Difference between revisions of "NAIC.SSAP-53"
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A '''Premium Deficiency Reserve''' ''(PDR)'' is a <u>liability</u> equal to the amount by which future losses <u>exceed</u> future premiums. | A '''Premium Deficiency Reserve''' ''(PDR)'' is a <u>liability</u> equal to the amount by which future losses <u>exceed</u> future premiums. | ||
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| + | If you're curious, this is the paragraph describing the premium reserve from the source text. It's got 5 sentences that I listed as bullet points to make it easier to understand. It basically tells you what you have to include in "losses". | ||
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| + | * When the anticipated <span style="color: red;">losses, loss adjustment expenses, commissions and other acquisition costs, and maintenance costs</span> <u>exceed</u> <span style="color: green;">the recorded unearned premium reserve, and any future installment premiums on existing policies</span>, '''a premium deficiency reserve shall be recognized''' by recording an additional liability for the deficiency, with a corresponding charge to operations. | ||
| + | * Commission and other acquisition costs need not be considered in the premium deficiency analysis to the extent they have previously been expensed. | ||
| + | * For purposes of determining if a premium deficiency exists, insurance contracts shall be grouped in a manner consistent with how policies are marketed, serviced and measured. | ||
| + | * A liability shall be recognized for each grouping where a premium deficiency is indicated. | ||
| + | * Deficiencies shall not be offset by anticipated profits in other policy groupings. | ||
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Revision as of 21:55, 18 October 2021
This statement establishes general statutory accounting principles for the recording and recognition of premium revenue for property and casualty contracts.
Study Tips
The CAS syllabus citation for this article is confusing. The syllabus says this is a new reading, however, it actually isn't. The year of publication for the manual changes each year but the content generally does not. We will let you know if there is a major change.
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
BattleTable
- 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) no prior questions
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In Plain English!
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 losses exceed future premiums.
If you're curious, this is the paragraph describing the premium reserve from the source text. It's got 5 sentences that I listed as bullet points to make it easier to understand. It basically tells you what you have to include in "losses".
- 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.
- Commission and other acquisition costs need not be considered in the premium deficiency analysis to the extent they have previously been expensed.
- For purposes of determining if a premium deficiency exists, insurance contracts shall be grouped in a manner consistent with how policies are marketed, serviced and measured.
- A liability shall be recognized for each grouping where a premium deficiency is indicated.
- Deficiencies shall not be offset by anticipated profits in other policy groupings.
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