B.1 Traditional Life (FAS 60)

Question 1

FAS 60 Background

Answer 1

Requires contracts to be classed as either short or long duration

short - (mostly PC)

• insurer can cancel or adjust contract provisions at the end of period
• premium recognized as revenue in proportion to insurance protection provided

long duration

• extended period of coverage
• insurer cannot unilaterally change contract provisions
• premium recognized as revenue when due from policyholders