5        Perbadanan Insurance Deposit Malaysia

This section provides information about the process of insurance allocation in Perbadanan Insurance Deposit Malaysia (PIDM).

Insurance Allocation

The steps involved in insurance allocation are described in the following sections.

Topics:

·        Identification of Insurance Eligible Accounts

·        Allocation of Deposit Insurance

Identification of Insurance Eligible Accounts

The identification of insurance eligible accounts involves looking at the inclusion and the exclusion criteria. The application requires users to provide the following inclusion criteria:

·        Ownership Category

The application allocates the insurance limit separately for each ownership category level. Ownership categories include single accounts, joint accounts, trust accounts, and so on. As per Perbadanan Insurans Deposit Malaysia (PIDM), a separate limit is assigned to a depositor combination based on the ownership category of accounts and hence users must provide the ownership categories that get a separate limit. If a customer gets a single limit irrespective of whether the accounts are held as single, joint, or a combination, the ownership category should have a single default value.

·        Product Type

The list of product types that are covered under the respective jurisdiction’s deposit insurance scheme. The insurance limit is allocated to only those accounts of a customer whose product types match those that are covered by the deposit insurance. In the case of Malaysia, PIDM covers all types of deposits such as current accounts, savings accounts, and term deposits, which must be provided as inputs.

·        Product Type Prioritization

The sequence in which the insured amount is to be allocated to each product type is captured. For instance, product prioritization may be specified as a current account, savings account, and term deposit. This indicates that the insured amount is allocated first to a current account held by the customer. After current accounts have been fully covered, the remaining amount is allocated to savings accounts and finally to term deposits.

If product type prioritization is not specified, the default allocation will be proportionate to the EOP balance of each account irrespective of the product type.

·        Currency Eligibility for Insurance

The list of currencies in which the accounts are denominated that are eligible for insurance coverage under a deposit insurance scheme. Some jurisdictions cover foreign currency deposits under their deposit insurance schemes. If eligible currencies are specified for insurance, then the insured balance is allocated to all accounts belonging to the particular legal entity which have the associated attributes required for assigning the insured balance. For instance, if PIDM insures only Malaysian Ringgit denominated deposits. The eligible currency against the PIDM insurance scheme should be provided as Malaysian Ringgit.

The application includes insurance exemption criteria covering deposits of foreign sovereigns, central and state governments, and banks, and so on. Deposits that are eligible for insurance under a particular insurance scheme are identified based on the inclusion and exclusion criteria as specified by the users.

Allocation of Deposit Insurance

As part of the BNM Run, the application allocates the deposit insurance to accounts based on the guidelines specified by the PIDM. The insurance limit captured against each deposit insurance scheme is allocated to the insurance eligible accounts under that scheme based on the ownership category and the depositor combination.

The insurance limit, that is the maximum deposit balance covered by an insurance scheme per customer, is captured against each insurance scheme - ownership category combination. Customers with an account in multiple legal entities get a separate deposit insurance limit per legal entity. For the PIDM insurance scheme, the limit amount must be provided in the Stage Insurance Scheme Master table at the granularity of the insurance scheme.

The insurance limit is allocated to accounts as explained below:

·        The application identifies the established relationship flag at a customer level.

·        The accounts are sorted by the specified product type prioritizations.

·        The insurance allocation is done based on the principal balance from the highest to the least, in the order of product type prioritization.

·        The insurance limit available is allocated to account 1 to n - 1 as per the following formula:

Where,

Insurance Limit Available: Limit available post allocation to previous accounts is equal to Insurance Limit Available n-1 minus Insured Amount x-1.

x: Number of accounts up to the current account to which insured amount is to be allocated.

n: Total number of accounts of a customer which are eligible for insurance coverage under a given ownership category.

The remaining available insurance is allocated to the last account. That is , account n for which insurance was not allocated.

If the insurance limit is available after allocating to the principal balances, it is allocated to the accrued interest from the highest to the least in the order of Product Type prioritization.

Following is an illustration of this procedure. It considers an insurance limit of 2,50000 Malaysian Ringgit for each depositor combination under each ownership category for each legal entity. The inputs to this calculation, including account details and customer details, are as follows.

The application allocates the insurance limit of Malaysian Ringgit 10,000,000 to all eligible accounts as follows:

Insurance Allocation for Customer A

Insurance Allocation of Customer B

Insurance Allocation of Customer C

Insurance Allocation of Customer D