# ASC 944-20-05: Financial Services—Insurance — Insurance Activities — 05 Overview and Background Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/944/20/#05-overview-and-background) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:4860d9c34438feb71236db500c68aa62a660bec0301a2b70fc047f18462cded8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 944-20-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/944/20/#05-overview-and-background) SEC content: no ##### [944-20-05-1](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:ec38065e14af20038813ae6f4c42a4a330e6a269772e1d67f3e79d125146f56c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Financial Services—Insurance Topic contains the following Subtopics unique to the accounting for and financial reporting of insurance activities and insurance contracts: 1. a Insurance Activities 2. b Acquisition Costs 3. c Claim Costs and Liabilities for Future Policy Benefits 4. d Policyholder Dividends 5. e Separate Accounts. ##### [944-20-05-2](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:4dc7fda123141bccb8a63d4cb5b8c8cbfcbef2988a2293a80328dd7a9d4028ff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides a description of insurance activities and insurance contracts, provides guidance on accounting for multi-year retrospectively rated contracts, and contains other overarching industry-specific content. ##### [944-20-05-2A](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-2A) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:a051af3c4726eb3cf239d74f7d348827042dfb9487072830f42733efe3231726 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In some cases an insurance contract or [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 does not transfer [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."). In those cases, Subtopic 340-30 provides guidance on applying the deposit method of accounting. ##### [944-20-05-3](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:72ac13e476311707ea4740ba961719c369b7039c30b045b9ad37995b41b18a1c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Four methods of premium revenue and contract liability recognition for insurance contracts have developed: short-duration contract accounting and three methods of long-duration contract accounting—Traditional, Universal Life, and Participating Contracts. Generally, the four methods reflect the nature of the insurance entity's obligations and policyholder rights under the provisions of the contract. ##### [944-20-05-3A](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-3A) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:8f5aae177bdd46b1f603c12d9d7cf5259ea2eaa3898309fd5a913c46e86508d4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The accounting model for financial guarantee insurance contracts incorporates attributes of both the short-duration and the long-duration models. Financial guarantee insurance contracts provide insurance protection to the holder of the insured financial obligation. Therefore, premium revenue recognition issues are addressed in the context of the short-duration insurance accounting model. The claim liability recognition and measurement approach for financial guarantee insurance contracts incorporates aspects of the long-duration insurance accounting model. ##### [944-20-05-4](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:8737c662043e376da072f1f67a3b3c2c8a3a7a894328a2187ffec8ee965ced83 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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 Contracts 5. e Financial Guarantee Insurance Contracts. #### Insurance Contracts ##### [944-20-05-5](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:1b3f04fa95a56655dffdf61117558d258bd347b0f509cffcbe1aa2510338da9c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The primary purpose of insurance is to provide economic protection from identified risks occurring or discovered within a specified period. ##### [944-20-05-6](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:6db376133201932661a38a2f86896644056d74e35e14d9905c282755864e4898 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Insurance transactions may be characterized generally by both of the following: 1. a The purchaser of an insurance contract makes an initial payment or deposit to the insurance entity in advance of the possible occurrence or discovery of an insured event. 2. b When the insurance contract is made, the insurance entity ordinarily does not know if, how much, or when amounts will be paid under the contract. ##### [944-20-05-7](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:cbec0d3ff2967bb6733754efa7241f94f02532243992902ed4f3b2f5e2d1816e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples of insured events include all of the following: 1. a The death or disability of the insured 2. b The maturity of an endowment 3. c The incurrence of hospital or medical bills 4. d The destruction or damage of property and related deaths or injuries 5. e Defects in, liens on, or challenges to the title to real estate 6. f The occurrence of a surety loss 7. g Business interruption. #### Statutory Accounting Practices ##### [944-20-05-8](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:7050d5b6a25a0cbef98d3ea71eab6de40ac544b8bfed9e34a526feac9330e3e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The insurance laws and regulations of most states require insurance entities domiciled in those states to comply with the guidance provided in the National Association of Insurance Commissioners' Accounting Practices and Procedures Manual, except as prescribed or permitted by state law. ##### [944-20-05-9](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-9) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:9c3d9be2976a3a6fc07cdd7ec4e2bd938b6fb6b2b36284f9c7d3b02471ad9dda Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Prescribed statutory accounting practices are those practices that are incorporated directly or by reference in state laws, regulations, and general administrative rules applicable to all insurance entities domiciled in a particular state. A state may adopt the revised Accounting Practices and Procedures Manual in whole, or in part, as an element of prescribed statutory accounting practices. If, however, the requirements of state laws, regulations, and administrative rules differ from the guidance provided in the revised Accounting Practices and Procedures Manual or subsequent revisions, those state laws, regulations, and administrative rules will take precedence. ##### [944-20-05-10](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-10) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:98392b4c57c61d948d5c5b2067a3a45583cd35eeae24b7a45fba284d83147165 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Permitted statutory accounting practices include practices not prescribed by the domiciliary state as described in the preceding paragraph, but allowed by the domiciliary state regulatory authority. An insurance entity may request permission from the domiciliary state regulatory authority to use a specific accounting practice in the preparation of the entity's statutory financial statements in either of the following circumstances: 1. a If it wishes to depart from the prescribed statutory accounting practices 2. b If prescribed statutory accounting practices do not address the accounting for the transaction. Accordingly, permitted accounting practices differ from state to state, may differ from entity to entity within a state, and may change in the future. ##### [944-20-05-11](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-11) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:828561af9b4d860f58837136aa3add5189aff79d63c6b76f3c1c41e7c283f4ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Subtopic 944-505 provides guidance to insurance entities on disclosure about statutory accounting practices. ### Short-Duration Contracts ##### [944-20-05-12](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-12) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:050cc82f21dc9348ec4dc8abe56eae9e01d26a4f381a1d781d3c2f983069e3bc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Short-Duration Contracts Subsections provide guidance on accounting for and financial reporting of short-duration insurance contracts. ##### [944-20-05-13](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-13) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:62cfefcc6cebb96dc8d676fb332e127f2d70115c30d6058075dab9d1cb39dd41 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Premiums from short-duration insurance contracts, such as most property and liability insurance contracts, are intended to cover 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.") costs resulting from insured events that occur during a fixed period of short duration. The insurance entity ordinarily has the ability to cancel the contract or to revise the premium at the beginning of each [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.") to cover future insured events. ### Long-Duration Contracts ##### [944-20-05-14](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-14) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:301fd2ab463d2f53b2221815c021f124f89fd4bbbe252a112efd2020e23c6d42 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Long-Duration Contracts Subsections provide guidance on accounting for and financial reporting of long-duration insurance contracts. This section is organized as follows: 1. a Traditional fixed and variable annuity and life insurance contracts 2. b Universal life-type contracts 3. c Nontraditional fixed and variable annuity and life insurance contracts 4. d Participating life insurance contracts 5. e Group participating pension contracts. #### Traditional Fixed and Variable Annuity and Life Insurance Contracts ##### [944-20-05-15](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-15) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:164f1d5c90a2ca50a2d5752d6066de5de5aa173ec50092beb56aff6ccda86386 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Traditional fixed annuity and life insurance contracts, typically offered through an insurance entity's [general account](https://asc.understandingaccounting.org/glossary/g/#general-account "All operations of an insurance entity that are not reported in the separate account(s)."), provide for a fixed rate of interest over some specified period, with the insurance entity bearing the investment risk associated with the invested assets. ##### [944-20-05-16](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-16) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:7a30905cad3998fe63c74b5101d1f766249bd11bce548e3f4febc40401bdbe6c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Traditional variable annuity](https://asc.understandingaccounting.org/glossary/t/#traditional-variable-annuity "An insurance product in which all the contract holder's payments are used to purchase units of a separate account.") and variable life insurance contracts, by contrast, offered through an insurance entity's [separate account](https://asc.understandingaccounting.org/glossary/s/#separate-account "A separate investment account established and maintained by an insurance entity under relevant state insurance law to which funds have been allocated for certain contracts of the insurance entity or similar accounts used for foreign originated products. The term separate accounts includes separate accounts and subaccounts or investment divisions of separate accounts."), provide that all investment risks associated with the separate account assets are passed through to the contract holder, with no guarantees of return of principal, minimum crediting rates, or (for annuity contracts) minimum death benefits. ##### [944-20-05-17](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-17) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:096c10511a5ee4c78b635c545cc87af8e0f2b3b36f6bec7750879e91016c5f65 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For example, in a traditional variable annuity, the contract holder directs the allocation of the account value among various investment alternatives and bears the investment risk. The units may be surrendered for their current value in cash (usually less a surrender charge) or applied to purchase annuity income. The insurance entity periodically deducts [mortality](https://asc.understandingaccounting.org/glossary/m/#mortality "The relative incidence of death in a given time or place.") and expense charges from the account. ##### [944-20-05-18](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-18) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:dea4475ce565392f1492a2d6dbb213d7b7e97c23355543b43f2a449a306c4338 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A traditional variable annuity product structure, as that term is used in this Subtopic, includes the following attributes: 1. a The policyholder's payments, after deduction of specified sales and administrative charges, are used to purchase units of a separate investment account (a separate account). 2. b The policyholder directs the allocation of the account value among various investment options (typically various mutual funds). The policyholder bears the investment risk (that is, the account value is based entirely on the performance of the directed investments). 3. c The units may be surrendered for their current value in cash, although there is often a small surrender charge, or the units may be applied to purchase annuity income. 4. d The insurer guarantees mortality and maximum expense charges, and amounts are deducted periodically from the separate account to cover these charges. 5. e Deferred annuity contracts typically provide a death benefit during the accumulation period under which the policyholder may receive the greater of the sum of premiums paid or the value of total units to the credit of the account at time of the policyholder's death. ##### [944-20-05-19](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-19) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:fe3b09a1a52c68be22e2329538dd148caf395134e1587d9fa9aa9cd444168699 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Premiums from long-duration insurance contracts, including many life insurance contracts, generally are level even though the expected policy benefits and services do not occur evenly over the periods of the contracts. Functions and services provided by the insurer include insurance protection, sales, premium collection, [claim](https://asc.understandingaccounting.org/glossary/c/#claim "A demand for payment of a policy benefit because of the occurrence of an insured event.") payment, investment, and other services. No single function or service is predominant over the periods of most types of long-duration contracts. Premium revenue from long-duration contracts generally exceeds expected policy benefits in the early years of the contracts. #### Limited-Pay Insurance Contracts ##### [944-20-05-19A](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-19A) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:b7963168f24552fe2fcdb23edd950d8d8b2f6636dd8a1e87f90c09d6c6b8cfba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some long-duration insurance contracts have terms that are fixed and guaranteed but lack either level premiums (as discussed in paragraph [944-20-05-19](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-19)) or insurance protection characteristics. #### Universal Life-Type Contracts ##### [944-20-05-20](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-20) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:dea583be9501086caee305fba432bedffa529d8a98be7595b3fca8d026a8c81e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The differences between universal life-type insurance contracts and other long-duration contracts is that universal life-type insurance contracts lack the fixed and guaranteed terms that are typical for other long-duration contracts. Policyholders are frequently granted significant discretion over the amount and timing of premium payments. Insurers are frequently granted significant discretion over amounts that accrue to and that are assessed against policyholders. ##### [944-20-05-21](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-21) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:604a75220917f6d444b455e025596ab6dc2b87c0b7eaca62f0ec7b71bd73944b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). #### Nontraditional Fixed and Variable Annuity and Life Insurance Contracts ##### [944-20-05-22](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-22) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:d22f57a1eb23ad7b8c4f61d63f0735ec8e3e63ef52af154543696c1e53f3cf6d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Annuity and life products with nontraditional terms may combine fixed and variable features and are sold as general account or separate account products. The features of such contracts are many and complex, and may be offered in different combinations, such that there are numerous variations of the same basic products being sold in the marketplace. ##### [944-20-05-23](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-23) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:6c9aa6aba79d38809d1ac83d04e88e86a37930659384ecbf624b36f1b3fafe16 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/). ##### [944-20-05-24](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-24) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:7ffa0302bebc380060b1e24b629dd18244d1c28b15d6e69be4efa81535711ce7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Insurance entities have developed a wide range of variable annuity contracts with nontraditional features. Nontraditional features of traditional variable annuity contracts result in a sharing of investment risk between the issuer and the holder. Nontraditional variable annuity contracts provide for some sort of minimum guarantee of the account value at a specified date. This minimum guarantee may be guaranteed through a minimum accumulation benefit or a guaranteed account value floor. For example, the floor guarantee might be that, at a specified anniversary date, the contract holder will be credited with the greater of the following: 1. a The account value, as determined by the separate account assets 2. b All deposits that are made, plus 3 percent interest compounded annually. ##### [944-20-05-25](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-25) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:d1920138689d1c5ca480780f2f8fef6ed2ae2a7b58f7489f6c0c49cebf3e8bbb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. While these nontraditional variable annuity contracts have distinguishing features, they possess a common characteristic: the investment risk associated with the assets backing the contract is shared by the issuer and the policyholder. That is, in contrast to traditional variable annuity contracts, the investment risk is, by virtue of the nontraditional product features, allocated between the two parties and not borne entirely by only one of the parties (the holder in the case of a traditional variable annuity contract). ##### [944-20-05-26](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-26) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:6f0746fdb62b0d385070d0d2739b38872f4e61a77651960566c9ae217fc45eff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Variable annuity contracts](https://asc.understandingaccounting.org/glossary/v/#variable-annuity-contract "An annuity in which the amount of payments to be made are specified in units, rather than in dollars. When payment is due, the amount is determined based on the value of the investments in the annuity fund.") and variable life insurance contracts provide the contract holder with a number of investment alternatives. Many of those investment alternatives will be separate account funds, such as equity, aggressive equity, high-grade corporate bond, mortgage loan, real estate, and similar funds. Other investment alternatives could include [guaranteed investment options](https://asc.understandingaccounting.org/glossary/g/#guaranteed-investment-option "Component of a variable contract that guarantees a specific rate of performance.") and market value adjusted separate accounts as well as a general account fixed interest rate option. ##### [944-20-05-27](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-27) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:b89fd3f8cff38cf7bed4d293d2ff3a7f2d9ae2f60338a0ee2d5ef91e0ed1c817 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The remainder of this guidance addresses the following annuity contracts and features: 1. a Market value annuities 2. b Minimum guaranteed death benefit 3. c Minimum guaranteed income benefit 4. d No-lapse guarantee 5. e Sales inducements to contract holders 6. f Other features. ##### [944-20-05-28](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-28) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:aead9dfa8be2e895eb95e9f1070add235d92112761a9180157618354c2ca0273 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [market value annuity](https://asc.understandingaccounting.org/glossary/m/#market-value-annuity "An annuity that provides for a return of principal plus a fixed rate of return (that is, book value) if held to maturity or, alternatively, a market-adjusted value if surrendered before maturity.") provides for a return of principal plus a fixed rate of return if held to maturity (book value), or, alternatively, a market-adjusted value if surrendered before maturity. The product is also sometimes referred to as a market value adjusted annuity or a modified guaranteed annuity. The product typically provides for a single premium that may be invested for a specified term, with typical terms of 1 to 10 years. A fixed interest rate is specified in the contract based on the term selected. The contract contains surrender values that are based on a market value adjustment formula if held for shorter periods. The formula typically is based on current crediting rates being offered for new market value annuity purchases with terms equal to the remaining term to maturity. The market value adjustment may be positive or negative, depending on crediting rates at surrender. ##### [944-20-05-29](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-29) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:99eb926171937fb98d2d412c08282bdec88b36a819a579961f222ef46315ac2e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A common feature in variable annuities is a [minimum guaranteed death benefit](https://asc.understandingaccounting.org/glossary/m/#minimum-guaranteed-death-benefit "A feature in an annuity, life insurance, or similar contract that provides that in the event of an insured's death, the beneficiary (or insurer in the case of a reinsurance contract) will receive the higher of the current account balance of the contract or another amount defined in the contract."), such as a [return of premium death benefit](https://asc.understandingaccounting.org/glossary/r/#return-of-premium-death-benefit "A death benefit equal to the total deposits made by the contract holder less any withdrawals.") or basic minimum guaranteed death benefit. Although the return-of-premium minimum guaranteed death benefit has become increasingly common in variable annuities, the trend has been for insurers to offer minimum guaranteed death benefits with more extensive benefit guarantees, such as any of the following: 1. a [Roll-up death benefit](https://asc.understandingaccounting.org/glossary/r/#roll-up-death-benefit "A death benefit equal to the total of deposits made to the contract less an adjustment for partial withdrawals, accumulated at a specified interest rate."). A death benefit equal to the total of deposits made to the contract less an adjustment for partial withdrawals, accumulated at a specified interest rate. 2. b Reset death benefit. A death benefit equal to the account balance on a specified anniversary date adjusted for deposits less partial withdrawals since the specified anniversary date. 3. c [Ratchet death benefit](https://asc.understandingaccounting.org/glossary/r/#ratchet-death-benefit "A death benefit equal to the highest account balance among prior specified anniversary dates adjusted for deposits less partial withdrawals since the specified anniversary date."). A death benefit equal to the highest account balance among prior specified anniversary dates adjusted for deposits less partial withdrawals since the specified anniversary date. ##### [944-20-05-30](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-30) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:a4bac908a9c3e3bfebed7f524705492de8a5d5caede6855cf9f1d2d148240ab6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some annuities may provide for potential benefits in addition to the account balance, payable only if annuitization is elected. For example, some deferred variable annuities provide that, regardless of separate account performance, a guaranteed minimum amount is available to annuitize after a specified period, thereby providing a [guaranteed minimum income benefit](https://asc.understandingaccounting.org/glossary/g/#guaranteed-minimum-income-benefit "A guarantee that, regardless of account balance performance, the contract holder will be able to annuitize after a specified date and receive a defined minimum periodic benefit. These benefits are available only if the contract holder elects to annuitize.") if the contract holder elects to annuitize. This benefit is in addition to the guaranteed minimum annuity interest rate traditionally offered. ##### [944-20-05-31](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-31) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:6de4a6482cfa6224f7a7570d032ee9b18333be492a8dc0c9bbd34fbdb897beaf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Another insurance benefit feature is a no-lapse guarantee, in which the insurance entity agrees to keep the insurance policy [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.") even if the account balance is not sufficient to pay the [cost of insurance](https://asc.understandingaccounting.org/glossary/c/#cost-of-insurance "Amounts expected to be assessed for mortality."). ##### [944-20-05-32](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-32) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:6e388c048173d40609e4ad7967229b193d438d9260b399541149d8e6dcd59f3a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Sales inducements](https://asc.understandingaccounting.org/glossary/s/#sales-inducements "Contractually obligated inducements that are identified explicitly in a contract and are in excess of current market conditions. A sales inducement to a contract holder enhances the investment yield to the contract holder. The three main types of sales inducements are an immediate bonus, a persistency bonus, and an enhanced-crediting-rate bonus.") to contract holders may be offered with fixed and variable life insurance and annuity contracts. Sales inducements to contract holders typically can be characterized as one of the following types: 1. a Immediate bonuses. In the case of the [immediate bonus](https://asc.understandingaccounting.org/glossary/i/#immediate-bonus "A sales inducement that the insurance entity is obligated to credit to the contract holder's account as a result of signing the contract, thus increasing the account value at inception."), the insurance entity is obligated to credit to the contract holder's account the sales inducement as a result of signing the contract. The contract holder account balance is increased for the full amount of the immediate bonus on the date that the bonus is contractually granted. 2. b Persistency bonuses. A [persistency bonus](https://asc.understandingaccounting.org/glossary/p/#persistency-bonus "A sales inducement credited to the contract holder account balance at the end of a specified period if the contract remains in force at that date, thus increasing the account value at the end of the specified period.") is credited to the contract holder account balance at the end of a specified period if the contract remains in force at that date. 3. c [Enhanced-crediting-rate bonuses](https://asc.understandingaccounting.org/glossary/e/#enhanced-crediting-rate-bonus "A sales inducement in which the insurance entity offers customers a crediting rate for a stated period in excess of that currently being offered for other similar contracts."). In an enhanced crediting rate sales inducement, the insurance entity offers customers a crediting rate for a stated period in excess of that currently being offered by the entity for other similar contracts. Pursuant to the contract, the enhanced crediting rate is applicable for a limited period of time, after which the rate is reset under the contractual provisions, typically at the discretion of the insurance entity. ##### [944-20-05-33](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-33) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:c4d38ca877550a5e842e9e09177013a13ff09d509123bbc320fe2a756fd1906c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A deferred annuity may provide multiple crediting rates throughout the life of the contract depending on whether the contract holder elects to terminate or annuitize the contract. An example is a contract that applies a lower rate to funds deposited if the contract holder elects to surrender the contract for cash, and a higher rate if the contract holder elects to annuitize, often referred to as a [two-tier annuity](https://asc.understandingaccounting.org/glossary/t/#two-tier-annuity "An annuity having two crediting rates applied to funds deposited into the contract. One rate is used to calculate the account balance if the contract holder elects to surrender the contract for cash, and is referred to as the lower tier. A second rate, typically higher, is used to calculate the account balance, but only if the contract holder elects to annuitize the contract, and is referred to as the upper tier."). ##### [944-20-05-34](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-34) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:1b9da615915ff22363789691c3b08037981deefe23ef2e0fc5df9de92e2bbee0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Contracts also exist that potentially may be viewed as providing multiple account balances; for example, a contract that provides a return based on a contractually referenced pool of real estate assets owned by the insurance entity but also provides for minimum investment return guarantees. ##### [944-20-05-35](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-35) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:365518e6a0e70eff77bab65d3ce1ab8401a70d1d0b7a1c071daad61fe20b0f7a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). #### Participating Life Insurance Contracts ##### [944-20-05-36](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-36) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:a84e548c48aabe5e8538cbf52f91371b020960aa27f194d3180b36e932ac7039 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Mutual life insurance entities primarily issue participating life insurance contracts. Those contracts provide policyholders with certain guaranteed benefits and allow policyholders to share in the experience of the entity through dividends. Dividends are paid periodically and generally reflect the experience and performance of the entity for investment activity, mortality experience, and contract administration for each particular class of contracts. The determination and distribution of dividends distinguish participating life insurance contracts from nonparticipating life insurance contracts. #### Group Participating Pension Contracts ##### [944-20-05-37](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-37) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:4bb0698959dbf3970181e9c25a5e404d7bb6ba034ba11b903a75ddbce68c638d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Group participating pension contracts](https://asc.understandingaccounting.org/glossary/g/#group-participating-pension-contracts "Contracts between insurance entities and pension plans that have account balance crediting provisions that give the contract holder the total return based on a referenced pool of assets over the life of the contract either through crediting rates or termination adjustments.") between insurance entities and pension plans have account balance crediting provisions that give the contract holder the total return based on a referenced pool of assets over the life of the contract either through crediting rates or [termination](https://asc.understandingaccounting.org/glossary/t/#termination "In general, the failure to renew an insurance contract. Involuntary terminations include death, expirations, and maturities of contracts. Voluntary terminations of life insurance contracts include lapses with or without cash surrender value and contract modifications that reduce paid-up whole-life benefits or term-life benefits.") adjustments. The ongoing crediting to the account balance may be based on statutory, cash basis, or book value returns. The contracts may not have a maturity date but specify that upon surrender any remaining return on the referenced pool of assets on the termination date not yet credited will be a termination adjustment. The referenced pool of assets may include mortgage loans, real estate, and equity and debt securities. ### Reinsurance Contracts ##### [944-20-05-38](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-38) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:2029e30dda00542aa60b49395a2d4184ecdde70c496a5e18576548ce60e0e5b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Reinsurance Contracts Subsections provide guidance on accounting for and financial reporting of [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, including those that reinsure short-duration insurance contracts and long-duration insurance contracts. ##### [944-20-05-39](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-39) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:41cdc8da04894e8c24f4e44ce56f4e0b0b9b5651cd2d42a9a9016de82acc2532 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Insurers may enter into various types of contracts described as reinsurance, including those commonly referred to as [fronting arrangements](https://asc.understandingaccounting.org/glossary/f/#fronting-arrangements "Reinsurance arrangements in which the ceding entity issues a policy and reinsures all or substantially all of the insurance risk with the assuming entity."). ##### [944-20-05-39A](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-39A) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:8b9331e75847d3cdaa69fd15d575cb91fb630a25194d2017d44ad507d5827125 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance entity may purchase reinsurance to reduce exposure to losses from the events it has agreed to insure, similar to a direct insurance contract purchased by an individual or noninsurance entity. The insurance entity also may contract with a reinsurer to facilitate the writing of contracts larger than those normally accepted, to obtain or provide assistance in entering new types of business, or to accomplish tax or regulatory objectives. ##### [944-20-05-40](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-40) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:3f43e93b234a89ff54f7865792e6dee15f4026529e2af62cac74b4bf9eac8b69 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Insurance provides indemnification against loss or liability from specified events and circumstances that may occur or be discovered during a specified period. In exchange for a payment from the policyholder, an insurance entity agrees to pay the policyholder if specified events occur or are discovered. Similarly, the insurance entity may obtain indemnification against claims associated with contracts it has written by entering into a reinsurance contract with another insurance entity (the [reinsurer](https://asc.understandingaccounting.org/glossary/r/#reinsurer "The assuming entity in a reinsurance transaction.") or assuming entity). The insurer (or [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.")) pays (cedes) an amount to the reinsurer, and the reinsurer agrees to reimburse the insurer for a specified portion of claims paid under the reinsured contracts. However, the policyholder usually is unaware of the reinsurance arrangement, and the insurer ordinarily is not relieved of its obligation to the policyholder. The reinsurer may, in turn, enter into reinsurance contracts with other reinsurers, a process known as [retrocession](https://asc.understandingaccounting.org/glossary/r/#retrocession "The circumstance in which a reinsurer, in turn, enters into reinsurance contracts with other reinsurers."). #### Multiple-Year Retrospectively Rated Reinsurance Contract ##### [944-20-05-41](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-41) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:63ded72f09a435693f535a2403fe5d3f9cf0d402fbc0c52250c9bdd25906f19f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Many short-duration insurance and reinsurance contracts have retrospective rating provisions. A retrospectively rated contract is a multiple-year contract in which events in one period of the contract create rights and obligations in another. For example, if losses above a certain level occur in one contract year, premiums increase in future years unless the ceding entity compensates the reinsurer through a settlement adjustment. The ceding entity has an obligation because it must pay either the settlement adjustment or the higher future premiums. ##### [944-20-05-42](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-42) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:12887aed0ef20ce3f2ff94d36fce37a1155aac44bf461e1797866e1a55dcf521 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurer (ceding entity) may enter into a multiple-year retrospectively rated reinsurance contract with a reinsurer (assuming entity). Examples of these contracts may include transactions referred to as funded catastrophe covers. These contracts include a retrospective rating provision that provides for at least one of the following based on contract experience: 1. a Changes in the amount or timing of future contractual cash flows, including premium adjustments, settlement adjustments, or refunds to the ceding entity 2. b Changes in the contract's future [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."). ##### [944-20-05-43](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-43) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:0c6e2f896d963ae21c39b17ed212690e40f76e8ccbd45256d61947485ace8de4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A critical distinguishing feature of these contracts is that part or all of the retrospective rating provision is obligatory such that the retrospective rating provision creates future rights and obligations as a result of past events. Therefore, a retrospectively rated contract that could be cancelled without further obligation (because it does not create rights and obligations that will be realized in a future period) is excluded. ### Financial Guarantee Insurance Contracts ##### [944-20-05-44](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-44) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:e708085962b8ab555c768d98e0ea6d5382adca09e78ff682506083905c46bc7e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Financial Guarantee Insurance Contracts Subsections of this Subtopic provide guidance on accounting for and financial reporting of [financial guarantee insurance contracts](https://asc.understandingaccounting.org/glossary/f/#financial-guarantee-insurance-contract "A contract issued by an insurance entity that provides protection to the holder of a financial obligation from a financial loss in the event of a default. Specifically, a contract that obligates the insurance entity to pay a claim upon the occurrence of an event of default. The event of a default (insured event) refers to nonpayment (when due) of insured contractual payments (generally principal and interest) by the issuer of the insured financial obligation.") and [financial guarantee reinsurance contracts](https://asc.understandingaccounting.org/glossary/f/#financial-guarantee-reinsurance-contract "See Financial Guarantee Insurance Contract"). Examples of such financial obligations include a municipal bond or an asset-backed security. ##### [944-20-05-45](https://asc.understandingaccounting.org/asc/944/20/#944-20-05-45) Pending content: no Source downloaded (UTC): 2026-09-10T02:15:01.505Z to 2026-09-10T02:15:01.505Z Record version: sha256:44e7badf1975196832db14398a7fd108be62df4ba418ff471be99ce06d17f8ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Although the direct or indirect beneficiary of the contract is the holder of the insured financial obligation, the holder of the financial guarantee insurance contract (policyholder) will vary. In some cases, the policyholder will be the issuer (for example, a municipality or a corporation) of the insured financial obligation because it is seeking to increase the marketability of the insured financial obligation while reducing future interest costs (by attaining a higher credit standing for the insured financial obligation through the financial guarantee insurance contract). In other cases, the policyholder will be both the holder of the insured financial obligation and beneficiary because it has purchased a financial obligation in the secondary market and seeks to protect itself from a financial loss in the event of a default.