# ASC 720-20-30: Other Expenses — Insurance Costs — 30 Initial Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/720/20/#30-initial-measurement) 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): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:9863f1c53eca0254cf50d54fa7c2c04344b08d79b7daa2311be837b7261770b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/720/20/#30-initial-measurement) SEC content: no ##### [720-20-30-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:f3a1c3d675830ba39b54bd0ddc13f4f7581ef1a7743e5bc5900db9c5e5942c65 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Subtopic 340-30 and Section 720-20-25 for measurement guidance on deposit accounting for payments to insurance entities that may not involve transfer of risk. ### Claims-Made Contracts #### Liability for Incurred but Not Reported Claims Based on the Cost of Tail Coverage ##### [720-20-30-2](https://asc.understandingaccounting.org/asc/720/20/#720-20-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:17bde3b8a1863500b666d37f46ac9f7a7403767f33ca86d4bdf1108a98b59daa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The estimated cost of purchasing [tail coverage](https://asc.understandingaccounting.org/glossary/t/#tail-coverage "Insurance designed to cover malpractice claims incurred before, but reported after, cancellation or expiration of a claims-made insurance policy.") is not relevant in determining the loss to be accrued because paragraph [210-20-45-1](https://asc.understandingaccounting.org/asc/210/20/#210-20-45-1) prohibits netting the insurance receivable against the claim liability. However, if the insured entity had the unilateral option to purchase tail coverage at a premium not to exceed a specified fixed maximum, then the insured entity could record a receivable for expected insurance recoveries (after considering deductibles and policy limits) for the portion of the [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity.") liability that is insurable under the tail coverage. In that case, the entity would need to record as a cost the expected premium for the tail coverage. The purchase of tail coverage does not eliminate the need to determine if an additional liability should be accrued because of policy limits or other factors. ### Multiple-Year Retrospectively Rated Contracts ##### [720-20-30-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-30-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:f891e9d557c1ddac5ff2a5261e4223a431cca2e80bfdda009e5690b76e61a3dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For a multiple-year retrospectively rated insurance contract accounted for as insurance, the amount recognized in the current period shall be computed using a with-and-without method, as the difference between the insured's total contract costs before and after the experience under the contract as of the reporting date, including costs such as premium adjustments, settlement adjustments, and impairments of coverage. The amount of premium expense related to impairments of coverage shall be measured in relation to the original contract terms. Future experience under the contract (that is, future losses and future premiums that would be paid regardless of past experience) shall not be considered in measuring the amount to be recognized. ##### [720-20-30-4](https://asc.understandingaccounting.org/asc/720/20/#720-20-30-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:aec4f6c66eb8f70643fbedd8cbd03666860ef17257010359f6b4abb9c8b9fe80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the insured could terminate the contract before the end of its term and if termination would change the amounts paid (for example, if terminating the contract would cost less than continuing the contract in force), the liability resulting from the contract shall be measured as follows: 1. a If a decision to terminate has been made, the measurement shall be based on an assumption of termination and on experience to date. 2. b Otherwise, the measurement shall be based on the lesser of the following: 1. 1 The total incremental amount that would be paid based on the with-and-without calculation assuming experience to date and assuming termination (that is, excluding the effects of future losses and future premiums that would have been paid regardless of experience to date) 2. 2 The total incremental amount that would be paid based on the with-and-without calculation assuming experience to date and assuming no termination (that is, excluding the effects of future losses and future premiums that would have been paid regardless of experience to date).