This Subtopic provides guidance to insurance entities on accounting for and financial reporting of revenue from insurance contracts. The guidance in this Subtopic is presented in the following five Subsections:
- a
General
- b
Short-Duration Contracts
- c
Long-Duration Contracts
- d
- e
Financial Guarantee Insurance Contracts.
The Short-Duration Contracts Subsections of this Subtopic provide guidance to insurance entities on accounting for and financial reporting of revenue from short-duration insurance contracts.
The Long-Duration Contracts Subsections of this Subtopic provide guidance to insurance entities on accounting for and financial reporting of revenue from long-duration insurance contracts.
The Reinsurance Contracts Subsections of this Subtopic provide guidance to insurance entities on accounting for and financial reporting of revenue from
reinsurance contracts.
A significant amount of reinsurance is transacted through syndicates organized by Lloyd's of London. Lloyd's syndicates report the amounts of premiums, claims, and expenses recorded in an underwriting account for a particular year to the assuming entities that participate in the syndicates. The syndicates generally keep accounts open for three years. Traditionally, three years have been necessary to report substantially all premiums associated with an underwriting year and to report most related claims, although claims may remain unsettled after the account is closed. A Lloyd's syndicate typically closes an underwriting account by reinsuring outstanding claims on that account with a syndicate for the next underwriting year. The ceding syndicate pays the assuming syndicate an amount based on the unearned premiums and outstanding claims in the underwriting account at the date of the assumption and distributes the remaining balance to its participants.
The Financial Guarantee Insurance Contracts Subsections of this Subtopic provide guidance to insurance entities on accounting for and financial reporting of revenue from financial guarantee insurance contracts.
In some cases, the issuer of an insured financial obligation will retire an insured financial obligation before its maturity and replace it with a new financial obligation. That situation, referred to as a refunding, often occurs when interest rates decrease and the insured financial obligation is replaced with a new financial obligation at a lower interest rate.