# ASC 944-40-30: Financial Services—Insurance — Claim Costs and Liabilities for Future Policy Benefits — 30 Initial Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/944/40/#30-initial-measurement) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:ba4814551405c67671930e30f6a2977ef51dd3e2e3723cedc89ceb24b303a110 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 944-40-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/944/40/#30-initial-measurement) SEC content: no #### Liability for Unpaid Claims ##### [944-40-30-1](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:717dadc48cb88a23d4190f69030af06700547ba9a9a37de2e61cddba55fcd330 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The [liability for unpaid claims](https://asc.understandingaccounting.org/glossary/l/#liability-for-unpaid-claims "The amount needed to provide for the estimated ultimate cost of settling claims relating to insured events that have occurred on or before a particular date (ordinarily, the balance sheet date).") shall be based on the estimated ultimate cost of settling the claims (including the effects of inflation and other societal and economic factors), using past experience adjusted for current trends, and any other factors that would modify past experience. ##### [944-40-30-2](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:16f49f7831cee74e3b8e4a84219b32970eb080db7a6462c4f83325c5a8589c59 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Estimated recoveries on unsettled claims, such as [salvage](https://asc.understandingaccounting.org/glossary/s/#salvage "The amount received by an insurer from the sale of property (usually damaged) on which the insurer has paid a total claim to the insured and has obtained title to the property."), [subrogation](https://asc.understandingaccounting.org/glossary/s/#subrogation "The right of an insurer to pursue any course of recovery of damages, in its name or in the name of the policyholder, against a third party who is liable for costs relating to an insured event that have been paid by the insurer."), or a potential ownership interest in real estate, shall be evaluated in terms of their estimated realizable value and deducted from the liability for unpaid claims. ##### [944-40-30-3](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:48addcc84548cacc821e69a345152d3a61471a69945bd81970498c954d049986 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Estimated recoveries on settled claims other than mortgage guaranty and title insurance claims also shall be deducted from the liability for unpaid claims. ##### [944-40-30-4](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:aaeca60c2ac5b172ee092c0bf49a3246542db01877777b2854cce41e61605745 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 associated directly with specific claims paid or in the process of settlement, such as legal and adjusters' fees. Claim adjustment expenses also include other costs that cannot be associated with specific claims but are related to claims paid or in the process of settlement, such as internal costs of the claims function. ##### [944-40-30-5](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:2806b80139ce0b5052215d3397f9271f017c26c44aa78e599c7849100d69910a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The initial measurement attributes of items recognized under the [General Subsection](https://asc.understandingaccounting.org/asc/944/40/#25-recognition) of Section 944-40-25 are the same as stated for subsequent measurement, see the [General Subsection](https://asc.understandingaccounting.org/asc/944/40/#35-subsequent-measurement) of Section 944-40-35. ### Long-Duration Contracts #### Overall ##### [944-40-30-6](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:09d0a99c6eb0b2bfb03c0cbdf784f14e1db0b11e8faf36c4193134d8c320d1db 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/). #### Traditional and Limited-Payment Long-Duration Contracts ##### [944-40-30-7](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:c3669e8b67ddbff67e6857d219bbdfbc4bd51bfd22e5a5e326893287a1a5435d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The [liability for future policy benefits](https://asc.understandingaccounting.org/glossary/l/#liability-for-future-policy-benefits "An accrued obligation to policyholders that relates to insured events, such as death or disability.") accrued under paragraph [944-40-25-8](https://asc.understandingaccounting.org/asc/944/40/#944-40-25-8) shall be the present value of future benefits to be paid to or on behalf of policyholders and related expenses less the present value of future [net premiums](https://asc.understandingaccounting.org/glossary/n/#net-premiums "For traditional and limited-payment long-duration insurance contracts, the net premium is that portion of the gross premium required to provide for all benefits and expenses, excluding acquisition costs or any costs that are required to be charged to expense as incurred. For long-duration participating life insurance contracts that meet the criteria in paragraph 944-20-15-3, the net premium is a constant ratio of guaranteed maximum gross premiums. The ratio is calculated at issue, so that the present value of all guaranteed death and endowment benefits is equal to the present value of all net premiums.") (portion of [gross premium](https://asc.understandingaccounting.org/glossary/g/#gross-premium "The premium charged to a policyholder for an insurance contract. See also Net Premiums.") required to provide for all benefits and expenses, excluding [acquisition costs](https://asc.understandingaccounting.org/glossary/a/#acquisition-costs "Costs that are related directly to the successful acquisition of new or renewal insurance contracts.") or costs that are required to be charged to expense as incurred). That liability shall be estimated using methods that include assumptions, such as discount rate, [mortality](https://asc.understandingaccounting.org/glossary/m/#mortality "The relative incidence of death in a given time or place."), [morbidity](https://asc.understandingaccounting.org/glossary/m/#morbidity "The relative incidence of disability due to disease or physical impairment."), [terminations](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."), and expenses (see paragraphs [944-40-30-9](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-9) and [944-40-30-11 through 30-15](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-11) ). The liability also shall consider other assumptions relating to guaranteed contract benefits, such as coupons, annual endowments, and conversion privileges. The assumptions shall not include a provision for the [risk of adverse deviation](https://asc.understandingaccounting.org/glossary/r/#risk-of-adverse-deviation "A concept (also referred to as risk load) used by insurance entities that allows for possible unfavorable deviations from assumptions."). In determining the level of aggregation at which reserves are calculated, an insurance entity shall not group contracts together from different issue years but shall group contracts into quarterly or annual groups. ##### [944-40-30-7A](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-7A) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:02eed694d2720e8cb19bf1c73ec29aae4eeb1ea844b267b1fe3833022a79dcdd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To the extent the present value of future benefits and expenses exceeds the present value of future gross premiums, an immediate charge shall be recognized in net income (see paragraph [944-40-45-4](https://asc.understandingaccounting.org/asc/944/40/#944-40-45-4)) such that net premiums are set equal to gross premiums. In no event shall the liability for future policy benefits balance be less than zero for the level of aggregation at which reserves are calculated. Assumptions shall be updated in subsequent accounting periods as described in paragraphs [944-40-35-5 through 35-6A](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-5) and [944-40-35-7A through 35-7B](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-7A) . ##### [944-40-30-8](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:251fdbee0100cb799996c45a255c210672b4737d8c936369e4c4623a54a3f66e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance discusses the following assumptions: 1. a Discount rate 2. b Mortality 3. c Morbidity 4. d Termination 5. e Expense. ##### [944-40-30-9](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-9) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:9fee33e759911853c1f1903f7f78125de67591f2e59d743c39cd1382aadc81ab Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The liability for future policy benefits shall be discounted using an upper-medium grade (low-credit-risk) fixed-income instrument yield. An insurance entity shall consider reliable information in estimating the upper-medium grade (low-credit-risk) fixed-income instrument yield that reflects the duration characteristics of the liability for future policy benefits (see paragraph [944-40-55-13E](https://asc.understandingaccounting.org/asc/944/40/#944-40-55-13E)). An insurance entity shall maximize the use of relevant observable inputs and minimize the use of unobservable inputs in determining the discount rate assumption. ##### [944-40-30-10](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-10) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:9de8ceb64a2184cdb0f349077ea045f05fcf6c3a26ba259d49e4354df23740f3 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/). ##### [944-40-30-11](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-11) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:a160b53846d004f3cbd1cf5dbbc5dd1d204d81c36f82a077e1416c70f0879aa6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Mortality assumptions used in estimating the liability for future policy benefits shall be based on estimates of expected mortality. ##### [944-40-30-12](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-12) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:531f738d9563e5fecbbdb1c671565faeabf10b2c003729a3b5dca4efbcb45aac Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Morbidity assumptions used in estimating the liability for future policy benefits shall be based on estimates of expected incidences of disability and [claim](https://asc.understandingaccounting.org/glossary/c/#claim "A demand for payment of a policy benefit because of the occurrence of an insured event.") costs. ##### [944-40-30-13](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-13) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:cecd7af859cb17f6c3b43d2a269d8c172949a3e2677778430c3c20ba4a27cd61 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Expected incidences of disability and claim costs for various types of insurance (for example, noncancelable and guaranteed renewable accident and health insurance contracts) and other factors, such as occupational class, waiting period, sex, age, and [benefit period](https://asc.understandingaccounting.org/glossary/b/#benefit-period "The period over which benefits are provided. The benefit period includes the periods during which the insurance entity is subject to risk from policyholder mortality and morbidity and during which the insurance entity is responsible for administration of the contract. The benefit period does not include the subsequent period over which the policyholder or beneficiary may elect to have settlement proceeds disbursed."), shall be considered in making morbidity assumptions. The [risk of antiselection](https://asc.understandingaccounting.org/glossary/r/#risk-of-antiselection "The tendency for lower terminations of poor risks.") or adverse selection also shall be considered in making morbidity assumptions. ##### [944-40-30-14](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-14) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:9772b24228339980254c2a0021ea163f2bb7560c7aa6992b6a316abd18949d39 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Termination assumptions used in estimating the liability for future policy benefits shall be based on estimates of expected terminations and [nonforfeiture benefits](https://asc.understandingaccounting.org/glossary/n/#nonforfeiture-benefits "Those benefits in a life insurance contract that the policyholder does not forfeit, even for failure to pay premiums. Nonforfeiture benefits usually include cash value, paid-up insurance value, or extended-term insurance value."), using expected [termination rates](https://asc.understandingaccounting.org/glossary/t/#termination-rate "The rate at which insurance contracts fail to renew. Termination rates usually are expressed as a ratio of the number of contracts on which insureds failed to pay premiums during a given period to the total number of contracts at the beginning of the period from which those terminations occurred.") and contractual nonforfeiture benefits. Termination rates may vary by plan of insurance, age at issue, year of issue, frequency of premium payment, and other factors. If composite rates are used, the rates shall be representative of the entity's actual mix of business. Termination assumptions shall be made for long-duration insurance contracts without termination benefits because of the effects of terminations on expected premiums and claim costs. ##### [944-40-30-15](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-15) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:be810971fccbfaa5b1c146971aa4f706b7bf85370a8c635d801e24e824677211 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Expense assumptions used in estimating the liability for future policy benefits shall be based on estimates of expected nonlevel costs, such as termination or settlement costs, and costs after the premium-paying period. Renewal expense assumptions shall consider the possible effect of inflation on those expenses. However, expense assumptions shall not include acquisition costs or any costs that are required to be charged to expense as incurred, such as those relating to investments, general administration, policy [maintenance costs](https://asc.understandingaccounting.org/glossary/m/#maintenance-costs "Costs associated with maintaining records relating to insurance contracts and with the processing of premium collections and commissions."), product development, market research, and general overhead (see paragraph [944-720-25-2](https://asc.understandingaccounting.org/asc/720/944/#720-944-25-2)). #### Universal Life-Type Contracts and Nontraditional Contract Benefits ##### [944-40-30-16](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-16) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:06f15261af694299a2cdfd4d4e0897adfd126d6e39b21168fdb49a4b6d4eba53 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The liability for policy benefits for universal life-type contracts shall be equal to the sum of the following: 1. a The balance that accrues to the benefit of policyholders at the date of the financial statements 2. b Any amounts that have been assessed to compensate the insurance entity for services to be performed over future periods (see Subtopic 944-605 on insurance—revenue recognition) 3. c Any amounts previously assessed against policyholders that are refundable on termination of the contract 4. d Any [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") loss (premium deficiency) as described in paragraphs [944-60-25-7 through 25-9](https://asc.understandingaccounting.org/asc/944/60/#944-60-25-7) . ##### [944-40-30-17](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-17) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:1a83e2896037828926cf8a94873a2ce74295c10cb55e2fdca07c34a38a9dfed1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Amounts that may be assessed against policyholders in future periods, including [surrender charges](https://asc.understandingaccounting.org/glossary/s/#surrender-charges "Amounts expected to be assessed against policyholder balances at contract redemption, whole or partial, regardless of how the charges are labeled, such as contingent deferred sales charges."), shall not be anticipated in determining the liability for policy benefits. ##### [944-40-30-18](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-18) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:07cf4fc24b30747cf94d06532a88ce2a49c41249fdbb916b9e81767160c7342c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the absence of a stated account balance or similar explicit or implicit contract value, the cash value, measured at the date of the financial statements, that could be realized by a policyholder upon surrender shall represent the element of liability described in paragraph [944-40-30-16(a)](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-16). ##### [944-40-30-19](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-19) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:5636a0ff29d7875291fc0d790e8211fe50a8ada7ad52570277c3b6196a54640a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Provisions for risk of adverse deviation shall not be made. ##### [944-40-30-19A](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-19A) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:95c684d0b911ee5af36f347fec9ab4941e1060aff9a226e74e440c62b54c253a 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/). ##### [944-40-30-19B](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-19B) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:d1d6b08cc97944e5d2ceed8ad960443d79a30aabd42b8a30f9a1f2e5ff3a03e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in paragraphs [944-40-30-19C through 30-24](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-19C) and [944-40-30-26 through 30-29A](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-26) addresses contracts or contract features that provide for potential benefits in addition to the account balance that accrues to the benefit of the policyholders. ##### [944-40-30-19C](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-19C) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:0537cb27131f36faee2d2fa913209f036c60a01c10aef04bc90b43d6105c286e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [market risk benefit](https://asc.understandingaccounting.org/glossary/m/#market-risk-benefit "A contract or contract feature in a long-duration contract issued by an insurance entity that both protects the contract holder from other-than-nominal capital market risk and exposes the insurance entity to other-than-nominal capital market risk.") shall be measured at [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date."). Total attributed fees used to calculate the fair value of the market risk benefit shall not be negative or exceed total contract fees and assessments collectible from the contract holder. ##### [944-40-30-19D](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-19D) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:21647c2a04e518580c0b165bb3e853a77ce1891c5aee205c40108fa764218c7d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In determining the terms of the market risk benefit, the insurance entity shall consider guidance on determining the terms of an embedded derivative that is required to be accounted for separately under Subtopic 815-15 on embedded derivatives, including the following: 1. a Consistent with paragraph [815-15-30-4](https://asc.understandingaccounting.org/asc/815/15/#815-15-30-4), if a nonoption valuation approach is used, the terms of the market risk benefit shall be determined in a manner that results in its fair value generally being equal to zero at the inception of the contract. 2. b Consistent with paragraph [815-15-30-6](https://asc.understandingaccounting.org/asc/815/15/#815-15-30-6), if an option-based valuation approach is used, the terms of the market risk benefit shall not be adjusted to result in the market risk benefit being equal to zero at the inception of the contract. 3. c Consistent with paragraph [815-15-25-7](https://asc.understandingaccounting.org/asc/815/15/#815-15-25-7), if a contract contains multiple market risk benefits, those market risk benefits shall be bundled together as a single compound market risk benefit. ##### [944-40-30-20](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-20) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:5d2c4931b3465bfba5f3e17beea1e317a8e2812f85c541242ddac6eae14d3f95 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amount of the additional liability recognized under paragraph [944-40-25-27A](https://asc.understandingaccounting.org/asc/944/40/#944-40-25-27A) shall be determined based on the ratio (benefit ratio) of the following: 1. a Numerator. The present value of total expected excess payments over the life of the contract, discounted at the [contract rate](https://asc.understandingaccounting.org/glossary/c/#contract-rate "The rate of interest that accrues to policyholder balances."). 2. b Denominator. The present value of total expected assessments over the life of the contract, discounted at the contract rate. Total expected assessments are the aggregate of all charges, including those for administration, mortality, expense, and surrender, regardless of how characterized. The contract rate used to compute present value shall be either the rate in effect at the inception of the book of contracts or the latest revised rate applied to the remaining benefit period. The approach selected to compute the present value of revised estimates shall be applied consistently in subsequent revisions to computations of the benefit ratio. ##### [944-40-30-21](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-21) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:fc7b952d0677c81a6d855485103f516a739f6c7e85ff92010843e2345bbe3158 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The benefit ratio as determined in paragraph [944-40-30-20](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-20) may exceed 100 percent, resulting in a liability that exceeds cumulative assessments. ##### [944-40-30-22](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-22) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:53aaabfaddbf0c5846418478f956c6951b126b2e13d1aa6ccb0b4d9b63fc60b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For contracts in which the assets are reported in the [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)."), the investment margin (that is, the amounts expected to be earned from the investment of policyholder balances less amounts credited to policyholder balances \[see paragraph [944-40-25-14](https://asc.understandingaccounting.org/asc/944/40/#944-40-25-14)\]) shall be included with any other assessments for purposes of determining total expected assessments that are referenced in paragraph [944-40-30-20](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-20). ##### [944-40-30-22A](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-22A) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:c40447b41ba37de2e67de9549cde3262cff75b4fd7e3485b83dd0c067c0fdc23 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An increase during a period in an unearned revenue liability (that is, deferral of revenue) established in paragraphs [944-605-25-6 through 25-7](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-6) shall be excluded from the amounts assessed against the contract holder's account balance for that period and a decrease in (that is, amortization of) an unearned revenue liability in accordance with paragraph [944-605-35-2](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-2) during a period shall be included with the assessments for that period. ##### [944-40-30-23](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-23) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:078adf7d3a9213f1a890f25f30922637ab5356bb0b3a6dc170970ee9bc30ad10 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The insurance entity shall calculate the present value of total expected excess payments and total assessments and investment margins, as applicable, based on expected experience. ##### [944-40-30-24](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-24) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:4a9904786f0fb84bb31ad835fad8b44b915708c7ae675a41f260e5b39b7e7c7b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Expected experience shall be based on a range of scenarios that considers the volatility inherent in the assumptions rather than a single set of best estimate assumptions. ##### [944-40-30-25](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-25) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:b98e57a0f4dc1eeda07a5ff00cf3e6a17c5d4ce0d022dda664e15636df815c03 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/). ##### [944-40-30-26](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-26) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:6ae338384f37baf21679f2dc2dc07fefa38d49d37a3d19188d8d9547ccded20d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The additional liability required under paragraph [944-40-25-27](https://asc.understandingaccounting.org/asc/944/40/#944-40-25-27) shall be measured initially based on the benefit ratio determined by the following numerator and denominator: 1. a Numerator. The present value of expected [annuitization](https://asc.understandingaccounting.org/glossary/a/#annuitization "Annuitization refers to the policyholder receiving periodic payments under various payment options, including their remaining life or for a term-certain period.") payments to be made and related incremental [claim adjustment expenses](https://asc.understandingaccounting.org/glossary/c/#claim-adjustment-expenses "Expenses incurred in the course of investigating and settling claims."), discounted at an upper-medium grade (low-credit-risk) fixed-income instrument yield applicable to the [payout phase](https://asc.understandingaccounting.org/glossary/p/#payout-phase "The period during which the contract holder is receiving periodic payments from an annuity, also referred to as the annuitization phase.") of the contract, minus the expected accrued account balance at the expected annuitization date (the excess payments). The excess of the present value payments to be made during the payout phase of the contract over the expected accrued account balance at the expected annuitization date shall be discounted at the contract rate. 2. b Denominator. The present value of total expected assessments during the [accumulation phase](https://asc.understandingaccounting.org/glossary/a/#accumulation-phase "The period during an annuity contract before annuitization. An insurance entity may call an annuity having an accumulation phase a deferred annuity.") of the contract, discounted at the contract rate. Total expected assessments are the aggregate of all charges, including those for administration, mortality, expense, and surrender, regardless of how characterized. ##### [944-40-30-27](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-27) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:50e045faa3d702940f7526e9da300a013f613fa8fba30882fc5fe517b120503f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For contracts whose assets are reported in the general account, the investment margin (that is, the amounts expected to be earned from the investment of policyholder balances less amounts credited to policyholder balances \[see paragraph [944-40-25-14](https://asc.understandingaccounting.org/asc/944/40/#944-40-25-14)\]) shall be included with any other assessments for purposes of determining total expected assessments that are referenced in paragraph [944-40-30-26](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-26). ##### [944-40-30-28](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-28) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:944eef4efc9f7b8dcb3d363b41c4f6b5621b4b5cd6906f638cf9def7667c7b23 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The insurance entity shall calculate the present value of total expected excess payments and total assessments and investment margins, as applicable, based on expected experience. Expected experience shall be based on a range of scenarios that considers the volatility inherent in the assumptions rather than a single set of best estimate assumptions. When determining expected excess payments, the expected annuitization rate is one of the assumptions that needs to be estimated. ##### [944-40-30-29](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-29) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:e3dd8e22cba60e1633cae08d7d3bc4d088ae8c1318eb917e4c0302c3bbde0d56 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In calculating the additional liability for the additional benefit feature, the contract rate used to compute present value shall be either the rate in effect at the inception of the book of contracts or the latest revised rate applied to the remaining benefit period. The approach selected to compute the present value of revised estimates shall be applied consistently in subsequent revisions to computations of the benefit ratio. ##### [944-40-30-29A](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-29A) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:78b2800dc166b3287b319d7e3ccdeffd3b7d7d5d23e73b5fbac6b038aae49313 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [reinsurer](https://asc.understandingaccounting.org/glossary/r/#reinsurer "The assuming entity in a reinsurance transaction.") or issuer of the insurance benefit features of a contract shall calculate a liability for the portion of premiums collected each period that represents compensation to the insurance entity for benefits that are assessed in a manner that is expected to result in current profits and future losses from the insurance benefit function. That liability shall be calculated using the methodology described in paragraphs [944-40-30-19B through 30-24](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-19B) and [944-40-30-26 through 30-29](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-26) . #### Certain Participating Life Insurance Contracts—Net Level Premium Reserve ##### [944-40-30-30](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-30) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:d9fcfacd240e0bf05d27c784dc41b99b3ffd877ac1a508df68b87dbaef4093da Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The [net level premium reserve](https://asc.understandingaccounting.org/glossary/n/#net-level-premium-reserve "The excess, if any, of the present value of future guaranteed death and endowment benefits over the present value of future net premiums.") shall be calculated based on the [dividend fund interest rate](https://asc.understandingaccounting.org/glossary/d/#dividend-fund-interest-rate "The interest rate determined at policy issuance used to determine the amount of the dividend fund. It is the rate used to credit interest to the dividend fund, and against which experience is measured to determine the amount of the interest portion of dividends paid to individual policyholders."), if determinable, and mortality rates guaranteed in calculating the [cash surrender values](https://asc.understandingaccounting.org/glossary/c/#cash-surrender-value "The amount of cash that may be realized by the owner of a life insurance contract or annuity contract upon discontinuance and surrender of the contract before its maturity. The cash surrender value may be different from the policy account balance due to outstanding loans (including accrued interest) and surrender charges. (Note: The use of this glossary term is not consistent among legal contracts. When determining the applicability of this term, the economic substance of the item shall be taken into consideration.)") described in the contract. If the dividend fund interest rate is not determinable, the [guaranteed interest rate](https://asc.understandingaccounting.org/glossary/g/#guaranteed-interest-rate "The interest rate guaranteed in a policy's cash surrender value or nonforfeiture value calculation.") used in calculating cash surrender values described in the contract shall be used. If the dividend fund interest rate is not determinable and there is no guaranteed interest rate, the interest rate used in determining guaranteed nonforfeiture values shall be used. Finally, if none of the above rates exists, then the interest rate used to determine minimum cash surrender values—as set by the National Association of Insurance Commissioners' model standard nonforfeiture law—for the year of issue of the contract should be used. Regardless of the rate used, net premiums shall be calculated as a constant percentage of the gross premiums. ### Financial Guarantee Insurance Contracts ##### [944-40-30-31](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-31) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:36637e7415cdf762310efbb414b4c585832955fd0972bdf3771eb5632a42ed1c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance entity shall measure a claim liability equal to the present value of expected net cash outflows to be paid under the insurance contract discounted using a current risk-free rate. That current risk-free rate shall be based on the remaining period (contract or expected, as applicable) of the insurance contract. #### Expected Net Cash Outflows ##### [944-40-30-32](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-32) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:d4a64018405deec63c9e99dfd1c65cb855a88c8b38b54915494c11d814431ed3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Expected net cash outflows (cash outflows, net of potential recoveries, expected to be paid to the holder of the insured financial obligation, excluding [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.")) are probability-weighted cash flows that reflect the likelihood of all possible outcomes. For purposes of this Subtopic, the expected net cash outflows shall be developed using the insurance entity's own assumptions about the likelihood of all possible outcomes based on all information available to the insurance entity (including relevant market information). Those assumptions shall consider all relevant facts and circumstances and, where applicable, be consistent with the information tracked and monitored through the insurance entity's risk-management activities and used to assist in making operational decisions. ##### [944-40-30-33](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-33) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:39.886Z to 2026-09-10T02:16:39.886Z Record version: sha256:dbfeae528a2b6e250f0131ac724fe0293c2a6de2e0fcf5f883da79a7547fb8ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At initial recognition of a claim liability, an insurance entity shall discount the expected net cash outflows under the insurance contract using the current risk-free rate at that date based on the remaining period (contract or expected, as applicable) of the insurance contract. Example 1 (see paragraph [944-40-55-30](https://asc.understandingaccounting.org/asc/944/40/#944-40-55-30)) illustrates the application of this guidance.