This course follows the introductory course on expenses for property & casualty insurance companies. In this course, the accounting treatment for acquisition costs will be reviewed in detail for Statutory and GAAP along with the testing for recoverability of the GAAP deferred acquisition cost asset and the calculation of a premium deficiency reserve for Statutory and GAAP.

Learning Objectives

• Distinguish between the Statutory and GAAP accounting of acquisition costs
• Calculate the deferred acquisition cost asset for GAAP and identify the appropriate amortization methodology
• Calculate the premium deficiency reserve and distinguish between the Statutory and GAAP accounting
• Identify required disclosures for deferred acquisition costs and the premium deficiency reserve

Outline

• Property and Casualty Insurance Expense Overview
  • Major P&C insurance expenses
    • Loss Adjustment Expenses (LAE)
    • Underwriting/Acquisition/Other expenses
    • Investment Expenses
    • Miscellaneous Expenses
    • Federal Income Taxes
  • Statutory versus GAAP
• Accounting for Acquisition Costs
  • Broad Definition
  • Statutory
    • Definition
    • Accounting
  • GAAP
    • Definition
    • Accounting
    • Capitalization & Amortization Methodology
    • Evaluating Deferred Acquisition Cost Asset for Recoverability
    • Reporting & Disclosures
• Statutory Premium Deficiency Reserve
  • Calculation
  • Reporting & Disclosures