The following is an analysis of the estimated timings of net cash flows by financial liability. The timing of cash flows are based on current estimates and historic trends and the actual timings of cash flows may be materially different from those disclosed below:


As at 20 February 2011 Amounts in $000


Gross outstanding claims Other liabilities


Total liabilities


As at 20 February 2010 Amounts in $000


Gross outstanding claims Other liabilities


Total liabilities (e) Operational risk


Operational risks relate to the failure of internal processes, systems or controls due to human or other error. In order to mitigate such risks the Association has engaged Thomas Miller (Bermuda) Limited as managers to document all key processes and controls in a procedural manual. This manual is embedded into the organisation and available to all staff. Compliance with the procedures and controls documented within the manual is audited on a regular basis through quality control checks and the internal audit function which is directed and reviewed by the Audit and Risk Committee. A human resource manual and including all key policies have also been documented.


(f) Limitation of the sensitivity analysis This sensitivity analysis shows the impact of a change in one input assumption with other assumptions remaining unchanged. In reality, there is normally correlation between the change in certain assumptions and other factors which would potentially have a significant impact on the effect noted above.


(g) Fair value estimations CICA 3862 requires, for financial instruments held at fair value in the balance sheet, disclosure of fair value measurements by level of the following fair value hierarchy:


Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (that is, prices) or indirectly (that is, derived from prices)


Level 3 – Inputs for the assets or liability that are not based on observable market data (that is, unobservable inputs)


All of the Association’s financial assets and liabilities that are measured at fair value at both 20th February 2011 and 20th February 2010 fall into the following categories: Amounts in $000


2011


Level 1 Level 2 Level 3


198,998 954,714 17,703


1,171,415


Within 1 year 1-2 years 2-5 years Over 5 years 382,351


26,838 409,189


250,141 -


250,141


347,324 -


347,324 Total


125,196 1,105,012 -


125,196 1,131,850 26,838


Within 1 year 1-2 years 2-5 years Over 5 years 376,150


20,311 396,461


250,580 1,377


251,957


360,409 100


360,509


Total


143,871 1,131,010 -


143,871 1,152,798 21,788


2010


151,616 867,909 16,839


1,036,364


The movement in Level 3 is as a result of fluctuations in the exchange rate since the shares are denominated in sterling. The fair values of financial instruments traded on the active markets are based on quoted bid prices as at the balance sheet date. All valuations are taken from external price feeds based upon market prices or broker quotes.


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