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Blanchard Selected

  1. 5 Loss Reserve Accounts in a Company's Ledger
    • 1. Case Reserve
    • 2. IBNR
    • 3. Bulk Reserve
    • 4. Additional Case Reserve
    • 5. Other
    • a) Reopened Claims
    • b) Anticipated Salvage & Subrogation
    • c) Deductible Recoveries
    • d) Expected Legal Defense Costs
  2. 3 Common Types of Recoverable Amounts
    • 1. Salvage and Subrogation
    • 2. Ceded Reinsurance
    • 3. Deductibles (where insurer pays full loss and bills insured for the deductible)
  3. 2 Approaches When Billed Amount is Determined Unrecoverable
    • 1. Reversal of original recoverable entries
    • 2. Write-off of the recoverable balance in a di fferent income statement account
  4. 2 Approaches To Account For Discounted Reserves
    • 1. Current Approach: Record increase due to discount amortization as incurred losses
    • 2. Alternative Approach: Record impact of increasing loss reserves as interest expense
  5. 2 General Approaches To Ceded Reinsurance Accounting
    • 1. Treating ceded reinsurance entries as negative of direct or assumed reinsurance entries
    • 2. Treating the purchase of reinsurance as the purchase of an asset
  6. Retroactive vs. Prospective Reinsurance
    • 1. Retroactive reinsurance is bought to cede past losses
    • 2. Diff erent rules for retroactive reinsurance where insurance accounting paradigm doesn't allow discounting
    • 3. Retroactive reinsurance accounting generally requires
    • a) Recoveries held on present value basis
    • b) Separate disclosure of benefi ts or impact contracts
  7. 4 General Rules For Deposit Accounting
    • 1. Accounting done on individual contract by contract basis
    • 2. Amount received for contract recorded as a deposit liability with no revenue or expense impact
    • 3. Deposit liability increased due to additional receipts and investment income credits, and it is decreased due to payments
    • 4. Deposit generally represents present value of future payment obligations
  8. 3 Conditions That May Require Deposit Accounting
    • 1. No risk transfer
    • 2. Timing risk transfer only
    • 3. Retroactive reinsurance, subject to exceptions
  9. 3 Approaches To Deposit Accounting
    • 1. Bank Deposit Approach
    • 2. Prospective Approach
    • 3. Retrospective Approach
  10. 6 Principle Functions of Reinsurance
    • 1. Increase Large Line Capacity
    • 2. Provide Catastrophe Protection
    • 3. Stabilize Loss Experience
    • 4. Provide Surplus Relief
    • 5. Facilitate Withdrawal from a Market Segment
    • 6. Provide Underwriting Guidance
  11. 3 Basic Accounting Di fferences Between Primary Insurance And Reinsurance
    • 1. Time Lag: Reinsurer has lag in collecting data from ceding company
    • 2. By-Line Breakdown: Primary may not give enough detail for reinsurer to breakdown by line
    • 3. Loss Expense Reserves: Ceding company will report separately by assuming company may combine as loss
  12. 2 Pieces of Incurred Losses In Financial Statement
    • 1. Incurred losses for the current accident year
    • 2. Changes in incurred loss estimates for prior accident years
Author
Esaie
ID
26151
Card Set
Blanchard Selected
Description
Updated

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