{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/944/20/#15-scope-and-scope-exceptions","source":"FASB Accounting Standards Codification, Basic View","usage":"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.","topic":"944","topic_title":"Financial Services—Insurance","subtopic":"944-20","subtopic_title":"Insurance Activities","section":{"number":"15","label":"15 Scope and Scope Exceptions","anchor":"15-scope-and-scope-exceptions","is_sec":false,"groups":[{"block":null,"heading":"Overall Guidance","paragraphs":[{"citation":"944-20-15-1","para":"15-1","html":"This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section
944-10-15, with other considerations noted below.
For instruments and transactions within its scope, the guidance in the Financial Guarantee Insurance Contracts Subsections take precedence to other guidance in this Subtopic.
Paragraph 720-20-25-1 states that, to the extent that an insurance contract or reinsurance contract does not, despite its form, provide for indemnification of the insured or the ceding entity by the issuer or reinsurer against loss or liability, the premium paid less the amount of the premium to be retained by the insurer or reinsurer shall be accounted for as a deposit by the insured or the ceding entity. See paragraph
340-30-05-1 for guidance on applying the deposit method of accounting. For guidance on long-duration contracts that do not incorporate significant insurance risk, see paragraph
944-20-15-14.
Insurance contracts, for purposes of this Subtopic, shall be classified as short-duration contracts (see paragraph 944-20-15-7) or long-duration contracts (see paragraph 944-20-15-10) depending on whether the contracts are expected to remain in force for an extended period. Certain guidance in the Long-Duration Subsections in this Subtopic (and other Subtopics within the Financial Services—Insurance Topic) applies only to certain long-duration participating life insurance contracts of mutual life insurance entities and certain stock life insurance entities. For purposes of that guidance:
- a
- b
Participating life insurance contracts denote those that have both of the following characteristics:
- 1
They are long-duration participating contracts that are expected to pay dividends to policyholders based on actual experience of the insurance entity. - 2
- a
Identifies divisible surplus
- b
Distributes that surplus in approximately the same proportion as the contracts are considered to have contributed to divisible surplus (commonly referred to in actuarial literature as the contribution principle).
Paragraph 944-20-15-11 states that stock life insurance entities with participating life insurance contracts that meet certain conditions are permitted to account for those contracts in accordance with the Long-Duration Contracts Subsections of this Subtopic. That paragraph explains that the same accounting policy shall be applied consistently to all those participating life insurance contracts. The Short-Duration Contracts Subsections follow the same Scope and Scope Exceptions as outlined in the
General Subsection of this Section, with specific instrument qualifications and exceptions noted below.
The guidance in the Short-Duration Contracts Subsections of this Subtopic applies only to short-duration contracts.
Paragraph 944-20-15-2 states that insurance contracts, for purposes of this Subtopic, shall be classified as short-duration contracts or long-duration contracts depending on whether the contracts are expected to remain in force for an extended period. The factors that shall be considered in determining whether a particular contract can be expected to remain in force for an extended period are as follows for a short-duration contract: - a
The contract provides insurance protection for a fixed period of short duration.
- b
The contract enables the insurer to cancel the contract or to adjust the provisions of the contract at the end of any contract period, such as adjusting the amount of premiums charged or coverage provided.
The Long-Duration Contracts Subsections follow the same Scope and Scope Exceptions as outlined in the
General Subsection of this Section, with specific instrument qualifications and exceptions and other considerations noted below.
The guidance in the Long-Duration Contracts Subsections of this Subtopic applies only to long-duration contracts.
Paragraph 944-20-15-2 states that insurance contracts, for purposes of this Subtopic, shall be classified as short-duration contracts or long-duration contracts depending on whether the contracts are expected to remain in force for an extended period. The factors that shall be considered in determining whether a particular contract can be expected to remain in force for an extended period are as follows for a long-duration contract: - a
The contract generally is not subject to unilateral changes in its provisions, such as a noncancelable or guaranteed renewable contract.
- b
The contract requires the performance of various functions and services (including insurance protection) for an extended period.
The guidance in the Long-Duration Contracts Subsections of this Subtopic applies, in part, to the following classes of long-duration contracts issued: - a
Universal life-type contracts, that is, long-duration insurance contracts with terms that are not fixed and guaranteed
- b
Limited-payment contracts, including limited-payment participating and limited-payment nonguaranteed-premium contracts that are not, in substance, universal life-type contracts - c
Except as noted in paragraph
944-20-15-3, participating life insurance contracts
- d
Whole-life contracts, that is, insurance contracts that may be kept in force for a person's entire life by paying one or more premiums - e
Term life insurance contracts, that is, insurance contracts that provide a benefit if the insured dies within the period specified in the contract.
Stock life insurance entities with participating life insurance contracts described in (c) are permitted to account for those contracts in accordance with the Long-Duration Contracts Subsections of this Subtopic. The same accounting policy shall be applied consistently to all those participating life insurance contracts. If insurance contracts have characteristics significant to the contracts cited in (a) or (b) of the preceding paragraph those contracts are within the scope of the Long-Duration Contracts Subsections of this Subtopic. For example, universal disability contracts that have many of the same characteristics as universal life-type contracts, with the exception of providing disability benefits instead of life insurance benefits, shall be accounted for in a manner consistent with universal life-type contracts.
The Long-Duration Subsections of this Subtopic also apply to certain contracts or features not covered elsewhere in the Codification, including asset, liability, revenue, and expense recognition. Examples of such contracts or features include the following: - a
Contracts offered through an insurance entity's separate accounts
- b
- c
- d
Contracts providing multiple account balances
- e
The guidance in the Long-Duration Subsections of this Subtopic does not apply to
investment contracts issued by an insurance entity that do not incorporate significant insurance risk and shall not be accounted for as insurance contracts. See paragraph
944-825-25-2 for investment contracts.
The following guidance addresses the scope application of the Long-Duration Subsections of this Subtopic:
- a
Distinguishing investment contracts from universal life-type insurance contracts
- b
Universal life-type contracts
- c
Embedded derivatives.
A mortality or morbidity risk is present if, under the terms of the contract, the entity is required to make payments or forego required premiums contingent on the death or disability (in the case of life insurance contracts) or the continued survival (in the case of annuity contracts) of a specific individual or group of individuals. A contract provision that allows the holder of a long-duration contract to purchase an annuity at a guaranteed price on settlement of the contract does not entail a mortality risk until the right to purchase is executed. If purchased, the annuity is a new contract to be evaluated on its own terms. Annuity contracts may require the insurance entity to make a number of payments that are not contingent on the survival of the beneficiary, followed by life-contingent payments. Such contracts are considered insurance contracts under this Subtopic unless either of the following conditions exist: - a
The probability that life-contingent payments will be made is remote. - b
The present value of the expected life-contingent payments relative to the present value of all expected payments under the contract is insignificant.
To determine the scope application for a contract that contains death or other insurance benefit features, the insurance entity shall first determine whether the contract is an investment contract or insurance contract. Classification of a contract as an investment contract or as an insurance contract shall be made at contract inception, and the classification shall not be reassessed during the accumulation phase of the contract. If the mortality and morbidity risk associated with insurance benefit features offered in a contract is deemed to be nominal—that is, a risk of insignificant amount or remote probability—the contract shall be classified as an investment contract; otherwise, it shall be considered an insurance contract. There is a rebuttable presumption that a contract has significant mortality risk if the additional insurance benefit would vary significantly in response to capital markets volatility.
If the mortality or morbidity risk is other than nominal and the fees assessed or insurance benefits are not fixed and guaranteed, the contract should be classified as a universal life-type contract by the insurance entity.
If the fees assessed on a contract and insurance benefits provided by the contract are fixed and guaranteed or if the contract is short duration, the contract should be classified as a traditional long-duration contract or short-duration contract, respectively.
The determination of the significance of mortality or morbidity risk shall be based on a comparison of the following amounts: - a
Excess payments. The present value of expected excess payments to be made under insurance benefit features—that is, insurance benefit amounts and related incremental claim adjustment expenses in excess of the account balances. - b
Revenue. The present value of all amounts expected to be assessed against the contract holder and the expected investment margin.
In performing the analysis, an insurance entity shall consider both frequency and severity under a full range of scenarios that considers the volatility inherent in the assumptions, rather than making a best estimate using one set of assumptions. For example, if the annuity contract is a variable annuity contract, the insurance entity shall consider a range of fund return scenarios. If considering a range of scenarios, the insurance entity shall consider historical investment returns, the volatility of those returns, and expected future returns, as applicable. For purposes of the scope application of the Long-Duration Subsections of this Subtopic, universal life-type contracts include contracts that provide either death or annuity benefits and are characterized by any of the following features: - a
One or more of the amounts assessed by the insurer against the policyholder—including amounts assessed for mortality coverage, contract administration, initiation, or surrender—are not fixed and guaranteed by the terms of the contract. - b
Amounts that accrue to the benefit of the policyholder—including interest accrued to policyholder balances—are not fixed and guaranteed by the terms of the contract.
- c
Premiums may be varied by the policyholder within contract limits and without consent of the insurer.
A participating or nonguaranteed-premium contract is within the scope of the Long-Duration Subsections of this Subtopic if the terms of the contract suggest that it is, in substance, a universal life-type contract. The determination that a contract is in substance a universal life-type contract requires judgment and a careful examination of all contract terms.
The following two paragraphs describe some circumstances in which a participating or nonguaranteed-premium contract shall be accounted for as a universal life-type contract. The provisions of the following two paragraphs are not intended to be either all-inclusive or limiting. Limited-payment participating and limited-payment nonguaranteed-premium contracts that are not, in substance, universal life-type contracts are limited-payment contracts because they are not conventional forms of participating or nonguaranteed-premium contracts.
A participating contract that includes any of the following features shall be considered a universal life-type contract: - a
The policyholder may vary premium payments within contract limits and without consent of the insurer.
- b
The contract has a stated account balance that is credited with policyholder premiums and interest and against which assessments are made for contract administration, mortality coverage, initiation, or surrender, and any of the amounts assessed or credited are not fixed and guaranteed.
- c
The insurer expects that changes in any contract element will be based primarily on changes in interest rates or other market conditions rather than on the experience of a group of similar contracts or the entity as a whole.
A nonguaranteed-premium contract that includes either of the features (b) or (c) in the preceding paragraph shall be considered a universal life-type contract.
For guidance on accounting for embedded derivatives contained in nontraditional and other contracts, see Subtopic 815-15. The Reinsurance Contracts Subsections follow the same Scope and Scope Exceptions as outlined in the
General Subsection of this Section, with specific entity and instrument qualifications and exceptions noted below.
Servicing carriers for involuntary risk pools also are included in the scope of the Reinsurance Contracts Subsections of this Subtopic because the servicing carrier business is indistinguishable effectively from other types of reinsurance for accounting purposes. The financial reporting for a contract with a reinsurer depends on whether the contract is considered to be reinsurance for purposes of applying this Subtopic. Financial reporting for a reinsurance contract also depends on whether the contract reinsures short-duration or long-duration insurance contracts and, for short-duration contracts, on whether the contract is considered prospective reinsurance or retroactive reinsurance. For contracts that reinsure long-duration contracts, characteristics of the reinsurance contract determine whether the contract is short- or long-duration. Determining whether a contract that reinsures a long-duration insurance contract is long-duration or short-duration in nature is a matter of judgment, considering all of the facts and circumstances. For example, some contracts described as yearly renewable term may be, in substance, long-duration contracts, depending on their terms and how they are priced.
The distinction between prospective and retroactive reinsurance contracts is based on whether the contract reinsures future or past insured events covered by the underlying contracts. For example, in occurrence-based insurance, the insured event is the occurrence of a loss covered by the insurance contract. In claims-made insurance, the insured event is the reporting to the insurer, within the period specified by the policy, of a claim for a loss covered by the insurance contract. A claims-made reinsurance contract that reinsures claims asserted to the reinsurer in a future period as a result of insured events that occurred before entering into the reinsurance contract is a retroactive contract. Reinsurance contracts may include both prospective and retroactive provisions. For example, a reinsurance contract that reinsures liabilities relating to contracts written during one or more prior years also may reinsure losses on contracts to be written during one or more future years. Reinsurance also may be acquired some time after the reinsured contract has been written, but before the close of the coverage period for that contract, and be made effective as of the beginning of the contract period. This may result in a reinsurance contract with prospective and retroactive provisions that relate to a single contract year. It is not uncommon for a reinsurance arrangement to be initiated before the beginning of a policy period but not finalized until after the policy period begins. Whether there was agreement in principle at the beginning of the policy period and, therefore, the contract is substantively prospective depends on the facts and circumstances. Paragraphs 944-605-30-4 and state that reinsurance of long-duration contracts can be either short- or long-duration. The fact that no similar guidance is provided for short-duration contracts is intentional, because it is not possible to reinsure more risk than was originally insured under the primary insurance contracts. The guidance in the Reinsurance Subsections of this Subtopic applies to the following instruments:
- a
Any transaction, regardless of its form, whose individual terms indemnify an insurer against loss or liability relating to insurance risk. That is, all contracts, including contracts that may not be structured or described as reinsurance, shall be accounted for as reinsurance if those conditions are met, including reinsurance contracts used to, in effect, sell a line of business by coinsuring all or substantially all of the risks related to the line. - b
All contract amendments.
The guidance in the Reinsurance Contracts Subsections of this Subtopic does not apply to the following instruments:
- a
Contracts that do not meet the conditions for reinsurance accounting
- b
Except as noted in the following paragraph, reinsurance assumed.
Only the following provisions of the Reinsurance Subsections in this Subtopic apply to reinsurance assumed:
- a
- b
Paragraphs require certain disclosures.
Determining under paragraph 944-20-15-37(a) whether a contract with a reinsurer provides indemnification against loss or liability relating to insurance risk requires a complete understanding of that contract and other contracts or agreements between the ceding entity and related reinsurers. A complete understanding includes an evaluation of all contractual features that do either of the following: - a
Limit the amount of insurance risk to which the reinsurer is subject (such as through experience refunds, cancellation provisions, adjustable features, or additions of profitable lines of business to the reinsurance contract)
- b
Delay the timely reimbursement of claims by the reinsurer (such as through payment schedules or accumulating retentions from multiple years).
This risk transfer assessment shall be made at contract inception, based on facts and circumstances known at the time. Reinsurance programs often entail the reinsurance of various layers of exposure through multiple reinsurance contracts. Indemnification against loss or liability relating to insurance risk shall be determined in relation to the provisions of the individual reinsurance contract being evaluated.
Unless the condition in paragraph 944-20-15-53 is met, indemnification of the ceding entity against loss or liability relating to insurance risk in reinsurance of short-duration contracts exists under paragraph 944-20-15-37(a) only if both of the following conditions are met: - a
Significant insurance risk. The reinsurer assumes significant insurance risk under the reinsured portions of the underlying insurance contracts. Implicit in this condition is the requirement that both the amount and timing of the reinsurer's payments depend on and directly vary with the amount and timing of claims settled under the reinsured contracts.
- b
Significant loss. It is reasonably possible that the reinsurer may realize a significant loss from the transaction.
The conditions are independent and the ability to meet one does not mean that the other has been met. A substantive demonstration that both conditions have been met is required for a short-duration contract to transfer risk. The reference in (a) in the preceding paragraph acknowledges that a ceding entity may reinsure only part of the risks associated with the underlying contracts. For example, a proportionate share of all risks or only specified risks may be reinsured. The conditions for reinsurance accounting are evaluated in relation to the reinsured portions of the underlying insurance contracts, rather than all aspects of those contracts.
The assessment of the criterion in paragraph 944-20-15-41 shall be applied from contract inception, considering the effect of any subsequent contract amendments. Careful evaluation and considered judgment is required to determine whether a significant loss to the reinsurer was reasonably possible at inception. The status of a contract should be determinable at inception and, absent amendment, subsequent changes shall be very rare. The assessment in paragraph 944-20-15-41 is applied to a particular scenario, not to the individual assumptions used in the scenario. Therefore, a scenario is not reasonably possible unless the likelihood of the entire set of assumptions used in the scenario occurring together is reasonably possible. Contracts that reinsure risks arising from short-duration contracts shall meet the definition of a short-duration contract in paragraph 944-20-15-2 to be accounted for as reinsurance, because reinsurance of short-duration contracts is inherently short-duration. Contracts that reinsure short-duration insurance risks over a significantly longer period are, in substance, financing transactions, because any of the following conditions exist: - a
Premiums are deferred over a period beyond the term of the underlying insurance contracts.
- b
Losses are recognized in a different period than the period in which the event causing the loss takes place.
- c
Both events (a) and (b) occur at different points in time.
A reinsurer shall not be considered under paragraph 944-20-15-37(a) to have assumed significant insurance risk under reinsured short-duration contracts if the probability of a significant variation in either the amount or timing of payments by the reinsurer is remote. Contractual provisions that delay timely reimbursement to the ceding entity would prevent this condition from being met because they prevent the reinsurer's payments from directly varying with the claims settled under the reinsured contracts. Whether underwriting risk has transferred to the reinsurer depends on how much uncertainty about the ultimate amount of net cash flows from premiums, commissions, claims, and claim settlement expenses paid under a contract has been transferred to the reinsurer. The preceding paragraph indicates that insurance risk transfer requires that both the amount and timing of the reinsurer's payments depend on, and directly vary with, the amount and timing of claims settled under the reinsured contracts. Accordingly, the significance of the amount of underwriting risk transferred shall be evaluated in relation to the ceding entity's claims payments. The word timely is used in paragraph 944-20-15-40 in the ordinary temporal sense to refer to the length of time between payment of the underlying reinsured claims and reimbursement by the reinsurer. While the test for reasonable possibility of significant loss to the reinsurer provides for a present-value-based assessment of the economic characteristics of the reinsurance contract, the concept of timely reimbursement relates to the transfer of insurance risk (the condition in paragraph 944-20-15-41[a]), not the reasonable possibility of significant loss (the condition in paragraph 944-20-15-41[b]). Accordingly, timely reimbursement shall be evaluated based solely on the length of time between payment of the underlying reinsured claims and reimbursement by the reinsurer. The ceding entity's evaluation of whether it is reasonably possible for a reinsurer to realize a significant loss from the transaction shall be based on the present value of all cash flows between the ceding and assuming entities under reasonably possible outcomes, without regard to how the individual cash flows are characterized. The same interest rate shall be used to compute the present value of cash flows for each reasonably possible outcome tested. To be reasonable and appropriate, that rate shall reflect both of the following: - a
The expected timing of payments to the reinsurer
- b
The duration over which those cash flows are expected to be invested by the reinsurer.
All cash flows are included in the calculation in the preceding paragraph because payments that effectively represent premiums or refunds of premiums may be described in various ways under the terms of a reinsurance contract. The way a cash flow is characterized does not affect whether it should be included in determining the reinsurer's exposure to loss. Only cash flows between the ceding and assuming entities are considered, therefore precluding consideration of other expenses of the reinsurer (such as taxes and operating expenses) in the calculation.
Significance of loss shall be evaluated by comparing the following: - a
The present value of all cash flows (determined as described in paragraph 944-20-15-49) - b
The present value of the amounts paid or deemed to have been paid to the reinsurer.
Determining (for purposes of [b]) the amounts paid or deemed to have been paid for reinsurance requires an understanding of all contract provisions. For example, payments and receipts under a reinsurance contract may be settled net. The ceding entity may withhold funds as collateral or may be entitled to compensation other than recovery of claims. Gross premiums shall be used—expenses shall not be deducted from premiums in evaluating the significance of a reasonably possible loss. Because the present value of cash flows shall be determined over the period in which cash flows are reasonably expected to occur, unless commutation (termination) is expected in the scenario being evaluated, commutation shall not be assumed in the calculation. Further, the assumptions used in a scenario shall be internally consistent and economically rational for that scenario's outcome to be considered reasonably possible. If, based on the comparison in paragraph 944-20-15-51, the reinsurer is not exposed to the reasonable possibility of significant loss, the ceding entity shall be considered indemnified against loss or liability relating to insurance risk only if substantially all of the insurance risk relating to the reinsured portions of the underlying insurance contracts has been assumed by the reinsurer. That condition is met only if insignificant insurance risk is retained by the ceding entity on the reinsured portions of the underlying insurance contracts. The assessment of that condition shall be made by comparing both of the following: - a
The net cash flows of the reinsurer under the reinsurance contract
- b
The net cash flows of the ceding entity on the reinsured portions of the underlying insurance contracts.
If the economic position of the reinsurer relative to the insurer cannot be determined, the contract shall not qualify under the exception in this paragraph. The extremely narrow and limited exemption in the preceding paragraph is for contracts that reinsure either an individual risk or an underlying book of business that is inherently profitable. To qualify under that exception, no more than trivial insurance risk on the reinsured portions of the underlying insurance contracts may be retained by the ceding entity. The reinsurer's economic position shall be virtually equivalent to having written the relevant portions of the reinsured contracts directly.
To be accounted for as reinsurance, a contract that reinsures risks arising from short-duration insurance contracts must meet all of the following conditions: - a
The contract shall qualify as a short-duration contract under paragraph 944-20-15-7. - b
The contract shall not contain features that prevent the risk transfer criteria in this Subsection from being reasonably applied and those risk transfer criteria shall be met.
- c
The ultimate premium expected to be paid or received under the contract shall be reasonably estimable and allocable in proportion to the reinsurance protection provided as required by paragraphs 944-605-25-2 and 944-605-35-8.
If any of these conditions are not met, a deposit method of accounting shall be applied by the ceding and assuming entities. Condition (b) in the preceding paragraph applies to a contract and determining the substance of a contract is a judgmental matter. If an agreement with a reinsurer consists of both risk transfer and nonrisk transfer coverages that have been combined into a single legal document, those coverages must be considered separately for accounting purposes. Section 944-20-15 does not intend for different kinds of exposures combined in a program of reinsurance to be evaluated for risk transfer and accounted for together because that would allow contracts that do not meet the conditions for reinsurance accounting to be accounted for as reinsurance by being designated as part of a program that in total meets the conditions for reinsurance accounting. Because the retrospective rating provisions of single-year retrospectively rated contracts do not create benefits or obligations in a future accounting period, other guidance, including paragraphs 720-20-25-1, 944-605-25-2(a) through (b), 944-605-25-20, and 944-605-35-8, shall be applied to those contracts. If the retrospectively rated contract contains any of the characteristics of paragraph 460-10-15-4 and does not qualify for the scope exception in paragraph 460-10-15-7(d), the guarantor would be subject to the initial recognition, initial measurement, and disclosure provisions of Subtopic 460-10. The guarantor could be the ceding entity, assuming entity, or both, depending on the terms of the retrospectively rated contract. Indemnification of the ceding entity against loss or liability relating to insurance risk in reinsurance of long-duration contracts requires the reasonable possibility that the reinsurer may realize significant loss from assuming insurance risk.
Consistent with the definition of investment contract, a contract that does not subject the reinsurer to the reasonable possibility of significant loss from the events insured by the underlying insurance contracts does not indemnify the ceding entity against insurance risk. The evaluation of mortality risk or morbidity risk in contracts that reinsure universal life-type policies shall be consistent with the criteria in paragraphs . Evaluation of the presence of insurance risk in contracts that reinsure other long-duration contracts (such as those that reinsure ordinary life contracts or contracts that provide benefits related only to illness, physical injury, or disability) also shall be consistent with those criteria. Any change or adjustment of contractual terms is considered an amendment for purposes of applying this Subtopic, including all but the most trivial changes and without distinction between financial and nonfinancial terms.
Examples of amendments include but are not limited to the following: - a
Replacing one assuming entity with another (including an affiliated entity)
- b
Modifying the contract's limit, coverage, premium, commissions, or experience-related adjustable features.
If contractual terms are amended, risk transfer shall be reassessed. For example, a contract that, upon its inception, met the conditions for reinsurance accounting under this Subsection could later be amended so that it no longer meets those conditions. The contract shall be reclassified and accounted for as a deposit in accordance with the guidance in Subtopic 340-30. Whether an amended contract in substance transfers risk shall be determined considering all of the facts and circumstances in light of risk transfer requirements. Judgment also will be required to determine whether an amendment in effect creates a new contract.
The Financial Guarantee Insurance Contracts Subsections follow the same Scope and Scope Exceptions as outlined in the General Subsection of this Section, with specific instrument qualifications and exceptions noted below.
Except as noted in the following paragraph, the guidance in the Financial Guarantee Insurance Contract Subsections applies to all
financial guarantee insurance contracts and
financial guarantee reinsurance contract.
The guidance in the Financial Guarantee Insurance Contract Subsections does not apply to any of the following:
- a
An insurance contract that is similar to a financial guarantee insurance contract (for example, mortgage guaranty insurance and credit insurance on trade receivables)
- b
A financial guarantee insurance contract accounted for as a derivative instrument within the scope of Subtopic 815-10.
An insurance entity shall consider the application of the Financial Guarantee Insurance Contracts Subsections only if the contract is not within the scope of Subtopic 815-10 and is not accounted for as a derivative instrument.The recognition and measurement provisions of the Financial Guarantee Insurance Contracts Subsections shall be applied on a contract-by-contract basis.