37. 37.3 • • • • • • amounts due from insurance and other receivables. Management of risks (continued) amounts due from intermediaries; reinsurers’ share of insurance liabilities; amounts due from reinsurers in respect of payments already paid to policyholders; and The nature of the Group’s exposures to credit risk and its objectives, policies and processes for managing credit risk have not changed significantly from the prior period. In monitoring credit risk, amounts receivable are grouped according to their credit characteristics. The Group also limits its exposure to credit risk by only investing in liquid debt securities and only with counterparties that have a local credit rating as set out below as well as only investing with reputable banks which are assessed quarterly. debt securities and cash and cash equivalents; amounts due from insurance and investment contract policyholders; Credit and counterparty risk Credit risk refers to the risk of loss arising from the inability of the counterparty to service its debt obligations. The Group’s key areas of exposure to credit risk include: The Group only enters into insurance contracts with eligible professional individuals. PPS Group operates a Credit Control Policy regarding outstanding long-term insurance premiums, which is formulated on the relevant provisions of the Policyholder Protection Rules (“PPRs”) set under section 62 of the Long-Term Insurance Act 52 of 1998, as substituted and/or amended from time to time and agreed in contracts with our members. In terms of this policy, a formal communication is sent to members after the first month and second month of premium defaults. In the third month of default, members are informed that premium collections have ceased and all benefits are suspended. In the event of default on the part of the individual, where the Apportionment Accounts has vested to the individual, there is a legal right of offset of the Apportionment Account against any outstanding premiums payable. This significantly reduces the credit risk on insurance policyholder recoverables. The Group only enters into reinsurance agreements with reinsurers registered with the Prudential Authority. The reinsurers contracted with, represent subsidiaries of large international reinsurance companies. No instances of default have been encountered. As such the Group has selected reinsurers with a minimum credit rating of A+ for Long-Term insurance and A- for Short-Term insurance. Cash and cash equivalents are invested with financial institutions holding credit ratings within the guidelines set by the Board, similar to corporate and government debt indicated below, as well as restrictions in the Collective Investment Schemes Control Act, No. 45 of 2002, as amended. The spread of cash between financial institutions is determined in line with limits specified in the Insurance Act 18 of 2017, as substituted and/or amended from time to time. The financial soundness of counterparties holding the Group’s cash is monitored by management on a monthly basis. Financial risk management (continued) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December 2023 213 Notes to the Consolidated Financial Statements
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