# ASC 405-944-05: Liabilities — Financial Services—Insurance — 05 Overview and Background

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/405/944/#05-overview-and-background)

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## ASC 405-944-05: 05 Overview and Background

[Read section](https://asc.understandingaccounting.org/asc/405/944/#05-overview-and-background)

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##### [405-944-05-1](https://asc.understandingaccounting.org/asc/405/944/#405-944-05-1)

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This Subtopic provides guidance to insurance entities on accounting for and financial reporting of liabilities. The guidance in this Subtopic is provided in the following two Subsections:

1.  a
    
    General
    
2.  b
    
    [Reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contracts.

##### [405-944-05-2](https://asc.understandingaccounting.org/asc/405/944/#405-944-05-2)

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For guidance on liabilities for claims costs and future policyholder benefits, see Subtopic 944-40. For guidance on liabilities related to premium deficiencies, see Subtopic 944-60. For guidance on liabilities for [dividends to policyholders](https://asc.understandingaccounting.org/glossary/d/#dividend-to-policyholders "Nonguaranteed amounts distributable to policyholders of participating life insurance contracts and based on actual performance of the insurance entity as determined by the insurer. Under various state insurance laws, dividends are apportioned to policyholders on an equitable basis. The dividend allotted to any contract often is based on the amount that the contract, as one of a class of similar contracts, has contributed to the income available for distribution as dividends. Dividends to policyholders include annual policyholder dividends and terminal dividends."), see Subtopic 944-50.

### Reinsurance Contracts

##### [405-944-05-3](https://asc.understandingaccounting.org/asc/405/944/#405-944-05-3)

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This Subtopic provides guidance to insurance entities on accounting for and financial reporting of liabilities related to [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contracts.