SSAP 65 Flashcards

1
Q

How are premium/ liabilities recorded under Tail Coverage contracts with an indefinite period

A
  • the premium should be fully earned at inception
  • the liabilities for unreported claims should be recognized at inception
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2
Q

How are premium/ liabilities recorded under Tail Coverage contracts with a fixed period

A
  • the premium should be earned over the term
  • losses should be recorded when reported.
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3
Q

Accounting action required of insurer if it provides tail coverage at no additional charge

A

Establish a policy reserve to ensure that premiums are not earned prematurely

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4
Q

Items that the insurer needs to disclose if there is a change in the key discount assumptions

A
  • amount of the discounted reserves at the current rates and assumptions (excluding the current AY)
  • amount of the discounted reserves at the prior rates and assumptions (excluding the current AY)
  • change in discounted liability due to change in interest rates and/ or assumptions
  • amount of the non tabular discount, by line of business and reserve category
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5
Q

Accounting treatment of structured settlements in which the insurer is the owner and payee

A
  • no reduction to loss reserves
  • the annuity is recorded as an “other than invested asset” at its present value
  • the income from the annuity is recorded as miscellaneous income
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6
Q

Accounting treatment of structured settlements in which the claimant is the payee

A
  • loss reserves can be reduced
  • the cost of the annuity is recorded as a paid loss
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7
Q

Difference between SAP and GAAP treatment of structured settlements when the claimant is the owner and payee, but has not released the insurer

A
  • GAAP: the gain from the purchase of the annuity needs to be deferred
  • SAP: recognizes gain immediately
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8
Q

Disclosures necessary when entering into a structured settlement

A
  • the amount of reserves which the company no longer needs to carry because it has purchased annuities with the claimant as payee.
  • the extent to which it is contingently liable for the liabilities.
  • if the aggregate value of annuities (for which the insurer has not received a release of liability) from a given life insurer exceed 1% of the surplus, it must disclose the name, location of the insurer and aggregate value of annuities.
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9
Q

2 requirements to qualify a contract as a “Long Term contract”

A
  • policy term greater or equal to 13 months
  • reporting entity can not cancel contract nor increase premium
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10
Q

UEPR for a Long Term contract is the maximum of what 3 tests

A
  1. Management’s best estimate of the amounts refundable to the contract holders
  2. Gross premium * (projected future gross losses & expenses from the unexpired term/ projected total gross losses & expenses).
  3. Projected future gross losses & expenses to be incurred during the unexpired term, minus the present value of future guaranteed gross premium
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11
Q

Are loss reserves for high deductible policies net or gross of the deductible?

A

Net (unless the deductible is deemed to be uncollectible)

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12
Q

Rules to determine nonadmitted balances of recoverables from high deductible policies

A
  • If the insurer does not hold collateral, deductible recoveries that are over 90 days overdue are nonadmitted.
  • If the insurer holds collateral, 10% of the deductible recoverable in excess of collateral is nonadmitted. If amounts in excess of this 10% are deemed uncollectible, they should be nonadmitted as well.
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13
Q

When do dividends to policyholders become liabilities

A

When they are declared

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