Extended Reporting Endorsements

For defined period endorsements, are loss reserves typically recorded as UEPR? Similarly are indefinite period endorsement reserves typically recorded as loss reserves? Or is the classification of reserves dependent on however the insurer decides to record them?

Comments

  • According to COPLFR (which references SSAP 65):

    For coverage for a fixed period:

    • premium shall be earned over the term of the fixed period, the reporting entity shall establish an unearned premium reserve for the unexpired portion of the premium
    • record losses as reported

    So premiums not yet earned would go into UEPR and unpaid losses would go into loss reserves.

    For indefinite reporting periods:

    • premium shall be fully earned (so there is no associated UEPR)
    • loss and expense liability associated with unreported claims shall be recognized immediately

    The difference in treatment depends on whether the endorsement is for a fixed or indefinite period. But loss reserves should never be classified as UEPR.

  • edited April 2022

    Would all three types of extended reporting endorsements (fixed period, indefinite period, DDR provision) be included in Item 12 of Exh B and discussed in Relevant Comments?
    (I'm asking because when defining DDR Provision, COPFLR states "This is an example of what is being requested in Exhibit B, item 12" which makes it sound like the other types don't need to be included in Exh B Item 12.)
    Also, the text mentions that a PDR must be established if needed. Would this be included in Item 12? Or it's just a random comment?

  • My reading of the text is that all types of extended reporting endorsements need to be reported in item 12 of Exhibit B. There doesn't seem to be any other place for these to go.

    About a PDR - according to SSAP-53:

    • When the anticipated losses, loss adjustment expenses, commissions and other acquisition costs, and maintenance costs exceed the recorded unearned premium reserve, and any future installment premiums on existing policies, a premium deficiency reserve shall be recognized by recording an additional liability for the deficiency, with a corresponding charge to operations.

    So when a PDR exists, it is recognized by recording a liability on the balance sheet. The text doesn't mention anything about including the PDR in item 12, Exhibit B.

    Also, all types extended reporting endorsements should be discussed in the Relevant Comments section (if relevant for the particular insurer.)

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