Difference between revisions of "FASB.944"
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==In Plain English!== | ==In Plain English!== | ||
Revision as of 21:58, 12 March 2019
This paper provides guidance from FASB regarding Financial Guarantee insurance contracts.
Study Tips
Virtually all of the content in this reading is covered in other reinsurance readings. The only thing you might want to learn is the definition of financial guarantee insurance.
BattleTable
- this reading has not been tested on any exam from the year 2012 and subsequent
reference part (a) part (b) part (c) part (d) no prior questions
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In Plain English!
A financial guarantee is a non-cancellable indemnity bond backed by an insurer to guarantee investors that principal and interest payments will be made. Or in simpler terms:
- it covers a lender from the liability resulting from the borrower defaulting on a loan
The reading draws a distinction between short and long-duration contracts. A short-duration contracts is characterized by:
- providing insurance protection for a fixed period of short duration (pretty darn obvious!)
- enabling insurer to cancel the contract or adjust the provision at the end of the contract period
Financial reporting of a reinsurance contract depends on whether:
- the contract is short or long-duration
- it is prospective or retrospective
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