TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Statement of Financial Position At March 31, 2019 with comparative figures at March 31, 2018 2019 2018 Assets US$ 32,723,761 24,751,772 4,736,873 3,479,874 Current assets: – 4,322,933 Cash and cash equivalents (note 5) 150,000 150,000 Contributions and other receivables (note 6) 2,602,874 – Short-term investment (note 7) 63,066 54,281 Current portion of long-term receivables (note 9) Current portion of long-term deposits (note 10) 40,276,574 32,758,860 Other assets 271,385,469 – Non-current assets: – 254,874,198 Financial assets measured at fair value through other comprehensive income (FVOCI) (note 8) 5,205,917 5,376,750 Available-for-sale financial assets (note 8) – 694,100 Long-term receivables (note 9) Long-term deposits (note 10) 3,151,122 3,195,852 Property and equipment (note 11) – – Investment in TCI Bank Limited (note 12) 279,742,508 264,140,900 US$ 320,019,082 296,899,760 Liabilities and Reserves US$ 840,138 1,584,354 FINANCIAL STATEMENTS Liabilities: 37,158,000 36,120,000 Accounts payable and 37,998,138 37,704,354 accrued expenses (note 13) Provisions for long-term benefits, 197,548,371 183,858,986 2019 other than retirement benefits (note 23) 35,238,228 31,750,352 573,738 963,377 Reserves: 48,660,607 42,622,691 Long-term benefit branch Short-term benefit branch 282,020,944 259,195,406 Employment injury benefit (note 22) Disablement and death benefit US$ 320,019,082 296,899,760 The accompanying notes are an integral part of these financial statements. These financial statements were approved on behalf of the Board of Directors on September 26, 2019 by the following: Samuel Swann Chairman Rhesa Cartwright Director 97 5
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Statement of Income, Expenses and Reserves Year ended March 31, 2019 with comparative figures for year ended March 31, 2018 2019 2018 Income: US$ 34,935,870 32,384,607 Contributions: 1,871,872 1,867,288 Private sector 1,068,951 800,304 Civil servants 307 116 Self employed Voluntary 37,877,000 35,052,315 Income from, and net realised gains on, 6,444,323 – financial assets measured at FVOCI (note 14) 1,908,774 – Change in fair value of long-term deposits (note 10) – 11,525,571 Income from, and net realised gains on, 552,501 1,223,340 593,348 653,306 available-for-sale financial assets (note 14) 47,375,946 Surcharges 48,454,532 Interest and other income (note 15) (18,292,674) (16,294,036) Expenses: (3,308,290) (5,590,191) Benefits (note 16) General and administrative expenses (note 17) (1,038,000) (3,840,000) Change in provisions for long-term benefits, (1,687,813) (1,460,054) other than retirement benefits (note 23) (24,326,777) (27,184,281) Investment expenses (note 18) Net income before other comprehensive income 23,049,169 21,270,251 FINANCIAL Other comprehensive income: (10,641,440) – STATEMENTS Net change in fair value of financial assets 10,417,809 – measured at FVOCI (note 19) Net realised gains on equity securities at FVOCI – 19,121,235 Net change in fair value of available-for-sale (223,631) 19,121,235 financial assets (note 19) 2019 Net income for year US$ 22,825,538 40,391,486 98 Net income for year transferred to: US$ 13,689,385 26,727,963 Long-term benefit branch reserve US$ 3,487,876 5,584,050 Short-term benefit branch reserve (389,639) (108,879) Employment injury benefit reserve 6,037,916 8,188,352 Disablement and death benefit reserve 22,825,538 40,391,486 The accompanying notes are an integral part of these financial statements. 6
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Long-Term Benefit Branch Statement of Income, Expenses and Reserve Year ended March 31, 2019 with comparative figures for year ended March 31, 2018 2019 2018 Income: US$ 24,018,410 22,264,417 Contributions: 1,502,963 1,499,282 Private sector 864,593 647,305 Civil servants 307 116 Self employed Voluntary 26,386,273 24,411,120 Income from, and net realised gains on, 4,571,248 – financial assets measured at FVOCI 1,353,979 – Change in fair value of long-term deposits – 8,276,930 Income from, and net realised gains on, 379,845 841,046 420,888 469,163 available-for-sale financial assets 33,112,233 Surcharges 33,998,259 Interest and other income (14,952,420) (13,140,003) Expenses: (2,216,555) (3,745,428) Benefits (note 16) General and administrative expenses (898,000) (3,068,000) Change in provisions for long-term benefits, (1,197,242) (1,048,517) other than retirement benefits (19,264,217) (21,001,948) Investment expenses Net income before other comprehensive (loss)/income 13,848,016 12,996,311 Other comprehensive (loss)/income: (7,548,453) – FINANCIAL Net change in fair value of financial assets 7,389,822 – STATEMENTS measured at FVOCI Net realised gains on equity securities at FVOCI – 13,731,652 Net change in fair value of available-for-sale (158,631) 13,731,652 financial assets 2019 Net income for year US$ 13,689,385 26,727,963 The accompanying notes are an integral part of these financial statements. 99 7
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Short-Term Benefit Branch Statement of Income, Expenses and Reserve Year ended March 31, 2019 with comparative figures for year ended March 31, 2018 2019 2018 Income: US$ 5,677,079 5,262,499 Contributions: 204,358 152,999 Private sector 40,990 40,890 Self employed Civil servants 5,922,427 5,456,388 Income from, and net realised gains on, 789,403 – financial assets measured at FVOCI 233,817 – Change in fair value of long-term deposits – 1,378,319 Income from, and net realised gains on, 89,781 198,793 72,683 78,127 available-for-sale financial assets 7,108,111 Surcharges 7,111,627 Interest and other income (2,823,682) (2,689,308) Expenses: (562,409) (950,332) Benefits (note 16) (206,750) (174,605) General and administrative expenses Investment expenses (3,592,841) (3,814,245) Net income before other comprehensive (loss)/income 3,515,270 3,297,382 Other comprehensive (loss)/income: (1,303,532) – Net change in fair value of financial assets 1,276,138 – measured at FVOCI Net realised gains on equity securities at FVOCI – 2,286,668 Net change in fair value of available-for-sale (27,394) 2,286,668 financial assets FINANCIAL US$ 3,487,876 5,584,050 STATEMENTS Net income for year 2019 The accompanying notes are an integral part of these financial statements. 100 8
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Employment Injury Benefit / Disablement and Death Benefit Statement of Income, Expenses and Reserves Year ended March 31, 2019 with comparative figures for year ended March 31, 2018 2019 2018 Income: US$ 5,240,381 4,857,691 Contributions: 327,919 327,116 Private sector Civil servants 5,568,300 5,184,807 Income from, and net realised gains on, 1,083,672 – financial assets measured at FVOCI 320,978 – Change in fair value of long-term deposits – 1,870,322 Income from, and net realised gains on, 82,875 183,501 99,777 106,016 available-for-sale financial assets 7,155,602 Surcharges 7,344,646 Interest and other income (529,326) (894,431) Expenses: General and administrative expenses (140,000) (772,000) Change in provisions for long-term benefits, (516,572) (464,725) other than retirement benefits (283,821) (236,932) Benefits (note 16) (1,469,719) (2,368,088) Investment expenses Net income before other comprehensive (loss)/income 5,685,883 4,976,558 Other comprehensive (loss)/income: (1,789,455) – FINANCIAL Net change in fair value of financial assets 1,751,849 – STATEMENTS measured at FVOCI Net realised gains on equity securities at FVOCI – 3,102,915 Net change in fair value of available-for-sale (37,606) 3,102,915 financial assets Net income for year US$ 5,648,277 8,079,473 2019 Net income for year transferred to: US$ (389,639) (108,879) Employment injury benefit reserve 6,037,916 8,188,352 Disablement and death benefit reserve 8,079,473 US$ 5,648,277 The accompanying notes are an integral part of these financial statements. 101 9
2019 FINANCIAL STATEMENTS 102 TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Statement of Changes in Reserves Year ended March 31, 2019 with comparative figures for year ended March 31, 2018 Long-term Short-term Employment Disablement and Total benefit branch benefit branch injury benefit death benefit US$ US$ US$ US$ US$ 218,803,920 Balance at April 1, 2017 157,131,023 26,166,302 1,072,256 34,434,339 40,391,486 Transfer from net income for year 26,727,963 5,584,050 (108,879) 8,188,352 Balance at March 31, 2018 183,858,986 31,750,352 963,377 42,622,691 259,195,406 Balance at April 1, 2018 183,858,986 31,750,352 963,377 42,622,691 259,195,406 Transfer from net income for year 13,689,385 3,487,876 (389,639) 6,037,916 22,825,538 Balance at March 31, 2019 197,548,371 35,238,228 573,738 48,660,607 282,020,944 The accompanying notes are an integral part of these financial statements. 10
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Statement of Cash Flows Year ended March 31, 2019 with comparative figures for year ended March 31, 2018 2019 2018 Cash flows from operating activities: US$ 23,049,169 21,270,251 Net income before other comprehensive income Adjustments for: 20,833 20,834 Change in fair value of TCI Government 286,770 278,497 (TCIG) bonds (note 15) (451,374) (425,124) Depreciation of property and equipment 1,650,133 Interest income (note 15) – Brokers’ fees on financial assets – 1,341,974 measured at FVOCI (note 18) (1,908,774) Brokers’ fees on available-for-sale (6,444,323) – financial assets (note 18) – Change in fair value of long-term deposits – (11,525,571) Income from, and net realised gains on, 16,202,434 10,960,861 financial assets measured at FVOCI Income from, and net realised gains on, (1,189,502) 69,791 available-for-sale financial assets (8,785) (19,065) (828,799) Changes in operating assets: (744,216) 3,840,000 Change in contributions and other receivables, 1,038,000 14,022,788 net of interest receivable 15,297,931 Change in other assets – (65,253,524) – Changes in operating liabilities: 53,312,812 (40,718,259) Change in accounts payable and accrued expenses 30,258,353 Change in provisions for long-term benefits, – 554,991 other than retirement benefits – 150,000 383,877 (122,933) Net cash from operating activities 150,000 (32,455) 4,322,933 (9,910,303) Cash flows used in investing activities: (242,040) FINANCIAL Net additions to financial assets measured at FVOCI (7,325,942) STATEMENTS Net proceeds from financial assets measured at FVOCI Net additions to available-for-sale financial assets 2019 Net proceeds from available-for-sale financial assets Interest income received Proceeds from partial repayment of TCIG bonds Change in short-term investment Additions to property and equipment Net cash used in investing activities Net increase in cash and cash equivalents 7,971,989 4,112,485 Cash and cash equivalents at beginning of year 24,751,772 20,639,287 Cash and cash equivalents at end of year US$ 32,723,761 24,751,772 The accompanying notes are an integral part of these financial statements. 103 11
FINANCIAL TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD STATEMENTS Notes to Financial Statements 2019 Year ended March 31, 2019 104 1. General information The Turks and Caicos Islands National Insurance Board (NIB) is a body corporate established in the Turks and Caicos Islands (TCI) on April 6, 1992 pursuant to section 27 of the National Insurance Ordinance 1991 (the Ordinance), as revised. NIB’s primary purpose is to control and manage the National Insurance Fund (“the Fund”) established under section 46 of the Ordinance so as to provide various benefits to persons insured under the Ordinance. NIB’s registered office address is at the Hon. L. Headley Durham building, Grand Turk, TCI. 2. Basis of preparation (a) Statement of accounting These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and with the requirements of the Ordinance. Details of NIB’s significant accounting policies are included at note 3. These financial statements have been prepared on a fair value basis for all assets held for investment purposes and under the historical cost convention for all other assets and liabilities. The methods used to measure fair values are discussed further at note 4. This is the first set of NIB’s annual financial statements in which IFRS 9, Financial Instruments, and IFRS 15, Revenue from Contracts with Customers, have been applied. Changes to significant accounting policies are described at note 2(d). (b) Functional and presentation currency These financial statements are presented in United States (US) dollars, which is NIB’s functional currency. All financial information presented in US dollars has been rounded to the nearest dollar. (c) Use of estimates and judgements The preparation of these financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. Information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes: 12
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 2. Basis of preparation, continued (c) Use of estimates and judgements, continued Note 6 – Contributions and other receivables Note 10 – Long-term deposits Note 12 – Investment in TCI Bank Limited Note 23 – Actuarial review These financial statements have been prepared on a going concern basis. No adjustments or reclassifications have been made that might be necessary if a basis of accounting other than a going concern basis were to be used. (d) Changes in significant accounting policies Except for the changes below, NIB has consistently applied its accounting policies to all years presented in these financial statements. For the year ended March 31, 2019 NIB has adopted IFRS 9 and IFRS 15, new standards issued and effective for financial years beginning on, or after, January 1, 2018. The nature and effects of the key changes in NIB's accounting policies resulting from its adoption of IFRS 9 and IFRS 15 are summarised below: (i) IFRS 9, Financial Instruments i. Classification and measurement of financial assets and financial liabilities IFRS 9 contains three principal classification categories for financial assets: FINANCIAL measured at amortised cost, fair value through profit or loss (FVTPL) and STATEMENTS FVOCI. The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. IFRS 9 eliminates the previous International Accounting Standard (IAS) 39, 2019 Financial Instruments: Recognition and Measurement, categories of held-to- maturity investments, loans and receivables, and available-for-sale financial assets. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification. IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities. IFRS 9 has not had a significant effect on NIB's accounting policies for financial liabilities. For an explanation of how NIB classifies and measures financial instruments and accounts for related gains and losses under IFRS 9, refer note 3(a). 105 13
FINANCIAL TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD STATEMENTS Notes to Financial Statements, continued Year ended March 31, 2019 2. Basis of preparation, continued (d) Changes in significant accounting policies, continued (i) IFRS 9, Financial Instruments, continued ii. Impairment of financial assets IFRS 9 replaces the 'incurred loss' model in IAS 39 with a forward-looking 'expected credit loss' (ECL) model. The new impairment model applies to financial assets measured at amortised cost, contract assets and debt securities at FVOCI, but not to investments in equity securities. Under IFRS 9, impairment losses are recognised earlier than under IAS 39, refer note 3(f). iii. Hedge accounting The new general hedge accounting model in IFRS 9 requires NIB to ensure that hedging relationships are aligned with its risk management objectives and strategy and to apply a more qualitative and forward-looking approach to assessing hedge effectiveness. The new general hedge accounting model in IFRS 9 has no impact on NIB’s financial statements and/or accounting policies. iv. Transition Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, except as described below: NIB has used an exemption not to restate comparative information for prior periods with respect to classification and measurements (including impairment) requirements. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 are recognised in reserves as at April 1, 2018, where material. Accordingly, the 2019 information presented for 2018 does not generally reflect the requirements of IFRS 9, but rather those of IAS 39. The determination of the business model within which a financial asset is held and designation and revocation of previous designations of certain financial assets as measured at FVTPL have been made on the basis of the facts and circumstances that existed at the date of initial application. If an investment in a debt security had low credit risk at the date of initial application of IFRS 9, then NIB has assumed that the credit risk on the asset had not increased significantly since initial recognition. 106 14
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 2. Basis of preparation, continued (d) Changes in significant accounting policies, continued (i) IFRS 9, Financial Instruments, continued iv. Transition, continued The adoption of IFRS 9 had no material impact on NIB’s financial statements as at March 31, 2019 and March 31, 2018 and for the years then ended and therefore no adjustment to the beginning balance of reserves at April 1, 2018 was required. v. Effect of initial application Classification of financial assets and financial liabilities The following table shows the original measurement category under IAS 39 and the new measurement category under IFRS 9 for each class of NIB's financial assets and financial liabilities as at March 31, 2019. Financial assets: Original New Cash and cash equivalents classification classification Contributions and other under IAS 39 under IFRS 9 receivables Short-term investment Loans and receivables Amortised cost Available-for-sale financial assets Long-term receivables Loans and receivables Amortised cost FINANCIAL Loans and receivables Amortised cost STATEMENTS Long-term deposits (note 4 (b)) Available-for-sale FVOCI Loans and receivables Amortised cost Designated as Designated as at FVTPL at FVTPL Financial liabilities: Other financial Other financial 2019 Accounts payable liabilities liabilities and accrued expenses (ii) IFRS 15, Revenue from Contracts with Customers i. Revenue from contracts with customers IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18, Revenue, IAS 11, Construction Contracts, and International Financial Reporting Interpretations Committee (IFRIC) 13, Customer Loyalty Programmes. 107 15
FINANCIAL TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD STATEMENTS Notes to Financial Statements, continued 2019 Year ended March 31, 2019 108 2. Basis of preparation, continued (d) Changes in significant accounting policies, continued (ii) IFRS 15, Revenue from contracts with customers, continued i. Revenue from contracts with customers, continued The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. ii. Transition IFRS 15 is either not relevant or not significant to NIB’s operations and, accordingly, has no material impact on the NIB’s accounting policies at the reporting date. 3. Significant accounting policies The accounting policies set out below have been applied consistently to all years presented in these financial statements, except where mentioned otherwise (refer notes 2(d), 3(a) and 3(f)). Certain comparative amounts have been reclassified to conform with the current year’s financial statement presentation. (a) Non-derivative financial instruments Policy applicable from April 1, 2018 (i) Recognition and initial measurement NIB initially recognises account receivables and debt securities on the date when they are originated. All other financial assets and financial liabilities (including regular-way purchases and sales of financial assets) are initially recognised on the trade date when NIB becomes a party to the contractual provisions of the instrument. A financial asset (unless it is an account receivable without a significant financing component) or financial liability is initially measured at fair value plus, for a financial asset or financial liability not measured at FVTPL, transaction costs that are directly attributable to its acquisition or issue. An account receivable without a significant financing component is initially measured at the transaction price. 16
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 3. Significant accounting policies, continued (a) Non-derivative financial instruments, continued (ii) Classification and subsequent measurement Financial assets On initial recognition, a financial asset is classified as measured at amortised cost, FVOCI or FVTPL. Financial assets are not reclassified subsequent to their initial recognition, unless NIB changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: it is held within a business model whose objective is to hold assets to collect contractual cash flows; and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. On initial recognition of an equity investment that is not held for trading, NIB may FINANCIAL irrevocably elect to present subsequent changes in fair value in other STATEMENTS comprehensive income on an investment-by-investment basis. 2019 All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. In addition, on initial recognition NIB may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. NIB has the following financial assets measured at amortised cost: cash and cash equivalents, contributions and other receivables, short-term investment, and long-term receivables. Long-term deposits are designated as at FVTPL to comply with the requirements of IAS 26. 17109
FINANCIAL TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD STATEMENTS Notes to Financial Statements, continued 2019 Year ended March 31, 2019 110 3. Significant accounting policies, continued (a) Non-derivative financial instruments, continued (ii) Classification and subsequent measurement, continued Financial assets – Business model assessment: NIB makes an assessment of the objective of the business model in which a financial asset is held for each portfolio of financial assets because this best reflects the way that the business is managed and information is provided to management. The information considered includes: the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management's strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of assets; how the performance of the portfolio is evaluated and reported to NIB's management; the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and the frequency, volume and timing of sales in prior periods, the reasons for such sales and expectations about future sales activity. Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered as sales for this purpose, consistent with NIB's continuing recognition of the assets. Financial assets that are managed and whose performance is evaluated on a fair value basis, which include underlying items of participating contracts, and financial assets that are held for trading, are measured at FVTPL because they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets. Financial assets – Assessment whether contractual cash flows are solely payments of principal and interest: For the purposes of this assessment, principal is defined as the fair value of the financial asset on initial recognition. However, the principal may change over time - e.g. if there are repayments of principal. 18
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 3. Significant accounting policies, continued FINANCIAL STATEMENTS (a) Non-derivative financial instruments, continued 2019 (ii) Classification and subsequent measurement, continued Financial assets – Assessment whether contractual cash flows are solely payments of principal and interest:, continued Interest is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin. In assessing whether the contractual cash flows are solely payments of principal and interest, NIB considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, NIB considers: contingent events that would change the amount or timing of cash flows; prepayment and extension features; terms that limit NIB's claim to cash flows from specified assets (e.g. non- recourse asset arrangements); and features that modify consideration of the time value of money (e.g. periodic reset of interest rates). A prepayment feature is consistent with the 'solely payments of principal and interest' criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. In addition, for a financial asset acquired at a premium or discount to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant on initial recognition Financial assets – Subsequent measurement and gains and losses: Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income and impairment losses are recognised in the statement of income, expenses and reserves. Any gain or loss on derecognition is also recognised in the statement of income, expenses and reserves. 111 19
FINANCIAL TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD STATEMENTS Notes to Financial Statements, continued Year ended March 31, 2019 3. Significant accounting policies, continued (a) Non-derivative financial instruments, continued (ii) Classification and subsequent measurement, continued Financial assets – Subsequent measurement and gains and losses, continued Financial assets at FVTPL are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in the statement of income, expenses and reserves. Debt investments at FVOCI are subsequently measured at fair value. Interest income calculated using the effective interest method and impairment are recognised in profit or loss. Other net gains and losses are recognised in other comprehensive income in the statement of income, expenses and reserves. Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognised as income in profit or loss unless the dividends clearly represent a recovery of part of the cost of the investment. Other net gains and losses are recognised in other comprehensive income and are never reclassified to profit or loss. Policy applicable before April 1, 2018 NIB classified non-derivative financial assets into the following categories: loans and receivables, FVTPL and available-for-sale financial assets. NIB classified non-derivative financial liabilities as other financial liabilities. (i) Non-derivative financial assets and financial liabilities – Recognition and derecognition NIB initially recognised loans and receivables and debt securities issued on the date when they were originated. All other financial assets and financial liabilities were initially recognised on the trade date when NIB became a party to the 2019 contractual provisions of the instrument. NIB derecognised a financial asset when the contractual rights to the cash flows from the asset expired, or it transferred the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset were transferred, or it neither transferred nor retained substantially all of the risks and rewards of ownership and did not retain control over the transferred asset. Any interest in such derecognised financial assets that was created or retained by NIB was recognised as a separate asset or liability. 112 20
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD FINANCIAL STATEMENTS Notes to Financial Statements, continued 2019 Year ended March 31, 2019 3. Significant accounting policies, continued (a) Non-derivative financial instruments, continued (i) Non-derivative financial assets and financial liabilities – Recognition and derecognition, continued NIB derecognised a financial liability when its contractual obligations were discharged, cancelled or expired. Financial assets and financial liabilities were offset and the net amount presented on the statement of financial position when, and only when, NIB currently had a legally enforceable right to offset the amounts and intended either to settle them on a net basis or to realise the asset and settle the liability simultaneously. The gross carrying amount of a financial asset was written-off (either partially or in full) to the extent that there was no prospect of recovery. This was generally the case when NIB determined that the debtor did not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to write-off. However financial assets that were written-off could still be subject to enforcement activities in order to comply with NIB's procedures for the recovery of the amounts due. (ii) Non-derivative financial assets – Measurement Loans and receivables Loans and receivables were financial assets with fixed or determinable payments that were not quoted in an active market. Such assets were recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they were measured at amortised cost using the effective interest rate method. The effective interest rate method was a method that was used in the calculation of the amortised cost of a financial asset or a financial liability and in the allocation and recognition of the interest income or interest expense over the relevant period. The effective interest rate was the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortised cost of a financial liability. Subsequent to initial recognition loans and receivables held for investment purposes were measured at fair value with changes in fair values recognised in the statement of income, expenses and reserves in accordance with IAS 26, ‘Accounting and Reporting by Retirement Benefit Plans’. 113 21
FINANCIAL TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD STATEMENTS Notes to Financial Statements, continued Year ended March 31, 2019 3. Significant accounting policies, continued (a) Non-derivative financial instruments, continued (ii) Non-derivative financial assets – Measurement, continued Loans and receivables, continued Loans and receivables not held for investment purposes were measured at amortised cost subsequent to initial recognition. Loans and receivables comprise: cash and cash equivalents, contributions and other receivables, short-term investment and long-term receivables. Cash and cash equivalents comprise cash on hand, cash at investment managers and cash at banks - savings and current accounts. Cash equivalents were short-term highly liquid investments with maturities of three months or less from the acquisition date that were subject to an insignificant risk of change of value and were held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. Debt instruments that were not quoted in an active market were classified as loans and receivables. Contributions and other receivables comprised outstanding contributions from private employers and the self-employed, interest receivable and other receivables. Financial assets at FVTPL Long-term deposits were non-derivative financial assets that were designated as at FVTPL. Financial assets at FVTPL were measured at fair value. Net gains and losses, including any interest or dividend income, were recognised in the statement of income, expenses and reserves. Available-for-sale financial assets 2019 Available-for-sale financial assets were non-derivative financial assets that were designated as available-for-sale and that were not classified in any of the previous categories. NIB’s investments in equity and debt securities were classified as available-for- sale financial assets. Subsequent to initial recognition, they were measured at fair value and changes therein were recognised as other comprehensive income in the statement of income, expenses and reserves. 114 22
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 3. Significant accounting policies, continued (a) Non-derivative financial instruments, continued (iii) Non-derivative financial liabilities – Measurement Non-derivative financial liabilities were initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities were measured at amortised cost using the effective interest rate method. NIB’s non-derivative financial liabilities were accounts payable and accrued expenses. (b) Provisions A provision is recognised if, as a result of a past event, NIB has a present legal or constructive obligation that can be reliably estimated, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a rate that reflects current market assessments of the time value of money and the risks specific to the liability. Per IAS 26, NIB has an option as to whether it discloses the actuarial present value of promised retirement benefits on the statement of financial position, in the notes to the financial statements or in an accompanying actuarial report. NIB has elected to disclose the actuarial present value of promised retirement FINANCIAL benefits in a note to the financial statements (note 23). The actuarial present value STATEMENTS of long-term benefits, other than retirement benefits, was quantified by an independent actuary at March 31, 2019 and 2018 (note 23) and recognised in NIB’s 2019 financial statements in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets, and IAS 1, Presentation of Financial Statements. (c) Property and equipment (i) Recognition and measurement Property and equipment are measured at cost less accumulated depreciation and impairment losses (note 3(f)(ii)). Cost includes expenditures that are directly attributable to the acquisition of property and equipment. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. 115 23
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 3. Significant accounting policies, continued (c) Property and equipment, continued (i) Recognition and measurement, continued Gains or losses arising from the disposal of property and equipment are reflected in the statement of income, expenses and reserves. (ii) Subsequent costs The cost of replacing an item of property and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to NIB and its cost can be reliably measured. The carrying amount of the replaced part is derecognised. The cost of the day- to-day servicing of property and equipment is recognised in the statement of income, expenses and reserves, as incurred. (iii) Depreciation Depreciation is recognised in the statement of income, expenses and reserves on a straight-line basis over the estimated useful lives of each part of an item of property and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Land is not depreciated. Estimated useful lives for the current and comparative periods are as follows: Buildings 25 years Furniture & Fixtures 3-10 years Computer Equipment 3-10 years Motor Vehicles 4 years FINANCIAL Depreciation methods, useful lives and residual values are reviewed at each STATEMENTS reporting date and adjusted, if necessary. 2019 (d) Reserves 116 The TCI National Insurance (Financial and Accounting) Regulations (the Regulations) require benefits and reserves to be grouped into separate benefit branches (the Benefit Branches) and reserves, respectively, as follows: (i) Long-term Benefit Branch, comprising retirement benefit, invalidity pension, survivors’ benefit, funeral grant and non-contributory old age pension. A Long-term Benefit Reserve is constituted by annually transferring the excess of income over expenses of the Long-term Benefit Branch. (ii) Short-term Benefit Branch, comprising sickness benefit and maternity benefit. A Short-term Benefit Reserve is constituted by annually transferring the excess of income over expenses of the Short-term Benefit Branch. 24
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 3. Significant accounting policies, continued FINANCIAL STATEMENTS (d) Reserves, continued 2019 (iii) Employment Injury Benefit Branch, comprising injury benefit, disablement benefit, death benefit, death grant payable on death due to employment injury and medical care. An Employment Injury Benefit Reserve is constituted to finance employment injury benefit, disablement grant, death grant and medical care by annually transferring that part of the net income of the Employment Injury Benefit Branch that is sufficient to maintain the level of the reserve at one-half of the amount paid for the said benefits in the two previous financial years. (iv) A Disablement and Death Benefit Reserve is constituted by annually transferring the remaining net income of the Employment Injury Benefit Branch, after the aforementioned transfer has been made to the Employment Injury Benefit Reserve in accordance with the Regulations. Further information on the allocation of income and expenses to the reserves is shown at note 3(e)(v). (e) Revenue and expense recognition (i) Contribution and surcharge income Contribution income is recognised on an accruals basis, at the requisite statutory rates, utilising employer monthly contribution statements, which are settled in arrears. Surcharges are recognised on an accruals basis at the requisite statutory rates. (ii) Rental income Rental income is recognised in the statement of income, expenses and reserves on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income over the term of the lease. (iii) Investment income Investment income comprises interest income on funds invested (including financial assets measured at FVOCI (2018: available-for-sale financial assets)), dividend income, gains on the disposal of financial assets measured at FVOCI (2018: available-for-sale financial assets) and change in fair value of financial assets measured at FVOCI (2018: change in fair value of available-for-sale financial assets). Interest income is recognised in the statement of income, expenses and reserves as it accrues, using the effective interest rate method. 117 25
FINANCIAL TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD STATEMENTS Notes to Financial Statements, continued Year ended March 31, 2019 3. Significant accounting policies, continued (e) Revenue and expense recognition, continued (iii) Investment income, continued Dividend income is recognised in the statement of income, expenses and reserves on the date that NIB’s right to receive payment is established, which, in the case of quoted securities, is the ex-dividend date. Gains on the disposal of financial assets measured at FVOCI (2018: available- for-sale financial assets) are included in the statement of income, expenses and reserves in the period in which they arise. (iv) Benefits, general and administrative expenses Expenditure on benefits is recognised when NIB’s obligation to make a payment has been established, which is generally upon approval of a claim. General and administrative expenses are recognised on an accruals basis. Long-term benefits such as retirement pension, old age non contributory, survivors, invalidity pension, retirement, funeral and survivors grants are generally recognised upon approval of a claim subject to the provisions of sections 3(1), 53(1), 14(1), 7(1), 3(4), 20(1) and 14(2) of the TCI National Insurance (Benefit) Regulations (the Benefit Regulations), respectively. Short-term benefits such as maternity allowance, sickness and maternity grants are generally recognised upon approval of a claim subject to the provisions of sections 28(1), 22(1) and 33(1) of the Benefit Regulations, respectively. Employment injury benefits such as disablement, death and injury are generally recognised upon approval of a claim subject to the provisions of sections 39(1), 45 and 35(1) of the Benefit Regulations, respectively. As disclosed at notes 3(i) and 23, NIB has chosen to disclose the actuarial 2019 present value of promised retirement benefits and other long-term benefits in the notes to these financial statements as per IAS 26. An actuarial valuation is performed every 3 years. The latest valuation was performed as at March 31, 2019. Certain results of the actuarial valuation as at March 31, 2019 are disclosed further at note 23. The actuarial present value of long-term benefits, other than retirement benefits, was quantified by an independent actuary at March 31, 2018 and 2019 (note 23) and recognised in NIB’s financial statements in accordance with IAS 37. 118 26
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 3. Significant accounting policies, continued (e) Revenue and expense recognition, continued (v) Basis of apportionment of income and expenses The statutory rates of total contributions, which are applied on an employed and self-employed person’s earnings and stipulated under sections 4, 14 and 19 of the TCI National Insurance (Contributions) Regulations (the Contributions Regulations), are as follows: Civil Servants 6.85%; Private Sector (general) 8.00%; Private Sector (under section 4(3) of the Contributions Regulations) 2.50%; Self Employed 6.80%; and Voluntary 5.50%. Section 4(3) of the Contributions Regulations relates to the employment of a temporary resident employed person on which contributions are payable at a rate of 2.5% and not the standard 8% for all other private sector workers. Section 13(1) of the Regulations provides that the aforementioned total contribution and surcharge income (note 3(e)(i)) shall be allocated among the Benefit Branches as follows: Contributions from: Long-Term Short-Term Employment Benefit Benefit Injury Benefit Branch Branch Branch Civil Servants 5.50 / 6.85 0.15 / 6.85 1.20 / 6.85 Private Sector (general) 5.50 / 8.00 1.30 / 8.00 1.20 / 8.00 Private Sector (under section – 1.30 / 2.50 1.20 / 2.50 4(3) of the Contributions 5.50 / 6.80 1.30 / 6.80 – Regulations) 10.0 / 10.0 Self Employed – – Voluntary Effective April 1, 2017 a new contribution ceiling was implemented by NIB FINANCIAL increasing from US$810/week or US$3,500/month to US$925/week or STATEMENTS US$4,000/month. 2019 Section 13(2) of the Regulations provides that income from investments of reserves shall be allocated to the Benefit Branches in proportion to the amount 119 of the reserve of each Benefit Branch at the beginning of the respective year. Investment income and expenses for the year ended March 31, 2019 and 2018 were allocated as follows: Long-Term Benefit Branch 2019 2018 Short-Term Benefit Branch Employment Injury Benefit Branch 70.93% 71.81% 12.25% 11.96% 16.82% 16.23% 100.00% 100.00% 27
FINANCIAL TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD STATEMENTS Notes to Financial Statements, continued 2019 Year ended March 31, 2019 120 3. Significant accounting policies, continued (e) Revenue and expense recognition, continued (v) Basis of apportionment of income and expenses, continued Section 14(1) of the Regulations provides that expenditure on each benefit shall be ascribed to the appropriate branch. Section 14(2) of the Regulations provides that the administrative expenditure of NIB shall be distributed among the Long-Term Benefit Branch, Short-Term Benefit Branch and Employment Injury Benefit Branch in the proportion of 67%, 17% and 16%, respectively. (f) Impairment Policy applicable from April 1, 2018 (i) Non-derivative financial assets NIB recognises loss allowances for ECLs on financial assets measured at amortised cost and debt securities at FVOCI. NIB measures loss allowances at an amount equal to lifetime ECLs, except in the following cases, for which the amount recognised is 12-month ECL: Debt securities that are determined to have low credit risk at the reporting date; and Other financial instruments (other than contributions and other receivables) for which credit risk has not increased significantly since initial recognition. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument, whereas 12-month ECL are the portion of ECL that results from default events that are possible within the 12 months after the reporting date. In all cases, the maximum period considered when estimating ECLs is the maximum contractual period over which NIB is exposed to credit risk. Measurement of ECL ECL are a probability-weighted estimate of credit losses and are measured as follows: Financial assets that are not credit-impaired at the reporting date: the present value of all cash shortfalls - i.e. the difference between the cash flows due to NIB in accordance with the contract and the cash flows that NIB expects to receive; and Financial assets that are credit-impaired at the reporting date: the difference between the gross carrying amount and the present value of estimated future cash flows. 28
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD FINANCIAL STATEMENTS Notes to Financial Statements, continued 2019 Year ended March 31, 2019 3. Significant accounting policies, continued (f) Impairment, continued (i) Non-derivative financial assets, continued Credit-impaired financial assets At each reporting date, NIB assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data: significant financial difficulty of the borrower or issuer; a breach of contract such as a default or past-due event; the restructuring of an amount due to NIB on terms that NIB would not otherwise consider; it is probable that the borrower will enter bankruptcy or other financial reorganisation; or the disappearance of an active market for a security because of financial difficulties. A financial asset that has been renegotiated due to a deterioration in the borrower's condition is usually considered to be credit-impaired unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of impairment. In assessing whether an investment in government debt securities is credit- impaired, NIB considers the following factors: the market's assessment of creditworthiness as reflected in the bond yields; the rating agencies' assessments of creditworthiness; the country's ability to access the capital markets for new debt issuance; the probability of debt being restructured, resulting in holders suffering losses through voluntary or mandatory debt forgiveness; and the international support mechanisms in place to provide the necessary support as 'lender of last resort' to that country, as well as the intention, reflected in public statements, of governments and agencies to use those mechanisms, including an assessment of the depth of those mechanisms and, irrespective of the political intent, whether there is the capacity to fulfil the required criteria. 121 29
FINANCIAL TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD STATEMENTS Notes to Financial Statements, continued 2019 Year ended March 31, 2019 122 3. Significant accounting policies, continued (f) Impairment, continued (i) Non-derivative financial assets, continued Presentation of allowances on the statement of financial position Loss allowances for ECL are presented as follows: Financial assets measured at amortised cost: the loss allowance is deducted from the gross carrying amount of the assets; and Debt investments at FVOCI: the loss allowance is recognised in other comprehensive income/reserves and does not reduce the carrying amount of the financial asset in the statement of financial position. Write-off The gross carrying amount or a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when NIB determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with NIB's procedures for recovery of amounts due. Policy applicable before April 1, 2018 (i) Non-derivative financial assets Financial assets not held for investment purposes were assessed at each reporting date to determine whether there was objective evidence of impairment. Objective evidence that financial assets were impaired included: default or delinquency by a debtor; restructuring of an amount due to NIB on terms that NIB would not consider otherwise; indications that a debtor or issuer will enter bankruptcy; adverse changes in the payment status of borrowers or issuers; the disappearance of an active market for a security because of financial difficulties; or observable data indicating that there was a measurable decrease in the expected cash flows from a group of financial assets. In addition, for an investment in an equity security, objective evidence of impairment included a significant or prolonged decline in its fair value below its cost. NIB considered a decline of 20% to be significant and a period of nine months to be prolonged. 30
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD FINANCIAL STATEMENTS Notes to Financial Statements, continued 2019 Year ended March 31, 2019 3. Significant accounting policies, continued (f) Impairment, continued (i) Non-derivative financial assets, continued Financial assets measured at amortised cost NIB considered evidence of impairment for these assets (loans and receivables) at both an individual asset and a collective level. All individually significant assets were individually assessed for impairment. Those found not to be impaired were then collectively assessed for any impairment that had been incurred but not yet individually identified. Assets that were not individually significant were collectively assessed for impairment. Collective assessment was carried out by grouping together assets with similar risk characteristics. In assessing collective impairment, NIB used historical information on the timing of recoveries and the amount of loss incurred, and made an adjustment if current economic and credit conditions were such that the actual losses were likely to be greater or lesser than suggested by historical trends. An impairment loss was calculated as the difference between an asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses were recognised in the statement of income, expenses and reserves and reflected in an allowance account against loans and receivables. When NIB considered that there were no realistic prospects of recovery of the asset, the relevant amounts were written off. If the amount of impairment loss subsequently decreased and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss was reversed in the statement of income, expenses and reserves. Available-for-sale financial assets Impairment losses on available-for-sale financial assets were recognised by NIB in the statement of income, expenses and reserves. Changes in cumulative impairment losses attributable to application of the effective interest rate method were reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt and equity security increased and the increase can be related objectively to an event occurring after the impairment loss was recognised in the statement of income, expenses and reserves, then the impairment loss was reversed by NIB, with the amount of the reversal recognised in the statement of income, expenses and reserves. 31123
FINANCIAL TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD STATEMENTS Notes to Financial Statements, continued Year ended March 31, 2019 3. Significant accounting policies, continued (f) Impairment, continued Policy applicable from April 1, 2017 (ii) Non-financial assets At each reporting date, NIB reviews the carrying amounts of its non-financial assets to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units (CGU). The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in the statement of income, expenses and reserves. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (g) Leases (i) Operating leases 2019 Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor, are classified as operating leases. Dual-use assets that are leased out under operating leases are included in property and equipment on the statement of financial position. Rental expenses and rental income are recognised in the statement of income, expenses and reserves on a straight- line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total rental expenses, over the term of the lease. 124 32
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD FINANCIAL STATEMENTS Notes to Financial Statements, continued 2019 Year ended March 31, 2019 3. Significant accounting policies, continued (g) Leases, continued (ii) Finance leases Assets held by NIB under leases which transfer substantially all of the risks and rewards of ownership to NIB are classified as finance leases. On initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Assets held under other leases are classified as operating leases and are not recognised on NIB’s statement of financial position. NIB considers whether a lease is a finance lease or an operating lease based on the substance of the transaction rather than the form. The following characteristics are considered by NIB that would normally lead to a lease being classified as a finance lease: the lease transfers ownership of the underlying asset to the lessee by the end of the lease term; the lessee has the option to purchase the underlying asset at a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable for it to be reasonably certain, at the inception date, that the option will be exercised; the lease term is for the major part of the economic life of the underlying asset even if title is not transferred; at the inception date, the present value of the lease payments amounts to at least substantially all of the fair value of the underlying asset; and the underlying asset is of such a specialised nature such that only the lessee can use it without major modifications. (h) Taxation Under current TCI law, NIB is not required to pay any taxes in TCI on either income or capital gains. Consequently, no tax liability or expense has been recorded in these financial statements. 125 33
FINANCIAL TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD STATEMENTS Notes to Financial Statements, continued 2019 Year ended March 31, 2019 126 3. Significant accounting policies, continued (i) Actuarial present value of promised retirement benefits IAS 26 permits the recognition of long-term liabilities for retirement benefits on the statement of financial position, in the notes to the financial statements or in an accompanying actuarial report. NIB has elected to recognise the actuarial present value of its promised retirement benefits in the notes to the financial statements (note 23). The actuarial present value of other long-term benefits have been recognised as a liability for all reporting periods. (j) Related parties A related party is a person or entity that is related to the entity that is preparing its financial statements. (i) A person or a close member of that person’s family is related to a reporting entity if that person: has control or joint control over the reporting entity; has significant influence over the reporting entity; or is a member of the key management personnel of the reporting entity, or of a parent of the reporting entity. (ii) An entity is related to a reporting entity if any of the following conditions apply: The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). Both entities are joint ventures of the same third party. One entity is a joint venture of a third entity and the other entity is an associate of the third entity. The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity. The entity is controlled, or jointly controlled, by a person identified above. A person identified above has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity. 34
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD FINANCIAL STATEMENTS Notes to Financial Statements, continued 2019 Year ended March 31, 2019 3. Significant accounting policies, continued (j) Related parties, continued Related party transactions pertain to transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged. (k) New standards, amendments to standards and interpretations not yet adopted The following are new standards, amendments and interpretations to published standards, issued but not effective for the financial year beginning April 1, 2018 and not early adopted by NIB: IFRS 16, Leases – IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. IFRS 16 provides a single lessee accounting model, requiring lessees to recognise assets and liabilities on the statement of financial position for all leases unless the lease term is 12 months or less or the underlying asset has a low value. It replaces existing leases guidance, including IAS 17, Leases, IFRIC 4, Determining whether an Arrangement contains a Lease, Standard Interpretations Committee (SIC)-15, Operating Leases - Incentives and SIC-27, Evaluating the Substance of Transactions involving the Legal Form of a Lease. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019, with early adoption permitted only for entities that also apply IFRS 15. IFRS 17, Insurance Contracts – IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the standard. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts. This information gives a basis for users of financial statements to assess the effect that insurance contracts have on the entity's financial position, financial performance and cash flows. IFRS 17 is effective for annual reporting periods beginning on or after January 1, 2022, with early adoption permitted only for entities that also apply both IFRS 9 and 15. NIB is currently assessing the potential future impact on its financial statements resulting from the application of IFRS 16. IFRS 17 is expected by management to be either not relevant or not significant to NIB’s operations and, accordingly, will not have a material impact on the NIB’s accounting policies. 127 35
FINANCIAL TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD STATEMENTS Notes to Financial Statements, continued Year ended March 31, 2019 4. Determination of fair values A number of NIB’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes, as described below. Where applicable, further information about the assumptions made in determining fair value has been disclosed in the notes specific to that asset or liability. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. (a) Financial assets measured at FVOCI / Available-for-sale financial assets The fair value of financial assets measured at FVOCI (2018: available-for-sale financial assets) is determined by reference to their quoted prices in active market at the reporting date. (b) Investment in, and assets held with, TCI Bank NIB’s investment in TCI Bank Limited (TCI Bank) has been accounted for using the fair value model so as to comply with IAS 26. Changes in fair value are recognised in the statement of income, expenses and reserves. The fair value of NIB’s investment in TCI Bank was assessed by NIB’s management to be US$nil at March 31, 2019 and March 31, 2018 as a consequence of TCI Bank entering provisional liquidation on April 9, 2010 and liquidation on October 29, 2010. The fair value of NIB’s other, non-secured, assets held with TCI Bank was reduced by 45% (2018: 56%) of the total amounts held at the date TCI Bank entered provisional liquidation, being management’s best estimate of an appropriate fair value adjustment in the circumstances. Changes in fair value are recognised in the statement of income, expenses and reserves. (c) Provisions for long-term benefits, other than retirement benefits The fair value of provisions for long-term benefits, other than retirement benefits, is 2019 estimated as the present value of future cash out flows discounted at a rate of 4.5% at March 31, 2019 (2018: 4.5%) (note 23). (d) Other financial instruments Due to their short-term nature the carrying amounts of other financial assets and liabilities of NIB approximate their fair value. The fair value of financial assets and liabilities with no fixed terms of repayment cannot be determined reliably. 128 36
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 4. Determination of fair values, continued FINANCIAL STATEMENTS NIB has an established control framework with respect to the measurement of fair values. 2019 NIB regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then NIB assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified. Significant valuation issues are reported to the Board of Directors of NIB (the Board). When measuring the fair value of a financial instrument, NIB uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments; Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data; and Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instruments’ valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments. Valuation techniques include net present value, discounted cash flow models and comparison with similar instruments for which an observable market exists. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates. The objective of the valuation technique is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date. If the inputs used to measure the fair value of a financial instrument fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. NIB recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. 129 37
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 5. Cash and cash equivalents 2019 2018 Cash at banks – savings and current accounts US$ 22,699,187 17,804,615 Cash at investment managers US$ 10,020,947 6,943,530 Cash on hand 3,627 3,627 32,723,761 24,751,772 The US$22,699,187 cash at banks – savings and current accounts at March 31, 2019 (2018: US$17,804,615) were held as follows: 2019 2018 CIBC First Caribbean International Bank US$ 19,535,372 14,818,311 (Bahamas) Limited (CIBC) 913,267 744,632 Interest bearing account 2,249,988 2,241,012 Non-interest bearing account 560 660 Scotiabank (Turks and Caicos) Ltd. (Scotiabank) Interest bearing account US$ 22,699,187 17,804,615 Non-interest bearing account During the year, interest bearing accounts with CIBC and Scotiabank earned interest at rates of 0.40% to 0.45% (2018: 0.41% to 0.43%). The US$10,020,947 cash held with investment managers at March 31, 2019 (2018: US$6,943,530) was held in the following investment accounts: 2019 2018 FINANCIAL Non U.S. equities US$ 2,694,514 2,161,193 STATEMENTS Fixed income 2,531,432 2,005,844 Hedge funds 125,193 U.S. equities 271,227 2019 713,817 Large cap value 527,656 489,221 130 Large cap growth 426,019 531,779 Mid cap growth 617,138 Small cap core 1,847,685 91,676 Convertibles 537,493 317,373 Commodities 1,073,746 Private equity – 10,020,947 1,471 US$ – 6,943,530 During the year, cash held with investment managers earned interest at an annual rate of 1.05% (2018: 0.29%). For NIB’s internal investment guidelines cash held with investment managers is considered to be part of financial assets measured at FVOCI (2018: available-for-sale financial assets) (note 21(c)(ii)). 38
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 6. Contributions and other receivables 2019 2018 Contributions receivable US$ 4,432,316 4,467,110 Other receivables – net US$ 923,663 542,929 Loss allowance for contributions receivable 5,355,979 5,010,039 (619,106) (1,530,165) 4,736,873 3,479,874 The movement on the loss allowance of contributions receivable for the year ended was as follows: 2019 2018 At April 1 US$ 1,530,165 1,136,000 Impairment (reversals)/losses recognised (note 17) US$ (754,003) 577,099 Contributions receivable written-off (157,056) (182,934) At March 31 619,106 1,530,165 The US$923,663 other receivables at March 31, 2019 (2018: US$542,929) comprised the following: 2019 2018 Surcharges receivable – net of loss allowance US$ 521,619 208,494 of US$1,177,265 (2018: US$1,777,367) US$ 300,824 233,327 Interest receivable – net of loss allowance of US$97,012 (2018: US$97,012) 101,220 101,108 923,663 542,929 Other receivables – net of loss allowance of US$143,003 (2018: US$143,003) The movement on the loss allowance of surcharges receivable for the year ended was as FINANCIAL follows: STATEMENTS 2019 2019 2018 At April 1 US$ 1,777,367 1,399,322 Impairment (reversals)/losses recognised (note 17) US$ (402,018) 608,257 Surcharges receivable written-off (198,084) (230,212) At March 31 1,177,265 1,777,367 7. Short-term investment The US$4,322,933 short-term investment at March 31, 2018 represented a certificate of deposit with a maturity period of more than three months, but less than one year, with CIBC. The deposit earned annual interest at 1.89% and matured on March 27, 2019. 131 39
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 8. Financial assets measured at FVOCI / Available-for-sale financial assets Financial assets measured at FVOCI at March 31, 2019 (2018: Available-for-sale financial assets) can be analysed as follows: Cost Fair Value 2019 2018 2019 2018 US$ US$ US$ US$ Financial assets measured at FVOCI Equity securities 196,131,859 – 216,027,818 – Government debt securities 43,073,748 – 43,174,852 – Corporate debt securities 12,314,919 – 12,182,799 – Available-for-sale financial assets Equity securities – 183,734,728 – 215,107,215 Government debt securities – 31,433,170 – 30,718,692 Corporate debt securities – 9,199,917 – 9,048,291 271,385,469 254,874,198 251,520,526 224,367,815 During the year, equity securities earned dividends with rates of return of 0.69% to 3.65% (2018: 0.81% to 4.26%) while government and corporate debt securities earned interest at rates of 2.17% to 3.00% (2018: 2.13% to 2.82%) with coupon rates ranging from 0.25% to 6.50% (2018: 0.25% to 6.75%). The US$271,385,469 financial assets measured at FVOCI (2018: available-for-sale financial assets) at March 31, 2019 (2018: US$254,874,198) were held by UBS Financial Services Inc. and managed by investment managers. Financial assets measured at FVOCI (2018: available-for-sale financial assets), excluding cash held with investment managers (note 5), at March 31, 2019 and 2018 were classified per NIB’s Investment Policy Statement (IPS) (note 21(c)(ii)) as follows: FINANCIAL 2019 2018 STATEMENTS Non U.S. equities US$ 64,624,382 70,899,391 2019 Fixed income 54,149,541 38,579,157 Hedge Funds 32,574,356 27,520,140 132 U.S. equities 27,406,473 31,684,941 Large cap value 27,636,613 30,283,292 Large cap growth 11,060,537 11,794,528 Mid cap growth Small cap core 9,925,840 9,955,374 Convertibles 21,656,776 19,556,472 Private equity 17,666,248 Commodities 9,025,463 4,684,703 5,575,440 US$ 271,385,469 254,874,198 A total of US$1,208,110 corporate debt securities in financial assets measured at FVOCI at March 31, 2019 (2018: available-for-sale financial assets) (2018: US$1,187,826) were classified as convertibles per NIB’s IPS. 40
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 9. Long-term receivables 2019 2018 FortisTCI Limited bonds US$ 5,000,000 5,000,000 TCIG bonds US$ 355,917 526,750 Less: current portion 5,355,917 5,526,750 (150,000) (150,000) 5,205,917 5,376,750 (a) FortisTCI Limited bonds On July 1, 2017, FortisTCI Limited (Fortis) issued to NIB a US$5,000,000 unsecured bond (Fortis Bonds) with a coupon rate of 5.14% per annum and a maturity date of July 1, 2031. The Fortis Bonds are repayable in full on July 1, 2031 and interest is payable every quarter of each calendar year (January 1, April 1, July 1 and October 1). Fortis can redeem, in whole or any part, the Fortis Bonds at any time prior to June 30, 2026 at a price agreed with NIB. During the year NIB earned US$257,000 (2018: US$257,000) of interest on the Fortis Bonds which was included as part of interest and other income in the statement of income, expenses and reserves. (b) TCIG bonds 2019 2018 Face value of TCIG bonds US$ 1,500,000 1,500,000 FINANCIAL Repayment of face value US$ (1,200,000) (1,050,000) STATEMENTS Premium 300,000 450,000 Accumulated change in fair value 250,000 250,000 Fair value (194,083) (173,250) 355,917 526,750 During the year the change in fair value of TCIG bonds was US$20,833 (2018: 2019 US$20,834) (note 15). 2019 2018 Fair value US$ 355,917 526,750 Less: current portion (150,000) (150,000) 376,750 US$ 205,917 On December 28, 2009 TCI Bank, a beneficial owner of 150 non-callable bonds 133 issued by TCIG, transferred these bonds to NIB pursuant to a Deed of Assignment. The TCIG bonds have a US$10,000 par value each, a coupon rate of 8% and a maturity date of November 30, 2021. The TCIG bonds are repayable in twenty equal semi-annual instalments of US$75,000 on the 31st day of May and the 30th day of November in each and every year commencing on May 31, 2011. 41
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 9. Long-term receivables, continued (b) TCIG bonds, continued The 150 non-callable bonds were transferred for a total cash consideration of US$1,750,000. Interest is payable on a semi-annual basis and secured by TCIG’s reserves and assets. The premium paid is being recognised as a fair value change over the period to maturity. During the year NIB earned US$7,992 (2018: US$20,008) of interest on the non- callable bonds which was included as part of interest and other income in the statement of income, expenses and reserves. The total remaining face value of TCIG bonds due at year end was as follows: 2019 2018 Within one year US$ 150,000 150,000 More than one year, less than two years 150,000 150,000 More than two years, less than three years – 150,000 450,000 US$ 300,000 10. Long-term deposits 2019 2018 Current account US$ 53,849 53,849 Certificates of deposit 17,298,642 17,298,642 Less: first and second interim distributions 17,352,491 17,352,491 Current account (21,540) (21,540) Certificates of deposit (6,919,456) (6,919,456) FINANCIAL STATEMENTS Balance (6,940,996) (6,940,996) Current account 32,309 32,309 2019 Certificates of deposit 10,379,186 10,379,186 . 10,411,495 10,411,495 Less: change in fair value Current account (24,232) (30,155) Certificates of deposit (7,784,389) (9,687,240) . (7,808,621) (9,717,395) US$ 2,602,874 694,100 134 42
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 10. Long-term deposits, continued The carrying value of long-term deposits at year-end were as follows: 2019 2018 Current account US$ 8,077 2,154 Certificates of deposit US$ 2,594,797 691,946 Total 2,602,874 694,100 Less: current portion (2,602,874) – – 694,100 All long-term deposits are held with TCI Bank. TCI Bank was placed into provisional FINANCIAL liquidation on April 9, 2010 and liquidation on October 29, 2010. NIB management STATEMENTS estimated a 45% (2018: 56%) reduction in fair value of NIB’s deposits with TCI Bank as being appropriate at March 31, 2019 and March 31, 2018, representing NIB 2019 management’s best estimate of an appropriate fair value adjustment in the circumstances. During the year ended March 31, 2019 NIB recognised US$1,908,774 change in fair value of long-term deposits in the statement of income, expenses and reserves (2018: US$nil). On September 10, 2012 NIB received a first interim distribution of US$3,511,002 from the liquidator of TCI Bank representing 20 cents on the dollar for NIB’s current account (US$10,770), certificates of deposit (US$3,459,728) and interest receivable (US$40,504) held with TCI Bank. On May 20, 2015 NIB received a second interim distribution of US$3,511,002 from the liquidator of TCI Bank representing 20 cents on the dollar for NIB’s current account (US$10,770), certificates of deposit (US$3,459,728) and interest receivable (US$40,504) held with TCI Bank. Due to the uncertainty regarding when, and how much, of NIB’s deposits with TCI Bank will be repaid, NIB’s management determined it appropriate to classify the current account and certificates of deposit held with TCI Bank as non-current assets for financial reporting purposes at March 31, 2018. Subsequent to March 31, 2019, on September 6, 2019 NIB received a third interim distribution of US$2,602,874 from the liquidator of TCI Bank representing 15 cents on the dollar, as approved by the Supreme Court of TCI, for NIB’s long-term deposits held with TCI Bank. NIB’s management determined it appropriate to classify the said distribution as current assets for financial reporting purposes at March 31, 2019. 135 43
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 11. Property and equipment Land and Furniture & Computer Motor Buildings Fixtures Equipment Vehicles Total US$ US$ US$ US$ US$ Cost: 5,118,756 557,234 991,727 337,881 7,005,598 April 1, 2017 – – 21,800 10,655 32,455 Additions – – – (85,000) (85,000) Disposals March 31, 2018 5,118,756 557,234 1,013,527 263,536 6,953,053 April 1, 2018 5,118,756 557,234 1,013,527 263,536 6,953,053 Additions 40,484 48,175 127,830 25,551 242,040 Disposals – – – – – March 31, 2019 5,159,240 605,409 1,141,357 289,087 7,195,093 Accumulated depreciation: 1,880,465 482,052 932,677 268,510 3,563,704 203,766 22,035 27,795 24,901 278,497 April 1, 2017 – – – (85,000) (85,000) Charge for the year Disposals 2,084,231 504,087 960,472 208,411 3,757,201 March 31, 2018 April 1, 2018 2,084,231 504,087 960,472 208,411 3,757,201 Charge for the year 204,167 20,222 41,147 21,234 286,770 Disposals – – – – – March 31, 2019 2,288,398 524,309 1,001,619 229,645 4,043,971 FINANCIAL Carrying amounts: 3,034,525 53,147 53,055 55,125 3,195,852 STATEMENTS March 31, 2018 2,870,842 81,100 139,738 59,442 3,151,122 March 31, 2019 2019 The cost of land included in land and buildings was US$70,500 representing US$500 for land transferred by TCIG to NIB in April 2003 and US$70,000 for land leased for 999 136 years by TCIG to NIB in November 2012. Included in land and buildings is the Hon. L. Headley Durham building (previously TC Invest building) located on Grand Turk and the aforementioned 999 year lease from TCIG on 0.56 acres of land where the building is located. NIB purchased the building from TCIG in November 2012. The original cost of the building was US$1,257,808 plus incidentals of US$15,070 while the total lease payment for the land for the entire 999 years is US$70,000. The cost of the building and the total payments for the leased land were paid in full by NIB in November 2012 as part of an Omnibus Agreement between NIB and TCIG. No impairment losses were recognised for the years ended March 31, 2019 and 2018. 44
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 12. Investment in TCI Bank Limited At March 31, 2019 NIB owned 2,000,000 (2018: 2,000,000) ordinary shares in TCI Bank with an issued value of US$2,000,000 (2018: US$2,000,000), representing approximately 15.95% of the total issued ordinary shares of TCI Bank. NIB was represented on the board of directors of TCI Bank. As disclosed at notes 10 and 21 to these financial statements NIB also held a current account and certificates of deposit with TCI Bank at March 31, 2019 and 2018. The fair value of this investment at March 31, 2019 and 2018 was assessed by NIB’s management to be US$nil as a consequence of TCI Bank entering provisional liquidation on April 9, 2010 and liquidation on October 29, 2010. 13. Accounts payable and accrued expenses 2019 2018 Accounts payable US$ 253,843 96,879 Accrued short-term benefits US$ 224,596 207,904 Accrued employment injury costs 216,791 495,058 Other accrued expenses 144,908 305,270 Deferred contribution income 479,243 – 1,584,354 840,138 NIB is liable, per the Ordinance, for the cost of medical services provided in connection with employment injuries. NIB’s liabilities for medical costs relating to employment injuries for the period from its establishment to March 31, 2010 were settled as part of an Omnibus Agreement with TCIG. NIB’s liabilities for medical costs relating to employment injuries for the period from April FINANCIAL 1, 2010 to March 31, 2019 were settled through agreement with the TCI National Health STATEMENTS Insurance Board (NHIB), in compliance with the Ordinance. 2019 NIB made an advance payment to NHIB of US$612,000 towards medical costs in connection with employment injuries in the year ended March 31, 2011. In addition, in 137 November 2016, NIB made another payment to NHIB of US$522,000 towards medical costs in connection with employment injuries in the years ended March 31, 2012 to 2015 and in March 2018, another payment of US$223,000 towards medical costs in connection with employment injuries in the years ended March 31, 2016 to 2018. In September 2018, a further payment of US$278,267 in connection with employment injuries from March 31, 2012 to 2015, was made by NIB to NHIB. No medical care costs were provided for during the years ended March 31, 2019 and March 31, 2018. At March 31, 2019 NIB included in accounts payable and accrued expenses US$216,791 (2018: US$495,058) representing NIB’s best estimate of its remaining obligation for medical costs in connection with employment injuries as at that date. 45
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 14. Income from, and net realised gains on, financial assets measured at FVOCI /available-for-sale financial assets 2019 2018 Dividend income and interest income US$ 4,968,077 – from equity securities at FVOCI US$ 1,476,246 – 6,170,312 Interest income and realised gains – 3,247,041 from debt securities at FVOCI 2,108,218 – 11,525,571 Realised gains from available-for-sale equity securities – 6,444,323 Dividend income and interest income from available-for-sale equity securities Interest income and realised gains from available-for-sale debt securities 15. Interest and other income 2019 2018 Interest income from loans and receivables US$ 285,825 297,842 Interest income from savings and current accounts US$ 165,549 127,282 Rental income 451,374 425,124 Other income 128,000 128,000 Change in fair value of TCIG Bond (note 9(b)) 121,016 34,807 (20,834) (20,833) 653,306 593,348 Rental income of US$128,000 (2018: US$128,000) is from TCIG. It relates to the rental of office space included in property and equipment. FINANCIAL 16. Benefits STATEMENTS 2019 2018 2019 Long-term benefits US$ 11,639,048 10,015,345 138 Retirement pension benefit 1,394,202 1,249,319 Survivors benefit 906,540 853,178 Invalidity pension 706,096 679,318 Old age non contributory 179,700 207,970 Funeral grant 109,685 119,348 Retirement grant 17,149 15,525 Survivors grant 14,952,420 13,140,003 Short-term benefits Sickness benefit 1,399,826 1,155,036 Maternity allowance 1,191,706 1,289,572 Maternity grant 232,150 244,700 2,823,682 2,689,308 46
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 16. Benefits, continued 2019 2018 Long-term and short term benefits US$ 17,776,102 15,829,311 balance brought forward Employment injury benefits/disablement 329,377 276,120 and death benefits 104,991 105,245 Disablement benefit 74,404 73,170 Injury benefit 7,800 7,800 Death benefit – 2,390 Constant attendance allowance Death grant 516,572 464,725 US$ 18,292,674 16,294,036 Refer to note 23 for additional information on long-term benefits. No medical care costs were provided for in the years ended March 31, 2019 and 2018 (note 13). 17. General and administrative expenses 2019 2018 Salaries and wages US$ 2,572,215 2,570,386 FINANCIAL Impairment (reversals)/losses STATEMENTS (754,003) 577,099 on contributions receivable (note 6) 2019 Impairment (reversals)/losses (402,018) 608,257 286,770 278,497 on surcharges receivable (note 6) 244,294 214,129 Depreciation 135,776 142,324 Professional fees 131,679 115,782 Security 128,040 139,526 Other expenses 123,586 Board of directors and committee allowances 120,058 99,717 Rent and utilities 116,222 78,178 Communications 113,241 101,532 Training 108,813 110,055 Office supplies, stationery and postage 108,708 132,106 Travel and subsistence 114,612 Insurance 97,813 192,600 Maintenance expenses 48,580 36,209 Vehicle expenses 46,236 32,915 Computer services 44,294 26,462 Advertising 37,986 19,805 Employee allowances US$ 3,308,290 5,590,191 47139
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 18. Investment expenses 2019 2018 Brokers’ fees on financial assets measured at FVOCI US$ 1,650,133 – Other investment expenses 37,680 40,080 Brokers’ fees on available-for-sale financial assets – 1,341,974 78,000 Salaries of NIB’s investment personnel – 1,460,054 US$ 1,687,813 19. Other comprehensive (loss)/income The US$10,641,440 other comprehensive loss for the year ended March 31, 2019 (2018: US$19,121,235, other comprehensive income) related to changes in fair value of financial assets measured at FVOCI (2018: available-for-sale financial assets) in the year ended March 31, 2019 and 2018, respectively. The changes in fair value of financial assets measured at FVOCI (2018: available-for-sale financial assets) included in NIB’s reserves at March 31, 2019 and 2018 can be analysed as follows: Unrealised changes in fair value at March 31 Movement 2019 2018 2019 Financial assets measured at FVOCI US$ 19,895,959 31,372,487 (11,476,528) Equity securities US$ 101,104 (714,478) 815,582 Government debt securities (132,120) (151,626) 19,506 Corporate debt securities 19,864,943 30,506,383 (10,641,440) FINANCIAL Unrealised changes in STATEMENTS fair value at March 31 Movement 2018 2019 2018 2017 Available-for-sale financial assets US$ 31,372,487 11,170,247 20,202,240 Equity securities US$ (714,478) (376,932) (337,546) Government debt securities (151,626) 591,833 (743,459) Corporate debt securities 30,506,383 11,385,148 19,121,235 140 48
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 20. Related party balances and transactions The following are transactions and balances with NHIB, TCI Bank and TCIG, related parties by virtue of significant influence and common directors, including transactions with key management personnel, which are not separately disclosed elsewhere in these financial statements. 2019 2018 TCI Bank transactions US$ 1,908,774 – Change in fair value of long-term deposits TCI Bank balances US$ 10,411,495 10,411,495 Long-term deposits (gross of change in fair value) US$ (7,905,633) (9,814,407) Reduction in fair value of assets held with TCI Bank US$ 2,000,000 2,000,000 Investment (before change in fair value) US$ (2,000,000) (2,000,000) Reduction in fair value of investment US$ Interest receivable (gross of change in fair value) 98,084 98,084 TCIG and related entities transactions US$ 5,160,780 4,936,994 Collection of contributions US$ 3,288,908 3,069,706 (Employer and employees’ contributions) Contributions – private sector US$ 1,871,872 1,867,288 (Employer and employees’ contributions) US$ 278,267 223,000 Contributions – civil servants Payment of employment injury costs to NHIB US$ 158,703 154,708 NIB’s payment of NIB contributions Repayment of Treasury bond US$ 150,000 150,000 NIB’s payment of NHIB contributions Rental income US$ 148,046 141,607 FINANCIAL Interest income STATEMENTS US$ 128,000 128,000 TCIG and related entities balances Treasury bonds – at par US$ 7,992 20,008 2019 Accrued NHIB employment injury costs Interest receivable US$ 300,000 450,000 US$ 216,791 495,058 US$ 8,117 12,103 Per the Ordinance, contributions from TCIG of US$1,871,872 (2018: US$1,867,288) comprise contributions relating to TCIG officers only and these are reflected in the statement of income, expenses and reserves as contributions from civil servants. Contributions for TCIG employees are charged at the same rates as the private sector and, on this basis, have been included within the private sector contributions in the statement of income, expenses and reserves and for the purpose of allocating contributions amongst branches. 49141
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 20. Related party balances and transactions, continued Key management personnel compensation US$ 2019 2018 Salary of the acting director US$ Allowances of the board of directors US$ 105,050 – Other benefits of the acting director US$ 85,200 85,200 Salary of the director and deputy director US$ 6,418 Gratuity benefits of the director US$ – – Other benefits of the director and deputy director – 181,053 – 24,000 20,194 FINANCIAL 21. Financial instruments STATEMENTS NIB has exposure to the following risks from its use of financial instruments: 2019 (a) Credit risk 142 (b) Liquidity risk (c) Market risk This note presents information about NIB’s exposure to each of the above risks, NIB’s objectives, policies and processes for measuring and managing risk, and NIB’s management of capital. Further quantitative disclosures are included throughout these financial statements. Risk management framework The Minister with responsibility for NIB (the Minister) appoints the Directors. The Directors have full discretionary power to direct, manage, allocate and rebalance or liquidate NIB’s investments in compliance with the terms of the IPS. The Directors established the IPS which communicates the investment philosophy of the Directors regarding NIB’s investments. The IPS creates a general framework within which the investment assets of NIB can be managed. The IPS envisages a rebalancing exercise at least semi-annually to keep asset allocations within recommended ranges. At March 31, 2019 and 2018 NIB kept within its asset allocation. The Directors may appoint such person(s) as necessary to achieve NIB’s investment objectives. The pursuit of these objectives also involves assuming responsibility for the establishment and oversight of NIB’s risk management framework and for developing and monitoring NIB’s risk management policies. NIB’s risk management policies are established to identify and analyse the risks faced by NIB, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and NIB’s activities. 50
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 21. Financial instruments, continued Risk management framework, continued The Directors appoint an Investment Committee and designate its Chairman who is a Director. The Directors also appoint an Investment Manager who has responsibility for the day to day management of NIB’s assets. NIB’s investment portfolio is comprised of mainly quoted equity securities and debt securities, long-term receivables and deposits. (a) Credit risk Credit risk is the risk that a contributor or counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with NIB, resulting in a financial loss to NIB. Credit risk is monitored on a regular basis by the Investment Committee. NIB management are of the opinion that NIB’s policies governing delinquent accounts and loss allowance / fair value adjustments ensure that these financial statements accurately reflect any credit risk associated with amounts due from contributors and other debtors. The maximum exposure to credit risk is represented by the carrying amount of each financial asset on the statement of financial position. The maximum exposure to credit risk at the reporting date was: Carrying Amount 2019 2018 Current assets: US$ 32,723,761 24,751,772 FINANCIAL Cash and cash equivalents 4,736,873 3,479,874 STATEMENTS Contributions and other receivables – 4,322,933 Short-term investment 150,000 150,000 2019 Current portion of long-term receivables 2,602,874 – Current portion of long-term deposit 40,213,508 32,704,579 Non-current assets: Financial assets measured at FVOCI 271,385,469 – Available-for-sale financial assets – 254,874,198 Long-term receivables Long-term deposits 5,205,917 5,376,750 – 694,100 276,591,386 260,945,048 US$ 316,804,894 293,649,627 51143
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 21. Financial instruments, continued (a) Credit risk, continued Contributions receivable The exposure to credit risk for contributions receivable, excluding surcharges, at the reporting date, by type of counterparty and by type of contribution risk accepted, was as follows: Carrying Amount 2019 2018 Private employers US$ 3,647,101 2,836,470 Self-employed 166,109 100,475 US$ 3,813,210 2,936,945 The exposure to credit risk for contributions receivable at the reporting date, by geographical location, was as follows: 2019 Carrying Gross Impairment Amount Providenciales US$ 3,703,489 548,493 3,154,996 Grand Turk US$ 612,214 50,831 561,383 North Caicos 81,878 8,010 73,868 South Caicos 29,569 10,370 19,199 Middle Caicos 1,935 254 1,681 Salt Cay 2,804 1,133 1,671 Pine Cay 427 15 412 FINANCIAL 4,432,316 619,106 3,813,210 STATEMENTS 2018 Gross Impairment Carrying 2019 Amount Providenciales US$ 4,034,712 1,393,228 2,641,484 Grand Turk US$ 293,104 79,909 213,195 North Caicos 82,799 27,319 55,480 South Caicos 32,820 20,091 12,729 Pine Cay 10,304 1,030 9,274 Middle Caicos 12,181 7,756 4,425 Salt Cay 1,190 832 358 4,467,110 1,530,165 2,936,945 144 52
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 21. Financial instruments, continued (a) Credit risk, continued Contributions receivable, continued NIB’s activities may give rise to risk at the time of settlement of transactions. Settlement risk is the risk of loss due to the failure of an entity to honour its obligations to deliver cash, securities or other assets as contractually agreed. For certain transactions NIB mitigates this risk by conducting settlements through a compliance officer to ensure that a contribution is settled only when both parties have fulfilled their contractual settlement obligations. The aging of contributions receivable, excluding surcharges, at the reporting date, by type of counterparty, was as follows: 2019 2018 Gross Impairment Gross Impairment Private employers US$ 299,363 24,103 191,198 38,239 Past due 78,561 14,903 132,746 53,098 Not later than one month 1,072,625 340,161 1,468,475 1,037,707 Later than one month but 2,668,353 2,414,549 4,118,902 92,634 4,206,968 241,454 not later than two months 471,801 1,370,498 Later than two months 28,933 Outstanding but not past due 21,230 4,629 21,216 4,242 FINANCIAL 187,322 STATEMENTS Self-employed 75,929 6,794 19,678 7,871 Past due 313,414 129,808 162,304 141,860 Not later than one month 6,074 56,944 5,694 Later than one month but 147,305 260,142 159,667 not later than two months Later than two months Outstanding but not past due US$ 4,432,316 619,106 4,467,110 1,530,165 2019 The movement in the loss allowance in respect of contributions receivable during the year is disclosed at note 6 to these financial statements. NIB’s exposure to credit risk is influenced mainly by the default risk associated with the industry and location in which contributors operate. In monitoring contributors’ credit risk, contributors are grouped according to their credit characteristics, including whether they are tourism related, wholesale or retail, construction and others. 53145
TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2019 21. Financial instruments, continued (a) Credit risk, continued Contributions receivable, continued Provision is made against outstanding contributions receivable and surcharges on the following basis: Weighted- 2018 average loss rate 2019 Outstanding but not past due 4% 10% Past due: 9% 20% 22% 40% Not later than one month 37% 90% Later than one month but not later than two months Later than two months FINANCIAL At March 31, 2019 NIB used an allowance matrix to measure the ECLs of STATEMENTS contributions receivable and surcharges. 2019 Loss rates are calculated using a roll rate method based on the probability of a receivable progressing through successive stages of delinquency to write-off. Roll 146 rates are calculated separately for exposure in different segments based on type of industry. Loss rates are based on actual credit loss experience over the past 3 years. These rates are multiplied by certain factors to reflect differences between economic conditions during the period over which the historical data has been collected, current conditions and NIB’s view of economic conditions over the expected lives of the receivables. Contributions receivable with pending legal matters that are past due for more than 90 days are 35% provided for at March 31, 2019 (2018: 50%) and all surcharges receivable with pending legal matters at March 31, 2019 are 81% provided for (2018: 90%). The loss allowance at March 31, 2018 reflected estimates of losses arising from the failure or inability of NIB’s contributors to make required payments. The allowance was based on the aging of contributor accounts, contributor credit worthiness and NIB’s historical write-off experience. Changes to the provision may have been required if the financial condition of its contributors improved or deteriorated. An improvement in financial condition might have resulted in lower actual write-offs. Historically, changes to the estimate of losses were not material to NIB’s financial position and results of operations. 54
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