NAIC.SSAP-53

Reading: Statement of Statutory Accounting Principles 53, “Property Casualty Contracts—Premiums,” paragraphs 1-18.

Author: National Association of Insurance Commissioners, Accounting Practices and Procedures Manual

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BA Quick-Summary: Accounting Principles - Contracts/Premiums This statement establishes general statutory accounting principles for the recording and recognition of premium revenue for property and casualty contracts. It details the methods for accounting for various types of premiums such as: → written premiums, earned but unbilled premiums, and advance premiums, and sets forth the requirements for establishing liabilities like the unearned premium reserve and premium deficiency reserve.

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I could barely find anything worthy of an exam question in this reading but I didn't want to leave the wiki page completely blank so: 2 BattleCards, 10 minutes max

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• this reading has not been tested on any exam from the year 2012 to Fall 2019 when the exams stopped being published.

reference	part (a)	part (b)	part (c)	part (d)
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In Plain English!

Things You Should Learn

Earned But Unbilled Premium (EBUB) is an estimate of audit premium for WC:

• written/earned premium is adjusted by the EBUB amount
• after policy expiration, an audit is performed and EBUB is adjusted by the appropriate amount
• EBUB is then immediately recognized in the financial statements

A Premium Deficiency Reserve (PDR) is a liability equal to the amount by which future outflows exceed future inflows

• outflows include: losses, loss adjustment expenses, commissions and other acquisition costs, maintenance costs (4 items)
• inflows include: recorded unearned premium reserve, future installment premiums on existing policies (2 items)

(The PDR is essentially a reserve for future claims corresponding to the the unearned portion of existing policies. This is in contrast to the "normal" claims liability which relates to covered events that have already occurred.)

According to paragraph 17 in 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.

Low Probability Exam Items

Topic omitted from study guide	Where in SSAP 53	What the source says	Why it may still matter (slightly)
Definition of written premium	paragraph 3	Written premium is the contractually determined amount charged for the effective period, subject to later audit adjustments.	Foundational definition; helps distinguish written vs earned vs EBUB if tested indirectly.
Workers’ compensation installment recording	paragraph 4	WC premiums may be recorded on an installment basis aligned with billing frequency rather than fully at inception.	Common exam distraction topic when comparing premium timing methods.
Prepaid legal expense plans	paragraph 5	Premiums recognized on a gross basis when due, but no earlier than the coverage effective date.	Niche exception; unlikely alone, but could appear in a “which is correct?” list.
Unearned premium reserve methods	paragraph 6–8	Unearned premium reserve must be established using either daily pro rata or monthly pro rata methods, with prescribed mechanics.	Core P&C concept; mechanics often tested elsewhere even if not labeled SSAP 53.
Monthly pro rata fractions	paragraph 8(b)	Example unearned fractions: January 1/24, February 3/24, March 5/24 for one-year policies.	Classic calculation trap; very testable in isolation.
Endorsements and coverage changes	paragraph 9	Additional premiums from endorsements recorded on the endorsement effective date and unearned portion reserved.	Reinforces timing logic and consistency with unearned premium treatment.
Earned but uncollected premium	paragraph 14	Premium is earned while coverage remains in force even if not yet collected; charged to expense if uncollectible.	Important distinction from EBUB; conceptual clarity question potential.
Advance premiums	paragraph 15	Premiums paid before the effective date are liabilities and not income until due.	Simple liability vs income classification issue.
Perpetual fire insurance deposits	paragraph 16	At least 90% of premium deposits must be reported as a liability.	Highly specific, but a clean rule if tested.
PDR disclosure when investment income is used	paragraph 18	Disclosure required if anticipated investment income is used in PDR calculations, even if no reserve is recorded.	Subtle disclosure rule; most exam-worthy nuance in the section.

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