CIA - Premium Liabilities

Question 1

What are the components of the policy liabilities in connections to UPR (Unearned Premium Reserve)? (3)

Answer 1

• Future claims & adjustment expense
• Reinsurance costs (net only)
• Maintenance expenses

Question 2

Define ‘DPAE asset’ and give examples of such costs.

Answer 2

An ASSET that is the portion of prepaid acquisition expenses related to the UNEXPIRED PORTION OF THE POLICY & incurred when the policy is issued
eg: Commissions, TLF (Taxes, Licenses, Fees), advertising

Question 3

What is the purpose of DPAE asset?

Answer 3

To RECOGNIZE prepaid expenses over policy terms PROVIDED such costs are recoverable from equity in UPR (Unearned Premium Reserve). Matches premium with expenses.

Question 4

Define UEComm (Unearned Reinsurance Commissions).

Answer 4

A LIABILITY arising from unearned commission on Reinsurance ceded FOR the unexpired portion of the ceded policy.

Question 5

Define PDR (Premium Deficiency Reserve).

Answer 5

A LIABILITY arising when the equity in the net UPR (Unearned Premium Reserve) is less than 0.