SSAPs

Question 1

subsequent event

Answer 1

events or transactions that occur subsequent to BS date but before issuance of statutory financial statements and before date of audited financial statements are issued, or available to be issued

Question 2

recognized & non-recognized

Answer 2

• recognized = provide additional evidence with respect to conditions that existed at valuation date of BS
• non-recognized = provide evidence with respect to conditions that did not exist at date of BS but arose after
• financial statements need to be adjusted to reflect impact of material recognized subsequent events; only necessary to disclose nature and amnt of adj if this will keep financial statements from being misleading
• non-recognized events are not included in financials (ie does not need to be updated) but should be disclosed in notes = nature of event and estimate of its financial impact

Question 3

for majority of contracts, WP should be recorded

Answer 3

on effective date of policy

-exception is WC where WP can be recorded on installment basis to match billing to PH

Question 4

earned but unbilled prem (EBUB) arises

Answer 4

from policies which have their exposures subject to audit; EBUB = amnt of adj to prem due to changes in level of exposure

• prior to audit, EBUB should be estimated and once audit is completed EBUB should be adj to reflect actual exposures and adj is recognized as revenue immediately
• 10% of EBUB in excess of collateral held is nonadmitted
• if any EBUB over this is not anticipated to be collected, should be written off

Question 5

prem deficiency reserve (PDR)

Answer 5

exists when anticipated loss and expenses associated with unearned portion of prem > UEPR; insurer must disclose amount of PDR

• when calc deficiency, contracts should be grouped same way in which policies are marketed, services, and measured; deficiencies in one group can not offset profits in other groups
• has option to include investment income in calc of deficiency and if choose to do so, need to disclose that II was considered even if deficiency is eliminated after consideration
• PDR is recognized by recording write in liab for deficiency with corresponding reduction in income

Question 6

structured settlements

Answer 6

agreements to make specific, set payments to claimants

Question 7

to make structured settlement payments

Answer 7

• Buy an annuity and use it to fund payments to claimant or Buy an annuity where the claimant is owner and payee and obtain a release of liability from claimant.
• if insurer is payee: cash decreases, no reduction in loss reserves, annuity is other than invested asset and income is recorded as misc income
• if claimant is payee: cash decreases, loss reserves can be reduced; gain is UW income and surplus increases btw reserves and amnt paid

Question 8

loss reserves that should appear on the balance sheet with
respect to high-deductible policies

Answer 8

The reserves should be held on a net basis. Credit should not be given to recoverables considered to be uncollectible

Question 9

2 ways to treat a recoverable in the deductible layer

Answer 9

• if the recoverable is associated with an unpaid loss (by the insurer), we simply reduce the amount of the reserve
• if the recoverable is associated a paid loss, we need to create a recoverable asset.

Question 10

the amount of the unearned premium reserves on long
duration contracts shall be no less than the largest result from three tests

Answer 10

Test 1 – management’s estimate of the amount refundable to such contracts.
Test 2 – Gross premium * (projected future gross losses & expenses from the
unexpired term/ projected total gross losses & expenses).

Test 3 - Projected future gross losses & expenses to be incurred during the
unexpired term, minus the present value of future guaranteed gross premiums

Question 11

reserves for loss under high deductible policies should be established

Answer 11

established throughout whole period as opposed to point when deductible levels are breached -> risk of loss is present from inception date

Question 12

PH dividends immediately become what when they are declared

Answer 12

liability

Question 13

non admitted balances of recoverables from high deductible policies depend on

Answer 13

whether or not insurer holds collateral

If the insurer does not hold collateral, deductible recoveries that are over 90 days
overdue are nonadmitted

If the insurer holds collateral, 10% of the deductible recoverable in excess of
collateral is nonadmitted

Question 14

Underwriting and Investment Exhibit, Part 1A shows that UEPR does not include

Answer 14

EBUB or Reserve for rate credits and retro adjustments based on experience