CIA Taxes

  1. Reported reserve vs. Claim liability, disclosure requirement
    • Reported reserve = net claim liabilities carried (on BS)
    • Claim liability = net claim liabilities according to AAP
    • Both net of reinsurance / S&S
    • AA report needs to disclose
      • both figures
      • claims liability calculation steps
      • reported reserves mgt selected and reasons if dif materially from claims liability (dif > AA materiality standard)
      • reported reserves can NOT be smaller than the claim liability
  2. Asset for Future income Taxes
    • recognize prepayment of tax as liability deduction for tax purpose is smaller than reported reserves
    • only 95% of min (reported reserve, liability) will be deducted (when claims settle, but income tax is paid on all), leaving a tax dif
  3. Effect of Discounting the Asset for Future Income Taxes
    • Where the effect (related to policy liabilities) is material, estimate of policy liabilities should be reduced accordingly.
    • [Reported Reserve – 95% x min (Reported Reserv, Claim Liability)] x Future Income Tax Rate x (1 – PV)
Card Set
CIA Taxes
CIA - Consideration of Future Income Taxes in the Valuation of Policy Liabilities