GAAP Surplus Formula based off of SAP
In the Wiki it says GAAP Surplus = SAP Surplus + DAC + RP
what about the Non-admitted assets? wouldn't they need to be added in as well? Are there other differences in GAAP/SAP that should be included in this formula? myself and battle acts user 093 were discussing this lol.
Comments
Yes, you're correct. The formula I put in the GAAP surplus subsection of the wiki in Odomirok.22-23-GAAP applied only to those 2 problems, but I see that I wasn't clear about that. The 2 exam problems I referenced only provided RP (Reinsurance Provision) and DAC so that's all you could add in, but there could be lots of other differences as well.
I added an explanatory note. (There are many other differences between GAAP and SAP which were discussed near the beginning of that wiki article, but even that was not an exhaustive list.)
okay, great! Really appreciate you clearing this up
Hi. I thought I understood at one point, but now I don't. Looking at a problem like Spring 2018 #19, why don't we made any adjustments for loss & LAE reserves or UPR when going from SAP to GAAP?
There actually could be adjustments required regarding loss reserves, especially regarding the treatment of reinsurance, but the question doesn't provide any further information.
You basically just have to assume the only adjustments you have to make in going from SAP to GAAP are the ones where they provide numbers. In that problem they don't tell you anything other than the gross and ceded loss & UPR reserves but you can't do anything more if that's all you have. The loss and UPR reserves are already included in the SAP reserves so the value of SAP reserves is your starting point. Then just throw in provision for reinsurance and DAC to get GAAP surplus.
I think the examiners were just trying to make an easy calculation problem to see if you could make a few simple adjustments to SAP surplus to get GAAP surplus. (They usually ask an essay question on the differences between SAP & GAAP.)
Is there somewhere we can get an exhaustive list of what needs to be added to the SAP Surplus to get to GAAP Surplus?
The wiki covers all the asset and liability differences between SAP and GAAP that are included in the syllabus. That will be the extent of your responsibility for the exam.
Would DTAs be added when calculating GAAP Surplus, if provided?
DTA is included in GAAP, whereas admitted DTA is included in SAP. See 2014.F.15.
Using the 2018 Spring #19- Why don't we have enough information to remove the ceded UEP and reserves, since we know GAAP is gross and should include those liabilities that were removed for SAP? Is it because these are called "Statutory XXX" and that is supposed to be the clue that they cannot be used for GAAP?
GAAP liability is gross of reinsurance, but GAAP also has assets for "reinsurance recoverable on unpaid loss" and "prepaid reinsurance premium" (i.e. ceded uep) that SAP does not have. So, going from SAP to GAAP surplus, no adjustment for ceded UEP and reserves is needed. (Remember: surplus = assets - liabilities.)