# ASC 340-30-05: Other Assets and Deferred Costs — Insurance Contracts That Do Not Transfer Insurance Risk — 05 Overview and Background Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/340/30/#05-overview-and-background) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:ce695ac0fe9c13b2dedc982b53252e1183dddf1084c69e5161ff4268e7f4c703 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 340-30-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/340/30/#05-overview-and-background) SEC content: no ##### [340-30-05-1](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:a691ab5b05e0ce315109bc43cf3572bc7386e89304834c02c7f8c41e853cde8e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on how to apply the deposit method of accounting when it is required for insurance and reinsurance contracts that do not transfer [insurance risk](https://asc.understandingaccounting.org/glossary/i/#insurance-risk "The risk arising from uncertainties about both underwriting risk and timing risk. Actual or imputed investment returns are not an element of insurance risk. Insurance risk is fortuitous; the possibility of adverse events occurring is outside the control of the insured."). These contracts may be prospective or retroactive in nature. ##### [340-30-05-2](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:96a233ca5e2d988229ee2eda9af672b8e4c8574613660ed497092cfd65ac2347 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The transfer of insurance risk requires transferring both [timing risk](https://asc.understandingaccounting.org/glossary/t/#timing-risk "The risk arising from uncertainties about the timing of the receipt and payments of the net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract.") and [underwriting risk](https://asc.understandingaccounting.org/glossary/u/#underwriting-risk "The risk arising from uncertainties about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract."). Therefore, four possible categories for deposit arrangements have been identified as follows: 1. a An insurance or reinsurance contract that transfers only significant timing risk. 2. b An insurance or reinsurance contract that transfers only significant underwriting risk. 3. c An insurance or reinsurance contract that transfers neither significant timing nor significant underwriting risk. 4. d An insurance or reinsurance contract with an indeterminate risk. #### An Insurance or Reinsurance Contract that Transfers Only Significant Timing Risk ##### [340-30-05-3](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:7dd23d36c84f03cb32fd74375883dbe6acce65feff02caa1c25710ac97d4e451 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For an insurance or reinsurance contract to be considered to have transferred significant timing risk, the timing of the loss reimbursement under the contract must be based on the timing of the loss event. ##### [340-30-05-4](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:d6372ba1e80077df0e7b05a95f17e4655bfe08cbce2157987d6215928e07aa5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The timing of the loss reimbursement under an insurance contract would be based on the timing of the payment with respect to the loss event. For reinsurance contracts, the timing of the loss reimbursement under the contract would be based on the timing of payment by the insured (reinsured) of the underlying loss, as well as when recovery is expected from the reinsurer. ##### [340-30-05-5](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:55de193a8394b938b5b23516b52c64580fc9ac6ef1a753dd7949d108ae502f4c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance or reinsurance contract that transfers only significant timing risk limits the amount of underwriting risk to which the insurer or reinsurer is subject and is commonly entered into by the insured or [ceding entity](https://asc.understandingaccounting.org/glossary/c/#ceding-entity "The party that pays a reinsurance premium in a reinsurance transaction. The ceding entity receives the right to reimbursement from the assuming entity under the terms of the reinsurance contract.") to provide liquidity. These limitations may result in an insufficient transfer of insurance risk. For example, insurance and reinsurance contracts that provide for [experience adjustments](https://asc.understandingaccounting.org/glossary/e/#experience-adjustment "A provision in an insurance or reinsurance contract that modifies the premium, coverage, commission, or a combination of the three, in whole or in part, based on experience under the contract.") may indicate that a sufficient amount of underwriting risk has not been transferred. The recovery of the amount of the initial deposit for a contract that transfers only significant timing risk is not substantially dependent on future loss experience of the insured. #### An Insurance or Reinsurance Contract that Transfers Only Significant Underwriting Risk ##### [340-30-05-6](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:b60ad1dd2304bbc1dfe2a3cbe871e4a01229e863f1324b103e6ec9857c24eef1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For an insurance or reinsurance contract to be considered to have transferred significant underwriting risk, the probability of a significant variation in the amount of payments under the insurance or reinsurance contract must be more than remote. Such variation must also result from variation in the insured's losses, and it must be at least reasonably possible that the insurer will realize a significant loss from the transaction. An insurance or reinsurance contract that transfers only significant underwriting risk may be entered into to lessen the overall economic risks associated with the contract and permit a greater amount of coverage than would otherwise be obtainable for a comparable premium. Features in insurance or reinsurance contracts that transfer only significant underwriting risk limit the uncertainties about the timing of the receipt and payment of cash flow, thus limiting the amount of timing risk assumed by the insurer. A delayed reimbursement of losses by the insurer is a possible indication that timing risk has not been transferred. Unlike insurance and reinsurance contracts that transfer only significant timing risk, the recovery of the amount of the initial deposit for an insurance or reinsurance contract that transfers only significant underwriting risk is substantially dependent on the future loss experience of the insured. Depending on such experience, the initial deposit may be recovered or the recovery may be significantly more or less than the original deposit. #### An Insurance or Reinsurance Contract that Transfers Neither Significant Timing nor Significant Underwriting Risk ##### [340-30-05-7](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:dc1294868d46212d09fa1e67105c6a9e63402f16216cf02c96912848ce058504 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Insurance and reinsurance contracts that transfer neither significant timing nor significant underwriting risk are expected to be rare. #### An Insurance or Reinsurance Contract with an Indeterminate Risk ##### [340-30-05-8](https://asc.understandingaccounting.org/asc/340/30/#340-30-05-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:55:43.666Z to 2026-09-09T23:55:43.666Z Record version: sha256:56c2b5993d508606e693e52bb73922929da5fffd2fc0950354810eeb3100c9dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. These insurance and reinsurance contracts have uncertain terms, or there is insufficient information to reasonably estimate and allocate premiums in proportion to the protection provided. For example, certain insurance and reinsurance contracts allow the insured to obtain some degree of coverage for multiple years without exposing the insurer to a defined level of insurance risk each year. Uncertainties surrounding these insurance and reinsurance contracts are analogous to those often associated with foreign property and liability reinsurance as addressed in the Reinsurance Contracts Subsections of Subtopic 944-605.