# ASC 605-944: Revenue Recognition — Financial Services—Insurance Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/605/944/) 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): 2026-09-10T00:49:17.918Z to 2026-09-10T00:49:46.481Z Record version: sha256:132ac680bb061d70613cb488dfea6f7c1509bcb7de40cdaf1be9418476ded09e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 605-944: Revenue Recognition — Financial Services—Insurance ### Machine-generated study aids ```json { "summary": "ASC 944-605 governs when and how insurance entities recognize premium revenue, split into short-duration, long-duration, reinsurance, and financial guarantee subsections. Short-duration premiums are earned over the contract (or risk) period in proportion to insurance protection provided; long-duration premiums are recognized when due from policyholders; universal life-type contract revenue is limited to amounts assessed against policyholders, with front-end fees deferred as unearned revenue. Reinsurance sections address prepaid reinsurance premiums, deferral and amortization of retroactive reinsurance gains, and the open year versus periodic method for foreign reinsurance.", "key_points": [ "Short-duration premiums are recognized as revenue over the contract period (or period of risk if significantly different) in proportion to the insurance protection provided, generally evenly (944-605-25-1); if the ultimate premium is not reasonably estimable, the cost recovery or deposit method may be used (944-605-25-2).", "Long-duration contract premiums are recognized as revenue over the premium-paying period when due from policyholders (944-605-25-3), and gross premium in excess of net premium on limited-payment contracts is deferred as a deferred profit liability (944-605-25-4A) recognized in constant relationship to insurance in force or expected future benefit payments (944-605-35-1 through 35-1C).", "Premiums collected on universal life-type contracts are not revenue; revenue is the amounts assessed against policyholders in the period assessed, with assessments for future services and front-end/initiation fees recorded as unearned revenue (944-605-25-5 through 25-7) and amortized using the same assumptions used for deferred acquisition costs (944-605-35-2).", "Title insurance premiums are recognized on the effective date of the contract (or binder date if the entity is legally or contractually entitled to the premium) (944-605-25-12), and agent-issued contracts are recognized when agents are entitled to premiums if reasonably estimable (944-605-25-13).", "Prospective reinsurance amounts paid are reported as prepaid reinsurance premiums amortized over the remaining contract period in proportion to protection provided (944-605-25-20; 944-605-35-8); retroactive reinsurance gains (liabilities exceeding amounts paid) are deferred and amortized by the interest or recovery method (944-605-25-22; 944-605-35-9), while excess of amounts paid over liabilities is charged to earnings immediately (944-605-25-23).", "Foreign reinsurance must use the periodic method unless the foreign ceding entity cannot supply information to estimate ultimate premiums and periods under U.S. GAAP, in which case the open year method defers premiums, claims, commissions, and direct taxes in an open underwriting balance until earned premiums are reasonably estimable (944-605-25-17 through 25-19; 944-605-35-5 through 35-7).", "For financial guarantee insurance contracts, an unearned premium revenue liability (the stand-ready obligation) is recognized at inception measured at the premium received or the present value of premiums due/expected (944-605-25-25; 944-605-30-5 through 30-7) and released to revenue using a constant rate applied to insured principal amounts outstanding (944-605-25-27 through 25-29); on a refunding, remaining nonrefundable unearned premium and deferred acquisition costs are recognized immediately (944-605-25-32 through 25-33)." ], "categories": [ "Revenue", "Industry-specific", "Recognition", "Subsequent measurement" ], "audience_level": "advanced", "student_note": "Insurance revenue recognition is largely carved out of ASC 606, so know that \"premium collected\" is not automatically \"revenue\"—for universal life-type contracts only assessments are revenue, and for retroactive reinsurance a day-one gain must be deferred (losses, by contrast, hit earnings immediately). The most common error is applying general revenue models or netting reinsurance recoverables against gross liabilities when no right of setoff exists.", "related_topics": [ "944-40", "944-20", "944-30", "944-310", "210-20", "606" ], "key_concepts": [ "premium revenue recognition", "short-duration and long-duration contracts", "universal life-type contracts", "unearned revenue and front-end fees", "deferred profit liability", "retroactive reinsurance deferred gain", "open year method", "financial guarantee unearned premium revenue" ] } ``` Source downloaded (UTC): 2026-09-10T00:49:17.918Z to 2026-09-10T00:49:17.918Z Record version: sha256:168222492945bd3aed0a8e5ebc4500bb73d4f6003fc9f39366b9974590341363 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 605-944-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/605/944/#00-status) SEC content: no ##### [605-944-00-1](https://asc.understandingaccounting.org/asc/605/944/#605-944-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:17.918Z to 2026-09-10T00:49:17.918Z Record version: sha256:d445bea788215f2ba5efa2b1b065a79cd4e40cb7eb5e92addd62f3126b11e79d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Acquisition CostsAmendedAccounting Standards Update No. 2010-2610/13/2010
Contract PeriodAmendedAccounting Standards Update No. 2016-1912/14/2016
Liability for Future Policy BenefitsAddedAccounting Standards Update No. 2018-1208/15/2018
Net PremiumsAmendedAccounting Standards Update No. 2018-1208/15/2018
Reinsurance ReceivableSupersededAccounting Standards Update No. 2016-1912/14/2016
Reinsurance RecoverableAddedAccounting Standards Update No. 2016-1912/14/2016
944-605-05-1AmendedAccounting Standards Update No. 2016-1912/14/2016
944-605-05-7AmendedAccounting Standards Update No. 2009-0207/01/2009
944-605-05-8AmendedAccounting Standards Update No. 2009-0207/01/2009
944-605-25-8SupersededAccounting Standards Update No. 2018-1208/15/2018
944-605-25-11SupersededAccounting Standards Update No. 2018-1208/15/2018
944-605-25-21AmendedAccounting Standards Update No. 2016-0101/05/2016
944-605-25-22AmendedAccounting Standards Update No. 2016-1912/14/2016
944-605-25-23AmendedAccounting Standards Update No. 2016-1912/14/2016
944-605-25-24AmendedAccounting Standards Update No. 2009-0207/01/2009
944-605-30-1AmendedAccounting Standards Update No. 2018-1208/15/2018
944-605-30-2AmendedAccounting Standards Update No. 2018-1208/15/2018
944-605-30-2AAddedAccounting Standards Update No. 2018-1208/15/2018
944-605-35-1AmendedAccounting Standards Update No. 2018-1208/15/2018
944-605-35-1AAmendedAccounting Standards Update No. 2018-1208/15/2018
944-605-35-1BAddedAccounting Standards Update No. 2018-1208/15/2018
944-605-35-1CAddedAccounting Standards Update No. 2018-1208/15/2018
944-605-35-8AmendedAccounting Standards Update No. 2012-0410/01/2012
944-605-35-9AmendedAccounting Standards Update No. 2012-0410/01/2012
944-605-35-12AmendedAccounting Standards Update No. 2016-1912/14/2016
944-605-45-1AmendedMaintenance Update 2016-11 (PDF)06/27/2016
944-605-55-1AmendedAccounting Standards Update No. 2016-1912/14/2016
944-605-55-11AmendedAccounting Standards Update No. 2016-1912/14/2016
944-605-55-12AmendedAccounting Standards Update No. 2016-1912/14/2016
944-605-55-14AmendedAccounting Standards Update No. 2016-1912/14/2016
944-605-55-15AmendedAccounting Standards Update No. 2016-1912/14/2016
Source downloaded (UTC): 2026-09-10T00:49:20.979Z to 2026-09-10T00:49:20.979Z Record version: sha256:3f3fe40daa53cb177eb9ca956bda7425a2ad993b06b96a69b00ea89604500871 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 605-944-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/605/944/#05-overview-and-background) SEC content: no ##### [605-944-05-1](https://asc.understandingaccounting.org/asc/605/944/#605-944-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:20.979Z to 2026-09-10T00:49:20.979Z Record version: sha256:93cd0546419051981d042cc1ad0954eb8001fa0639ffb6401300d12af2e31ba6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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: 1. a General 2. b Short-Duration Contracts 3. c Long-Duration Contracts 4. d [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 5. e Financial Guarantee Insurance Contracts. ### Short-Duration Contracts ##### [605-944-05-2](https://asc.understandingaccounting.org/asc/605/944/#605-944-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:20.979Z to 2026-09-10T00:49:20.979Z Record version: sha256:9ab5cbf35c62d24acb405f16518debe13d40a43995b1d0c9ad1aa3a1375ab396 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ### Long-Duration Contracts ##### [605-944-05-3](https://asc.understandingaccounting.org/asc/605/944/#605-944-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:20.979Z to 2026-09-10T00:49:20.979Z Record version: sha256:1df6022ce4af4ff8ac7fcbc2250ce2bc6e4771e04af0da551cf294959f0a63c8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ### Reinsurance Contracts ##### [605-944-05-4](https://asc.understandingaccounting.org/asc/605/944/#605-944-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:20.979Z to 2026-09-10T00:49:20.979Z Record version: sha256:5abff7a765088f2419ad6049522a15e5c416a073b8988f94674f205571bbfd9f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Reinsurance Contracts Subsections of this Subtopic provide guidance to insurance entities on accounting for and financial reporting of revenue from [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. #### All Reinsurance Contracts ##### [605-944-05-5](https://asc.understandingaccounting.org/asc/605/944/#605-944-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:20.979Z to 2026-09-10T00:49:20.979Z Record version: sha256:59a3f7d2a166603b55fe274c46f38815b496f707c7d6816de003b5f553ebe367 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Reinsurers](https://asc.understandingaccounting.org/glossary/r/#reinsurer "The assuming entity in a reinsurance transaction.") assuming business from domestic entities historically have had sufficient information to monitor and account for contract results. In contrast, some reinsurers assuming business from foreign entities do not receive such information, because in some foreign jurisdictions, insurance entities' accounting and reporting practices concerning periodic recognition of revenue and incurred claims are substantially different from U.S. practices. Therefore, reinsurers assuming business from foreign ceding entities cannot always obtain sufficient information to periodically estimate earned premiums for the business assumed from the foreign ceding entities. ##### [605-944-05-6](https://asc.understandingaccounting.org/asc/605/944/#605-944-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:20.979Z to 2026-09-10T00:49:20.979Z Record version: sha256:a0ced4cdab21a3e513a6fbbbc466a53c0559b13e9a463ad676bc5bd23951bad0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [605-944-05-7](https://asc.understandingaccounting.org/asc/605/944/#605-944-05-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:20.979Z to 2026-09-10T00:49:20.979Z Record version: sha256:3e8c119924ec6649b8c6560718f266d7c956102a6cd1a56c8b92f29a49387737 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ##### [605-944-05-8](https://asc.understandingaccounting.org/asc/605/944/#605-944-05-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:20.979Z to 2026-09-10T00:49:20.979Z Record version: sha256:3c3101282d4268b3dc8477706080c1a8cd09c3d2e1e39dc6c732caafb7a08681 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ### Financial Guarantee Insurance Contracts ##### [605-944-05-9](https://asc.understandingaccounting.org/asc/605/944/#605-944-05-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:20.979Z to 2026-09-10T00:49:20.979Z Record version: sha256:b9dea77382c6b6fb8ae2bc7cbfb66b1bf1be0d5505ef43d7ff33a25c51e28934 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. #### Early Retirement and Replacement of an Insured Financial Obligation ##### [605-944-05-10](https://asc.understandingaccounting.org/asc/605/944/#605-944-05-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:20.979Z to 2026-09-10T00:49:20.979Z Record version: sha256:54ed7d443227edeec3b8f455f78931db665fac003f4f181afc79fc628adb6f03 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. Source downloaded (UTC): 2026-09-10T00:49:23.529Z to 2026-09-10T00:49:23.529Z Record version: sha256:3f55e94916620682a1cc691e3779fa6a3137c93a9e75c60b47636c2bdb744bf7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 605-944-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/605/944/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [605-944-15-1](https://asc.understandingaccounting.org/asc/605/944/#605-944-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:23.529Z to 2026-09-10T00:49:23.529Z Record version: sha256:eef56cb3326f65c9a3ba7a28c017b950de1e58bc1e94b880bbfed66d737941ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 944-10-15, with specific entity exceptions noted below. #### Entities ##### [605-944-15-2](https://asc.understandingaccounting.org/asc/605/944/#605-944-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:23.529Z to 2026-09-10T00:49:23.529Z Record version: sha256:c9415f0a43748088740fe276a14f561ea65bf16b35833ca338f0e414e1a1e94d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to [mortgage guaranty insurance entities](https://asc.understandingaccounting.org/glossary/m/#mortgage-guaranty-insurance-entity "An insurance entity that issues insurance contracts that guarantee lenders, such as savings and loan associations, against nonpayment by mortgagors."). ### Short-Duration Contracts #### Overall Guidance ##### [605-944-15-3](https://asc.understandingaccounting.org/asc/605/944/#605-944-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:23.529Z to 2026-09-10T00:49:23.529Z Record version: sha256:e72281715772b340021af087c15c21af167cfd31032911bdf9f2c0f334238c7d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Short-Duration Contracts Subsections of this Subtopic follow the same Scope and Scope Exceptions as outlined in the [General Subsection](https://asc.understandingaccounting.org/updates/page-2147479834/) of this Section, with specific instrument exceptions noted below. #### Instruments ##### [605-944-15-4](https://asc.understandingaccounting.org/asc/605/944/#605-944-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:23.529Z to 2026-09-10T00:49:23.529Z Record version: sha256:27382c9e37b40cca9c69ac6bf7520f1e71c6cde64128c6b20256b216e6ad4ffa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Short-Duration Contracts Subsections of this Subtopic applies only to short-duration contracts. See the [Short-Duration Contracts Subsection](https://asc.understandingaccounting.org/asc/944/20/#15-scope-and-scope-exceptions) of Section 944-20-15 for a discussion of what constitutes a short-duration contract. ### Long-Duration Contracts #### Overall Guidance ##### [605-944-15-5](https://asc.understandingaccounting.org/asc/605/944/#605-944-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:23.529Z to 2026-09-10T00:49:23.529Z Record version: sha256:4843594f7148e03aff3a6c24ea8d28b0dd9a0bd2f4153098184e420fb125896d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Long-Duration Contracts Subsections of this Subtopic follow the same Scope and Scope Exceptions as outlined in the [General Subsection](https://asc.understandingaccounting.org/updates/page-2147479834/) of this Section, with specific instrument exceptions noted below. #### Instruments ##### [605-944-15-6](https://asc.understandingaccounting.org/asc/605/944/#605-944-15-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:23.529Z to 2026-09-10T00:49:23.529Z Record version: sha256:65854578c4f767bbea4b78cb12535359ddd52c1791d844215135e3504c38a8b7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Long-Duration Contracts Subsections of this Subtopic applies only to long-duration contracts. See the [Long-Duration Contracts Subsection](https://asc.understandingaccounting.org/asc/944/20/#15-scope-and-scope-exceptions) of Section 944-20-15 for a discussion of what constitutes a long-duration contract. ### Reinsurance Contracts #### Overall Guidance ##### [605-944-15-7](https://asc.understandingaccounting.org/asc/605/944/#605-944-15-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:23.529Z to 2026-09-10T00:49:23.529Z Record version: sha256:1cba74a99d08ec6abd48f9903cb786215798e5773e11ee95eacf97618bfff305 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Reinsurance Contracts Subsections of this Subtopic follow the same Scope and Scope Exceptions as outlined in the [General Subsection](https://asc.understandingaccounting.org/updates/page-2147479834/) of this Section, with specific instrument exceptions noted below. #### Instruments ##### [605-944-15-8](https://asc.understandingaccounting.org/asc/605/944/#605-944-15-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:23.529Z to 2026-09-10T00:49:23.529Z Record version: sha256:3bbd782bcefdcc7a5b2d63b188b0d20f9645641aac524207842f9955c9d9f82a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Reinsurance Contracts Subsections of this Subtopic applies only 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. See the [Reinsurance Contracts Subsection](https://asc.understandingaccounting.org/asc/944/20/#15-scope-and-scope-exceptions) of Section 944-20-15 for a discussion of what constitutes a reinsurance contract. ### Financial Guarantee Insurance Contracts ##### [605-944-15-9](https://asc.understandingaccounting.org/asc/605/944/#605-944-15-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:23.529Z to 2026-09-10T00:49:23.529Z Record version: sha256:cf7042eab2b39a15276bc6028e5d10436019f2409af80579d7ab383cba20eb3e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Financial Guarantee Insurance Contracts Subsections of this Subtopic applies only to financial guarantee insurance contracts (which include financial guarantee reinsurance contracts). Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:2edc9c88c4103363ea15e8617fcff8050644bad4c10bcd2a65db7331bc7c1aef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 605-944-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/605/944/#25-recognition) SEC content: no ### Short-Duration Contracts ##### [605-944-25-1](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:5fc3207e3e8898a5138ae173f26da053b9a2312e7cf5c7d2c7abe120055e67b0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Premiums from short-duration contracts shall be recognized as revenue over the period of the contract in proportion to the amount of insurance protection provided. For those few types of contracts for which the period of risk differs significantly from the [contract period](https://asc.understandingaccounting.org/glossary/c/#contract-period "The period over which insured events that occur are covered by insurance or reinsurance contracts. Commonly referred to as the coverage period or period that the contracts are in force."), premiums shall be recognized as revenue over the period of risk in proportion to the amount of insurance protection provided. That generally results in premiums being recognized as revenue evenly over the contract period (or the period of risk, if different), except for those few cases in which the amount of insurance protection declines according to a predetermined schedule. ##### [605-944-25-2](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:48e687da323e3ba237e32b0eaaec5c9cb9b3f8d33e180c26436260bac59f4f3a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If premiums are subject to adjustment (for example, retrospectively rated or other experience-rated insurance contracts for which the premium is determined after the period of the contract based on [claim](https://asc.understandingaccounting.org/glossary/c/#claim "A demand for payment of a policy benefit because of the occurrence of an insured event.") experience or reporting-form contracts for which the premium is adjusted after the period of the contract based on the value of insured property), premium revenue shall be recognized as follows: 1. a If the ultimate premium is reasonably estimable, the estimated ultimate premium shall be recognized as revenue over the period of the contract. The estimated ultimate premium shall be revised to reflect current experience. 2. b If the ultimate premium cannot be reasonably estimated, the [cost recovery method](https://asc.understandingaccounting.org/glossary/c/#cost-recovery-method "A revenue recognition method under which premiums are recognized as revenue in an amount equal to estimated claim costs as insured events occur until the ultimate premium is reasonably estimable, and recognition of income is postponed until that time.") or the [deposit method](https://asc.understandingaccounting.org/glossary/d/#deposit-method "A revenue recognition method under which premiums are not recognized as revenue and claim costs are not charged to expense until the ultimate premium is reasonably estimable, and recognition of income is postponed until that time.") may be used until the ultimate premium becomes reasonably estimable. ### Long-Duration Contracts #### Traditional Long-Duration Contracts ##### [605-944-25-3](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:9c24d261e5fcee9fec70bbdd4653e0c3b3a640d2583faf9987d5c81649d9a41c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because no single function or service is predominant over the periods of most types of long-duration contracts, premiums shall be recognized as revenue over the premium-paying periods of the contracts when due from policyholders. This includes premiums from [whole-life contracts](https://asc.understandingaccounting.org/glossary/w/#whole-life-contract "Insurance that may be kept in force for a person's entire life by paying one or more premiums. It is paid for in one of three different ways: Ordinary life insurance (premiums are payable as long as the insured lives) Limited-payment life insurance (premiums are payable over a specified number of years) Single-premium life insurance (a lump-sum amount paid at the inception of the insurance contract). The insurance contract pays a benefit (contractual amount adjusted for items such as policy loans and dividends, if any) at the death of the insured. Whole-life insurance contracts also build up nonforfeiture benefits."), guaranteed renewable term life contracts, title insurance contracts, and participating life insurance contracts that meet the criteria in paragraph [944-20-15-3](https://asc.understandingaccounting.org/asc/944/20/#944-20-15-3). ##### [605-944-25-4](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:affa815e71a2731dcbbeca8ed42070d3836052ced7b5bbdb9fd2500efcd2d3c5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Premium revenue from long-duration contracts generally exceeds expected policy benefits in the early years of the contracts and it is necessary to accrue, as premium revenue is recognized, a liability for costs that are expected to be paid in the later years of the contracts. See Subtopic 944-40 for specific guidance. #### Limited-Payment Contracts ##### [605-944-25-4A](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-4A) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:22f0d1eac4c24e3e6ac2aaba8ef030d0ea57308fb9d2abcf060908bea9f70eb3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because the collection of premium under a limited-payment contract does not represent the completion of an earnings process, any [gross premium](https://asc.understandingaccounting.org/glossary/g/#gross-premium "The premium charged to a policyholder for an insurance contract. See also Net Premiums.") received in excess of the net premium shall be deferred. #### Universal Life-Type Contracts ##### [605-944-25-5](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:378b58ffac739f89dc1bbfe76454e091c06889bd0ddfdf625c81b523867c5d7d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Premiums collected on universal life-type contracts shall not be reported as revenue in the statement of earnings of the insurance entity. Revenue from those contracts shall represent amounts assessed against policyholders and shall be reported in the period that the amounts are assessed unless evidence indicates that the amounts are designed to compensate the insurer for services to be provided over more than one period. ##### [605-944-25-6](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:423da51c60cb343ed4696e0b344eb36fd3c055893f6081c99aa074c57719c963 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Amounts assessed that represent compensation to the insurance entity for services to be provided in future periods are not earned in the period assessed. Such amounts shall be recognized as unearned revenue. ##### [605-944-25-7](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:f2312909ddcbf90bda1d6abc0bf12270671bec8fc1a70426576cff5bf6b95265 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Amounts that are assessed against the policyholder balance as consideration for origination of the contract, often referred to as [initiation or front-end fees](https://asc.understandingaccounting.org/glossary/i/#initiation-or-front-end-fees "Amounts that are assessed against the policyholder balance as consideration for origination of the contract."), shall be recognized as unearned revenues. ##### [605-944-25-8](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:9a58799a06c43320e7239f97577bf48a595dba6c7ab20eea7ed1332703979360 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2018-12](https://asc.understandingaccounting.org/updates/asu-2018-12/). ##### [605-944-25-9](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:75a5113b9d9eaf0871462c3c6c48b2c6e389c074240e7ad77d69938f18ca65fb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance entity shall not record a liability for unearned revenue if the purpose is an attempt to inappropriately level the contract's gross profit over the life of the contract or the accrual would serve to produce a level gross profit from the [mortality](https://asc.understandingaccounting.org/glossary/m/#mortality "The relative incidence of death in a given time or place.") benefit over the life of the contract. ##### [605-944-25-10](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:c16c9aa60b74d039410fffeb8f5c008c8ca7b8e1cc22540c58b68f744061adc0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic does not limit the accrual of unearned revenue for insurance benefit features of universal life-type contracts to situations where profits are expected to be followed by losses; that is, the facts and circumstances of each situation must be considered in determining the need for accruing unearned revenue. ##### [605-944-25-11](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:4dad90b903f2b7f75ac4a8feb36b08da0439445e66f87223969f4c79d1d3cb00 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2018-12](https://asc.understandingaccounting.org/updates/asu-2018-12/). #### Title Insurance Contracts ##### [605-944-25-12](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:e6a4c151c8d24c7dfc7adcfbb56ebe5a4505cbc61c13e8fa66a028577c743499 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Except as noted in the next sentence, premiums from title insurance contracts shall be considered due from policyholders and, accordingly, recognized as revenue on the effective date of the insurance contract because most of the services associated with the contract have been rendered by that time. However, the [binder date](https://asc.understandingaccounting.org/glossary/b/#binder-date "The date a commitment to issue a policy is given.") is appropriate if the insurance entity is legally or contractually entitled to the premium on the binder date. ##### [605-944-25-13](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-13) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:934f1350caf5ede6d21c01b72fb31f34b5a98dc9fc915f074cc98d4cd536b22d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If reasonably estimable, premium revenue and costs relating to title insurance contracts issued by agents shall be recognized when the agents are legally or contractually entitled to the premiums, using estimates based on past experience and other sources. If not reasonably estimable, premium revenue and costs shall be recognized when agents report the issuance of title insurance contracts. #### Retrospective and Contingent Commission Arrangements ##### [605-944-25-14](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-14) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:5c578400e08042250a5f0448ca871a80f5be2f9308e7094c9166300ce7083365 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If retrospective commission or experience refund arrangements exist under experience-rated insurance contracts, a separate liability shall be accrued for those amounts. Income in any period shall not include any amounts that are expected to be paid to agents or others in the form of experience refunds or additional commissions. Contingent commissions receivable or payable shall be accrued over the period in which related income is recognized. ##### [605-944-25-15](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-15) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:3318a1e3c6bfcf9690ec9aae6014f63e52750e64e6b05ab8155cb4f7d418f546 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ### Reinsurance Contracts #### Foreign Property and Liability Reinsurance ##### [605-944-25-16](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-16) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:18ff76886be11b87bb17f0b3757d83ded26683fb894475b6776052f2368a89ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The periodic method and [open year method](https://asc.understandingaccounting.org/glossary/o/#open-year-method "A revenue recognition method under which underwriting results of foreign reinsurance are not included in the income statement until sufficient information becomes available to provide reasonable estimates of earned premiums.") are not interchangeable in the same circumstances. The periodic method and open year method are not alternative accounting principles as discussed in Topic 250. Rather, one or the other is to be used depending on the circumstances. As such, changes between these methods are not accounting changes. In addition, changes from the periodic method to the open year method would be seldom. ##### [605-944-25-17](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-17) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:22cfefae41ea538ba7063cd15bc603f923cb841fccfe0a6ae4cf5e680e64ca92 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The periodic method of accounting for [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.") provides for current recognition of profits and losses. Premiums are recognized as revenue over the policy term, and claims, including an estimate of claims incurred but not reported, are recognized as they occur. The periodic method shall be used to account for foreign reinsurance except in the circumstance described in the following paragraph. Only if reasonable estimates cannot be made currently, for the reason discussed in the following paragraph, shall the open year method be used. ##### [605-944-25-18](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-18) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:b8b368d294a9ae238edc197f029b62873d8129a5b9ba270366fc586b7c68a234 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If, due to local revenue recognition policies, the foreign [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.") cannot provide the information required by the assuming entity to estimate both the ultimate premiums and the appropriate periods of recognition in accordance with U.S. generally accepted accounting principles (GAAP), then the open year method shall be used. If the foreign ceding entity maintains supplementary records that are sufficient to reasonably estimate earned premiums currently, then the U.S. assuming entity shall obtain the necessary information and use the periodic method to account for the foreign reinsurance. The presence of uncertainties that may be inherent in estimating earned premiums is not an acceptable basis for using the open year method. ##### [605-944-25-19](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-19) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:c598b0cbf4d6f1703a9b5b1d3be177b8816ab757ea6dc6aeac91ae8d5a9b2dbc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under the open year method, premiums, claims, commissions, and related direct taxes shall not be reported currently as income; instead, paragraph [944-605-35-5](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-5) requires that they be included in the open underwriting balance to which they pertain. The underwriting balances shall be aggregated and each underwriting balance shall be kept open until, as discussed in paragraph [944-605-35-6](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-6), sufficient information becomes available to record a reasonable estimate of earned premiums. #### Reinsurance of Short-Duration Contracts ##### [605-944-25-20](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-20) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:6676dcc1948adee9836b90efa818d9bcd23d17b289c2b6b729f2a23d00cb500f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Amounts paid for [prospective reinsurance](https://asc.understandingaccounting.org/glossary/p/#prospective-reinsurance "Reinsurance in which an assuming entity agrees to reimburse a ceding entity for losses that may be incurred as a result of future insurable events covered under contracts subject to the reinsurance. A reinsurance contract may include both prospective and retroactive reinsurance provisions.") of short-duration contracts that meet the conditions for reinsurance accounting shall be reported as [prepaid reinsurance premiums](https://asc.understandingaccounting.org/glossary/p/#prepaid-reinsurance-premiums "Amounts paid to the reinsurer relating to the unexpired portion of reinsured contracts."). ##### [605-944-25-21](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-21) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:374a6789ae0efbef6b80e678f69037e8a8914aaa37f1c62f11e523585a750c6c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If practicable, prospective and retroactive provisions included within a single contract shall be accounted for separately. The Reinsurance Contracts Subsections of this Subtopic do not require any specific method for allocating reinsurance premiums to the prospective and retroactive portions of a contract. However, separate accounting for the prospective and retroactive portions of a contract may take place only when an allocation is practicable. Practicability requires a reasonable basis for allocating the reinsurance premiums to the risks covered by the prospective and retroactive portions of the contract, considering all amounts paid or deemed to have been paid regardless of the timing of payment. If separate accounting for prospective and retroactive provisions included within a single contract is impracticable, the contract shall be accounted for as a retroactive contract provided the conditions for reinsurance accounting are met. Impracticable is used to mean that the prospective and retroactive provisions cannot be accounted for separately without incurring excessive costs. Practicability is a dynamic concept: what is practicable for one entity might not be for another; what is not practicable in one year might be in another. ##### [605-944-25-22](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-22) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:711e59e6bddfdc2961b3f8d614f8ea7ddcf63fc645f02a72b3b1dec98cc58321 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Amounts paid for [retroactive reinsurance](https://asc.understandingaccounting.org/glossary/r/#retroactive-reinsurance "Reinsurance in which an assuming entity agrees to reimburse a ceding entity for liabilities incurred as a result of past insurable events covered under contracts subject to the reinsurance. A reinsurance contract may include both prospective and retroactive reinsurance provisions.") of short-duration contracts that meets the conditions for reinsurance accounting shall be reported as [reinsurance recoverables](https://asc.understandingaccounting.org/glossary/r/#reinsurance-recoverable "All amounts recoverable from reinsurers for paid and unpaid claims and claim settlement expenses, including estimated amounts receivable for unsettled claims, claims incurred but not reported, or policy benefits.") to the extent those amounts do not exceed the recorded liabilities relating to the underlying reinsured contracts. If the recorded liabilities exceed the amounts paid, reinsurance recoverables shall be increased to reflect the difference and the resulting gain deferred. ##### [605-944-25-23](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-23) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:26f0e15d0547385c66010c78b4842ed72a9fc1f813a0e5bc0f8e83973fb749fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the amounts paid for retroactive reinsurance for short-duration contracts exceed the recorded liabilities relating to the underlying reinsured short-duration contracts, the ceding entity shall increase the related liabilities or reduce the reinsurance recoverable or both at the time the reinsurance contract is entered into, so that the excess is charged to earnings. ##### [605-944-25-24](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-24) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:62d79949e4a81a5670f5e98d60d539fea3e4f9c84211fee789b64ef0f2a60084 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ### Financial Guarantee Insurance Contracts ##### [605-944-25-25](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-25) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:27b7d013d8d0c8b2f055c8e2862d9d5f3613fbb83ad8fc5f4c82efc092e625f6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance entity shall recognize a liability for the unearned premium revenue at the inception of a financial guarantee insurance contract. The unearned premium revenue represents the insurance entity's stand-ready obligation under a financial guarantee insurance contract at initial recognition. ##### [605-944-25-26](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-26) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:add511fcb941f4d6414edf9de9d962427c1e125b0f4ac98cf16edc01206cbe94 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance entity shall recognize the premium from a financial guarantee insurance contract as revenue over the period of the contract in proportion to the amount of insurance protection provided with a corresponding adjustment (decrease) in the unearned premium revenue. ##### [605-944-25-27](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-27) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:05dab8dcee8b8a8885f64e8d5f49db43ac0d659831516d0a28cb47854a20e960 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amount of insurance protection provided is assumed to be a function of the insured principal amount outstanding. Therefore, the proportionate share of premium revenue to be recognized in a given reporting period shall be a constant rate calculated based on the relationship between the following: 1. a The insured principal amount outstanding in a given reporting period 2. b The sum of each of the insured principal amounts outstanding for all periods. ##### [605-944-25-28](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-28) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:63d944fd30aaa713e5967dd4daf96c4bf7f6f1914e48425041bdedae02dbb5ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Accordingly, the premium revenue for each reporting period shall be determined by multiplying the insured principal amount outstanding for that period by the ratio of (a) to (b): 1. a The total present value of the premium due or expected to be collected over the period of the contract 2. b The sum of all insured principal amounts outstanding during each reporting period over the period of the contract (either contract period or expected period). Example 2 (see paragraph [944-605-55-17](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-17)) illustrates the application of this guidance. ##### [605-944-25-29](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-29) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:5dbb9e847665d7e9d51f026744e33ac78b8d818d12f8d83204e3d9e52677b053 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an insured financial obligation accretes to the principal amount over its life and has a single principal payment at maturity, the sum of all insured accreted principal amounts outstanding during each reporting period shall be used as the denominator of the ratio and the insured principal amount outstanding is the accreted principal amount outstanding. Example 3 (see paragraph [944-605-55-19](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-19)) illustrates the application of this guidance. ##### [605-944-25-30](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-30) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:b0510727f9bd14e3000f947b93828b9e493f5b84b69dfa9a3574116d0198b1aa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the following paragraph applies if both of the following conditions exist: 1. a An expected period is used as discussed in paragraph [944-310-30-3](https://asc.understandingaccounting.org/asc/310/944/#310-944-30-3) 2. b The expected period changes due to changes in prepayment assumptions. ##### [605-944-25-31](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-31) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:0a9263683ba5d28307386f7600a02fa5ca8eb98d98b18aeae695f3685942fd96 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the conditions in the preceding paragraph are met, the insurance entity shall recalculate the constant rate based on the new prepayment assumptions (and current risk-free rate) and apply that new constant rate to the principal amounts outstanding for the remaining expected period of the contract. Example 1 in Section 944-310-55 (see paragraph [944-310-55-1](https://asc.understandingaccounting.org/asc/310/944/#310-944-55-1)) illustrates the application of this guidance. #### Early Retirement and Replacement of an Insured Financial Obligation ##### [605-944-25-32](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-32) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:5028a619127f54fe68ba1260aa4a7017af11bf19c37b53fb26ca5c8b652b1559 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In a refunding, the financial guarantee insurance contract on the retired financial obligation is extinguished—that is, the financial guarantee insurance contract must be extinguished to be considered a refunding for purposes of this paragraph. The insurance entity shall immediately recognize any nonrefundable unearned premium revenue related to that contract as premium revenue and any associated acquisition costs previously deferred under Subtopic 944-30 as an expense. ##### [605-944-25-33](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-33) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:29.001Z to 2026-09-10T00:49:29.001Z Record version: sha256:22ec964b33d0eeeb5c5846ebfa0ec7c410ef4daef4bc77ed7c9f33a65e81b7f9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the insurance entity insures the new financial obligation, the insurance entity shall recognize the unearned premium revenue on the new financial obligation that is commensurate with the premium it would charge to insure a similar financial obligation in a separate (standalone) transaction. If that premium differs from the premium actually charged, the difference shall be recognized in current earnings. Example 4 (see paragraph [944-605-55-22](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-22)) illustrates the application of this guidance. Source downloaded (UTC): 2026-09-10T00:49:31.248Z to 2026-09-10T00:49:31.248Z Record version: sha256:8a97ae5f311f8862343e661b2174b453795d4532f35cace46d75592de9466c19 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 605-944-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/605/944/#30-initial-measurement) SEC content: no ### Long-Duration Contracts #### Universal Life-Type Contracts with Death or Other Insurance Benefit Features ##### [605-944-30-1](https://asc.understandingaccounting.org/asc/605/944/#605-944-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:31.248Z to 2026-09-10T00:49:31.248Z Record version: sha256:a552d9407514c3f9fb305c21dc64c4d4dfbd27bffd943cd31b3950ce9281cb96 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A liability for unearned revenue to be recognized under paragraphs [944-605-25-5 through 25-7](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-5) and [944-605-25-9 through 25-10](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-9) shall be measured initially as the portion of such assessments that compensates the insurance entity for benefits to be provided in future periods. ##### [605-944-30-2](https://asc.understandingaccounting.org/asc/605/944/#605-944-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:31.248Z to 2026-09-10T00:49:31.248Z Record version: sha256:f426a3d19c85bb56d5d99db1f522fa5b4ecc80e69e97384939d43a5796afd9a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For contracts in which assessments are collected over a period significantly shorter than the period for which the contract is subject to [mortality](https://asc.understandingaccounting.org/glossary/m/#mortality "The relative incidence of death in a given time or place.") and [morbidity](https://asc.understandingaccounting.org/glossary/m/#morbidity "The relative incidence of disability due to disease or physical impairment.") risks, the assessment would be considered a [front-end fee](https://asc.understandingaccounting.org/glossary/f/#front-end-fees "See Initiation or Front-End Fees.") and accounted for under paragraphs [944-605-25-6 through 25-7](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-6) . The amounts amortized into income shall be considered assessments for purposes of this paragraph. #### Limited-Payment Contracts ##### [605-944-30-2A](https://asc.understandingaccounting.org/asc/605/944/#605-944-30-2A) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:31.248Z to 2026-09-10T00:49:31.248Z Record version: sha256:d0ca2a06422ba60ac6ecf32012b283ec65c1eea0bb003a60bd742de89ae9a305 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Assumptions used in measuring any [gross premium](https://asc.understandingaccounting.org/glossary/g/#gross-premium "The premium charged to a policyholder for an insurance contract. See also Net Premiums.") deferred in accordance with paragraph [944-605-25-4A](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-4A) (that is, the deferred profit liability) shall be consistent with those used in estimating the [liability for future policy benefits](https://asc.understandingaccounting.org/glossary/l/#liability-for-future-policy-benefits "An accrued obligation to policyholders that relates to insured events, such as death or disability.") as described in paragraph [944-40-30-7](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-7). #### Retrospective and Contingent Commission Arrangements ##### [605-944-30-3](https://asc.understandingaccounting.org/asc/605/944/#605-944-30-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:31.248Z to 2026-09-10T00:49:31.248Z Record version: sha256:1af4e8deb97c13fcbf4ad88e07b1cfa5489ce128fed0e94112c2ee21ecd260a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The liability recognized under paragraph [944-605-25-14](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-14) shall be based on experience and the provisions of the contract. ### Reinsurance Contracts #### Reinsurance of Long-Duration Contracts ##### [605-944-30-4](https://asc.understandingaccounting.org/asc/605/944/#605-944-30-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:31.248Z to 2026-09-10T00:49:31.248Z Record version: sha256:c8c22e960f6abaf59552d481411c9e7fd542f748182d37781b019cf6fec4cb1f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The difference, if any, between amounts paid for a [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.") contract and the amount of the liabilities for policy benefits relating to the underlying reinsured contracts is part of the estimated cost to be amortized. ### Financial Guarantee Insurance Contracts ##### [605-944-30-5](https://asc.understandingaccounting.org/asc/605/944/#605-944-30-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:31.248Z to 2026-09-10T00:49:31.248Z Record version: sha256:dc7378f2f1c7500919f0387dc399db521f6e3b70223ca3abd42d00dd71a5c9c3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Initial measurement of the unearned premium revenue recognized under paragraph [944-605-25-25](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-25) shall be equal to the present value of either of the following: 1. a If the criteria in paragraph [944-310-30-3](https://asc.understandingaccounting.org/asc/310/944/#310-944-30-3) are met and used, the premiums expected to be collected over the period of the financial guarantee insurance contract 2. b If the criteria in paragraph [944-310-30-3](https://asc.understandingaccounting.org/asc/310/944/#310-944-30-3) are not met, the premiums due. ##### [605-944-30-6](https://asc.understandingaccounting.org/asc/605/944/#605-944-30-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:31.248Z to 2026-09-10T00:49:31.248Z Record version: sha256:22abafa39eba86d812a3f275e01cc7235bdf2899cb78fb0df55d40daa746fdea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the premium is a single premium received at the inception of the financial guarantee insurance contract, the insurance entity shall initially measure the unearned premium revenue at the amount received. ##### [605-944-30-7](https://asc.understandingaccounting.org/asc/605/944/#605-944-30-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:31.248Z to 2026-09-10T00:49:31.248Z Record version: sha256:03bfb861cdba49bf3611724bca3b766e01e1e4740af45831d497973689d92556 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the premiums are received as payments over the period of the financial guarantee insurance contract, the insurance entity shall initially measure the unearned premium revenue at an amount equal to the present value of the premiums due or expected to be collected over the period of the financial guarantee insurance contract. Example 1 (see paragraph [944-605-55-16](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-16)) illustrates the application of this paragraph. Paragraph [944-310-30-2](https://asc.understandingaccounting.org/asc/310/944/#310-944-30-2) provides guidance on the discount rate and the period used. Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:25ab330c177b4c7f479256ba48612c69f53d2f99150a21bd295f46384811aa70 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 605-944-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/605/944/#35-subsequent-measurement) SEC content: no ### Long-Duration Contracts #### Limited-Payment Contracts ##### [605-944-35-1](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:d926a2d2ffd677ceddb33ecd75824695a36903df4b9a86efd4ca4bac0f744a0a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Any [gross premium](https://asc.understandingaccounting.org/glossary/g/#gross-premium "The premium charged to a policyholder for an insurance contract. See also Net Premiums.") deferred in accordance with paragraph [944-605-25-4A](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-4A)(that is, the deferred profit liability) shall be recognized in income in a constant relationship with insurance [in force](https://asc.understandingaccounting.org/glossary/i/#in-force "Policies and contracts written and recorded on the books of an insurance carrier that are unexpired as of a given date.") (if accounting for life insurance contracts) or with the amount of expected future benefit payments (if accounting for annuity contracts). ##### [605-944-35-1A](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-1A) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:86990d44b3783648a19c8a949246085403ecbc9143a4073501435206661ce647 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The deferred profit liability shall be amortized in relation to the discounted amount of the insurance in force or expected future benefit payments, discounted as described in paragraph [944-40-30-9](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-9), and interest shall accrue to the unamortized balance. The use of interest in the amortization is consistent with the determination of the deferred profit using discounting. ##### [605-944-35-1B](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-1B) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:8f8625e1e3c5634e989aedabd38017faca02ed31076cd930a9f3d075652b1eaa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Assumptions shall be updated in subsequent accounting periods to determine changes in the deferred profit liability, contemporaneously with the updating of assumptions for the corresponding [liability for future policy benefits](https://asc.understandingaccounting.org/glossary/l/#liability-for-future-policy-benefits "An accrued obligation to policyholders that relates to insured events, such as death or disability.") (see paragraph [944-40-35-5](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-5)). Cash flow assumptions shall be reviewed—and if there is a change, updated—on an annual basis, at the same time every year. Cash flow assumptions shall be updated in interim reporting periods if evidence suggests that earlier cash flow assumptions should be revised. The interest accretion rate shall remain the original discount rate used at contract issue date. ##### [605-944-35-1C](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-1C) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:27e818b16c5da2dfedf8681a8faa4a1166e280b7c4de9024c9815cecfffe4b67 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A related charge or credit to net income for the current reporting period as a result of updating cash flow assumptions at the level of aggregation at which reserves are calculated shall be determined as follows: 1. a Cash flow assumptions used to calculate the deferred profit liability at contract issuance shall be updated in subsequent periods using actual historical experience and updated future cash flow assumptions. 2. b The recalculated deferred profit liability as of the contract issue date shall be subsequently amortized in accordance with paragraph [944-605-35-1A](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-1A) to derive the revised deferred profit liability estimate as of the beginning of the current reporting period. 3. c The revised deferred profit liability estimate calculated in (b) shall be compared with the carrying amount of the deferred profit liability as of the beginning of the current reporting period to determine the change in estimate adjustment to be recognized in net income for the current reporting period (see paragraph [944-40-45-4](https://asc.understandingaccounting.org/asc/944/40/#944-40-45-4)). #### Universal Life-Type Contracts ##### [605-944-35-2](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:a982dcff919a2bd2d33b25917d9f74289c68a6bd301c4abe91bdd5b785acdb19 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Amounts recognized as unearned revenue under paragraph [944-605-25-6](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-6) shall be recognized in income over the period benefited using the same assumptions and factors used to amortize capitalized [acquisition costs](https://asc.understandingaccounting.org/glossary/a/#acquisition-costs "Costs that are related directly to the successful acquisition of new or renewal insurance contracts.") under the [Long-Duration Contracts Subsection](https://asc.understandingaccounting.org/asc/944/30/#35-subsequent-measurement) of Section 944-30-35. ##### [605-944-35-3](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:1b6b2a30c86104e173985e67a612c7883836c80d97f73457dfe7eeb71d7bf5e2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ### Reinsurance Contracts #### Foreign Property and Liability Reinsurance—Open Year Method ##### [605-944-35-4](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:92f655171411e421cea5fd6c1749adfbe3b1b3698e238dedf6e3e1dce12c7bc0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [944-605-25-17](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-17) explains that only if reasonable estimates cannot be made currently for the reason discussed in paragraph [944-605-25-18](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-18), shall the [open year method](https://asc.understandingaccounting.org/glossary/o/#open-year-method "A revenue recognition method under which underwriting results of foreign reinsurance are not included in the income statement until sufficient information becomes available to provide reasonable estimates of earned premiums.") be used. ##### [605-944-35-5](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:708cbca0b8f17c45a3febc33328b9356c3fc4b5013f8f32fbdb8498cbb9d752d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under the open year method, underwriting results of foreign [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.") shall not be included in the income statement until sufficient information becomes available to provide reasonable estimates of earned premiums. Instead, premiums, claims, commissions, and related direct taxes shall be included in the open underwriting balance to which they pertain. The underwriting balances shall be aggregated and each underwriting balance shall be kept open until sufficient information becomes available to record a reasonable estimate of earned premiums. ##### [605-944-35-6](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:11ddea3578bf55476812117d52fa55ca7cec8db7c67d6e73f551ed19afa95f93 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The underwriting balance aggregated under the preceding paragraph shall be disaggregated and reported in the income statement as premiums, claims, commissions, and related direct taxes when earned premiums are reasonably determinable. ##### [605-944-35-7](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:623a983e66fa7f5d5730c034c37d2144cb6d0caffe705cb5f19aa7b674b63387 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If it becomes [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") that a loss has been incurred before an underwriting balance is closed, a provision for the loss shall be recorded. Examples of situations in which a provision may need to be recorded before an underwriting balance is closed include catastrophic losses, higher-than-expected [claim](https://asc.understandingaccounting.org/glossary/c/#claim "A demand for payment of a policy benefit because of the occurrence of an insured event.") frequency, significant unanticipated adverse events, or a negative open year account. #### Reinsurance of Short-Duration Contracts ##### [605-944-35-8](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:b3eb0ddb230ec71dc5ce1336b9f523fe26a358adb30c6028fe0c758bb85d1c6a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Prepaid reinsurance premiums](https://asc.understandingaccounting.org/glossary/p/#prepaid-reinsurance-premiums "Amounts paid to the reinsurer relating to the unexpired portion of reinsured contracts.") recognized under paragraph [944-605-25-20](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-20) shall be amortized over the remaining [contract period](https://asc.understandingaccounting.org/glossary/c/#contract-period "The period over which insured events that occur are covered by insurance or reinsurance contracts. Commonly referred to as the coverage period or period that the contracts are in force.") in proportion to the amount of insurance protection provided. If the amounts paid are subject to adjustment and can be reasonably estimated, the basis for amortization shall be the estimated ultimate amount to be paid. ##### [605-944-35-9](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:fb63c1aaa04bb66a4630b3188d35766bd447084241ef4c9d307e4ac068783db3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Any gain deferred under paragraph [944-605-25-22](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-22) shall be amortized over the estimated remaining [settlement period](https://asc.understandingaccounting.org/glossary/s/#settlement-period "The estimated period over which a ceding entity expects to recover substantially all amounts due from the reinsurer under the terms of the reinsurance contract."). If the amounts and timing of the reinsurance recoveries can be reasonably estimated, the deferred gain shall be amortized using the effective interest rate inherent in the amount paid to the [reinsurer](https://asc.understandingaccounting.org/glossary/r/#reinsurer "The assuming entity in a reinsurance transaction.") and the estimated timing and amounts of recoveries from the reinsurer; that is, the interest method. Otherwise, the proportion of actual recoveries to total estimated recoveries (the recovery method) shall determine the amount of amortization. ##### [605-944-35-10](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:8531606c224b4b89c26ae75539ce73ee0b7bc3bfe9e1a06f73b772ac97e4f84a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Amortization of deferred amounts arising from [retroactive reinsurance](https://asc.understandingaccounting.org/glossary/r/#retroactive-reinsurance "Reinsurance in which an assuming entity agrees to reimburse a ceding entity for liabilities incurred as a result of past insurable events covered under contracts subject to the reinsurance. A reinsurance contract may include both prospective and retroactive reinsurance provisions.") under both the interest method and the recovery method is based on the ceding entity's estimates of the expected timing and total amount of cash flows. The timing of changes in those estimates shall not alter the recognition of the revenues and costs of reinsurance. Therefore, changes in estimates of the amount recoverable from the reinsurer shall be accounted for consistently both at the inception of and after the reinsurance transaction. ##### [605-944-35-11](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:59729484b4ff550e5d8a561ea80c3ce3041546f192918b405af5314796db488c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Changes in the estimated amount of the liabilities relating to the underlying reinsured contracts shall be recognized in earnings in the period of the change. ##### [605-944-35-12](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:c793cd7ffe57fdbf62109dc89f9d18980441ca9e150ee20c110634ce502e1d6a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Reinsurance recoverables](https://asc.understandingaccounting.org/glossary/r/#reinsurance-recoverable "All amounts recoverable from reinsurers for paid and unpaid claims and claim settlement expenses, including estimated amounts receivable for unsettled claims, claims incurred but not reported, or policy benefits.") shall reflect the related change in the amount recoverable from the reinsurer, and a gain to be deferred and amortized, as described in paragraph [944-605-25-22](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-22), shall be adjusted or established as a result. Decreases in the estimated amount of the liabilities shall reduce the related amount recoverable from the reinsurer and accordingly reduce previously deferred gains. ##### [605-944-35-13](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-13) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:b2165142a7a7f8279774c6f6f7dc1939b38b63569dffaf401e757b5ca20a34fe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When changes in the estimated amount recoverable from the reinsurer or in the timing of receipts related to that amount occur, a cumulative amortization adjustment shall be recognized in earnings in the period of the change so that the deferred gain reflects the balance that would have existed had the revised estimate been available at the inception of the reinsurance transaction. However, if the revised estimate of the liabilities is less than the amounts paid to the reinsurer, a loss shall not be deferred. The resulting difference shall be recognized in earnings immediately, as described in paragraph [944-605-25-23](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-23). #### Reinsurance of Long-Duration Contracts ##### [605-944-35-14](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-14) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:ce35b8de578645e187f244d80bcbdca38e92c5c25ae695e3ff05b82522ec9a8b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Amortization of the estimated cost of reinsurance of long-duration contracts that meets the conditions for reinsurance accounting depends on whether the reinsurance contract is long-duration or short-duration. The cost shall be amortized over the remaining life of the underlying reinsured contracts if the reinsurance contract is long-duration, or over the contract period of the reinsurance if the reinsurance contract is short-duration. ##### [605-944-35-15](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-15) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:0e5b6060ec70f78d4eaa0bd2dacee05a9a2db2eea7cbd9b8dcdf4d15c3a8fb5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The assumptions used in accounting for reinsurance costs shall be consistent with those used for the reinsured contracts. ### Financial Guarantee Insurance Contracts ##### [605-944-35-16](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-16) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:33.589Z to 2026-09-10T00:49:33.589Z Record version: sha256:a0171d151a48d405c676ea3130f0fa8f0077fa9b38ee970b7a4985ad7e047249 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In instances where a contract period is used as the period of the financial guarantee insurance contract to measure the unearned premium revenue an insurance entity shall adjust the unearned premium revenue to reflect early principal payments as they occur. The adjustment to the unearned premium revenue shall equal the adjustment to the premium receivable. Source downloaded (UTC): 2026-09-10T00:49:36.452Z to 2026-09-10T00:49:36.452Z Record version: sha256:8640e36eb338cf93eaea0598681a02764c6efb80d5c699b1332cd46d95474a28 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 605-944-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/605/944/#45-other-presentation-matters) SEC content: no ### Reinsurance Contracts #### All Reinsurance Contracts ##### [605-944-45-1](https://asc.understandingaccounting.org/asc/605/944/#605-944-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:36.452Z to 2026-09-10T00:49:36.452Z Record version: sha256:c26f57f8f8b15abbb9a5d5af38fc3d3bda57f99040de929d8b42319c4045ae3d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amounts of earned premiums ceded and recoveries recognized under [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 shall either be: 1. a Reported in the statement of earnings, as separate line items or parenthetically 2. b Disclosed in the notes to financial statements under paragraph [944-605-50-1](https://asc.understandingaccounting.org/asc/605/944/#605-944-50-1). Source downloaded (UTC): 2026-09-10T00:49:39.778Z to 2026-09-10T00:49:39.778Z Record version: sha256:4d5ac361fc8f2b65e79635a8dd8469ae0ce6d1a6ae6864ab3771a60388dc815b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 605-944-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/605/944/#50-disclosure) SEC content: no ### Reinsurance Contracts #### All Reinsurance Contracts ##### [605-944-50-1](https://asc.understandingaccounting.org/asc/605/944/#605-944-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:39.778Z to 2026-09-10T00:49:39.778Z Record version: sha256:9b4ef8d61df509a5b4a509081d6294fd02837795c5a080fd4c435197b72ff85b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All insurance entities shall disclose all of the following in their financial statements: 1. a For all [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, both of the following: 1. 1 Methods used for income recognition on reinsurance contracts 2. 2 If not reported under paragraph [944-605-45-1](https://asc.understandingaccounting.org/asc/605/944/#605-944-45-1) in the statement of earnings, as separate line items or parenthetically, the amounts of earned premiums ceded and recoveries recognized under reinsurance contracts. 2. b For short-duration contracts, all of the following on both a written basis and an earned basis: 1. 1 Premiums from direct business 2. 2 Reinsurance assumed 3. 3 Reinsurance ceded. 3. c For long-duration contracts, all of the following: 1. 1 Premiums and amounts assessed against policyholders from direct business 2. 2 Reinsurance assumed and ceded 3. 3 Premiums and amounts earned. 4. d For foreign reinsurance accounted for by the [open year method](https://asc.understandingaccounting.org/glossary/o/#open-year-method "A revenue recognition method under which underwriting results of foreign reinsurance are not included in the income statement until sufficient information becomes available to provide reasonable estimates of earned premiums."), all of the following shall be disclosed for each period for which an income statement is presented: 1. 1 The amounts of premiums, claims, and expenses recognized as income on closing underwriting balances 2. 2 The additions to underwriting balances for the year for reported premiums, claims, and expenses. 5. e The amounts of premiums, claims, and expenses in the underwriting account for each balance sheet presented. ##### [605-944-50-2](https://asc.understandingaccounting.org/asc/605/944/#605-944-50-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:39.778Z to 2026-09-10T00:49:39.778Z Record version: sha256:0071ee962ea9cee160d3c192ef213a615018727c2cbdafe7412d95243bedb947 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Appropriate disclosure of both of the following items is encouraged: 1. a The extent to which reinsurance contracts indemnify the [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.") against loss or liability relating to [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.") 2. b Indemnification policies as part of the required disclosure in the preceding paragraph about the nature and effect of reinsurance transactions. ##### [605-944-50-3](https://asc.understandingaccounting.org/asc/605/944/#605-944-50-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:39.778Z to 2026-09-10T00:49:39.778Z Record version: sha256:2fcddba75365d7b74f09443cfccf8d63ac5df2cbc1282723418d3d2791b4cddb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Disclosure in the financial statements of an insurance entity's accounting policies under Topic 250 shall include a description of the methods used to account for foreign reinsurance. ### Financial Guarantee Insurance Contracts ##### [605-944-50-4](https://asc.understandingaccounting.org/asc/605/944/#605-944-50-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:39.778Z to 2026-09-10T00:49:39.778Z Record version: sha256:068e1aa2fbe6871b99336f9881acdf06aa4d7a0d3f9659493d1b39335495c932 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To meet the disclosure objective in paragraph [944-20-50-7](https://asc.understandingaccounting.org/asc/944/20/#944-20-50-7), an insurance entity shall disclose all of the following information for each annual period and interim period: 1. a For premium revenue recognition that has been accelerated, the amount and reasons for acceleration 2. b A schedule of the future expected premium revenue as of the latest date of the statement of financial position detailing both of the following: 1. 1 The four quarters of the subsequent annual period and each of the next four annual periods 2. 2 The remaining periods aggregated in five-year increments. Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:ff651245d2e9066870dedd533e4f755b2afa5703f2324ea30d49286a8e4fd2ad Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 605-944-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/605/944/#55-implementation-guidance-and-illustrations) SEC content: no ### Reinsurance Contracts #### Implementation Guidance ##### [605-944-55-1](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:dbbacc18befcc0ec44a0b835c3ecb24d2ea807cc432aa58929545f9e27b878e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a [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.") contract provides the ceding entity's policyholders and claimants with the right to recover their claims directly from the [reinsurer](https://asc.understandingaccounting.org/glossary/r/#reinsurer "The assuming entity in a reinsurance transaction.") (a cut-through provision), the [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.") shall not net the recoverable due from the reinsurer against the gross loss obligations on the underlying insurance contracts. As stated in paragraphs [944-20-40-3 through 40-4](https://asc.understandingaccounting.org/asc/944/20/#944-20-40-3) , reinsurance contracts in which a ceding entity is not relieved of its legal liability to its policyholder do not result in removal of the related assets and liabilities from the ceding entity's financial statements. Amounts recoverable and payable between the ceding entity and a reinsurer may be offset only if a right of setoff exists, as defined in Subtopic 210-20. ##### [605-944-55-2](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:96bfb9b0149d6a16601733d47b37c9dde45ba7d5cd892318a474b90910237586 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Similarly, if the circumstances discussed in the preceding paragraph involved [retroactive reinsurance](https://asc.understandingaccounting.org/glossary/r/#retroactive-reinsurance "Reinsurance in which an assuming entity agrees to reimburse a ceding entity for liabilities incurred as a result of past insurable events covered under contracts subject to the reinsurance. A reinsurance contract may include both prospective and retroactive reinsurance provisions.") of short-duration insurance policies that resulted in a gain to the ceding entity, the gain shall not be recognized in income immediately. Paragraph [944-40-25-33](https://asc.understandingaccounting.org/asc/944/40/#944-40-25-33) states that reinsurance contracts do not result in immediate recognition of gains unless the reinsurance contract is a legal replacement of one insurer by another and thereby extinguishes the ceding entity's liability to the policyholder. ##### [605-944-55-3](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:8dd3f790057840ef9c4ce7b4dd49e9ab7ab739b31845a75e2e94f89d28e0092a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under the definition of [settlement period](https://asc.understandingaccounting.org/glossary/s/#settlement-period "The estimated period over which a ceding entity expects to recover substantially all amounts due from the reinsurer under the terms of the reinsurance contract."), if the ceding entity does not expect to receive any recoveries because the reinsurer has agreed to reimburse claimants under the reinsured contracts directly, the settlement period shall not be considered to have ended on the effective date of the contract. Unless the reinsurance contract results in legal replacement of one reinsurer by another, a gain shall not be recognized at the inception of the contract. In the circumstances discussed in paragraph [944-605-55-1](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-1) the reinsurer is substantively acting as disbursing agent for the ceding entity. Therefore, the ceding entity cannot be said to have recovered amounts due from the reinsurer before payment is made to the claimant. ##### [605-944-55-4](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:727dba4d8210605e6c960936dea06825ea295fcdc415b917d01042ea8dce61f3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This implementation guidance addresses circumstances in which a ceding entity enters into a retroactive contract to reinsure short-duration insurance policies that gives rise to a deferred gain. Specifically, it addresses whether, if the reinsurer prepays its obligation under the contract, the ceding entity may recognize its deferred gain at the time the prepayment is received. ##### [605-944-55-5](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:7c9971ab6690b066ac9c4471dfcc72cb8c3110b4c80553acb90825a8b3d0ee06 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amortization period (the settlement period) is based on the period over which the reinsurer settles its obligations to the ceding entity, and it may be appropriate to recognize the gain over the expected prepayment period. However, all of the facts and circumstances shall be considered to determine whether the reinsurer has substantively settled its obligation to the ceding entity. For example, if the ceding entity agrees to compensate the reinsurer for the prepayment, such as by crediting the reinsurer with investment income on prepaid amounts or balances held, the reinsurer has not, in substance, settled its obligation but rather has made a deposit with the ceding entity that shall be accounted for accordingly. #### Illustrations ##### [605-944-55-6](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:f1f6c81beb3d41485e02af09ed17920b7fff98c5b6cbc4be029c2ba8954190f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Cases illustrate how the requirement in paragraphs [944-605-25-22 through 25-23](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-22) that gains arising from retroactive reinsurance be deferred and losses be charged to expense immediately is affected by the requirements in paragraphs [944-605-35-11 through 35-13](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-11) for a catch-up adjustment to reflect changes in estimates of amounts recoverable from reinsurers: 1. a Adverse development occurs (Case A) 2. b Favorable development occurs (Case B). ##### [605-944-55-7](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:8663d6370ef55ef720a013b432f85c4958ad816511434bb98a56d4df1a5ea180 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cases A and B share all of the following assumptions: 1. a Entity A pays $100 of premium in 1993 for $150 limit of retroactive reinsurance. 2. b Entity A has recorded related liabilities of $110. 3. c There is a 5-year settlement period. 4. d At inception, Entity A recorded a reinsurance recoverable of $110 and a deferred gain of $10. ##### [605-944-55-8](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:e7a7c7152600f1d7b9bd54908ea415f5f1496a2576d42e652d9fc0bdaa535729 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an adverse development of $30 occurred in the first year, paragraphs [944-605-35-11 through 35-13](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-11) require an adjustment to bring the balance of the deferred gain to the balance that would have existed had the revised estimate been available at inception, less cumulative amortization. The balance that would have existed at inception is $40 ($140 reserves less $100 premium) and cumulative amortization to date is $8 ($40/5 years). Therefore, a net $32 deferred gain balance is required. Entity A would defer $30 of additional gain ($40 less the $10 already recorded) and credit income for $8 amortization. Straight-line amortization is used for simplicity of illustration rather than the interest method or recovery method as required by paragraph [944-605-35-9](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-9). ##### [605-944-55-9](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:7e8ba19e02f4c9d8272584805f000a6bb19d1b136d2d1cdfc7b4caf346865a32 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a favorable development of $15 occurred in the first year, the amount of ceded premiums ($100) would exceed the related revised liabilities ($95). Paragraphs [944-605-35-11 through 35-13](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-11) state that decreases in the estimated amount of the liabilities reduce the related amount recoverable and reduce previously deferred gains. Further, if the revised estimate of the liabilities is less than the amounts paid to the reinsurer, the difference shall be charged to earnings. Entity A would therefore reduce the reinsurance recoverable by $15, reduce the $10 deferred gain to zero, and charge $5 to earnings. ##### [605-944-55-10](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:c4b26c86eebc3c244bcb0c5625dcbba34c04ee6457229751efa22c1916399aaf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the application of the requirements in the Reinsurance Contracts Subsections of this Subtopic to a property-casualty insurance entity (Property-Casualty Insurance Entity) that issues short-duration contracts. ##### [605-944-55-11](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:536600d158c8e8169d18dcf132c18deacc12d4af7d00dc218a3cdeee19381517 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Property-Casualty Insurance Entity's statement of financial position follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-53703E17-A6A9-48A4-88A2-9B47DCEA0275-low.gif) Property-Casualty Insurance Entity Statement of Financial Position (in millions) Gross Assets: Investments " $8,500 " Cash 20 Reinsurance recoverables (a) " 1,400 " Receivables " 1,900 " Deferred policy acquisition costs 300 Prepaid reinsurance premiums (b) 250 Other assets " 1,400 " Total assets " $13,770 " Liabilities and equity: Liabilities for claims and claim settlement expenses " $7,600 " Unearned premiums " 1,700 " Other liabilities " 2,300 " Equity " 2,170 " Total liabilities and equity " $13,770 " Property-Casualty Insurance Entity Statement of Earnings (in millions) Gross Revenues: Premiums earned " $3,350 " Premiums ceded (c) (450) Net premiums earned " 2,900 " Net investment income " 1,700 " Other revenues 400 Total revenues " 5,000 " Expenses: Claims and claim settlement expenses " 2,200 " Reinsurance recoveries (c) (300) Net claims and claim settlement expenses " 1,900 " Policy acquisition costs " 1,450 " Other expenses " 1,150 " Total expenses " 4,500 " Earnings before tax $500 $500 1. a The Reinsurance Contracts Subsections of this Subtopic require that estimated amounts recoverable from reinsurers include amounts related to paid and unpaid claims and claims incurred but not reported. Details of the amounts comprising reinsurance recoverables may be presented separately. 2. b [Prepaid reinsurance premiums](https://asc.understandingaccounting.org/glossary/p/#prepaid-reinsurance-premiums "Amounts paid to the reinsurer relating to the unexpired portion of reinsured contracts.") include amounts paid to reinsurers relating to the unexpired portion of reinsured policies, often referred to as ceded unearned premiums. 3. c Alternatively, the effect of reinsurance on premiums earned and [claim](https://asc.understandingaccounting.org/glossary/c/#claim "A demand for payment of a policy benefit because of the occurrence of an insured event.") costs may be shown parenthetically or may be disclosed. An illustration of a parenthetical presentation follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-06D5B046-120F-441A-963B-838E9F3E7791-low.gif) Premiums earned (net of premiums ceded totaling $450) " $2,900 " Claims and claim settlement expenses (net of reinsurance recoveries totaling $300) " $1,900 " ##### [605-944-55-12](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:61fa84c012c09ff47c3f6c0986e319ca1ba2d214e2465c606781b3fa472403d5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Property-Casualty Insurance Entity's related notes to financial statements follow. - Property-Casualty Insurance Entity— Notes to Financial Statements - Summary of Significant Accounting Policies - In the normal course of business, the Entity seeks to reduce the loss that may arise from catastrophes or other events that cause unfavorable underwriting results by reinsuring certain levels of risk in various areas of exposure with other insurance entities or reinsurers. - Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policy. The amount by which the liabilities associated with the reinsured policies exceed the amounts paid for retroactive reinsurance contracts is amortized in income over the estimated remaining settlement period using the interest method. The effects of subsequent changes in estimated or actual cash flows are accounted for by adjusting the previously deferred amount to the balance that would have existed had the revised estimate been available at the inception of the reinsurance transactions, with a corresponding charge or credit to income. - Reinsurance - Reinsurance contracts do not relieve the Entity from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Entity; consequently, allowances are established for amounts deemed uncollectible. The Entity evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. At December 31, 19X3, reinsurance recoverables with a carrying value of $260 million and prepaid reinsurance premiums of $45 million were associated with a single reinsurer. The Entity holds collateral under related reinsurance agreements in the form of letters of credit totaling $150 million that can be drawn on for amounts that remain unpaid for more than 120 days. - The effect of reinsurance on premiums written and earned is as follows (in millions). - ![](https://asc.understandingaccounting.org/asc-img/GUID-07E63250-7E72-403C-84C4-FB33FF7292DE-low.gif) Written Earned Direct " $2,880 " " $2,730 " Assumed 630 620 Ceded (470) (450) Net premiums " $3,040 " " $2,900 " ##### [605-944-55-13](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-13) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:22a30e548ef14a29214bdd2d01a16cc359d90f2f1c2356e014eba426e1008328 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the application of the requirements in the Reinsurance Contracts Subsections of this Subtopic to a [life insurance entity](https://asc.understandingaccounting.org/glossary/l/#life-insurance-entity "An entity that can issue annuity, endowment, and accident and health insurance contracts as well as life insurance contracts. Life insurance entities may be either stock or mutual entities.") (Life Insurance Entity) that issues long-duration contracts. ##### [605-944-55-14](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-14) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:ced874c07f9b7ab4bfc89f5faeedcb3321fceea0ef5c406dc9e0697d57c07098 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Life Insurance Entity's statement of financial position follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-999EA1A0-73DC-4452-BB9E-D0D632C73C1E-low.gif) Life Insurance Entity Statement of Financial Position (in millions) Gross Assets: Investments " $13,100 " Cash 20 Receivables: Reinsurance (a) " 1,400 " Other " 1,900 " Deferred policy acquisition costs 300 Other assets " 1,400 " Total assets " $18,120 " Liabilities and equity: Liability for policy benefits " $7,200 " Policyholders' contract deposits " 5,000 " Other liabilities " 3,750 " Equity " 2,170 " Total liabilities and equity " $18,120 " Life Insurance Entity Statement of Earnings (in millions) Gross Revenues: Premiums and policyholder fees earned " $3,350 " Premiums ceded (b) (450) Net premiums and policyholder fees earned " 2,900 " Net investment income " 1,700 " Other revenues 400 Total revenues " 5,000 " Expenses: Policyholder benefits " 2,200 " Reinsurance recoveries (b) (300) Net policyholder benefits " 1,900 " Amortization of deferred policy acquisition costs 950 Other expenses " 1,650 " Total expenses " 4,500 " Earnings before tax $500 1. a The Reinsurance Contracts Subsections of this Subtopic require that estimated amounts recoverable from reinsurers include amounts related to paid and unpaid benefits, including amounts related to liabilities recognized for future policy benefits. Details of the amounts comprising reinsurance recoverables may be presented separately. 2. b Alternatively, the effect of reinsurance on premiums earned and benefit costs may be shown parenthetically or may be disclosed. An illustration of a parenthetical presentation follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-F11712C8-4A58-4ACE-924F-13CBD38F90A3-low.gif) Premiums and policyholder fees earned (net of premiums ceded totaling $450) " $2,900 " Benefits (net of reinsurance recoveries totaling $300) " $1,900 " ##### [605-944-55-15](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-15) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:73f671cad8c2a94340d9da548ac7bf843a35502aed88f7c2eee8e41fca823886 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Life Insurance Entity's related notes to financial statements follow. - Life Insurance Entity—Notes to Financial Statements - Summary of Significant Accounting Policies - In the normal course of business, the Entity seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to other insurance entities or reinsurers under excess [coverage](https://asc.understandingaccounting.org/glossary/c/#coverage "An insurance entity's exposure to loss. The concept of coverage would typically include policy limits, deductible, insured, and covered property or insured event.") and coinsurance contracts. The Entity retains a maximum of $500,000 of coverage per individual life. - Amounts paid or deemed to have been paid for reinsurance contracts are recorded as reinsurance recoverables. The cost of reinsurance related to long-duration contracts is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies. - Reinsurance - Reinsurance contracts do not relieve the Entity from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Entity; consequently, allowances are established for amounts deemed uncollectible. The Entity evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. At December 31, 19X3, reinsurance recoverables with a carrying value of $260 million were associated with a single reinsurer. The Entity holds collateral under related reinsurance agreements in the form of letters of credit totaling $150 million that can be drawn on for amounts that remain unpaid for more than 120 days. - The effect of reinsurance on premiums and amounts earned is as follows (in millions). - ![](https://asc.understandingaccounting.org/asc-img/GUID-12A2786E-583B-430E-AECF-EB328F169B0D-low.gif) Direct premiums and amounts assessed against policyholders " $2,730 " Reinsurance assumed 620 Reinsurance ceded (450) Net premiums and amounts earned " $2,900 " ### Financial Guarantee Insurance Contracts ##### [605-944-55-16](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-16) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:095841fb91d475607319389c7067bf44170d5abe90b81fe1f8c63014f2a70851 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This example illustrates the application of paragraph [944-605-30-7](https://asc.understandingaccounting.org/asc/605/944/#605-944-30-7), which states that if the premiums are received as payments over the period of the financial guarantee insurance contract, the insurance entity shall initially measure the unearned premium revenue at an amount equal to the present value of the premiums due or expected to be collected over the period of the financial guarantee insurance contract. For example, if the insurance entity expects to receive total premiums due over the period of the financial guarantee insurance contract of $28 million and the present value of that amount is $24.3 million, both the unearned premium revenue and the premium receivable initially shall be recognized at $24.3 million. ##### [605-944-55-17](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-17) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:08100e9a90aad27721a49f18b71a03efe53937a328bf695b70e8a1ece0673ce3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the application of paragraphs [944-605-25-27 through 25-28](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-27) to insured principal payments made over the period of a contract. On January 1, 20X0, an insurance entity issues a single-premium financial guarantee insurance contract for a financial obligation (municipal bond) with a contract period of 10 years. The premium amount is $5 million. Insured principal payments of $100 million will be made by the issuer of the bond over the period of the contract. The contractual schedule of expected insured principal payments follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-A0CFA450-6C69-437B-A646-0568BF54C4A1-low.gif) Year "Insured Principal Amounts Outstanding (a)" "Principal Payments" "Premium Revenue Recognized" "Unearned Premium Revenue" " $5,000,000 " 1 " $100,000,000 " " $5,000,000 " " $877,193 " " 4,122,807 " 2 " 95,000,000 " " 5,000,000 " " 833,333 " " 3,289,474 " 3 " 90,000,000 " " 10,000,000 " " 789,474 " " 2,500,000 " 4 " 80,000,000 " " 10,000,000 " " 701,754 " " 1,798,246 " 5 " 70,000,000 " " 15,000,000 " " 614,035 " " 1,184,211 " 6 " 55,000,000 " " 15,000,000 " " 482,456 " " 701,755 " 7 " 40,000,000 " " 15,000,000 " " 350,877 " " 350,878 " 8 " 25,000,000 " " 15,000,000 " " 219,298 " " 131,580 " 9 " 10,000,000 " " 5,000,000 " " 87,719 " " 43,861 " 10 " 5,000,000 " " 5,000,000 " " 43,861 " - Total " $570,000,000 " " $100,000,000 " " $5,000,000 " (a) Insured Principal Amounts Outstanding represents beginning-of-the-year balances. ##### [605-944-55-18](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-18) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:f684e552a98fab460eb4f143f2681b5baa95f6e8ac18ca31fb96b259c9050070 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The ratio of the premium to the sum of all contractual insured principal amounts outstanding during each reporting period (the constant rate) is 0.00877193 (calculated as $5 million divided by $570 million). Accordingly, the insurance entity would recognize $877,193 of premium revenue (calculated as $100 million of insured principal amount outstanding multiplied by 0.00877193) in the first year of the contract. In the second year of the contract, the insurance entity would recognize $833,333 (calculated as $95 million multiplied by 0.00877193) of premium revenue. Thus, premium revenue is recognized based on the insurance protection being provided (represented by the constant rate and the insured principal amounts outstanding). ##### [605-944-55-19](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-19) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:7c085ecca4b5fc6560b9b89c48b482da4e45b3922be48501755855cc2c91dc11 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Example illustrates the application of paragraph [944-605-25-29](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-29) to an insured principal payment made at the end of period of a contract. Assume all of the following: 1. a On January 1, 200X, an insurance entity issues a single-premium financial guarantee insurance contract for a financial obligation (a zero-coupon municipal bond). 2. b The insured financial obligation was issued at $61.4 million, resulting in an effective yield of 5 percent. 3. c The premium amount is $5 million. 4. d The insured principal payment of $100 million will be made by the issuer of the bond in total at the end of the 10-year period of the contract. ##### [605-944-55-20](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-20) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:e645d24160375b839a87e5c6ce49cbd37f3510acb7acda4cdc6af2ef51483e74 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this Example, the insured accreted principal amount outstanding represents the obligation of the insurance entity. The schedule of the insured accreted principal amounts outstanding during each reporting period follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-8C4DD2BF-49A5-4F1C-8CA3-1B9CA4EE87D7-low.gif) Year "Insured Accreted Principal Amounts Outstanding (a)" "Principal Payments" "Premium Revenue Recognized" "Unearned Premium Revenue" " $5,000,000 " 1 " $61,400,000 " - " $397,514 " " 4,602,486 " 2 " 64,500,000 " - " 417,584 " " 4,184,902 " 3 " 67,700,000 " - " 438,301 " " 3,746,601 " 4 " 71,100,000 " - " 460,313 " " 3,286,288 " 5 " 74,600,000 " - " 482,973 " " 2,803,315 " 6 " 78,400,000 " - " 507,575 " " 2,295,740 " 7 " 82,300,000 " - " 532,824 " " 1,762,916 " 8 " 86,400,000 " - " 559,368 " " 1,203,548 " 9 " 90,700,000 " - " 587,207 " " 616,341 " 10 " 95,200,000 " " $100,000,000 " " 616,341 " - Total " $772,300,000 " " $100,000,000 " " $5,000,000 " (a) Insured Accreted Principal Amounts Outstanding represents beginning-of-the-year balances and is calculated based on the effective yield of the insured financial obligation. ##### [605-944-55-21](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-21) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:d781d0f454abc743e617827c5ae9a1652173d6296dcc869642e80080a632d482 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The ratio of the premium to the sum of the insured accreted principal amounts outstanding (the constant rate) is 0.006474168 (calculated as $5 million divided by $772.3 million). Accordingly, the insurance entity would recognize $397,514 of premium revenue (calculated as $61.4 million of insured accreted principal amount outstanding multiplied by 0.006474168) in the first year of the contract. In accordance with the Financial Guarantee Insurance Contracts Subsection of Section 944-605-25, premium revenue is recognized based on the insurance protection being provided (represented by the constant rate and the insured accreted principal amount outstanding). ##### [605-944-55-22](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-22) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:039ca68f3605ba77370e963113182ec16a1bbd705472d5dedd75585ea3cab8a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the application of paragraphs [944-605-25-32 through 25-33](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-32) to the early retirement and replacement of an insured financial obligation if the same insurance entity insured the new financial obligation. This Example makes all of the following assumptions: 1. a On January 1, 20X0, an insurance entity issues a nonrefundable, single premium financial guarantee insurance contract for a 30-year financial obligation (municipal bond). 2. b The premium amount is $5 million. 3. c On the municipal bond's 10th anniversary, the issuer of the insured financial obligation retires the municipal bond. 4. d Premium recognized by the insurance entity for the financial guarantee insurance contract over the first 10 years was $2 million. ##### [605-944-55-23](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-23) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:b8161a22fe398c873c61b71b3fc6039d35d9e3c5b1795358b85c25acfad3329f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At early retirement on the 10th anniversary, the insurance entity would recognize as premium revenue the remaining unearned premium revenue ($3 million) because the risk to the insurance entity is extinguished. In addition, any remaining associated deferred acquisition costs are expensed. ##### [605-944-55-24](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-24) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:dd480c35b75e14671d4f1c68216d36362470368072671f15c0615f73bf395b14 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example makes all of the following further assumptions: 1. a The issuer of the financial obligation facilitated the early retirement of the municipal bond by issuing a new municipal bond at a lower interest rate. 2. b The same insurance entity insures the new municipal bond. 3. c The premium amount for the financial guarantee insurance contract for the new financial obligation is $3 million. 4. d The amount of premium charged to insure a similar financial obligation in a separate standalone transaction is $4 million. ##### [605-944-55-25](https://asc.understandingaccounting.org/asc/605/944/#605-944-55-25) Pending content: no Source downloaded (UTC): 2026-09-10T00:49:43.753Z to 2026-09-10T00:49:43.753Z Record version: sha256:4bebf92761fd85491a849a1a04bd6e9ee9ab49ac69e63f832640605d491a74cc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The insurance entity would recognize unearned premium revenue of $4 million. It also would recognize a debit to earnings in the amount of $1 million. This represents the difference between the amount of premium charged ($3 million) and the amount of premium that would be charged for a similar financial obligation in a separate standalone transaction.