NAIC.SSAP-65
This statement establishes statutory accounting principles for property and casualty insurance contracts.
Study Tips
This SSAP seems more important than some of the others, but it's never been tested (since at least prior to 2012). If you're playing to odds, limit yourself to 1 hour here. I pulled a few factoids from the reading for the BattleCards but you may want to skim the reading in case you have a different opinion on what might be important.
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!
Overview
Types of P&C contracts: occurrence, claims-made, extended reporting
Discounting: when are reserves discounted...
- - when payments are fixed and reasonably determinable (Ex: structured settlements)
- (LAE is not discounted)
Structured Settlements: if an annuity is purchased to fund a structured settlement, describe the accounting treatment...
- - if insurer is the payee ==> no reduction to reserve
- - if claimant is the payee ==> reserves are reduced in the amount that the annuity provides for funding of future payments
Long-Duration Contracts: contracts with terms of at least 13 months and cannot be cancelled or modified by the insurer (Ex: home warranty, mechanical breakdown)
A Calculation Problem
There is a calculation problem embedded in this reading regarding unearned premium reserves for long-duration contracts. I think it's a low-probability question because long-duration contracts is a fairly specialized topic, but if the examiners are looking for a new type of problem, this might be a candidate.
Question: given the information below for a long-duration contract, calculate the unearned premium reserve (UEP)
- Each "test" is the table is a different estimate of the unearned premium reserve for a particular policy year (PY). We will discuss these tests further but for now, just accept these liability estimates as given.
PY test 1 test 2 test 3 current 1st prior 2nd prior 3rd prior 4th prior
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