to be paid within one year of the statement of financial position date.d)Salvage and subrogation reimbursementSome insurance contracts permit the Company to sell (usually damaged) assets acquired in settling a claim (for example, salvage). The Company may also have the right to pursue third parties for payment of some or all costs (for example, subrogation).Estimates of salvage recoveries are included as an allowance in the measurement of the outstanding claims liability. The allowance is the amount that can reasonably be recovered from the disposal of the asset.Subrogation reimbursements are also considered as an allowance in the measurement of the outstanding claims liability. The allowance is the assessment of the amount that can be recovered from the third party.e)Reinsurance contracts heldReinsurance is distributed between treaty, facultative and excess of loss reinsurance contracts. Contracts entered into by the Company with reinsurers under which the Company is compensated for losses on one or more contracts issued by the Company and that meet the classification requirements for insurance contracts in Note 3(a) are classified as reinsurance contracts held. Contracts that do not meet these classification requirements are classified as financial assets. An asset or liability is recorded in the statement of financial position representing payments due from reinsurers, the share of losses recoverable from reinsurers and premiums due to reinsurers. Amounts receivable from reinsurance is estimated in a manner consistent with the claim liability associated with the insured parties. Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expire or when the contract is transferred to another party.An impairment review is performed at each reporting date or more frequently when an indication of impairment arises during the reporting year. Impairment occurs when objective evidence exists that the Company may not recover outstanding amounts under the terms of the contract and when the impact on the amounts that the Company will receive from the reinsurer can be measured reliably. The impairment loss is recorded in the statement of income as incurred. For details please refer 3(m).Ceded reinsurance arrangements do not relieve the Company from its obligations to policyholders. Premiums and claims on assumed reinsurance are recognised as income and expenses in the same manner as they would be if the reinsurance were considered direct business, taking into account the product classification of the reinsured business.f)Deferred policy acquisition costsCommissions and other costs directly related to the acquisition and renewal of insurance contracts are deferred and amortized over the terms of the insurance contracts to which they relate, similar to premiums earned. All other acquisition costs are recognized as an expense when incurred. Amortization is recorded in the “Policy acquisition costs” in the statement of income.Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization year and are treated as a change in accounting estimate.An impairment review is performed at each reporting date or more frequently when an indication of impairment arises. If the assumptions relating to future profitability of these policies are not realized, the amortization of these costs could be accelerated, and this may also require additional impairment write-offs in the statement of income. Deferred policy acquisition costs are also considered in the liability adequacy test at each reporting date.g)Liability adequacy testAt each statement of financial position date, liability adequacy tests are performed to ensure the adequacy of the insurance contracts liabilities net of related deferred policy acquisition costs. In performing these tests management uses current best estimates of future contractual cash flows and claims handling and administration expenses. Any deficiency in the carrying amounts is immediately charged to the statement of income by establishing a provision for losses arising from liability adequacy tests accordingly.h)ReceivablesPremiums receivable are stated at gross written premiums receivable from insurance contracts, less an allowance for any uncollectible amounts. Premiums and reinsurance balances receivable are recognised when due and measured on initial recognition at the fair value of the consideration received or receivable. The carrying value of receivable is reviewed for impairment and whenever events or circumstances indicate that the carrying amount may not be recoverable, the impairment loss is recorded as “Allowance for impairment of doubtful debts” in the statement of income. Receivable balances are derecognised when the Company no longer controls the contractual rights that comprise the receivable balance, which is normally the case when the receivable balance is sold, or all the cash flows attributable to the balance are passed through to an independent third party. Receivables disclosed in note 6 and 7 fall under the scope of IFRS 4 “Insurance contracts”.i)InvestmentsAvailable-for-sale investments Available-for-sale financial assets are those non-derivative financial assets that are neither classified as held for trading or held to maturity or loans and receivables, nor are designated at fair value through profit or loss. Such investments are initially recorded at cost, being the fair value of the consideration given including transaction costs directly attributable to the acquisition of the investment and subsequently measured at fair value. Cumulative changes in fair value of such investments are recognized in other comprehensive income in the statement of comprehensive income under “Net change in fair value – Available for sale investments”. Realized gains or losses on sale of these investments are reported in the related statements of income under “Realized gain / (loss) on investments available-for-sale investments.”Dividend, commission income and foreign currency gain/loss on available-for-sale investments are recognized in the related statements of income or statement of comprehensive income - shareholders operations, as part of the net investment income / loss.Any significant or prolonged decline in fair value of available-for-sale investments is adjusted for and reported in the related statement of comprehensive income, as impairment charges.Fair values of available-for-sale investments are based on quoted prices for marketable securities or estimated fair values. The fair value of commission-bearing items is estimated based on discounted cash flows using commission for items with similar terms and risk characteristics.For unquoted investments, fair value is determined by reference to the market value of a similar investment or where the fair values cannot be derived from active markets, they are determined using a variety of valuation techniques. The input to these models is taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values.Reclassification:The Company evaluates whether the ability and intention to sell its AFS financial assets in the near term is still appropriate. When, in rare circumstances, the Company is unable to trade these financial assets due to inactive markets, the Company may elect to reclassify these financial assets if management has the ability and intention to hold the assets for the foreseeable future or until maturity. Reclassification to loans and receivables is permitted when the financial asset meets the definition of loans and receivables and management has the intention and ability to hold these assets for the foreseeable future or until maturity. The reclassification to HTM is permitted only when the entity has the ability and intention to hold the financial asset until maturity. For a financial asset reclassified out of the available-for-sale category, the fair value at the date of r | 3 |
| Disclosure of summary of significant accounting policies [abstract] | | |
| Disclosure of summary of significant accounting policies, general comment [text block] | The accounting policies, estimates and assumptions used in the preparation of these financial statements are consistent with those used in the preparation of the annual financial statements for the year ended December 31, 2019 except for the adoption of the following:3.1 New IFRS, International Financial Reporting and Interpretations Committee’s interpretations (IFRIC) and amendments thereof, adopted by the CompanyThe Company has adopted the following amendments, interpretations and revisions to existing standards, which were issued by the IASB and are applicable from January 1, 2020:Standard / AmendmentsDescriptionAmendments to IAS 1 and IAS 8Definition of MaterialAmendments to IFRS 3Definition of a BusinessAmendments to IFRS 7, IFRS 9 and IAS 39Interest Rate Benchmark ReformConceptual Framework Revised Conceptual Framework for Financial ReportingAmendments to IFRS 16Covid-19-related Rent ConcessionsThe adoption of the above amendments to standards and interpretations did not have any significant impact on these financial statements.3.2 Standards issued but not yet effectiveStandards issued but not yet effective up to the date of issuance of the Company’s financial statements are listed below. The listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt these standards when they become effective.Standard/InterpretationDescriptionEffective from periods beginning on or after the following dateIFRS 9 Financial InstrumentsSee note belowAmendments to IAS 1Classification of Liabilities as Current or Non-currentJanuary 1, 2022Amendments to IAS 16Property, Plant and Equipment: Proceeds before intended useJanuary 1, 2022Amendments to IFRS 3Reference to the Conceptual FrameworkJanuary 1, 2022Amendments to IAS 37Onerous Contracts – Cost of Fulfilling a Contract January 1, 2022Annual Improvements to IFRS Standards 2018–2020Improvements relating to:-IFRS 9 Financial Instruments-IFRS 16 Leases-IFRS 1 First-time Adoption of IFRSJanuary 1, 2022Interest rate benchmark (IBOR) reform Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16January 1, 2021IFRS 17Insurance Contracts January 1, 2023There are no other relevant IFRS or IFRS interpretations that are not yet effective that would be expected to have a material impact on the Company’s financial statements except for IFRS 9 and IFRS 17 as explained below.IFRS 9 – Financial instrumentsThis standard was published on July 24, 2014 and has replaced IAS 39. The new standard addresses the following items related to financial instruments:a) Classification and measurementIFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss. A financial asset is measured at amortized cost if both:i. the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; andii. the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (“SPPI”).The financial asset is measured at fair value through other comprehensive income and realized gains or losses would be recycled through profit or loss upon sale, if both conditions are met:i. the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows and for sale; andii. the contractual terms of cash flows are SPPI.Assets not meeting either of these categories are measured at fair value through profit or loss. Additionally, at initial recognition, an entity can use the option to designate a financial asset at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch.For equity instruments that are not held for trading, an entity can also make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of the instruments (including realized gains and losses), dividends being recognized in statement of income.Additionally, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in statement of income.b) ImpairmentThe impairment model under IFRS 9 reflects expected credit losses, as opposed to incurred credit losses under IAS 39. Under the IFRS 9 approach, it is no longer necessary for a credit event to have occurred before credit losses are recognized. Instead, an entity always accounts for expected credit losses and changes in those expected credit losses. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition.c) Hedge accountingIFRS 9 introduces new requirements for hedge accounting that align hedge accounting more closely with Risk Management. The requirements establish a more principles-based approach to the general hedge accounting model. The amendments apply to all hedge accounting with the exception of portfolio fair value hedges of interest rate risk (commonly referred to as “fair value macro hedges”). For these, an entity may continue to apply the hedge accounting requirements currently in IAS 39. This exception was granted largely because the IASB is addressing macro hedge accounting as a separate project.Effective dateThe published effective date of IFRS 9 was January 1, 2018. However, amendments to IFRS 4 – Insurance Contracts: Applying IFRS 9 – Financial Instruments with IFRS 4 – Insurance Contracts, published on September 12, 2016, changes the existing IFRS 4 to allow entities issuing insurance contracts within the scope of IFRS 4 to mitigate certain effects of applying IFRS 9 before the IASB’s new insurance contract standard (IFRS 17 – Insurance Contracts) becomes effective. The amendments introduce two alternative options:1.apply a temporary exemption from implementing IFRS 9 until the earlier of:a)the effective date of a new insurance contract standard; orb)annual reporting periods beginning on or after January 1, 2021. The IASB extended the effective date of IFRS 17 and the IFRS 9 temporary exemption in IFRS 4 to January 1, 2023. Additional disclosures related to financial assets are required during the deferral period. This option is only available to entities whose activities are predominately connected with insurance and have not applied IFRS 9 previously; or2.adopt IFRS 9 but, for designated financial assets, remove from profit or loss the effects of some of the accounting mismatches that may occur before the new insurance contract standard is implemented. During the interim period, additional disclosures are required.The Company has performed a detailed assessment beginning January 1, 2017: (1) The carrying amount of the Company’s liabilities arising from contracts within the scope of IFRS 4 (including deposit components or embedded derivatives unbundled from insurance contracts) were compared to the total carrying amount of all its liabilities; and (2) the total carrying amount of the company’s liabilities connected with insurance were compared to the total carrying amount of all its liabilities. Based on these assessments the Company determined that it is eligible for the temporary exemption. Consequently, the Company has decided to defer the implementation of IFRS 9 until the effective date of the new insurance contracts standard. Disclosures related to financial assets required during the deferral period are included in the Company’s financial statements.Impact assessmentAs at December 31, 2020, the Company has total financial assets and insurance related assets amounting to SAR 592 million (2019: SAR 678 million) and SAR 774 million (2019: SAR 717 million), respectively. Currently, financial assets held at amortized cost consist of cash and cash equivalents and certain other receivables amounting to SAR 592 million (2019: SAR 678 million). Investments are carried currently at fair value through statement of income at SAR 162 million (2019: SAR 110 million). Credit risk exposure, concentration of credit risk and credit quality of the company’s receivables portfolio are mentioned in notes 6 and 7. The Company’s financial assets have low credit risk as at December 31, 2020 and 2019. The above is based on high-level impact assessment of IFRS 9. This preliminary assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional reasonable and supportable information being made available to the Company in the future. Overall, the Company expects some effect of applying the impairment requirements of IFRS 9. However, the impact of the same is not expected to be significant. At present it is not possible to provide reasonable estimate of the effects of application of this new standard as the Company is yet to perform a detailed review. IFRS 17 – Insurance contractsOverviewThis standard has been published on May 18, 2017, it establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4 – Insurance contracts.The new standard applies to insurance contracts issued, to all reinsurance contracts and to investment contracts with discretionary participating features provided the entity also issues insurance contracts. It requires to separate the following components from insurance contracts:i.embedded derivatives, if they meet certain specified criteria;ii.distinct investment components; andiii.any promise to transfer distinct goods or non-insurance services.These components should be accounted for separately in accordance with the related standards (IFRS 9 and IFRS 15). MeasurementIn contrast to the requirements in IFRS 4, which permitted insurers to continue to use the accounting policies for measurement purposes that existed prior to January 2015, IFRS 17 provides the following different measurement models:1)The General Measurement Model (GMM) is based on the following “building blocks”:a)the fulfilment cash flows (FCF), which comprises:probability-weighted estimates of future cash flows;an adjustment to reflect the time value of money (i.e. discounting) and the financial risks associated with those future cash flows; and a risk adjustment for non-financial risk.b)the Contractual Service Margin (CSM). The CSM represents the unearned profit for a group of insurance contracts and will be recognized as the entity provides services in the future. The CSM cannot be negative at inception; any net negative amount of the fulfilment cash flows at inception will be recorded in profit or loss immediately.At the end of each subsequent reporting period the carrying amount of a group of insurance contracts is remeasured to be the sum of:the liability for remaining coverage, which comprises the FCF related to future services and the CSM of the group at that date;and the liability for incurred claims, which is measured as the FCF related to past services allocated to the group at that date.The CSM is adjusted subsequently for changes in cash flows related to future services but the CSM cannot be negative, so changes in future cash flows that are greater than the remaining CSM are recognized in profit or loss. Interest is also accreted on the CSM at rates locked in at initial recognition of a contract (i.e. discount rate used at inception to determine the present value of the estimated cash flows). Moreover, the CSM will be released into profit or loss based on coverage units, reflecting the quantity of the benefits provided and the expected coverage duration of the remaining contracts in the group.2)The Variable Fee Approach (VFA):VFA is a mandatory model for measuring contracts with direct participation features (also referred to as ‘direct participating contracts’). This assessment of whether the contract meets these criteria is made at inception of the contract and not reassessed subsequently. For these contracts, the CSM is also adjusted for in addition to adjustment under general model:i.changes in the entity’s share of the fair value of underlying items;ii.changes in the effect of the time value of money and financial risks not relating to the underlying items.In addition, a simplified Premium Allocation Approach (PAA) is permitted for the measurement of the liability for the remaining coverage if it provides a measurement that is not materially different from the general model or if the coverage period for each contract in the group is one year or less. With the PAA, the liability for remaining coverage corresponds to premiums received at initial recognition less insurance acquisition cash flows. The general model remains applicable for the measurement of incurred claims. However, the entity is not required to adjust future cash flows for the time value of money and the effect of financial risk if those cash flows are expected to be paid/received in one year or less from the date the claims are incurred.Effective dateThe IASB issued an Exposure Draft Amendments to IFRS 17 during June 2019 and received comments from various stakeholders. The IASB is currently re-deliberating issues raised by stakeholders. For any proposed amendments to IFRS 17, the IASB will follow its normal due process for standard-setting. The effective date of IFRS 17 and the deferral of the IFRS 9 temporary exemption in IFRS 4, is currently January 1, 2021. Under the current exposure draft, it is proposed to amend the IFRS 17 effective date to reporting periods beginning on or after January 1, 2023. This is a deferral of 2 years compared to the previous date of January 1, 2021. Earlier application is permitted if both IFRS 15 – Revenue from Contracts with Customers and IFRS 9 – Financial Instruments have also been applied. The Company intend to apply the standard on its effective date.TransitionRetrospective application is required. However, if full retrospective application for a group of insurance contracts is impracticable, then the entity is required to choose either a modified retrospective approach or a fair value approach.Presentation and disclosuresThe Company expects that the new standard will result in a change to the accounting policies for insurance contracts together with amendments to presentation and disclosures. Impact assessmentThe Company is currently assessing the impact of the application and implementation of IFRS 17. As of the date of the publication of these financial statements, the financial impact of adopting the standard has yet to be fully assessed by the Company. The Company has undertaken a Gap Analysis and the key areas of Gaps are as follows: Impact areaSummary of impactFinancial impactA limited financial impact review was done, as required by the SAMA, for under writing during the year 2018. The financial impact of applying requirements of IFRS 17 compared to IFRS 4 was not significant. A more detailed review is planned for the last quarter of 2021.Data impactThe Company believes that the data impact is not likely to be significant as a major proportion of the Company’s business would qualify for measurement under the premium allocation approach.IT systemsOracle Financial Analyzer tool (OFSAA) has been procured by the Company to implement IFRS 17. Oracle Corporation has been awarded the contract to implement the OFSAA tool. Technical discussions between the Source core systems and the impacted systems have started. The impact analysis is in progress including the data benchmarking to comply IFRS 17 standards and reporting.Process impactThe process impact is under evaluation, but no significant process changes are anticipated. However, should the Company shift its focus to majority long term business, the process impact would be significant.Impact on reinsurance arrangementsThe Company’s reinsurance arrangements have been evaluated under the requirements of the IFRS 17 standard. The initial conclusion is that the reinsurance arrangements qualify for the PAA assessment. The initial conclusion is under constant review.Impact on policies & control’s frameworksThe Company is in the process of updating Accounting and Finance Policies and Procedures to cover the new and additional requirement:UnbundlingLevel of aggregationMeasurement modelsRisk Adjustment MethodologiesNew presentation and disclosure requirementThe revised manual will be followed by Finance function to ensure that financial statements are in conformity with IFRS 17 on the effective date..Human resources The Company has recruited several key personnel, including the Deputy CFO, Chief Technical Officer, who will play a key role in the IFRS 17 implementation. It has alsodeveloped a training plan and 3 training sessions have already been completed:1-IFRS 17 overview to all stake holders2-PAA Measurement Model3-GMM Measurement ModelRemaining sessions are planned to be competed in 2021.The Company has started with their implementation process and have set up a proper team, supervised by a steering committee.The significant accounting policies used in preparing these financial statements are set out below:a)Insurance contractsThe Company issues insurance contracts that transfer insurance risk. Insurance contracts are those contracts where the insurer accepts significant insurance risk from the policyholder by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. As a general guideline, the Company defines significant insurance risk as the possibility of having to pay benefits on the occurrence of an insured event that are at least 10% more than the benefits payable if the insured event did not occur.Marine insurance is designed to compensate contract holders for damage and liability arising through loss or damage to marine craft and accidents at sea resulting in the total or partial loss of cargoes. For marine insurance, the main risks are loss or damage to marine craft and accidents resulting in the total or partial loss of cargoes. Property insurance contracts mainly compensate the Company’s customers for damage suffered to their properties or for the value of property lost. Customers who undertake commercial activities on their premises could also receive compensation for the loss of earnings caused by the inability to use the insured properties in their business activities (business interruption cover). For property insurance contracts, the main risks are fire, business interruption and burglary.Motor insurance is designed to compensate contract holders for damages suffered to their vehicles or liability to third parties arising through accidents. Contract holders could also receive compensation for fire or theft of their vehicles. In Saudi Arabia, it is compulsory for all vehicles to have minimum third party cover. The Company also issues comprehensive motor policies. Such motor policies cover damages to vehicles due to storm, tempest, flood, fire, theft and personal accident.Accident insurance includes money insurance, fidelity guarantee insurance, business all risk insurance, business travel insurance and exhibition insurance. Liability insurance includes general third-party liability, product liability, workmen’s compensation/employer’s liability and professional indemnity cover protecting the insured’s legal liability arising out of acts of negligence during their business operations.Engineering insurance covers two principal types (a) “Contractors all risk” insurance offering cover during erection or construction of buildings or civil engineering works such as houses, shops, blocks of flats, factory buildings, roads, buildings, roads, bridges, sewage works and reservoirs. (b) “Erection all risk” insurance offering cover during the erection or installation of plant and machinery such as power stations, oil refineries, chemical works, cement works, metallic structures or any factory with plant and machinery. The Engineering line of business also includes machinery breakdown insurance and electronic equipment insurance.Extended Warranty insurance commences when the manufacturer warranty expires and covers all electrical and mechanical damages occurring to the vehicles, as covered in the original manufacturer warranty. Term Life insurance is a policy that pays a pre-determined amount of money called "sum insured" at the time of the insured's death. It covers the insured for a period of time. At the expiration of the policy term no refunds or returns are allowed.Claim and loss adjustment expenses are charged to income as incurred based on the estimated liability for compensation owed to contract holders or third parties damaged by the contract holders. They include direct and indirect claims settlement costs and arise from events that have occurred up to the balance sheet date even if they have not yet been reported to the Company. The Company does not discount its liabilities for unpaid claims. Liabilities for unpaid claims are estimated using the input of assessments for individual cases reported to the Company and statistical analyses for the claims incurred but not reported and to estimate the expected ultimate cost of more complex claims that may be affected by external factors such as court decisions.b) Revenue recognitionRecognition of premium and commission revenuePremiums and commission are recorded in the statement of income based on straight line method over the insurance policy coverage year except for long term polices (construction and engineering) and marine cargo. Unearned premiums are calculated on a straight-line method over the insurance policy coverage except for: Last three months premium at a reporting date is considered as unearned in respect of marine cargo; and Pre-defined calculation for Engineering class of business for risks undertaken that extend beyond a single year. In accordance with this calculation, lower premiums are earned in the first year which gradually increases towards the end of the tenure of the policy.Unearned premiums represent the portion of premiums written relating to the unexpired year of coverage. The change in the provision for unearned premium is taken to the statement of income in the same order that revenue is recognised over the year of risk.Reinsurance contracts that do not transfer significant insurance risk are accounted for directly through the statement of financial position. These are deposit assets or financial liabilities that are recognised based on the consideration paid or received less any explicit identified premiums or fees to be retained by the reinsured. Commission incomeCommission income is recognized on an effective yield basis taking account of the principal outstanding and thecommission rate applicable.c)ClaimsClaims consist of amounts payable to policyholders and third parties and related loss adjustment expenses, net of salvage and other recoveries.Gross outstanding claims comprise the gross estimated cost of claims incurred but not settled at the statement of financial position date together with related claims handling costs, whether reported by the insured or not. Provisions for reported claims not paid as of the statement of financial position date are made on the basis of individual case estimates. In addition, a provision based on management’s judgment and the Company’s prior experience is maintained for the cost of settling claims incurred but not reported including related claims handling costs at the statement of financial position date. The outstanding claims are shown on a gross basis and the related share of the reinsurers is shown separately. Further, the Company does not discount its liability for unpaid claims as substantially all claims are expected to be paid within one year of the statement of financial position date.d)Salvage and subrogation reimbursementSome insurance contracts permit the Company to sell (usually damaged) assets acquired in settling a claim (for example, salvage). The Company may also have the right to pursue third parties for payment of some or all costs (for example, subrogation).Estimates of salvage recoveries are included as an allowance in the measurement of the outstanding claims liability. The allowance is the amount that can reasonably be recovered from the disposal of the asset.Subrogation reimbursements are also considered as an allowance in the measurement of the outstanding claims liability. The allowance is the assessment of the amount that can be recovered from the third party.e)Reinsurance contracts heldReinsurance is distributed between treaty, facultative and excess of loss reinsurance contracts. Contracts entered into by the Company with reinsurers under which the Company is compensated for losses on one or more contracts issued by the Company and that meet the classification requirements for insurance contracts in Note 3(a) are classified as reinsurance contracts held. Contracts that do not meet these classification requirements are classified as financial assets. An asset or liability is recorded in the statement of financial position representing payments due from reinsurers, the share of losses recoverable from reinsurers and premiums due to reinsurers. Amounts receivable from reinsurance is estimated in a manner consistent with the claim liability associated with the insured parties. Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expire or when the contract is transferred to another party.An impairment review is performed at each reporting date or more frequently when an indication of impairment arises during the reporting year. Impairment occurs when objective evidence exists that the Company may not recover outstanding amounts under the terms of the contract and when the impact on the amounts that the Company will receive from the reinsurer can be measured reliably. The impairment loss is recorded in the statement of income as incurred. For details please refer 3(m).Ceded reinsurance arrangements do not relieve the Company from its obligations to policyholders. Premiums and claims on assumed reinsurance are recognised as income and expenses in the same manner as they would be if the reinsurance were considered direct business, taking into account the product classification of the reinsured business.f)Deferred policy acquisition costsCommissions and other costs directly related to the acquisition and renewal of insurance contracts are deferred and amortized over the terms of the insurance contracts to which they relate, similar to premiums earned. All other acquisition costs are recognized as an expense when incurred. Amortization is recorded in the “Policy acquisition costs” in the statement of income.Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization year and are treated as a change in accounting estimate.An impairment review is performed at each reporting date or more frequently when an indication of impairment arises. If the assumptions relating to future profitability of these policies are not realized, the amortization of these costs could be accelerated, and this may also require additional impairment write-offs in the statement of income. Deferred policy acquisition costs are also considered in the liability adequacy test at each reporting date.g)Liability adequacy testAt each statement of financial position date, liability adequacy tests are performed to ensure the adequacy of the insurance contracts liabilities net of related deferred policy acquisition costs. In performing these tests management uses current best estimates of future contractual cash flows and claims handling and administration expenses. Any deficiency in the carrying amounts is immediately charged to the statement of income by establishing a provision for losses arising from liability adequacy tests accordingly.h)ReceivablesPremiums receivable are stated at gross written premiums receivable from insurance contracts, less an allowance for any uncollectible amounts. Premiums and reinsurance balances receivable are recognised when due and measured on initial recognition at the fair value of the consideration received or receivable. The carrying value of receivable is reviewed for impairment and whenever events or circumstances indicate that the carrying amount may not be recoverable, the impairment loss is recorded as “Allowance for impairment of doubtful debts” in the statement of income. Receivable balances are derecognised when the Company no longer controls the contractual rights that comprise the receivable balance, which is normally the case when the receivable balance is sold, or all the cash flows attributable to the balance are passed through to an independent third party. Receivables disclosed in note 6 and 7 fall under the scope of IFRS 4 “Insurance contracts”.i)InvestmentsAvailable-for-sale investments Available-for-sale financial assets are those non-derivative financial assets that are neither classified as held for trading or held to maturity or loans and receivables, nor are designated at fair value through profit or loss. Such investments are initially recorded at cost, being the fair value of the consideration given including transaction costs directly attributable to the acquisition of the investment and subsequently measured at fair value. Cumulative changes in fair value of such investments are recognized in other comprehensive income in the statement of comprehensive income under “Net change in fair value – Available for sale investments”. Realized gains or losses on sale of these investments are reported in the related statements of income under “Realized gain / (loss) on investments available-for-sale investments.”Dividend, commission income and foreign currency gain/loss on available-for-sale investments are recognized in the related statements of income or statement of comprehensive income - shareholders operations, as part of the net investment income / loss.Any significant or prolonged decline in fair value of available-for-sale investments is adjusted for and reported in the related statement of comprehensive income, as impairment charges.Fair values of available-for-sale investments are based on quoted prices for marketable securities or estimated fair values. The fair value of commission-bearing items is estimated based on discounted cash flows using commission for items with similar terms and risk characteristics.For unquoted investments, fair value is determined by reference to the market value of a similar investment or where the fair values cannot be derived from active markets, they are determined using a variety of valuation techniques. The input to these models is taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values.Reclassification:The Company evaluates whether the ability and intention to sell its AFS financial assets in the near term is still appropriate. When, in rare circumstances, the Company is unable to trade these financial assets due to inactive markets, the Company may elect to reclassify these financial assets if management has the ability and intention to hold the assets for the foreseeable future or until maturity. Reclassification to loans and receivables is permitted when the financial asset meets the definition of loans and receivables and management has the intention and ability to hold these assets for the foreseeable future or until maturity. The reclassification to HTM is permitted only when the entity has the ability and intention to hold the financial asset until maturity. For a financial asset reclassified out of the available-for-sale category, the fair value at the date of r | 3 |
| Description of accounting policy for cash and cash equivalents [text block] | Cash and cash equivalents20202019Cash in hand2628Bank balances67,70732,804Deposits with original maturity of less than 3 months 13,000321,87580,733354,707Except for balances amounting to SAR 0.33 million, the bank balances and deposits are with a bank which is a related party, registered in Saudi Arabia and are denominated in Saudi Riyals and US Dollars. The deposits have an original maturity of less than three months and yield income at rates of 0.65% annum (2019: 1% to 2% per annum). | 4 |
| Description of accounting policy for receivables [text block] | Premiums receivable – net20202019Receivable from policyholders235,313187,651Impairment allowance for doubtful receivables (40,775)(33,838)Premiums receivable – net194,538153,813Movement in impairment allowance for doubtful receivables during the year is as follows:20202019January 133,83825,752Provision for the year10,6258,086Write-offs(3,688)-December 3140,77533,838As at December 31, the ageing analysis of unimpaired net premiums receivable is as follows:Total ------------------ Past due but not impaired ---------------Less than 90 days91 to 180 days181 to 360 daysMore than 360 daysDecember 31, 2020194,538115,90134,58536,5577,495December 31, 2019153,81376,20140,90931,3095,394Premiums receivable comprise a large number of customers mainly within the Kingdom of Saudi Arabia. The Company’s terms of business generally require amounts to be paid in accordance with credit terms agreed with the customers.Five largest customers account for 21% (2019: Five accounted for 20%) of outstanding premiums receivable as at December 31, 2020.Management considers its external customers to be individual policyholders. One customer of the Company accounts for 17% of the gross premiums written for the year ended December 31, 2020 (2019: 20%). The total premiums attributable to the said customer was Saudi Riyals 136 million for the year (2019: Saudi Riyals 145 million), included mainly in the motor segment. It is not the practice of the Company to obtain collateral over these balances, which are therefore, unsecured. | 6 |
| Description of accounting policy for deferred policy acquisition costs [text block] | 3 Movement in deferred policy acquisition costs Movement in deferred policy acquisition costs comprise of the following:20202019Balance at beginning of the year23,77124,279Costs accrued69,10464,507Costs charged(60,576)(65,015)Balance at end of the year32,29923,771 | 8.3 |
| Description of accounting policy for zakat [text block] | 22.1Components of zakat baseSignificant components of zakat base of the Company attributable to the Saudi shareholders, which are subject to adjustment under zakat and income tax regulations, are shareholders’ equity at the beginning of the year, adjusted net income and certain other items. Zakat base has been computed based on the Company’s understanding of the zakat regulations enforced in the Kingdom of Saudi Arabia. The zakat regulations in Saudi Arabia are subject to different interpretations, and the assessments to be raised by the General Authority of Zakat and Tax (“GAZT”) could be different from the declaration filed by the Company.20202019Shareholders’ equity, at beginning of year 192,256178,339Provisions, at beginning of year37,88630,542Adjusted net income for the year22,07319,770Statutory deposit(14,888)(14,888)Property, equipment and intangible assets, as adjusted(37,580)(35,159)Others(5,488)476Approximate zakat base194,259179,08022.2Provision for zakat and income taxZakatIncome taxTotalJanuary 1, 20204,6691,1845,853Provision for the current year4,9991,4536,452Adjustment for prior year769165934Payments during the year(5,324)(1,311)(6,635)December 31, 20205,1131,4916,604ZakatIncome taxTotalJanuary 1, 20195,2852,0207,305Provision for the current year4,1611,1845,345Other adjustments7(185)(178)Payments during the year(4,784)(1,835)(6,619)December 31, 20194,6691,1845,853Zakat is payable at 2.5% of higher of the approximate zakat base and adjusted net income attributable to Saudi shareholders.Provision for income tax is payable at 20% of the adjusted net income attributable to the foreign shareholders of the Company, less allowances for foreign shareholders’ share in the losses carry forwarded from previous year calculated in accordance with the guidelines provided in the income tax regulations. Income tax paid is recovered from foreign shareholders.The shareholding percentage subject to zakat and income tax is as follows:2020 2019 %%Zakat74.4474.44Income tax25.5625.5622.3Status of assessmentsThe Company has filed its tax returns with the General Authority of Zakat and Tax (“GAZT”) from inception up to 2019. The Company’s tax and zakat position has been finalised up to and including the year ended December 31, 2018, except for the assessment for withholding tax as explained below. The tax return for 2013 is deemed to be finalized as no queries have been received from the GAZT and the statutory time limit of 5 years is over. The Company has received the final assessment for 2018 for zakat and income tax, with an additional tax and zakat liability of SAR 175 thousand. Management has accepted this assessment and has paid this amount in the current year.During the year, the Company has received the final assessment for the years 2014 to 2017 for zakat and income tax. The assessment has raised additional tax and zakat liability of SAR 934 thousand. Management has accepted this assessment and has paid this amount in the current year.In addition to above, the Company had also received an assessment for the 2018 withholding tax liability during 2019 in which the GAZT had imposed additional taxes, including penalties, of SAR 11.37 million. Management believes that the assessment raised is without merit and has appealed against this assessment. The Company’s initial appeal was rejected by the GAZT and has been escalated to the General Secretariat of Tax Committee (GSTC) online portal in order to assign the hearing session by the related Committee to discuss the Company's objection. Management of the Company believes that there is a high probability to waive the majority of this assessment and hence no additional liability has been recorded against this assessment. | 22 |
| Description of accounting policy for fair value measurement [text block] | Fair values of financial instrumentsFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction takes place either:-in the accessible principal market for the asset or liability, or-in the absence of a principal market, in the most advantages accessible market for the asset or liabilityThe fair values of on-balance sheet financial instruments are not significantly different from their carrying amounts included in these financial statements.Determination of fair value and fair value hierarchyThe Company uses the following hierarchy for determining and disclosing the fair value of financial instruments:Level 1: quoted prices in active markets for the same or identical instrument that an entity can access at the measurement date;Level 2: quoted prices in active markets for similar assets and liabilities or other valuation techniques for which all significant inputs are based on observable market data; andLevel 3: valuation techniques for which any significant input is not based on observable market data. The Company ascertains the Level 3 fair values based on a valuation technique which is primarily derived by net assets value of the respective investee at the year end. There are no transfers between Level 1, Level 2 and Level 3 during the year.The following table shows the carrying value and fair value of financial assets measured at fair value at December 31, 2020 and 2019:Fair valueDecember 31, 2020TotalLevel 1Level 2Level 3Financial assets measured at fair valueEquity 16,25016,250--Mutual funds39,715--39,715Sukuks28,41928,419--Other investments77,645--77,645162,02944,669-117,360Fair valueDecember 31, 2019TotalLevel 1Level 2Level 3Financial assets measured at fair valueEquity 3,2303,230--Mutual funds39,342--39,342Sukuks30,02530,025--Other investments38,048--38,048110,64533,255-77,390Significant unobservable inputs used in the valuation of level 3 investments include the Fund administrator report based on NAV and assumptions about rates for other investments as confirmed by the discretionary portfolio manager.Available-for-sale investment amounting to SAR 1.9 million (2019: SAR 1.9 million) is carried at cost as its fair value cannot be measured reliably. | 18 |
| Description of accounting policy for investment income [text block] | Investments Note20202019Fair value through statement of income investments (FVSI)9.1162,029110,645Held-to-maturity investment9.23,000-Available-for-sale investment9.31,9231,923166,952112,5689.1Fair value through statement of income investments (FVSI)Movement is as follows:20202019Balance at beginning of the year110,645105,004Additions50,000284Changes in fair value of investments1,3845,357Balance at end of the year162,029110,645The analysis of the composition of investments is as follows:20202019Cash and cash equivalents4452,348Equity16,2503,230Murabaha placements77,20035,700Mutual funds39,71539,342Sukuks 28,41930,025Total investments162,029110,6459.2 Held to maturity investmentThis represents the Company’s investment in Saudi Fransi Tier 1 Sukuks. These represent 3 Sukuks at a face value of SAR 1 million per Sukuk with a coupon rate of 4.50% per annum. These Sukuks have a maturity duration of 5 years commencing from November 30, 2020.9.3 Available-for-sale investmentThis represents the Company’s 3.85% (December 31, 2019: 3.85%) holding in Najm for Insurance Services Company, a Saudi Closed Joint Stock Company. These shares are un-quoted and are carried at cost. In the absence of reliable financial information, management believe that fair values cannot be ascertained reliably.9.4All investments are from the shareholders’ operations and are placed inside the Kingdom of Saudi Arabia. | 9 |
| Description of accounting policy for segment reporting [text block] | Operating segments Operating segments are identified on the basis of internal reports about components of the Company that are regularly reviewed by the Chief Operating Decision Maker (CODM) in order to allocate resources to the segments and to assess its performance. Transactions between the operating segments are on normal commercial terms and conditions. The revenue from external parties reported to the CODM is measured in a manner consistent with that in the statement of income. Segment assets and liabilities comprise operating assets and liabilities.There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss since December 31, 2019. Segment assets do not include cash and cash equivalents, short-term deposits, premiums receivables, investments, due from reinsurers, prepaid expenses and other assets, property and equipment, intangible assets, statutory deposit and accrued income on statutory deposit. Accordingly, they are included in unallocated assets. Segment liabilities do not include policyholders payable, accrued expenses and other liabilities, due to reinsurers, agents, brokers and third-party administrators, surplus distribution payable, zakat and income tax, and accrued income on statutory deposit. Accordingly, they are included in unallocated liabilities.These unallocated assets and liabilities are not reported to CODM under related segments and are monitored on a centralized basis.For management reporting purposes, the Company is organised into business units on the basis of products and services offered by the Company.The segment information provided to the CODM for the reportable segments for the Company’s total assets and liabilities at December 31, 2020 and December 31, 2019, its total revenues, expenses, and net income for the year then ended, are as follows:MarinePropertyMotorEngineeringAccident & liabilityExtended warrantyTerm lifeTotal For the year ended December 31, 2020Revenues Gross premiums written 43,222123,282427,82659,01148,80723,24360,490785,881Reinsurance premiums ceded (31,813)(112,083)(6,164)(54,815)(40,467)(23,243)(39,574)(308,159)Excess of loss expenses(3,335)(2,887)(6,915)(1,425)(180)--(14,742)Net premiums written8,0748,312414,7472,7718,160-20,916462,980Change in unearned premiums, net657(258)(43,402)(462)660-(2,513)(45,318)Net premiums earned8,7318,054371,3452,3098,820-18,403417,662Reinsurance commissions 9,40219,3571,28011,5496,6202,6544,65455,516Other underwriting income8020411128 -10190Total revenues18,21327,431372,66613,86915,4682,65423,067473,368Cost and expensesGross claims paid and loss adjustment expenses11,5968,614247,9727,6406,2334,62757,472344,154Reinsurer’s share of claims paid(8,598)(8,022)(6,410)(7,005)(4,999)(4,627)(47,337)(86,998)Net claims paid2,998592241,5626351,234-10,135257,156Changes in outstanding claims, net(1,315)4,098(78)297(166)-4533,289Changes in incurred but not reported claims, net(383)194,3766(413)-(65) 3,540Net claims incurred1,3004,709245,860938655-10,523263,985Premium deficiency reserve--2,121----2,121Additional unexpired risk reserve---(196)---(196)Unallocated loss adjusted expenses198421(1,244)31783-(135)(360)Policy acquisition costs5,18010,80925,1516,1483,9901,9177,38160,576Other underwriting expenses7551,9965,8691,07666028833410,978Total underwriting cost and expenses7,43317,935277,7578,2835,3882,20518,103337,104Net underwriting income 10,7809,49694,9095,58610,0804494,964136,264Other operating (expenses) / incomeAllowance for impairment of doubtful premium, reinsurers and other receivables (10,398)General and administration expenses(119,453)Commission income on deposits2,588Commission income on short term deposits128Unrealized gain on investments1,384Other income7,179Total other operating expenses, net(118,572)Net income for the year before allocation 17,692Net income attributed to the policyholders (2,468)Net income for the year attributable to the shareholders, before zakat and income tax15,224Zakat (5,768)Income tax(1,618)Net income for the year attributable to the shareholders 7,838MarinePropertyMotorEngineer-ingAccident & liabilityExtended warrantyTerm lifeTotal For the year ended December 31, 2019RevenuesGross premiums written 56,410106,868390,20754,33432,12122,25372,851735,044Reinsurance premiums ceded(43,419)(95,310)(9,764)(50,740)(22,821)(22,253)(62,288)(306,595)Excess of loss expenses(2,290)(3,609)(5,425)(1,000)(300)-(119)(12,743)Net premiums written10,7017,949375,0182,5949,000-10,444415,706Change in unearned premiums, net(687)(319)(3,333)(433)(760)-(96)(5,628)Net premiums earned10,0147,630371,6852,1618,240-10,348410,078Reinsurance commissions9,85919,0382,9069,8775,83210,46918,05876,039Other underwriting income84711002529-10319Total revenues19,95726,739374,69112,06314,10110,46928,416486,436Cost and expensesGross claims paid and loss adjustment expenses135,00426,023315,19113,3063,6005,38442,700541,208Reinsurer’s share of claims paid(131,960)(23,757)(17,148)(12,438)(2,851)(5,384)(35,532)(229,070)Net claims paid3,0442,266298,043868749-7,168312,138Changes in outstanding claims1,925391(11,358)1,8681,128-53(5,993)Changes in incurred but not reported claims, net(1,281)7112,476(496)(291)-(524)9,955Net claims incurred3,6882,728299,1612,2401,586-6,697316,100Premium deficiency reserve(16)(1,721)(9,820)(819)---(12,376)Additional unexpired risk reserve---14---14Unallocated loss adjustment expenses(636)(117)2,467(98)143-(252)1,507Policy acquisition costs5,8149,41523,1015,3933,2308,6459,41765,015Other underwriting expenses525 890695792633041052,735Total underwriting cost and expenses9,37511,195314,9787,3095,2228,94915,967372,995Net underwriting income 10,58215,54459,7134,7548,8791,52012,449113,441Other operating (expenses) / incomeAllowance for impairment of doubtful premium, reinsurers and other receivables(7,473)General and administration expenses(107,594)Commission income on deposits7,411Unrealized gain on investments5,357Other income15,153Total other operating expenses, net(87,146)Net income for the year26,295Net income attributed to the policyholders(2,512)Net income for the year attributable to the shareholders, before zakat and income tax23,783Zakat(4,161)Income tax(1,184)Net income for the year attributable to the shareholders 18,438MarinePropertyMotorEngineer-ingAccident & liabilityExtended warrantyTerm life TotalAs at December 31, 2020AssetsReinsurers’ share of unearned premiums8,73033,8731,28721,16920,11838,5105,684129,371Reinsurers’ share of outstanding claims5,41958,4692,294383,118104,322416,174559,837Reinsurers’ share of claims incurred but not reported2,4478,5902,18822,6948,195-8,74952,863Deferred policy acquisition costs1,0743,64111,8602,8751,9729,7411,13632,299Unallocated assets820,358Total assets1,594,728LiabilitiesUnearned premiums11,28337,080187,70923,20722,25338,5109,590329,632Unearned reinsurance commission2,1336,0942004,9493,41713,48710630,386Outstanding claims7,49363,82470,024387,067105,929417,570641,948Claims incurred but not reported2,7788,85445,48623,29210,144-10,937101,491Premium deficiency reserve--12,966---12,966Additional unexpired risk reserve---203---203Unallocated loss adjustment expenses3195562,415532538-2944,654Unallocated liabilities207,616Total liabilities 1,328,896MarinePropertyMotorEngineer-ingAccident & LiabilityExtended WarrantyTerm life TotalAs at December 31, 2019AssetsReinsurers’ share of unearned premiums14,29425,4763,67020,13111,46622,9057,002104,944Reinsurers’ share of outstanding claims9,5169,5283,311390,830111,073377,306531,601Reinsurers’ share of claims incurred but not reported3,8542,0681,72925,59911,784-12,05757,091Deferred policy acquisition costs2,1073,0397,8782,8091,2155,6781,04523,771Unallocated assets 848,284Total assets1,565,691LiabilitiesUnearned premiums17,50328,425146,69121,70814,26122,9058,394259,887Unearned reinsurance commission3,5104,8235514,7211,8867,8451,99225,328Outstanding claims12,90610,78671,119394,481112,845378,249610,423Claims incurred but not reported4,5682,31340,65126,19114,146-14,310102,179Premium deficiency reserve--10,845----10,845Additional unexpired risk reserve---399---399Unallocated loss adjustment expenses2191543,577208487-3695,014Unallocated liabilities293,346Total liabilities 1,307,421 | 20 |
| Description of accounting policy for statutory deposit [text block] | Statutory depositIn compliance with Article 58 of the Implementing Regulations issued by SAMA, the Company is required to maintain a deposit of not less than 10% of its share capital which is amounting to Saudi Riyals 20 million in a bank designated by SAMA. The statutory deposit is maintained with a reputed bank which is also a related party. The Company cannot withdraw this deposit without SAMA’s approval. Commission accruing on this deposit is payable to SAMA.In accordance with instructions received from the SAMA vide their circular dated March 1, 2016, the Company disclosed the commission due on the statutory deposit as an asset and a liability in these financial statements. | 13 |
| Disclosure of notes forming part of accounts [abstract] | | |
| Disclosure of investments [text block] | Investments Note20202019Fair value through statement of income investments (FVSI)9.1162,029110,645Held-to-maturity investment9.23,000-Available-for-sale investment9.31,9231,923166,952112,5689.1Fair value through statement of income investments (FVSI)Movement is as follows:20202019Balance at beginning of the year110,645105,004Additions50,000284Changes in fair value of investments1,3845,357Balance at end of the year162,029110,645The analysis of the composition of investments is as follows:20202019Cash and cash equivalents4452,348Equity16,2503,230Murabaha placements77,20035,700Mutual funds39,71539,342Sukuks 28,41930,025Total investments162,029110,6459.2 Held to maturity investmentThis represents the Company’s investment in Saudi Fransi Tier 1 Sukuks. These represent 3 Sukuks at a face value of SAR 1 million per Sukuk with a coupon rate of 4.50% per annum. These Sukuks have a maturity duration of 5 years commencing from November 30, 2020.9.3 Available-for-sale investmentThis represents the Company’s 3.85% (December 31, 2019: 3.85%) holding in Najm for Insurance Services Company, a Saudi Closed Joint Stock Company. These shares are un-quoted and are carried at cost. In the absence of reliable financial information, management believe that fair values cannot be ascertained reliably.9.4All investments are from the shareholders’ operations and are placed inside the Kingdom of Saudi Arabia. | 9 |
| Disclosure of investments at fair value through statement of income [text block] | Fair value through statement of income investments (FVSI)Movement is as follows:20202019Balance at beginning of the year110,645105,004Additions50,000284Changes in fair value of investments1,3845,357Balance at end of the year162,029110,645The analysis of the composition of investments is as follows:20202019Cash and cash equivalents4452,348Equity16,2503,230Murabaha placements77,20035,700Mutual funds39,71539,342Sukuks 28,41930,025Total investments162,029110,645 | 9.1 |
| Disclosure of due from related parties [text block] | Related party transactions and balances 21.1Related party transactions Related parties represent major shareholders, directors and key management personnel of the Company, and entities controlled or significantly influenced by such parties.The Company in the normal course of business carries out transactions with its related parties. The transactions with related parties are made on terms agreed with those related parties and the transactions are approved by the Board of Directors.The significant transactions with related parties and the related amounts are as follows:Related partyNature of transactionsFor the year ended December 31, 2020For the year ended December 31, 2019Board members- Fees and related expenses1,4501,601Key management personnel-Remuneration and related expenses11,04411,000-Loans and advances652602Shareholders’ and related parties (common ownership)-Gross premium written39,18764,253-Claims paid and payable 11,64915,647-Facultative premiums ceded1,8012,650-Facultative commission received295568-Facultative claims recovered2951,177-Expenses incurred5,6726,231-Commission income on deposits2,5887,411-Commission income on short-term deposits90-21.2Related party balances 20202019Premiums receivable6,3778,913Claims payable1,041 5,809Cash and cash equivalents with a shareholder 80,379354,679Short-term deposits with a shareholder192,250-Amounts due (to)/from a shareholder for facultative transactions (174)39Advances due from key management personnel 627602Income tax receivable from foreign shareholders 3591,184Statutory deposit placed with a shareholder 20,00020,000Accrued income on statutory deposit with a shareholder1,4691,275Employee benefits payable to key management personnel3,3122,806 | 21 |
| Disclosure of cash and cash equivalents [text block] | Cash and cash equivalents20202019Cash in hand2628Bank balances67,70732,804Deposits with original maturity of less than 3 months 13,000321,87580,733354,707Except for balances amounting to SAR 0.33 million, the bank balances and deposits are with a bank which is a related party, registered in Saudi Arabia and are denominated in Saudi Riyals and US Dollars. The deposits have an original maturity of less than three months and yield income at rates of 0.65% annum (2019: 1% to 2% per annum). | 4 |
| Disclosure of statutory deposit [text block] | Statutory depositIn compliance with Article 58 of the Implementing Regulations issued by SAMA, the Company is required to maintain a deposit of not less than 10% of its share capital which is amounting to Saudi Riyals 20 million in a bank designated by SAMA. The statutory deposit is maintained with a reputed bank which is also a related party. The Company cannot withdraw this deposit without SAMA’s approval. Commission accruing on this deposit is payable to SAMA.In accordance with instructions received from the SAMA vide their circular dated March 1, 2016, the Company disclosed the commission due on the statutory deposit as an asset and a liability in these financial statements. | 13 |
| Disclosure of due to related parties [text block] | Related party transactions and balances 21.1Related party transactions Related parties represent major shareholders, directors and key management personnel of the Company, and entities controlled or significantly influenced by such parties.The Company in the normal course of business carries out transactions with its related parties. The transactions with related parties are made on terms agreed with those related parties and the transactions are approved by the Board of Directors.The significant transactions with related parties and the related amounts are as follows:Related partyNature of transactionsFor the year ended December 31, 2020For the year ended December 31, 2019Board members- Fees and related expenses1,4501,601Key management personnel-Remuneration and related expenses11,04411,000-Loans and advances652602Shareholders’ and related parties (common ownership)-Gross premium written39,18764,253-Claims paid and payable 11,64915,647-Facultative premiums ceded1,8012,650-Facultative commission received295568-Facultative claims recovered2951,177-Expenses incurred5,6726,231-Commission income on deposits2,5887,411-Commission income on short-term deposits90-21.2Related party balances 20202019Premiums receivable6,3778,913Claims payable1,041 5,809Cash and cash equivalents with a shareholder 80,379354,679Short-term deposits with a shareholder192,250-Amounts due (to)/from a shareholder for facultative transactions (174)39Advances due from key management personnel 627602Income tax receivable from foreign shareholders 3591,184Statutory deposit placed with a shareholder 20,00020,000Accrued income on statutory deposit with a shareholder1,4691,275Employee benefits payable to key management personnel3,3122,806 | 21 |
| Disclosure of zakat [text block] | 22.1Components of zakat baseSignificant components of zakat base of the Company attributable to the Saudi shareholders, which are subject to adjustment under zakat and income tax regulations, are shareholders’ equity at the beginning of the year, adjusted net income and certain other items. Zakat base has been computed based on the Company’s understanding of the zakat regulations enforced in the Kingdom of Saudi Arabia. The zakat regulations in Saudi Arabia are subject to different interpretations, and the assessments to be raised by the General Authority of Zakat and Tax (“GAZT”) could be different from the declaration filed by the Company.20202019Shareholders’ equity, at beginning of year 192,256178,339Provisions, at beginning of year37,88630,542Adjusted net income for the year22,07319,770Statutory deposit(14,888)(14,888)Property, equipment and intangible assets, as adjusted(37,580)(35,159)Others(5,488)476Approximate zakat base194,259179,08022.2Provision for zakat and income taxZakatIncome taxTotalJanuary 1, 20204,6691,1845,853Provision for the current year4,9991,4536,452Adjustment for prior year769165934Payments during the year(5,324)(1,311)(6,635)December 31, 20205,1131,4916,604ZakatIncome taxTotalJanuary 1, 20195,2852,0207,305Provision for the current year4,1611,1845,345Other adjustments7(185)(178)Payments during the year(4,784)(1,835)(6,619)December 31, 20194,6691,1845,853Zakat is payable at 2.5% of higher of the approximate zakat base and adjusted net income attributable to Saudi shareholders.Provision for income tax is payable at 20% of the adjusted net income attributable to the foreign shareholders of the Company, less allowances for foreign shareholders’ share in the losses carry forwarded from previous year calculated in accordance with the guidelines provided in the income tax regulations. Income tax paid is recovered from foreign shareholders.The shareholding percentage subject to zakat and income tax is as follows:2020 2019 %%Zakat74.4474.44Income tax25.5625.5622.3Status of assessmentsThe Company has filed its tax returns with the General Authority of Zakat and Tax (“GAZT”) from inception up to 2019. The Company’s tax and zakat position has been finalised up to and including the year ended December 31, 2018, except for the assessment for withholding tax as explained below. The tax return for 2013 is deemed to be finalized as no queries have been received from the GAZT and the statutory time limit of 5 years is over. The Company has received the final assessment for 2018 for zakat and income tax, with an additional tax and zakat liability of SAR 175 thousand. Management has accepted this assessment and has paid this amount in the current year.During the year, the Company has received the final assessment for the years 2014 to 2017 for zakat and income tax. The assessment has raised additional tax and zakat liability of SAR 934 thousand. Management has accepted this assessment and has paid this amount in the current year.In addition to above, the Company had also received an assessment for the 2018 withholding tax liability during 2019 in which the GAZT had imposed additional taxes, including penalties, of SAR 11.37 million. Management believes that the assessment raised is without merit and has appealed against this assessment. The Company’s initial appeal was rejected by the GAZT and has been escalated to the General Secretariat of Tax Committee (GSTC) online portal in order to assign the hearing session by the related Committee to discuss the Company's objection. Management of the Company believes that there is a high probability to waive the majority of this assessment and hence no additional liability has been recorded against this assessment. | 22 |
| Disclosure of income tax [text block] | 22.1Components of zakat baseSignificant components of zakat base of the Company attributable to the Saudi shareholders, which are subject to adjustment under zakat and income tax regulations, are shareholders’ equity at the beginning of the year, adjusted net income and certain other items. Zakat base has been computed based on the Company’s understanding of the zakat regulations enforced in the Kingdom of Saudi Arabia. The zakat regulations in Saudi Arabia are subject to different interpretations, and the assessments to be raised by the General Authority of Zakat and Tax (“GAZT”) could be different from the declaration filed by the Company.20202019Shareholders’ equity, at beginning of year 192,256178,339Provisions, at beginning of year37,88630,542Adjusted net income for the year22,07319,770Statutory deposit(14,888)(14,888)Property, equipment and intangible assets, as adjusted(37,580)(35,159)Others(5,488)476Approximate zakat base194,259179,08022.2Provision for zakat and income taxZakatIncome taxTotalJanuary 1, 20204,6691,1845,853Provision for the current year4,9991,4536,452Adjustment for prior year769165934Payments during the year(5,324)(1,311)(6,635)December 31, 20205,1131,4916,604ZakatIncome taxTotalJanuary 1, 20195,2852,0207,305Provision for the current year4,1611,1845,345Other adjustments7(185)(178)Payments during the year(4,784)(1,835)(6,619)December 31, 20194,6691,1845,853Zakat is payable at 2.5% of higher of the approximate zakat base and adjusted net income attributable to Saudi shareholders.Provision for income tax is payable at 20% of the adjusted net income attributable to the foreign shareholders of the Company, less allowances for foreign shareholders’ share in the losses carry forwarded from previous year calculated in accordance with the guidelines provided in the income tax regulations. Income tax paid is recovered from foreign shareholders.The shareholding percentage subject to zakat and income tax is as follows:2020 2019 %%Zakat74.4474.44Income tax25.5625.5622.3Status of assessmentsThe Company has filed its tax returns with the General Authority of Zakat and Tax (“GAZT”) from inception up to 2019. The Company’s tax and zakat position has been finalised up to and including the year ended December 31, 2018, except for the assessment for withholding tax as explained below. The tax return for 2013 is deemed to be finalized as no queries have been received from the GAZT and the statutory time limit of 5 years is over. The Company has received the final assessment for 2018 for zakat and income tax, with an additional tax and zakat liability of SAR 175 thousand. Management has accepted this assessment and has paid this amount in the current year.During the year, the Company has received the final assessment for the years 2014 to 2017 for zakat and income tax. The assessment has raised additional tax and zakat liability of SAR 934 thousand. Management has accepted this assessment and has paid this amount in the current year.In addition to above, the Company had also received an assessment for the 2018 withholding tax liability during 2019 in which the GAZT had imposed additional taxes, including penalties, of SAR 11.37 million. Management believes that the assessment raised is without merit and has appealed against this assessment. The Company’s initial appeal was rejected by the GAZT and has been escalated to the General Secretariat of Tax Committee (GSTC) online portal in order to assign the hearing session by the related Committee to discuss the Company's objection. Management of the Company believes that there is a high probability to waive the majority of this assessment and hence no additional liability has been recorded against this assessment. | 22 |
| Disclosure of statutory reserve [text block] | Statutory reserveAs required by the Implementing Regulations issued by SAMA, 20% of the net income for the year after adjusting accumulated losses, has to be set aside from net income for the year as a statutory reserve until this amounts to 100% of the paid-up share capital. Accordingly, during the year, the Company has transferred SAR 1.57 million, (2019: SAR 3.69 million) to the statutory reserve. This reserve is not available for distribution to the shareholders until the liquidation of the Company. | 24 |
| Disclosure of technical reserve for insurance/takaful/reinsurance/retakaful operations [text block] | Technical reserves8.1 Net outstanding claims and reserves20202019Outstanding claims641,948610,423Claims incurred but not reported101,491102,179Premium deficiency reserve12,96610,845Additional unexpired risk reserve203399Unallocated loss adjustment expenses4,6545,014761,262728,860Less:Reinsurers’ share of outstanding claims(559,837)(531,601)Reinsurers’ share of claims incurred but not reported(52,863)(57,091)(612,700)(588,692)Net outstanding claims and reserves148,562140,1688.2 Movement in unearned premiums Movement in unearned premiums comprise of the following:For the year ended December 31, 2020GrossReinsuranceNetBalance at beginning of the year259,887(104,944)154,943Premium written during the year785,881(322,901)462,980Premium earned during the year(716,136)298,474(417,662)Balance at end of the year329,632(129,371)200,261For year ended December 31, 2019Gross ReinsuranceNetBalance at beginning of the year253,354(104,039)149,315Premium written during the year735,044(319,338)415,706Premium earned during the year(728,511)318,433(410,078)Balance at end of the year259,887(104,944)154,9438.3 Movement in deferred policy acquisition costs Movement in deferred policy acquisition costs comprise of the following:20202019Balance at beginning of the year23,77124,279Costs accrued69,10464,507Costs charged(60,576)(65,015)Balance at end of the year32,29923,7718.4 Movement in unearned reinsurance commission Movement in unearned reinsurance commission comprise of the following:2020 2019Balance at beginning of the year 25,32829,443Commission accrued60,57471,924Commission earned(55,516) (76,039)Balance at end of the year30,38625,328 | 8 |
| Disclosure of compensation to key management personnel [text block] | Related party transactions and balances 21.1Related party transactions Related parties represent major shareholders, directors and key management personnel of the Company, and entities controlled or significantly influenced by such parties.The Company in the normal course of business carries out transactions with its related parties. The transactions with related parties are made on terms agreed with those related parties and the transactions are approved by the Board of Directors.The significant transactions with related parties and the related amounts are as follows:Related partyNature of transactionsFor the year ended December 31, 2020For the year ended December 31, 2019Board members- Fees and related expenses1,4501,601Key management personnel-Remuneration and related expenses11,04411,000-Loans and advances652602Shareholders’ and related parties (common ownership)-Gross premium written39,18764,253-Claims paid and payable 11,64915,647-Facultative premiums ceded1,8012,650-Facultative commission received295568-Facultative claims recovered2951,177-Expenses incurred5,6726,231-Commission income on deposits2,5887,411-Commission income on short-term deposits90-21.2Related party balances 20202019Premiums receivable6,3778,913Claims payable1,041 5,809Cash and cash equivalents with a shareholder 80,379354,679Short-term deposits with a shareholder192,250-Amounts due (to)/from a shareholder for facultative transactions (174)39Advances due from key management personnel 627602Income tax receivable from foreign shareholders 3591,184Statutory deposit placed with a shareholder 20,00020,000Accrued income on statutory deposit with a shareholder1,4691,275Employee benefits payable to key management personnel3,3122,806 | 21 |
| Disclosure of earnings per share [text block] | 23Share capital and earnings per share The authorized, issued and paid up capital of the Company is SAR 200 million divided into 20 million shares of SAR 10 each (December 31, 2019: SAR 200 million divided into 20 million shares of SAR 10 each).Earnings per share for the year have been calculated by dividing the net income for the year attributable to the shareholders by the weighted average number of ordinary shares at the statement of financial position date. Diluted earnings per share is not applicable to the Company. | 23 |
| Disclosure of investments held at fair value through statement of income [text block] | Fair value through statement of income investments (FVSI)Movement is as follows:20202019Balance at beginning of the year110,645105,004Additions50,000284Changes in fair value of investments1,3845,357Balance at end of the year162,029110,645The analysis of the composition of investments is as follows:20202019Cash and cash equivalents4452,348Equity16,2503,230Murabaha placements77,20035,700Mutual funds39,71539,342Sukuks 28,41930,025Total investments162,029110,645 | 9.1 |
| Disclosure of related party transactions [text block] | Related party transactions and balances 21.1Related party transactions Related parties represent major shareholders, directors and key management personnel of the Company, and entities controlled or significantly influenced by such parties.The Company in the normal course of business carries out transactions with its related parties. The transactions with related parties are made on terms agreed with those related parties and the transactions are approved by the Board of Directors.The significant transactions with related parties and the related amounts are as follows:Related partyNature of transactionsFor the year ended December 31, 2020For the year ended December 31, 2019Board members- Fees and related expenses1,4501,601Key management personnel-Remuneration and related expenses11,04411,000-Loans and advances652602Shareholders’ and related parties (common ownership)-Gross premium written39,18764,253-Claims paid and payable 11,64915,647-Facultative premiums ceded1,8012,650-Facultative commission received295568-Facultative claims recovered2951,177-Expenses incurred5,6726,231-Commission income on deposits2,5887,411-Commission income on short-term deposits90-21.2Related party balances 20202019Premiums receivable6,3778,913Claims payable1,041 5,809Cash and cash equivalents with a shareholder 80,379354,679Short-term deposits with a shareholder192,250-Amounts due (to)/from a shareholder for facultative transactions (174)39Advances due from key management personnel 627602Income tax receivable from foreign shareholders 3591,184Statutory deposit placed with a shareholder 20,00020,000Accrued income on statutory deposit with a shareholder1,4691,275Employee benefits payable to key management personnel3,3122,806 | 21 |
| Disclosure of entity's operating segments [text block] | Operating segments Operating segments are identified on the basis of internal reports about components of the Company that are regularly reviewed by the Chief Operating Decision Maker (CODM) in order to allocate resources to the segments and to assess its performance. Transactions between the operating segments are on normal commercial terms and conditions. The revenue from external parties reported to the CODM is measured in a manner consistent with that in the statement of income. Segment assets and liabilities comprise operating assets and liabilities.There have been no changes to the basis of segmentation or the measurement basis for the segment profit or loss since December 31, 2019. Segment assets do not include cash and cash equivalents, short-term deposits, premiums receivables, investments, due from reinsurers, prepaid expenses and other assets, property and equipment, intangible assets, statutory deposit and accrued income on statutory deposit. Accordingly, they are included in unallocated assets. Segment liabilities do not include policyholders payable, accrued expenses and other liabilities, due to reinsurers, agents, brokers and third-party administrators, surplus distribution payable, zakat and income tax, and accrued income on statutory deposit. Accordingly, they are included in unallocated liabilities.These unallocated assets and liabilities are not reported to CODM under related segments and are monitored on a centralized basis.For management reporting purposes, the Company is organised into business units on the basis of products and services offered by the Company.The segment information provided to the CODM for the reportable segments for the Company’s total assets and liabilities at December 31, 2020 and December 31, 2019, its total revenues, expenses, and net income for the year then ended, are as follows:MarinePropertyMotorEngineeringAccident & liabilityExtended warrantyTerm lifeTotal For the year ended December 31, 2020Revenues Gross premiums written 43,222123,282427,82659,01148,80723,24360,490785,881Reinsurance premiums ceded (31,813)(112,083)(6,164)(54,815)(40,467)(23,243)(39,574)(308,159)Excess of loss expenses(3,335)(2,887)(6,915)(1,425)(180)--(14,742)Net premiums written8,0748,312414,7472,7718,160-20,916462,980Change in unearned premiums, net657(258)(43,402)(462)660-(2,513)(45,318)Net premiums earned8,7318,054371,3452,3098,820-18,403417,662Reinsurance commissions 9,40219,3571,28011,5496,6202,6544,65455,516Other underwriting income8020411128 -10190Total revenues18,21327,431372,66613,86915,4682,65423,067473,368Cost and expensesGross claims paid and loss adjustment expenses11,5968,614247,9727,6406,2334,62757,472344,154Reinsurer’s share of claims paid(8,598)(8,022)(6,410)(7,005)(4,999)(4,627)(47,337)(86,998)Net claims paid2,998592241,5626351,234-10,135257,156Changes in outstanding claims, net(1,315)4,098(78)297(166)-4533,289Changes in incurred but not reported claims, net(383)194,3766(413)-(65) 3,540Net claims incurred1,3004,709245,860938655-10,523263,985Premium deficiency reserve--2,121----2,121Additional unexpired risk reserve---(196)---(196)Unallocated loss adjusted expenses198421(1,244)31783-(135)(360)Policy acquisition costs5,18010,80925,1516,1483,9901,9177,38160,576Other underwriting expenses7551,9965,8691,07666028833410,978Total underwriting cost and expenses7,43317,935277,7578,2835,3882,20518,103337,104Net underwriting income 10,7809,49694,9095,58610,0804494,964136,264Other operating (expenses) / incomeAllowance for impairment of doubtful premium, reinsurers and other receivables (10,398)General and administration expenses(119,453)Commission income on deposits2,588Commission income on short term deposits128Unrealized gain on investments1,384Other income7,179Total other operating expenses, net(118,572)Net income for the year before allocation 17,692Net income attributed to the policyholders (2,468)Net income for the year attributable to the shareholders, before zakat and income tax15,224Zakat (5,768)Income tax(1,618)Net income for the year attributable to the shareholders 7,838MarinePropertyMotorEngineer-ingAccident & liabilityExtended warrantyTerm lifeTotal For the year ended December 31, 2019RevenuesGross premiums written 56,410106,868390,20754,33432,12122,25372,851735,044Reinsurance premiums ceded(43,419)(95,310)(9,764)(50,740)(22,821)(22,253)(62,288)(306,595)Excess of loss expenses(2,290)(3,609)(5,425)(1,000)(300)-(119)(12,743)Net premiums written10,7017,949375,0182,5949,000-10,444415,706Change in unearned premiums, net(687)(319)(3,333)(433)(760)-(96)(5,628)Net premiums earned10,0147,630371,6852,1618,240-10,348410,078Reinsurance commissions9,85919,0382,9069,8775,83210,46918,05876,039Other underwriting income84711002529-10319Total revenues19,95726,739374,69112,06314,10110,46928,416486,436Cost and expensesGross claims paid and loss adjustment expenses135,00426,023315,19113,3063,6005,38442,700541,208Reinsurer’s share of claims paid(131,960)(23,757)(17,148)(12,438)(2,851)(5,384)(35,532)(229,070)Net claims paid3,0442,266298,043868749-7,168312,138Changes in outstanding claims1,925391(11,358)1,8681,128-53(5,993)Changes in incurred but not reported claims, net(1,281)7112,476(496)(291)-(524)9,955Net claims incurred3,6882,728299,1612,2401,586-6,697316,100Premium deficiency reserve(16)(1,721)(9,820)(819)---(12,376)Additional unexpired risk reserve---14---14Unallocated loss adjustment expenses(636)(117)2,467(98)143-(252)1,507Policy acquisition costs5,8149,41523,1015,3933,2308,6459,41765,015Other underwriting expenses525 890695792633041052,735Total underwriting cost and expenses9,37511,195314,9787,3095,2228,94915,967372,995Net underwriting income 10,58215,54459,7134,7548,8791,52012,449113,441Other operating (expenses) / incomeAllowance for impairment of doubtful premium, reinsurers and other receivables(7,473)General and administration expenses(107,594)Commission income on deposits7,411Unrealized gain on investments5,357Other income15,153Total other operating expenses, net(87,146)Net income for the year26,295Net income attributed to the policyholders(2,512)Net income for the year attributable to the shareholders, before zakat and income tax23,783Zakat(4,161)Income tax(1,184)Net income for the year attributable to the shareholders 18,438MarinePropertyMotorEngineer-ingAccident & liabilityExtended warrantyTerm life TotalAs at December 31, 2020AssetsReinsurers’ share of unearned premiums8,73033,8731,28721,16920,11838,5105,684129,371Reinsurers’ share of outstanding claims5,41958,4692,294383,118104,322416,174559,837Reinsurers’ share of claims incurred but not reported2,4478,5902,18822,6948,195-8,74952,863Deferred policy acquisition costs1,0743,64111,8602,8751,9729,7411,13632,299Unallocated assets820,358Total assets1,594,728LiabilitiesUnearned premiums11,28337,080187,70923,20722,25338,5109,590329,632Unearned reinsurance commission2,1336,0942004,9493,41713,48710630,386Outstanding claims7,49363,82470,024387,067105,929417,570641,948Claims incurred but not reported2,7788,85445,48623,29210,144-10,937101,491Premium deficiency reserve--12,966---12,966Additional unexpired risk reserve---203---203Unallocated loss adjustment expenses3195562,415532538-2944,654Unallocated liabilities207,616Total liabilities 1,328,896MarinePropertyMotorEngineer-ingAccident & LiabilityExtended WarrantyTerm life TotalAs at December 31, 2019AssetsReinsurers’ share of unearned premiums14,29425,4763,67020,13111,46622,9057,002104,944Reinsurers’ share of outstanding claims9,5169,5283,311390,830111,073377,306531,601Reinsurers’ share of claims incurred but not reported3,8542,0681,72925,59911,784-12,05757,091Deferred policy acquisition costs2,1073,0397,8782,8091,2155,6781,04523,771Unallocated assets 848,284Total assets1,565,691LiabilitiesUnearned premiums17,50328,425146,69121,70814,26122,9058,394259,887Unearned reinsurance commission3,5104,8235514,7211,8867,8451,99225,328Outstanding claims12,90610,78671,119394,481112,845378,249610,423Claims incurred but not reported4,5682,31340,65126,19114,146-14,310102,179Premium deficiency reserve--10,845----10,845Additional unexpired risk reserve---399---399Unallocated loss adjustment expenses2191543,577208487-3695,014Unallocated liabilities293,346Total liabilities 1,307,421 | 20 |
| Disclosure of capital management [text block] | Capital management Objectives are set by the Company to maintain healthy capital ratios in order to support its business objectives and maximize shareholders’ value.The Company manages its capital requirements by assessing shortfalls between reported and required capital levels on a regular basis. Adjustments to current capital levels are made in light of changes in market conditions and risk characteristics of the Company’s activities. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders or issue shares.The Company manages its capital to ensure that it is able to continue as going concern and comply with the regulators’ capital requirements of the markets in which the Company operates while maximizing the return to stakeholders through the optimization of the debt and equity balance. The capital structure of the Company consists of equity attributable to equity holders comprising paid share capital, reserves and retained earnings. As per guidelines laid out by SAMA in Article 66 of the Implementing Insurance Regulations detailing the solvency margin required to be maintained, the Company shall maintain solvency margin equivalent to the highest of the following three methods as per SAMA Implementing Regulations:Minimum Capital Requirement of SAR 100 millionPremium Solvency MarginClaims Solvency MarginThe Company is in compliance with all externally imposed capital requirements with sound solvency margin. The capital structure of the Company as at December 31, 2020 consists of paid-up share capital of SAR 200 million, statutory reserve of SAR 15.35 million and retained earnings of SAR 50.48 million (December 31, 2019: paid-up share capital of SAR 200 million, statutory reserves of SAR 13.78 million and retained earnings of SAR 44.48 million), in the statement of financial position. In the opinion of the Board of Directors, the Company has fully complied with the externally imposed capital requirements during the reported financial year. | 26 |
| Disclosure of commitments and contingencies, general [text block] | Commitments and contingencies32.1 The Company’s banks have issued payment guarantees of SAR 2.2 million (2019: SAR 2.1 million) to its suppliers on behalf of the Company.32.2 The Company is a defendant in a case that was filed by a client amounting to SAR 19 million (2019: Nil). The preliminary decision of the Primary Committee for Resolution of Insurance Disputes and Violations ruled in favour of the Company and dismissed the case brought by the claimant. The Appeal Committee for Settlement of Insurance of Insurance Disputes and Violations has issued a verdict which cancels the preliminary decision and decided to return the case to the Primary Committee for Resolution of Insurance Disputes and Violations for consideration and review. Management believes that the case is without merit and has therefore not taken any provisions there against. 32.3See note 22.3 for zakat and tax related contingencies.32.4The Company has discounted letters of credit issued in its favour by a customer to SR 3.7 million (2019: Nil). | 32 |
| Disclosure of risk management [abstract] | | |
| Disclosure of insurance/ takaful risk [text block] | Risk managementRisk governanceThe Company’s risk governance is manifested in a set of established policies, procedures and controls which uses the existing organizational structure to meet strategic targets. The Company’s philosophy revolves on willing and knowledgeable risk acceptance commensurate with the risk appetite and strategic plan approved by the Board of Directors of the Company. The Company is exposed to insurance, reinsurance, regulatory framework, credit, liquidity, foreign currency, commission rate, and market risk.Risk management structure:A cohesive organizational structure is established within the Company in order to identify, assess, monitor, and control risks.Board of directors:The apex of risk governance is the centralized oversight of Board of Directors providing direction and the necessary approvals of strategies and policies in order to achieve defined corporate goals.Audit committee and internal audit department:The internal audit department performs risk assessments with senior management annually. The internal audit department examines both adequacy of procedures and the Company’s compliance with the procedures through regular audits. Audit findings and recommendations are reported directly to the Audit Committee. Senior management:Senior management is responsible for the day to day operations towards achieving the strategic goals within the Company’s pre-defined risk appetite.Risk management committee:The Board of Directors of the Company has constituted a Risk Management Committee, which oversees the risk management function of the Company and report to Board on a periodic basis. This committee operates under framework established by the Board of Directors.The primary objective of the Company’s risk and financial management framework is to protect the Company from events that hinder the sustainable achievement of financial performance objectives, including failing to exploit opportunities. The risks faced by the Company and the manner in which these risks are mitigated by management are summarized below:30.1Insurance risk The principal risk the Company faces under insurance contracts is that the actual claims and benefit payments or the timing thereof, differ from expectations. This is influenced by the frequency of claims, severity of claims, actual benefits paid and subsequent development of long–term claims. Therefore, the objective of the Company is to ensure that sufficient reserves are available to cover these liabilities.The Company purchases reinsurance as part of its risk’s mitigation programme. Reinsurance ceded is placed on both a proportional and non–proportional basis. The majority of proportional reinsurance is quota–share reinsurance which is taken out to reduce the overall exposure of the Company to certain classes of business. Non–proportional reinsurance is primarily excess–of–loss reinsurance designed to mitigate the Company’s net exposure to catastrophe losses. Retention limits for the excess–of–loss reinsurance vary by product line and territory.Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision and are in accordance with the reinsurance contracts. Although the Company has reinsurance arrangements, it is not relieved of its direct obligations to its policyholders and thus a credit exposure exists with respect to reinsurance ceded, to the extent that any reinsurer is unable to meet its obligations assumed under such reinsurance arrangements. The Company’s placement of reinsurance is diversified such that it is neither dependent on a single reinsurer nor are the operations of the Company substantially dependent upon any single reinsurance contract. WATANIYA INSURANCE COMPANY (A Saudi Joint Stock Company)Notes to the financial statements (continued)December 31, 2020(All amounts in Saudi Riyals thousands unless otherwise stated)30Risk management (continued)30.1Insurance risk (continued)(a)Frequency and severity of claimsThe frequency and severity of claims can be affected by several factors like natural disasters, flood, environmental and economical, atmospheric disturbances, concentration of risks, civil riots etc. The Company manages these risks through the measures described above. The Company has limited its risk by imposing maximum claim amounts on certain contracts as well as the use of reinsurance arrangements in order to limit exposure to catastrophic events (e.g., hurricanes, earthquakes and flood damage). The purpose of these underwriting and reinsurance strategies is to limit exposure to catastrophes based on the Company’s risk appetite as decided by management. The overall aim is currently to restrict the impact of a single catastrophic event to approximately 10% of shareholders’ equity on a gross basis and 2% on a net basis. In the event of such a catastrophe, counterparty exposure to a single reinsurer is estimated not to exceed 5% of shareholders’ equity. The Board may decide to increase or decrease the maximum tolerances based on market conditions and other factors. The table below sets out the concentration of the outstanding claims and unearned premiums (in percentage terms) by class of business at the statement of financial position date:2020Gross unearned premiumsNet unearned premiumsGross outstanding claimsNet outstanding claimsMarine3%1% 1%3%Property11%2%10%6%Motor57%93%11%82%Engineering7%1%60%5%Accident and liability7%1%17%2%Extended warranty12%---Term life3%2%1%2%Total100%100%100%100%2019Gross unearned premiumsNet unearned premiumsGross outstanding claimsNet outstanding claimsMarine7%2%2%4%Property11%2%2%2%Motor56%92%12%86%Engineering8%1%65%5%Accident and liability6%2%18%2%Extended warranty9%---Term Life3%1%1%1%Total100%100%100%100%(b)Concentration of insurance riskThe Company monitors concentration of insurance risks primarily by class of business. The major concentration lies in the motor segment.The Company also monitors concentration of risk by evaluating multiple risks covered in the same geographical location. For flood or earthquake risk, a complete city is classified as a single location. For fire and property risk a particular building and neighbouring buildings, which could be affected by a single claim incident, are considered as a single location. Similarly, for marine risk, multiple risks covered in a single vessel voyage are considered as a single risk while assessing concentration of risk. The Company evaluates the concentration of exposures to individual and cumulative insurance risks and establishes its reinsurance policy to reduce such exposures to levels acceptable to the Company.Since the Company operates only in Saudi Arabia, hence, all the insurance risks relate to policies written in Saudi Arabia. WATANIYA INSURANCE COMPANY (A Saudi Joint Stock Company)Notes to the financial statements (continued)December 31, 2020(All amounts in Saudi Riyals thousands unless otherwise stated)30Risk management (continued)30.1Insurance risk (continued)(c)Sources of uncertainty in estimation of future claim paymentsThe key source of estimation uncertainty at the statement of financial position date relates to valuation of outstanding claims, whether reported or not, and includes expected claims settlement costs. The principal assumption underlying the liability estimates is that the Company’s future claims development will follow a similar pattern to past claims development experience. This includes assumptions in respect of average claim costs, claim handling costs, claim inflation factors and claim numbers for each accident year. Additional qualitative judgements are used to assess the extent to which past trends may not apply in the future, for example: one–off occurrence; changes in market factors such as public attitude to claiming: economic conditions: as well as internal factors such as portfolio mix, policy conditions and claims handling procedures. Judgement is further used to assess the extent to which external factors such as judicial decisions and government legislation affect the estimates. Considerable judgment by management is required in the estimation of amounts due to policyholders arising from claims made under insurance contracts. Such estimates are necessarily based on assumptions about several factors involving varying and possibly significant degrees of judgment and uncertainty and actual results may differ from management’s estimates resulting in future changes in estimated liabilities. Qualitative judgments are used to assess the extent to which past trends may not apply in the future, for example one-off occurrence, changes in market factors such as public attitude to claiming and economic conditions. Judgment is further used to assess the extent to which external factors such as judicial decisions and government legislation affect the estimates.In particular, estimates have to be made both for the expected ultimate cost of claims reported at the statement of financial position date and for the expected ultimate cost of claims incurred but not reported (IBNR) at the statement of financial position date. The details of estimation uncertainty of outstanding claims (including IBNR) are given in note 2.(d)Process used to decide on assumptionsThe process used to determine the assumptions for calculating the outstanding claim reserve is intended to result in neutral reasonable estimates of the most likely or expected outcome. The nature of the business makes it very difficult to predict with certainty the likely outcome of any particular claim and the ultimate cost of notified claims. Each notified claim is assessed on a separate, case by case basis with due regard to claim circumstances, information available from surveyors and historical evidence of the size of similar claims. Case estimates are reviewed regularly and are updated as and when new information is available.The estimation of IBNR is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Company, in which case information about the claim event is available. The estimation process takes into account the past claims reporting pattern and details of reinsurance programs. For details please refer note 2(e)(i).The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims projection techniques, such as Chain Ladder and Bornheutter-Ferguson methods.The main assumption underlying these techniques is that a Company’s past claims development experience can be used to project future claims development and hence ultimate claims costs. As such, these methods extrapolate the development of paid and incurred losses, average costs per claim and claim numbers based on the observed development of earlier years and expected loss ratios. Historical claims development is mainly analysed by accident years, but can also be further analysed by geographical area, as well as by significant business lines and claim types. Large claims are usually separately addressed, either by being reserved at the face value of loss adjuster estimates or separately projected in order to reflect their future development. In most cases, no explicit assumptions are made regarding future rates of claims inflation or loss ratios. Instead, the assumptions used are those implicit in the historical claims’ development data on which the projections are based. Additional qualitative judgement is used to assess the extent to which past trends may not apply in future, (e.g., to reflect one-off occurrences, changes in external or market factors such as public attitudes to claiming, economic conditions, levels of claims inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy features and claims handling procedures) in order to arrive at the estimated ultimate cost of claims that present the likely outcome from the range of possible outcomes, taking account of all the uncertainties involved. The premium liabilities have been determined such that the total premium liability provisions (unearned premium reserve, additional unexpired risk reserves, and premium deficiency reserve in result of liability adequacy test) would be sufficient to service the future expected claims and expenses likely to occur on the unexpired policies as at the statement of financial position date. The expected future liability is determined using estimates and assumptions based on the experience during the expired year of the contracts and expectations of future events that are believed to be reasonable. WATANIYA INSURANCE COMPANY (A Saudi Joint Stock Company)Notes to the financial statements (continued)December 31, 2020(All amounts in Saudi Riyals thousands unless otherwise stated)30Risk management (continued)30.1Insurance risk (continued)Sensitivity analysisThe Company believes that the claim liabilities under insurance contracts outstanding at the year-end are adequate. However, these amounts are not certain and actual payments may differ from the claims’ liabilities provided in the financial statements. The insurance claim liabilities are sensitive to the various assumptions. It has not been possible to quantify the sensitivity of specific variable such as legislative changes or uncertainty in the estimation process.(e)Reinsurance riskIn order to minimize financial exposure arising from large claims, the Company, in the normal course of business, enters into agreements with other parties for reinsurance purposes.To minimize 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.Reinsurers are selected using the following parameters and guidelines set by the Company’s Board of Directors and Reinsurance Committee. The criteria may be summarized as follows:-Minimum acceptable credit rating by recognized rating agencies (e.g. S&P) that is not lower than BBB or equivalent-Reputation of particular reinsurance companies-Existing or past business relationship with the reinsurer.Furthermore, the financial strength and managerial and technical expertise as well as historical performance of the reinsurers, wherever applicable, are thoroughly reviewed by the Company and agreed to pre-set requirements of the Company’s Board of Directors and Reinsurance Committee before approving them for exchange of reinsurance business. As at December 31, 2020 and 2019, there is no significant concentration of reinsurance balances.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. 30.2Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: foreign exchange rates (currency risk), market interest rates (interest rate risk) and market prices (price risk).-The Company’s market risk policy sets out the assessment and determination of what constitutes market risk for the Company. Compliance with the policy is monitored and exposures and breaches are reported to the Company risk committee. The policy is reviewed regularly for pertinence and for changes in the risk environment.-Guidelines are set for asset allocation and portfolio limit structure, to ensure that assets back specific policyholders’ liabilities and that assets are held to deliver income and gains for policyholders which are in line with their expectations.-The Company stipulates diversification benchmarks by type of instrument and geographical area, as the Company is exposed to guaranteed bonuses, cash and annuity options when interest rates fall.-There is strict control over hedging activities (e.g., equity derivatives are only permitted to be held to facilitate portfolio management or to reduce investment risk).The Board of Directors of the Company ensure that the overall market risk exposure is maintained at prudent levels and is consistent with the available capital. While the Board gives a strategic direction and goals, risk management function related to market risk is mainly the responsibility of Investment Committee team. The team prepares forecasts showing the effects of various possible changes in market conditions related to risk exposures. This risk is being mitigated through the proper selection of securities. Company maintains diversified portfolio and performs regular monitoring of developments in related markets. In addition, the key factors that affect stock and sukuk market movements are monitored, including analysis of the operational and financial performance of investees. WATANIYA INSURANCE COMPANY (A Saudi Joint Stock Company)Notes to the financial statements (continued)December 31, 2020(All amounts in Saudi Riyals thousands unless otherwise stated)30Risk management (continued)30.2Market risk (continued)Market risk comprises of three types of risk: currency risk, commission rate risk and other price risk.(a)Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Management assesses that there is minimal risk of significant losses due to exchange rate fluctuations and, consequently, the Company does not hedge its foreign currency exposure. The Company has transactions in Saudi Riyals and US Dollars which are pegged and hence there is no currency risk exposure to the Company.(b)Commission rate riskCommission rate risk is the risk that the value of future cash flows of a financial instrument will change because of change in market commission rates.The Company invests in securities and has deposits that are subject to commission rate risk. Commission rate risk to the Company is the risk of changes in commission rates reducing the overall return on its fixed commission rate bearing securities. The Commission rate risk is limited by monitoring changes in commission rates and by investing in floating rate instruments.The commission and non-commission bearing investments of the Company and their maturities as at December 31, 2020 and 2019 are as follows:Less than 1 yearMore than 1 yearNon-commission bearingTotal2020332,53731,436145,962509,9352019361,73326,00099,542487,275An increase or decrease of 100 basis points in interest yields would result in a change in the profit for the year of SAR 3.6 million (2019: SAR 3.9 million).(c)Other price riskOther price risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market prices (other than those arising from commission rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.The Company's investments amounting to SAR 56 million (2019: SAR 43 million) are susceptible to market price risk arising from uncertainty about the future value of invested securities. The Company limits this nature of market risk by diversifying its invested portfolio and by actively monitoring the developments in markets.The impact of hypothetical change of a 10% increase and 10% decrease in the market prices of investments on Company's profit would be as follows:Fair value changeEffect on Company’s profit December 31, 2020+ / - 10% + / - 5,600December 31, 2019+ / - 10%+ / - 4,300The Company has an unquoted equity investment amounting to SAR 1.9 million (2019: SAR 1.9 million) carried at cost where the impact of changes in equity price risk will only be reflected when the investment is sold or deemed to be impaired and statement of income will be then impacted. WATANIYA INSURANCE COMPANY (A Saudi Joint Stock Company)Notes to the financial statements (continued)December 31, 2020(All amounts in Saudi Riyals thousands unless otherwise stated)30Risk management (continued)30.3Credit riskCredit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. For all classes of financial instruments held by the Company, the maximum credit risk exposure to the Company is the carrying value as disclosed in the statement of financial position.The table below shows the maximum exposure to credit risk for the components of the statement of financial position:20202019Financial assets Cash and cash equivalents80,733354,707Short-term deposits242,250-Premiums receivable, net194,538153,813Due from reinsurers, net44,039139,910Reinsurers’ share of outstanding claims559,837531,601Investments, net of equity investments and mutual funds109,06468,073Statutory deposit20,00020,000Accrued income on statutory deposit1,4691,275Staff and other receivables9,6628,2941,261,5921,277,673The table below provides information regarding the credit risk exposure of the Company by classifying assets according to the management’s best estimate. Investment grade is considered to be the highest possible rating. Assets falling outside the range of investment grade are classified as non-investment grade satisfactory or past due but not impaired.Non-investment grade2020Investment gradeSatisfactoryPast due but not impairedTotalCash and cash equivalents80,733--80,733Short-term deposits242,250--242,250Premiums receivable, net-115,90178,637194,538Due from reinsurers, net-44,039-44,039Reinsurers’ share of outstanding claims-559,837-559,837Investments, net of equity and mutual funds109,064--109,064Statutory deposit20,000--20,000Accrued income on statutory deposit1,469--1,469Staff and other receivables-9,662-9,662December 31, 2020453,516729,43978,6371,261,592Non-investment grade2019Investment gradeSatisfactoryPast due but not impairedTotalCash and cash equivalents354,707--354,707Premiums receivable, net-76,20177,612153,813Due from reinsurers, net-131,2558,655139,910Reinsurers’ share of outstanding claims-531,601-531,601Investments, net of equity and mutual funds68,073--68,073Statutory deposit20,000--20,000Accrued income on statutory deposit1,275--1,275Staff and other receivables-8,294-8,294December 31, 2019444,055747,35186,2671,277,673 WATANIYA INSURANCE COMPANY (A Saudi Joint Stock Company)Notes to the financial statements (continued)December 31, 2020(All amounts in Saudi Riyals thousands unless otherwise stated)30Risk management (continued)30.3Credit risk (continued)Concentration of credit riskConcentration of credit risk exists when changes in economic or industry factors similarly affect groups of counterparties whose aggregate credit exposure is significant in relation to the Company’s total credit exposure. All of the Company’s underwriting activities are carried out in Saudi Arabia. The Company’s portfolio of financial instruments is broadly diversified, and transactions are entered into with diverse credit-worthy counterparties thereby mitigating any significant concentrations of credit risk. Also see note 6.30.4Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet obligations and commitments associated with financial liabilities. The Company has a proper cash management system, where daily cash collections and payments are strictly monitored and reconciled on regular basis. The Company manages liquidity risk by maintaining maturities of financial assets and financial liabilities and investing in liquid financial assets.-The Company’s liquidity risk policy which sets out the assessment and determination of what constitutes liquidity risk for the Company. Compliance with the policy is monitored and exposures and breaches are reported to the Company risk committee. The policy is regularly reviewed for pertinence and for changes in the risk environment.-Guidelines are set for asset allocations, portfolio limit structures and maturity profiles of assets, in order to ensure sufficient funding available to meet insurance and investment contracts obligations.-Contingency funding plans are in place, which specify minimum proportions of funds to meet emergency calls as well as specifying events that would trigger such plans.The Company’s catastrophe excess–of–loss reinsurance contracts contain clauses permitting the immediate draw down of funds to meet claim payments should claim events exceed a certain size.The table below summarizes the maturities of the Company's undiscounted contractual obligations relating to financial liabilities as of December 31:Financial liabilitiesLess than 12 monthsMore than 12 monthsTotalOutstanding claims266,948375,000641,948Due to reinsurers, agents, brokers and third-party administrators105,695-105,695Policyholder payable22,681-22,681Accrued expenses and other liabilities58,36513,85972,224Accrued income on statutory deposit-1,4691,469December 31, 2020453,689390,328844,017Financial liabilitiesLess than 12 monthsMore than 12 monthsTotalOutstanding claims235,423375,000610,423Due to reinsurers, agents, brokers and third-party administrators76,899-76,899Policyholder payable153,385-153,385Accrued expenses and other liabilities41,34512,07753,422Accrued income on statutory deposit-1,2751,275December 31, 2019507,052388,352895,404Insurance contract liabilities amounting to Saudi Riyals 119.31 million (2019: 118.44 million) which include Claims incurred but not reported, Premium deficiency reserve, Additional unexpired risk reserve and Unallocated loss adjustment expenses have a maturity of less than 12 months. WATANIYA INSURANCE COMPANY (A Saudi Joint Stock Company)Notes to the financial statements (continued)December 31, 2020(All amounts in Saudi Riyals thousands unless otherwise stated)30Risk management (continued)30.4Liquidity risk (continued)To manage the liquidity risk arising from financial liabilities mentioned above, the Company holds liquid assets comprising cash and cash equivalents and investment securities. These assets can be readily sold to meet liquidity requirements.The assets with maturity less than one year are expected to realize as follows:Fair value through income statement investments include investments in mutual funds and Murhaba deposits and are held for cash management purposes and expected to be matured/ settled within 12 months from the balance sheet date.Murabaha deposits classified as ‘cash and cash equivalents’ are deposits placed with high credit rating financial institutions with maturity of less than three months from the date of placement. Cash and bank balances are available on demand.Reinsurers share of outstanding claims mainly pertain to property and casualty segment and are generally realized within 6 to 9 months based on settlement of claims.The liabilities with maturity less than one year are expected to settle as follows:Reinsurers’ balances payable are settled on a periodic basis as per terms of reinsurance agreements.Majority of gross outstanding claims are expected to be settled within 12 months in accordance with statutory timelines for payment. Property and casualty policies due to the inherent nature are generally settled within 12 months from the date of receipt of loss adjustor report.The claims payable, accrued expenses and other liabilities are expected to settle within a year of 12 months from the year end date except for end of services benefits.Surplus distribution payable is to be settled within 6 months of annual general meeting in which financial statements are approved.30.5Operational riskOperational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the processes, technology and infrastructure supporting the Company’s operations either internally within the Company or externally at the Company’s service providers, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of investment management behaviour. Operational risks arise from all of the Company’s activities.The operations of the Company are subject to regulatory requirements in the Kingdom of Saudi Arabia. Such regulations only prescribe approval and monitoring of activities but also impose certain restrictive provisions e.g. capital adequacy to maintain the risk of default and insolvency on the part of the insurance companies and to enable them to meet unforeseen liabilities as these arise. In management view, the Company has substantially complied with such regulatory requirements.The Company’s objective is to manage operational risk so as to balance limiting of financial losses and damage to its reputation with achieving its investment objective of generating returns for investors. The primary responsibility for the development and implementation of controls over operational risk rests with the Board of Directors. This responsibility encompasses the controls in the following areas:-Requirements for appropriate segregation of duties between various functions, roles and responsibilities;-Requirements for the reconciliation and monitoring of transactions;-Compliance with regulatory and other legal requirements;-Documentation of controls and procedures;-Requirements for the yearly assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified;-Ethical and business standards; and-Risk mitigation policies and procedures. | 30 |
| Disclosure of currency risk [text block] | (a)Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Management assesses that there is minimal risk of significant losses due to exchange rate fluctuations and, consequently, the Company does not hedge its foreign currency exposure. The Company has transactions in Saudi Riyals and US Dollars which are pegged and hence there is no currency risk exposure to the Company. | 30.2 |
| Disclosure of commission/ special commission rate risk [text block] | (b)Commission rate riskCommission rate risk is the risk that the value of future cash flows of a financial instrument will change because of change in market commission rates.The Company invests in securities and has deposits that are subject to commission rate risk. Commission rate risk to the Company is the risk of changes in commission rates reducing the overall return on its fixed commission rate bearing securities. The Commission rate risk is limited by monitoring changes in commission rates and by investing in floating rate instruments.The commission and non-commission bearing investments of the Company and their maturities as at December 31, 2020 and 2019 are as follows:Less than 1 yearMore than 1 yearNon-commission bearingTotal2020332,53731,436145,962509,9352019361,73326,00099,542487,275An increase or decrease of 100 basis points in interest yields would result in a change in the profit for the year of SAR 3.6 million (2019: SAR 3.9 million). | 30.2 |
| Disclosure of market risk [text block] | Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: foreign exchange rates (currency risk), market interest rates (interest rate risk) and market prices (price risk).-The Company’s market risk policy sets out the assessment and determination of what constitutes market risk for the Company. Compliance with the policy is monitored and exposures and breaches are reported to the Company risk committee. The policy is reviewed regularly for pertinence and for changes in the risk environment.-Guidelines are set for asset allocation and portfolio limit structure, to ensure that assets back specific policyholders’ liabilities and that assets are held to deliver income and gains for policyholders which are in line with their expectations.-The Company stipulates diversification benchmarks by type of instrument and geographical area, as the Company is exposed to guaranteed bonuses, cash and annuity options when interest rates fall.-There is strict control over hedging activities (e.g., equity derivatives are only permitted to be held to facilitate portfolio management or to reduce investment risk).The Board of Directors of the Company ensure that the overall market risk exposure is maintained at prudent levels and is consistent with the available capital. While the Board gives a strategic direction and goals, risk management function related to market risk is mainly the responsibility of Investment Committee team. The team prepares forecasts showing the effects of various possible changes in market conditions related to risk exposures. This risk is being mitigated through the proper selection of securities. Company maintains diversified portfolio and performs regular monitoring of developments in related markets. In addition, the key factors that affect stock and sukuk market movements are monitored, including analysis of the operational and financial performance of investees. WATANIYA INSURANCE COMPANY (A Saudi Joint Stock Company)Notes to the financial statements (continued)December 31, 2020(All amounts in Saudi Riyals thousands unless otherwise stated)30Risk management (continued)30.2Market risk (continued)Market risk comprises of three types of risk: currency risk, commission rate risk and other price risk.(a)Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Management assesses that there is minimal risk of significant losses due to exchange rate fluctuations and, consequently, the Company does not hedge its foreign currency exposure. The Company has transactions in Saudi Riyals and US Dollars which are pegged and hence there is no currency risk exposure to the Company.(b)Commission rate riskCommission rate risk is the risk that the value of future cash flows of a financial instrument will change because of change in market commission rates.The Company invests in securities and has deposits that are subject to commission rate risk. Commission rate risk to the Company is the risk of changes in commission rates reducing the overall return on its fixed commission rate bearing securities. The Commission rate risk is limited by monitoring changes in commission rates and by investing in floating rate instruments.The commission and non-commission bearing investments of the Company and their maturities as at December 31, 2020 and 2019 are as follows:Less than 1 yearMore than 1 yearNon-commission bearingTotal2020332,53731,436145,962509,9352019361,73326,00099,542487,275An increase or decrease of 100 basis points in interest yields would result in a change in the profit for the year of SAR 3.6 million (2019: SAR 3.9 million).(c)Other price riskOther price risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market prices (other than those arising from commission rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.The Company's investments amounting to SAR 56 million (2019: SAR 43 million) are susceptible to market price risk arising from uncertainty about the future value of invested securities. The Company limits this nature of market risk by diversifying its invested portfolio and by actively monitoring the developments in markets.The impact of hypothetical change of a 10% increase and 10% decrease in the market prices of investments on Company's profit would be as follows:Fair value changeEffect on Company’s profit December 31, 2020+ / - 10% + / - 5,600December 31, 2019+ / - 10%+ / - 4,300The Company has an unquoted equity investment amounting to SAR 1.9 million (2019: SAR 1.9 million) carried at cost where the impact of changes in equity price risk will only be reflected when the investment is sold or deemed to be impaired and statement of income will be then impacted. | 30.2 |
| Disclosure of credit risk [text block] | Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. For all classes of financial instruments held by the Company, the maximum credit risk exposure to the Company is the carrying value as disclosed in the statement of financial position.The table below shows the maximum exposure to credit risk for the components of the statement of financial position:20202019Financial assets Cash and cash equivalents80,733354,707Short-term deposits242,250-Premiums receivable, net194,538153,813Due from reinsurers, net44,039139,910Reinsurers’ share of outstanding claims559,837531,601Investments, net of equity investments and mutual funds109,06468,073Statutory deposit20,00020,000Accrued income on statutory deposit1,4691,275Staff and other receivables9,6628,2941,261,5921,277,673The table below provides information regarding the credit risk exposure of the Company by classifying assets according to the management’s best estimate. Investment grade is considered to be the highest possible rating. Assets falling outside the range of investment grade are classified as non-investment grade satisfactory or past due but not impaired.Non-investment grade2020Investment gradeSatisfactoryPast due but not impairedTotalCash and cash equivalents80,733--80,733Short-term deposits242,250--242,250Premiums receivable, net-115,90178,637194,538Due from reinsurers, net-44,039-44,039Reinsurers’ share of outstanding claims-559,837-559,837Investments, net of equity and mutual funds109,064--109,064Statutory deposit20,000--20,000Accrued income on statutory deposit1,469--1,469Staff and other receivables-9,662-9,662December 31, 2020453,516729,43978,6371,261,592Non-investment grade2019Investment gradeSatisfactoryPast due but not impairedTotalCash and cash equivalents354,707--354,707Premiums receivable, net-76,20177,612153,813Due from reinsurers, net-131,2558,655139,910Reinsurers’ share of outstanding claims-531,601-531,601Investments, net of equity and mutual funds68,073--68,073Statutory deposit20,000--20,000Accrued income on statutory deposit1,275--1,275Staff and other receivables-8,294-8,294December 31, 2019444,055747,35186,2671,277,673 WATANIYA INSURANCE COMPANY (A Saudi Joint Stock Company)Notes to the financial statements (continued)December 31, 2020(All amounts in Saudi Riyals thousands unless otherwise stated)30Risk management (continued)30.3Credit risk (continued)Concentration of credit riskConcentration of credit risk exists when changes in economic or industry factors similarly affect groups of counterparties whose aggregate credit exposure is significant in relation to the Company’s total credit exposure. All of the Company’s underwriting activities are carried out in Saudi Arabia. The Company’s portfolio of financial instruments is broadly diversified, and transactions are entered into with diverse credit-worthy counterparties thereby mitigating any significant concentrations of credit risk. Also see note 6. | 30.3 |
| Disclosure of liquidity risk [text block] | Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in raising funds to meet obligations and commitments associated with financial liabilities. The Company has a proper cash management system, where daily cash collections and payments are strictly monitored and reconciled on regular basis. The Company manages liquidity risk by maintaining maturities of financial assets and financial liabilities and investing in liquid financial assets.-The Company’s liquidity risk policy which sets out the assessment and determination of what constitutes liquidity risk for the Company. Compliance with the policy is monitored and exposures and breaches are reported to the Company risk committee. The policy is regularly reviewed for pertinence and for changes in the risk environment.-Guidelines are set for asset allocations, portfolio limit structures and maturity profiles of assets, in order to ensure sufficient funding available to meet insurance and investment contracts obligations.-Contingency funding plans are in place, which specify minimum proportions of funds to meet emergency calls as well as specifying events that would trigger such plans.The Company’s catastrophe excess–of–loss reinsurance contracts contain clauses permitting the immediate draw down of funds to meet claim payments should claim events exceed a certain size.The table below summarizes the maturities of the Company's undiscounted contractual obligations relating to financial liabilities as of December 31:Financial liabilitiesLess than 12 monthsMore than 12 monthsTotalOutstanding claims266,948375,000641,948Due to reinsurers, agents, brokers and third-party administrators105,695-105,695Policyholder payable22,681-22,681Accrued expenses and other liabilities58,36513,85972,224Accrued income on statutory deposit-1,4691,469December 31, 2020453,689390,328844,017Financial liabilitiesLess than 12 monthsMore than 12 monthsTotalOutstanding claims235,423375,000610,423Due to reinsurers, agents, brokers and third-party administrators76,899-76,899Policyholder payable153,385-153,385Accrued expenses and other liabilities41,34512,07753,422Accrued income on statutory deposit-1,2751,275December 31, 2019507,052388,352895,404Insurance contract liabilities amounting to Saudi Riyals 119.31 million (2019: 118.44 million) which include Claims incurred but not reported, Premium deficiency reserve, Additional unexpired risk reserve and Unallocated loss adjustment expenses have a maturity of less than 12 months. WATANIYA INSURANCE COMPANY (A Saudi Joint Stock Company)Notes to the financial statements (continued)December 31, 2020(All amounts in Saudi Riyals thousands unless otherwise stated)30Risk management (continued)30.4Liquidity risk (continued)To manage the liquidity risk arising from financial liabilities mentioned above, the Company holds liquid assets comprising cash and cash equivalents and investment securities. These assets can be readily sold to meet liquidity requirements.The assets with maturity less than one year are expected to realize as follows:Fair value through income statement investments include investments in mutual funds and Murhaba deposits and are held for cash management purposes and expected to be matured/ settled within 12 months from the balance sheet date.Murabaha deposits classified as ‘cash and cash equivalents’ are deposits placed with high credit rating financial institutions with maturity of less than three months from the date of placement. Cash and bank balances are available on demand.Reinsurers share of outstanding claims mainly pertain to property and casualty segment and are generally realized within 6 to 9 months based on settlement of claims.The liabilities with maturity less than one year are expected to settle as follows:Reinsurers’ balances payable are settled on a periodic basis as per terms of reinsurance agreements.Majority of gross outstanding claims are expected to be settled within 12 months in accordance with statutory timelines for payment. Property and casualty policies due to the inherent nature are generally settled within 12 months from the date of receipt of loss adjustor report.The claims payable, accrued expenses and other liabilities are expected to settle within a year of 12 months from the year end date except for end of services benefits.Surplus distribution payable is to be settled within 6 months of annual general meeting in which financial statements are approved. | 30.4 |
| Disclosure of comparative figures [text block] | Comparative figures Certain of the comparative figures have been reclassified and regrouped to conform to the current year presentation. Such reclassifications have not resulted in any additional impact on equity, income, or total comprehensive income for comparative year. The reclassification in 2019 comparative statement of income relates to VAT paid amounting to SAR 2.7 million from the "general and administrative expenses" to "other underwriting expenses" | 31 |
| Disclosure of board of director's approval of the financial statements [text block] | Approval of the financial statements These financial statements have been approved by the Board of Directors on March 01, 2021 corresponding to 17 Rajab 1442 H. | 34 |
| Disclosure of other notes relevant to understanding of financial statements [text block] | Impact of COVID-19The World Health Organisation declared the corona virus (COVID-19) to be a global pandemic on March 11, 2020, escalating from a declaration of a public health emergency on January 30, 2020. COVID-19 has had unexpected human and economic consequences across many countries and has resulted in significant market volatility. COVID-19 pandemic continues to disrupt global markets as many geographies are beginning to experience a “second wave” of infections despite having previously controlled the outbreak through aggressive precautionary measures such as imposing restrictions on travel, lockdowns and strict social distancing rules. The Government of Kingdom of Saudi Arabia (“the Government”) however has managed to successfully control the outbreak to date, owing primarily to the effective measures taken by the Government, following which the Government has now ended the lockdowns and has begun taking phased measures to normalize international travel and resume Umrah pilgrimages.The Company continues to be cognisant of both the micro and macroeconomic challenges that COVID-19 has posed, the teething effects of which may be felt for some time and is closely monitoring its exposures at a granular level, while maintaining acceptable service levels and operational activities and ensuring the safety and wellbeing of its employees.Management of the Company is closely monitoring the situation as it evolves which is outlined on the broad dimensions as below: (a)Business impactImpact on sales, receivables and product/pricing strategiesThe major impact of COVID-19 pandemic is seen in motor line of business as explained below. As with any estimate, the projections and likelihoods of occurrence are underpinned by significant judgment and rapidly evolving situation and uncertainties surrounding the duration and severity of the pandemic, and therefore, the actual outcomes may be different to those projected. The impact of such uncertain economic environment is judgmental, and the Company will continue to reassess its position and the related impact on a regular basis.The key factors that impacted the 2020 production were market dynamics, the consumer spending and the insurance industry outlook and initiatives. Market dynamics involved the reduced Government spending and curtailment of projects due to COVID-19 situation. On the consumer side there was a clear tendency of the consumers to reduce cost and to shop for the cheapest solution. There has been a limited impact on collections and liquidity during the current phase and this is being monitored regularly by management. Overall, product and pricing strategies continue to be on track and hence management does not see any significant changes presently.Based upon the current trends, management has updated its sales forecasts to reflect these for the future. Management will continue to monitor the impact and update the forecasts further considering the situation as it continues to evolve.Impact on claims and reservingMotor technical reservesIn response to the COVID-19 pandemic, SAMA issued a circular 189 (the “circular”) dated May 8, 2020 to all insurance companies in the Kingdom of Saudi Arabia. Amongst other things, the circular instructed insurance companies to extend the period of validity of all existing retail motor insurance policies by further two months as well as providing a two-month additional coverage for all new retail motor policies written within one month of this circular, without any additional consideration from the policyholders.The management, in conjunction with its appointed actuary, deliberated on a variety of internal factors and concluded, that the Company considers the extension of two months in existing motor policies as new policy and recorded a premium deficiency reserve based on the expected claims for the extended 2 months period. The Company has performed a liability adequacy test using current estimates of future cash flows under its insurance contracts at an aggregated level for motor line of business and the recorded a Premium/contribution deficiency reserve amounting to SAR 12.96 million as at December 31, 2020.Reinsurers continue to settle their share of the claims in line with the treaty and contracts with no adverse impact to business. Management continues to conduct regular reviews on the Company’s reinsurers in relation to the counterparty credit ratings, financial metrics, credit outlook and changes to their structures, if any.The reserving towards IBNR continues to be consistent with the methodology and techniques applied as at December 31, 2019 and it factors the actual claim experience in the year ended December 31, 2020. Impact on expensesThe Company continues to maintain its staff in the normal course of business and pay the salaries. Some of the expenses such as communication, technology and maintenance costs have increased due to the higher level of support to extend remote working options for the employees as well as costs towards sanitising, social distancing and providing a safe environment for those employees working from the office. The additional costs have been partially offset with the lower costs towards business travel, conveyance and lower discretionary spending.Impact on financial assetsIn line with the impact upon the capital markets and interest-rates in the initial period of the pandemic in March 2020, there was some volatility and impact on the investment valuation which has recovered during the year ended December 31, 2020. The determination of fair value considers observable market information, determining whether specific markets are active or inactive, and whether transactions in inactive markets are deemed to be disorderly (i.e. forced or distressed), with none noted for the portfolio of financial assets held by the Company.The Company continued to assess whether there is an objective evidence that a financial asset or a group of financial assets is impaired. During the year, the Company applied the accounting policy for impairment of financial assets consistent with prior year. With respect to insurance and reinsurance receivables, the Company is closely monitoring the credit quality of its customers and reinsurance companies and updating the allowance for impairment whenever there is an objective evidence of credit impairment. (b)Operational resilience and business continuityFrom the initial stages of the COVID-19 pandemic, the Company set-up business continuity committee which frequently meets and reviews the operational, continuity, security, health and safety matters for the Company. This includes rolling out several key guidelines with respect to systems availability, continuity of service to our customers, employee health and safety guidelines, travel restrictions, social distancing, rotational remote-working, exposure policy, travel guidelines in case required for personal reasons and other related matters. The IT systems availability and the business continuity procedures in terms of data back-up and recovery remain intact in the current situation. (c)Accounting and financial reportingIn the current phase of COVID-19 pandemic, the Company continues to apply its accounting policies consistently without deviation. Considering the impact on the business is limited, management continues to adopt a consistent approach to the use of estimates in the financial information. As the situation evolves in future, management will continue to monitor and consider updates as appropriate at that time.The Company continues to maintain a healthy solvency ratio (note 26) and sound liquidity position during this phase. | 33 |
