Categorizing BS Items
Hi Graham,
In the series of weird questions by SOA, here's another one:
Given the following items:
A. Assumed reserves from pools & associations
B. Ceded reserves from retroactive reinsurance
C. Ceded reserves from reinsurance that does not meet the risk transfer test
D. Other ceded reserves (not retroactive or financial reinsurance)
E. Statutorily permitted tabular discount on permanent disability workers compensation cases
F. The insurer’s best estimate of uncollectible reinsurance
Each of the given items A to F above may, or may not, belong in the statutory balance sheet. Possible balance sheet locations for these items may include, but are not limited to:
- contra asset on the assets section of the balance sheet,
- reinsurance recoverable on the assets section of the balance sheet,
- loss reserves on the liabilities section of the balance sheet,
- write-in liability on the liabilities section of the balance sheet
Identify where each item belongs or does not belong in the statutory balance sheet.
Is there a cheat sheet or a thumb rule which could be applied to accurately map these balance sheet items as 1,2,3,4?
Comments
At first glance, it seems like they're testing knowledge of the layout of the balance sheet, but just knowing the layout wouldn't be enough to answer this question. The items A through F are not the labels that are used on the balance sheet. Also, the example categories they provide are not actual categories on the balance sheet either.
So, the answer to your question about a cheat sheet that could help: I don't there's anything you could prepare in advance. It looks what they're really testing is reinsurance and Schedule F. Here's a link to the Schedule F wiki article that might help:
Item E: Schedule P has columns for non-tabular discounts while tabular discounts are discussed in the "Notes to the Financial Statements", so I probably would have answered that item E isn't part of the balance sheet. For item E, here's a link that might be helpful. Check the Discounting discussion:
Note that SOA source texts may be different and that this question may have been easier to answer based on those. You could still do it with the CAS Exam 6 source texts, I suppose, but it is a tricky question because you have to think of referencing 2 topics (Schedule F, and Notes to the Financial Statements) without those topics being mentioned in the statement of the question.