SSAP 53

Question 1

When is written premium recorded for most contracts; and what is the exception to this rule?

Answer 1

• Effective date

- Exception of WC, which can be recorded on an installment basis

Question 2

When are the additional premium for endorsements and changes in coverage recorded?

Answer 2

Effective date of change

Question 3

2 methods to uniformly earn premium throughout the year

Answer 3

1. Daily pro rata: compares the number of days which have elapsed to the number remaining
2. Monthly pro rata: assumes that the same amount of business is written on any day of the month, and therefore the mean will be written in the middle of the month

Question 4

Accounting treatment of flat fees

Answer 4

Included in “other income”

Question 5

How is EBUB recorded, both before and after the exposure is audited?

Answer 5

• Prior to the audit, companies should estimate EBUB. Premium is modified by the level of this estimate.
• Once the audit is completed, EBUB shall be adjusted to reflect the actual exposures. This adjustment is recognized as revenue immediately

Question 6

Rule to determine non admitted EBUB

Answer 6

10% of the EBUB in excess of the collateral held is nonadmitted. If any EBUB over this level is not anticipated to be collected, it should also be written off.

Question 7

Accounting treatment of advance premiums

Answer 7

• Recorded as liabiilty

- Not considered income until due

Question 8

Necessary disclosure if the premium written through MGAs or TPAs exceeds 5% of surplus

Answer 8

• Name & address
• Federal employer ID number
• Whether the party holds an exclusive contract
• Type of business written
• Type of authority granted
• Total premium written