TIA Section A - Odomirok 6-7 Flashcards
Why are non-admitted assets not included in the surplus calculation?
Non-admitted assets are not easily convertible to cash to satisfy the insurer’s liabilities
List some differences between preferred stocks and common stocks:
- Preferred stocks do not offer voting rights
- Preferred stocks guarantee dividends
- Owners of preferred stocks have priority to those of common stocks to receive a return of their investment during a liquidation
Portion of agents balances that is non-admitted:
Premium that is over 90 days overdue is non-admitted
Why should users be concerned if there are large receivables from parent, subsidiary or affiliates?
They are usually not as liquid as other assets.
Examples of non-admitted assets:
- Investments in bonds, stocks, mortgage loans or real estate that exceed state limitations
- Investments in EDP & software that exceed the set limits
- Non-operating system software
- Furniture, equipment, & supplies
- Balances from agent from sale of a security, overdue by over 15 days
- Funds held at a reinsured company that exceed the associated liabilities
- 10% of deductibles recoverable in excess of collateral
How should reserves be booked if management has a range of estimates, and no point within the range is more likely
The midpoint should be booked.
2 methods to calculate UEPR:
- Daily pro rata method: based on the number of days the policy that have expired
- Monthly pro rata method: assumes that premiums are written evenly through each month
Define common capital stock
Par value of the insurer’s stock that is issued & outstanding
Define Gross Paid in & Contributed Surplus:
Generated when the insurer issues stock. It equals the excess of the sale price of stock over its par value.