SSAP 53

Question 1

When is Written Premium recorded for most contracts; and what is the exception to this rule.

Answer 1

• effective date
• exception of WC, which can be recorded on an installment basis

Question 2

When are the additional premium for endorsements and changes in coverage recorded?

Answer 2

Effective date of change

Question 3

2 methods to uniformly earn premium throughout the year

Answer 3

1. daily pro rata: compares the number of days which have elapsed to the number remaining.
2. monthly pro rata: assumes that the same amount of business is written on any day of the month, and therefore the mean will be written in the middle of the month

Question 4

Accounting treatment of flat fees:

Answer 4

Included in “other income”

Question 5

How is EBUB recorded, both before and after the exposure is audited

Answer 5

• Prior to the audit, companies should estimate EBUB. Premium is modified by the level of this estimate.
• Once the audit is completed, EBUB shall be adjusted to reflect the actual exposures. This adjustment is recognized as revenue immediately.

Question 6

Rule to determine non admitted EBUB

Answer 6

10% of the EBUB in excess of the collateral held is nonadmitted. If any EBUB over this level is not anticipated to be collected, it should also be written off

Question 7

Accounting treatment of advance premiums:

Answer 7

• recorded as liability
• not considered income until due

Question 8

Necessary disclosure if the premium written through MGAs or TPAs exceed 5% of surplus:

Answer 8

• name & address
• federal employer identification number
• whether the party holds an exclusive contract
• type of business written
• type of authority granted
• total premium written