# ASC 944-40-05: Financial Services—Insurance — Claim Costs and Liabilities for Future Policy Benefits — 05 Overview and Background Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/944/40/#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): 2026-09-10T02:16:29.572Z to 2026-09-10T02:16:29.572Z Record version: sha256:b84da01027041fc240d620ef151bc66e39a93831cfad7704a6d092ba0320dce7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 944-40-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/944/40/#05-overview-and-background) SEC content: no ##### [944-40-05-1](https://asc.understandingaccounting.org/asc/944/40/#944-40-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:29.572Z to 2026-09-10T02:16:29.572Z Record version: sha256:3480840bfe5b987b065b0e6b4890e9859fb6d312f43646e353d1a3527a6b299f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance to insurance entities on accounting for and financial reporting of claims costs and liabilities for future policy benefits. The guidance in this Subtopic is presented in the following five Subsections: 1. a General 2. b Short-Duration Contracts 3. c Long-Duration Contracts 4. d [Reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") Contracts 5. e Financial Guarantee Insurance Contracts. ##### [944-40-05-2](https://asc.understandingaccounting.org/asc/944/40/#944-40-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:29.572Z to 2026-09-10T02:16:29.572Z Record version: sha256:9e7318da973504b63211e0cde70acc722e767420b43ef1635359f4172c0e7bd1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Claim adjustment expenses](https://asc.understandingaccounting.org/glossary/c/#claim-adjustment-expenses "Expenses incurred in the course of investigating and settling claims.") include costs incurred in the [claim](https://asc.understandingaccounting.org/glossary/c/#claim "A demand for payment of a policy benefit because of the occurrence of an insured event.") settlement process such as all of the following: 1. a Legal fees 2. b Outside adjuster fees 3. c Costs to record, process, and adjust claims. ### Short-Duration Contracts ##### [944-40-05-3](https://asc.understandingaccounting.org/asc/944/40/#944-40-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:29.572Z to 2026-09-10T02:16:29.572Z Record version: sha256:2f0788522a7c431e9f5be14cb663778ac914b78d5b3d81e30677d0c54cb967d3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Short-Duration Contracts Subsections of this Subtopic provide insurance entities guidance on accounting for and financial reporting of short-duration contracts. ### Long-Duration Contracts ##### [944-40-05-4](https://asc.understandingaccounting.org/asc/944/40/#944-40-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:29.572Z to 2026-09-10T02:16:29.572Z Record version: sha256:9cc28574ccb7a10f24de9d4ce51488baaf9587fbb6a00010a6fa7fff0ffbbd9e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Long-Duration Contracts Subsections of this Subtopic provide guidance to insurance entities on accounting for and financial reporting of the expected cost related to long-duration insurance contracts. ### Reinsurance Contracts ##### [944-40-05-5](https://asc.understandingaccounting.org/asc/944/40/#944-40-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:29.572Z to 2026-09-10T02:16:29.572Z Record version: sha256:666dba26b898ea6a8b96c5e8be435419c0b918b5b009f33b20771a1380192587 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Reinsurance Contracts Subsections of this Subtopic provide insurance entities 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. ### Financial Guarantee Insurance Contracts ##### [944-40-05-6](https://asc.understandingaccounting.org/asc/944/40/#944-40-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:29.572Z to 2026-09-10T02:16:29.572Z Record version: sha256:736d11fd93bda6ebc0fd0d49454b950075c1c857ec6d320cdcc05c2e366c0d10 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 claim liabilities for financial guarantee insurance contracts. #### Information about Insured Financial Obligations ##### [944-40-05-7](https://asc.understandingaccounting.org/asc/944/40/#944-40-05-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:29.572Z to 2026-09-10T02:16:29.572Z Record version: sha256:21d47dd5d977aa6173b6c01c09c3ea524db895cda674c405e6da072967dc9622 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Insurance entities often aggregate information related to the credit standing of their insured financial obligations in a watch list or surveillance list to evaluate credit deterioration in those insured financial obligations. Those lists often are separated into groupings or categories to assist management in identifying varying degrees of credit deterioration of insured financial obligations in its portfolios.