# ASC 405-30-05: Liabilities — Insurance-Related Assessments — 05 Overview and Background Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/405/30/#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): 2026-09-10T00:14:16.426Z to 2026-09-10T00:14:16.426Z Record version: sha256:3d3815466f5e5d5777787f745cfc24011b7336efe3d75b5d84177b28986b8fa5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 405-30-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/405/30/#05-overview-and-background) SEC content: no ##### [405-30-05-1](https://asc.understandingaccounting.org/asc/405/30/#405-30-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:14:16.426Z to 2026-09-10T00:14:16.426Z Record version: sha256:5f2593e713bdb5cdc70288e190dfbb2b1e6a407321fc896f9a8adaad99bc66a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Insurance entities as well as noninsurance entities are subject to a variety of assessments related to insurance activities, including those by state guaranty funds and workers' compensation second-injury funds. Some entities may be subject to insurance-related assessments because they self-insure against loss or liability. This Subtopic provides guidance on accounting for insurance-related assessments. The annual fee imposed on health insurers by the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act (the Acts) is not considered an insurance-related assessment. The accounting for the Acts' fee is addressed in Subtopic 720-50. #### State Guaranty Funds ##### [405-30-05-2](https://asc.understandingaccounting.org/asc/405/30/#405-30-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:14:16.426Z to 2026-09-10T00:14:16.426Z Record version: sha256:faf64a69824e3ba3c91fd51ffd4569e9ab133a707725eafdef93cbdb77be82e1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. States have enacted legislation establishing guaranty funds. The state guaranty funds assess entities licensed to sell insurance in the state to provide for the payment of covered claims or to meet other insurance obligations—subject to prescribed limits—of insolvent insurance entities. The assessments are generally based on premium volume for certain covered lines of business. Most state guaranty funds assess entities for costs related to a particular insolvency after the insolvency occurs. At least one state, however, assesses entities before insolvencies. ##### [405-30-05-3](https://asc.understandingaccounting.org/asc/405/30/#405-30-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:14:16.426Z to 2026-09-10T00:14:16.426Z Record version: sha256:5552c32756d6ed4d94b5db52a93fa818c2498776d248e5342f39d8e32f72e6e3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. State guaranty funds use a variety of methods for assessing entities. This Subtopic identifies the following four primary methods of guaranty-fund assessments: 1. a Retrospective-premium-based assessments. Guaranty funds covering benefit payments of insolvent [life, annuity, and health insurance entities](https://asc.understandingaccounting.org/glossary/l/#life-annuity-and-health-insurance-entities "An entity that may issue annuity, endowment, and accident and health insurance contracts as well as life insurance contracts. Life and health insurance entities may be either stock or mutual entities.") typically assess entities based on [premiums written](https://asc.understandingaccounting.org/glossary/p/#premiums-written "The premiums on all policies an entity has issued in a period.") or received in one or more years before the year of insolvency. Assessments in any year are generally limited to an established percentage of an entity's average premiums for the three years preceding the insolvency. Assessments for a given insolvency may take place over several years. 2. b Prospective-premium-based assessments. Guaranty funds covering claims of insolvent [property and casualty insurance entities](https://asc.understandingaccounting.org/glossary/p/#property-and-casualty-insurance-entity "An entity that issues insurance contracts providing protection against either of the following: Damage to or loss of property caused by various perils, such as fire and theft Legal liability resulting from injuries to other persons or damage to their property. Property and liability insurance entities may be either stock or mutual entities.") typically assess entities based on premiums written in one or more years after the insolvency. Assessments in any year are generally limited to an established percentage of an entity's premiums written or received for the year preceding the assessment. Assessments for a given insolvency may take place over several years. 3. c Prefunded-premium-based assessments. At least one state uses this kind of assessment to cover claims of insolvent property and casualty insurance entities. This kind of assessment is intended to prefund the costs of future insolvencies. Assessments are imposed before any particular insolvency and are based on the current level of written premiums. Rates to be applied to future premiums are adjusted as necessary. 4. d Administrative-type assessments. These assessments are typically a flat (annual) amount per entity to fund operations of the guaranty association, regardless of the existence of an insolvency. ##### [405-30-05-4](https://asc.understandingaccounting.org/asc/405/30/#405-30-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:14:16.426Z to 2026-09-10T00:14:16.426Z Record version: sha256:4c6c4576272a885575b26cac4211c183a071d9056f0b8b65486ca01e6e5fc440 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. State laws often allow for recoveries of guaranty-fund assessments by entities subject to assessments through such mechanisms as [premium tax offsets](https://asc.understandingaccounting.org/glossary/p/#premium-tax-offsets "Offsets against premium taxes levied on insurance entities by states."), policy surcharges, and future premium rate structures. The policy surcharges referred to in this Subtopic are those surcharges that are intended to provide an opportunity for assessed entities to recover some or all of the amounts assessed over a period of time. #### Other Insurance-Related Assessments ##### [405-30-05-5](https://asc.understandingaccounting.org/asc/405/30/#405-30-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:14:16.426Z to 2026-09-10T00:14:16.426Z Record version: sha256:b1304c0fdfe3029e0f73679c62ec900d36e9f6581ee04f5d00d13d13ed6cc314 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entities are subject to a variety of other insurance-related assessments. Many states and a number of local governmental units have established other funds supported by assessments. The two most prevalent uses for such assessments are as follows: 1. a To fund operating expenses of state insurance regulatory bodies (for example, the state insurance department or workers' compensation board) 2. b To fund second-injury funds, which provide reimbursement to insurance carriers or employers for workers' compensation claims when the cost of a second injury combined with a prior accident or disability is greater than what the second accident alone would have produced. The employer of an injured or handicapped worker is responsible only for the workers' compensation benefit for the most recent injury; the second-injury fund would cover the cost of any additional benefits for aggravation of a prior condition or injury. The intent of the fund is to help insure that employers are not made to suffer a greater monetary loss or increased insurance costs because of hiring previously injured or handicapped employees. ##### [405-30-05-6](https://asc.understandingaccounting.org/asc/405/30/#405-30-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:14:16.426Z to 2026-09-10T00:14:16.426Z Record version: sha256:8b033e43f1c7bf219f5b34d705460e7077660a6194eb7b5736f7d617fa0cf098 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The primary methods used to assess for these other insurance-related assessments are the following: 1. a Premium-based. The assessing entity imposes the assessment based on the entity's written premiums. The assessing entity may be at the state, county, municipality, or other such level. The base year of premiums is generally either the current year or the year preceding the assessment. 2. b Loss-based. The assessing entity imposes the assessment based on the entity's [incurred losses](https://asc.understandingaccounting.org/glossary/i/#incurred-losses "Losses paid or unpaid for which the entity has become liable during a period.") or paid losses in relation to that amount for all entities subject to that assessment in the particular jurisdiction.