MILLIRE_2019_Annual Report

Milli Re Annual Report 2019 172 Key audit matter How our audit addressed the key audit matter Estimates and assumptions used in calculation of insurance contract liabilities As of December 31, 2019, the Company has insurance liabilities of TL 8.447.200.221 representing 66% of the Company’s total liabilities. The Company made net provision of TL 5.088.425.481 for the future outstanding claims for insurance contracts. In the calculation of Incurred But Not Reported (IBNR) claims provisions (net amount of TL 2.247.926.454) which is accounted under the outstanding claims reserves, the Company Management has used the actuarial assumptions and estimates detailed in note 2 and 17. Uncertainty of estimation and management judgment containing, IBNR calculations has been considered as a key audit matter. We have performed the audit procedures related the actuarial assumptions which disclosed in the Note 2 and 17 together with the actuary auditor who is part of our audit team. These procedures are primarily intended to assess whether the estimates and methods that used in the calculation of the outstanding claims reserve by the Group are appropriate. In this context, we have performed the audit procedures related to the recording the Group’s incurred outstanding claims; performed the analytical review the incurred case files which selected randomly; obtained the signed lawyer letters from the Group’s attorneys for litigated case files; assessed the average claim amount and opening claim amounts determined by the Group’s actuaries; have performed the audit procedures related to the completeness of the data used in the correct calculation of insurance contract liabilities; assessed the convenience of the IBNR calculation method used by the Group for each line of businesses both the relevant claim characteristics and the Group’s claim history; performed the recalculation procedure on the amount of IBNR calculated by the Group; reviewed the claim analyzes made by the Group’s actuaries and questioned these analyzes in terms of suitability and consistency of both legislation and Group past experience; assessed whether the explanation in the notes of the consolidated financial statements are sufficient. INDEPENDENT AUDITOR’S REPORT