Page 146 - NIB Annual Report 12-13 | 13-14

TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD
Notes to Financial Statements, continued Year ended March 31, 2014
20. Financial instruments, continued
(c) Market risk, continued
(i) Interest rate risk, continued
NIB’s investment portfolio is not permitted to utilise derivatives for hedging and income enhancing strategies. Derivatives are not used to expressly employ leverage or other speculative strategies. Therefore, unless a specific type of security is allowed by the IPS, the Investment Manager must seek permission from the Investment Committee to invest in derivative instruments.
A change of 100 basis points in interest rates for fixed rate instruments at the reporting date would have increased/(decreased) income in the statement of income, expense and reserves by US$518,899/(US$518,899) (2013 – US$521,752/(US$521,752)) assuming all other variables remained constant.
Cash flow sensitivity analysis for variable rate instruments
Variable rate instruments: Financial assets
Cash and cash equivalents Financial liabilities
2014 2013
US$ 43,701,530 33,597,059 – – US$ 43,701,530 33,597,059
A change of 100 basis points in interest rates for variable rate instruments at the reporting date would have increased/(decreased) income in the statement of income, expenses and reserves by US$437,015/(US$437,015) (2013 – US$335,971/(US$335,971)) assuming all other variables remained constant.
NIB’s interest rate risks are monitored on a regular basis by the Investment Committee and third party investment managers.
(ii) Price risk
Price risk is the risk that the fair value of the financial instrument will fluctuate as a result of changes in market prices other than those arising from interest rate risk, whether caused by factors specific to an individual investment, its issuer or factors affecting all instruments traded in the market.
NIB’s procedures require price risks to be monitored on a regular basis by the Investment Committee and third party investment managers.
142| The National Insurance Board of The Turks and Caicos Islands
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