SSAP 53: P&C Contracts - Premiums Flashcards
When is Written Premium recorded for most contracts; and what is the exception to this rule:
- effective date
- exception of WC, which can be recorded on an installment basis
When are the additional premium for endorsements and changes in coverage recorded?:
Effective date of change
2 methods to uniformly earn premium throughout the year:
- daily pro rata: compares the number of days which have elapsed to the number remaining.
- 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
Accounting treatment of flat fees:
Included in “other income”
How is EBUB recorded, both before and after the exposure is audited:
- 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.
Rule to determine non admitted EBUB:
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
Define Advance Premiums
Advance Premiums are premiums which are paid prior to effective date.
Accounting treatment of advance premiums:
- recorded as liability
- not considered income until due
Define Premium Deficiency Reserve
exists when the anticipated losses, LAE, commissions & other acquisition costs and maintenance costs exceed the UEPR.
What to do if a Premium Deficiency Reserve exists
- Disclose amount of PDR
- Book PDR as a liability
- Deficiencies in one group can’t offset profits in other groups
Necessary disclosure if the premium written through MGAs or TPAs exceeds 5% of surplus:
- name & address
- federal employer identification number
- whether the party holds an exclusive contract
- type of business written
- type of authority granted
- total premium written
