# ASC 944-40-35: Financial Services—Insurance — Claim Costs and Liabilities for Future Policy Benefits — 35 Subsequent Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/944/40/#35-subsequent-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): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:367d0f4ba5ea6772bc4fc4c7990093d89b1c822e4a837d207e1fda4c39504ac8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 944-40-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/944/40/#35-subsequent-measurement) SEC content: no #### Claim Costs ##### [944-40-35-1](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:8c037db83c4b5cd727dee2e684cd7247417559d6aff3f7e2d9831760176033cd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Changes in estimates of [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 the continuous review process and differences between estimates and payments for claims shall be recognized in income of the period in which the estimates are changed or payments are made. ##### [944-40-35-2](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:e4951d46057aa43901e25af6e827948b5ceda6d8cbeb3bc7fbc2edfddcda4a72 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As discussed in paragraph [944-40-30-2](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-2), 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](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)."). ##### [944-40-35-3](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:74ca565179372c896012fd68be8a43b424414eea311bde0222cca29920fe66b4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As discussed in paragraph [944-40-30-3](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-3), estimated recoveries on settled claims other than mortgage guaranty and title insurance claims also shall be deducted from the liability for unpaid claims. ##### [944-40-35-4](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:1b28e3c9fa71ef43d3440e367ddf0190602a87288ea02d4760c8c29f657ef3f2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Subsequent reductions in the reported amount and realized gains and losses on the sale of real estate acquired in settling claims shall be recognized as an adjustment to claim costs incurred. ### Long-Duration Contracts #### Traditional and Limited-Payment Long-Duration Contracts ##### [944-40-35-5](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:dd9b2e12d49f5b4ff762a6b8ef5271df70ba7bddd46238dcd35471111afef98d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Assumptions shall be updated in subsequent accounting periods as follows to determine changes in 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."): 1. a Cash flow assumptions (that is, the assumptions used to derive estimated cash flows, including the [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."), [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."), and expense assumptions referenced in paragraphs [944-40-30-11 through 30-15](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-11) ) shall be reviewed—and if there is a change, updated—on an annual basis, at the same time every year. 1. 1 Cash flow assumptions shall be updated in interim reporting periods if evidence suggests that cash flow assumptions should be revised. 2. 2 An insurance entity may make an entity-wide election not to update the expense assumption referenced in paragraph [944-40-30-15](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-15). 2. b The discount rate assumption referenced in paragraph [944-40-30-9](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-9) shall be updated for annual and interim reporting periods, as of the reporting date. ##### [944-40-35-6](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:4e34e8ab5101c90fe155d8a53c0dad14d484920ab1e28bc5108df1825518a035 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Actual experience shall be recognized in the period in which that experience arises. The liability for future policy benefits shall then be updated for actual experience at least on an annual basis as described in paragraph [944-40-35-5(a)](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-5) (and for limited-payment contracts, see paragraph [944-605-35-1B](https://asc.understandingaccounting.org/asc/605/944/#605-944-35-1B) for guidance on updating any corresponding deferred profit liability). An insurance entity need not update the liability for future policy benefits for actual experience more often than on an annual basis, unless cash flow assumptions are updated as described in paragraph [944-40-35-5(a)(1)](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-5). ##### [944-40-35-6A](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-6A) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:e970540c698b2ba79bf2bf2e82ea1c8976f9cf70aee4cd3cb8ce404d2a7d3d21 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A related charge or credit to net income (see paragraph [944-40-45-4](https://asc.understandingaccounting.org/asc/944/40/#944-40-45-4)) or other comprehensive income as a result of updating assumptions at the level of aggregation at which reserves are calculated (that is, for a group of contracts) shall be determined as follows: 1. a Cash flow assumptions. [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.") shall be updated for cash flow changes. An insurance entity shall update its estimate of cash flows expected over the entire life of a group of contracts using actual historical experience and updated future cash flow assumptions. An insurance entity shall recalculate net premiums by comparing the present value of actual historical benefits and related actual (if applicable) historical expenses plus updated remaining expected benefits and related expenses, less the liability carryover basis (if applicable), with the present value of actual historical gross premiums plus the updated remaining expected gross premiums (see Examples 6 and 7 in paragraphs [944-40-55-29H through 55-29U](https://asc.understandingaccounting.org/asc/944/40/#944-40-55-29H) ). The revised ratio of net premiums to gross premiums shall not exceed 100 percent (see paragraph [944-40-35-7A](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-7A)). 1. 1 Liability remeasurement gain or loss. The revised net premiums shall be used to derive an updated liability for future policy benefits as of the beginning of the current reporting period, discounted at the original (that is, contract issuance) discount rate. The updated liability for future policy benefits as of the beginning of the current reporting period shall then be compared with the carrying amount of the liability as of that date (that is, before the updating of cash flow assumptions) to determine the current period change in liability estimate (that is, the liability remeasurement gain or loss) to be recognized in net income for the current reporting period (see paragraph [944-40-45-4](https://asc.understandingaccounting.org/asc/944/40/#944-40-45-4) for presentation requirements). 2. 2 Current-period benefit expense. The revised net premiums shall be applied as of the beginning of the current reporting period to derive the benefit expense for the current reporting period (see paragraph [944-40-45-4](https://asc.understandingaccounting.org/asc/944/40/#944-40-45-4) for presentation requirements). 3. 3 Subsequent periods. In subsequent periods, the revised net premiums shall be used to measure the liability for future policy benefits, subject to future revisions. 2. b Discount rate assumptions. Net premiums shall not be updated for discount rate assumption changes. 1. 1 The difference between the updated carrying amount of the liability for future policy benefits (that is, the present value of future benefits and expenses less the present value of future net premiums based on updated cash flow assumptions) measured using the updated discount rate assumption and the original discount rate assumption shall be recognized directly to other comprehensive income (that is, on an immediate basis). 2. 2 The interest accretion rate shall remain the original discount rate used at contract issue date. ##### [944-40-35-7](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:eb83813994f5f52d605d0f96604894eafa77aba02728e43386daf665515f2849 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/). ##### [944-40-35-7A](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-7A) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:f542230432965b4fded6fdc6ca926ef1b605989ab5e1fcf43613ece082d9ba63 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the updating of cash flow assumptions results in the present value of future benefits and expenses exceeding the present value of future gross premiums, an insurance entity shall: 1. a Set net premiums equal to gross premiums 2. b Increase the liability for future policy benefits 3. c Recognize a corresponding charge to net income for the current reporting period (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 subsequent periods (that is, until assumptions are subsequently updated), the liability for future policy benefits shall be accrued with net premiums set equal to gross premiums. ##### [944-40-35-7B](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-7B) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:cb241b9ffd633b72be1094bde4ffce5c8fe14863538bb5644b872588684f96a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In no event shall the liability for future policy benefits balance be less than zero at the level of aggregation at which reserves are calculated. #### Universal Life-Type Contracts and Nontraditional Contract Benefits ##### [944-40-35-8](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:bb7f1c5082a383c353a0b67098dcd80a34dc1ab203a200ce65b1b4e340ec70e7 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/). ##### [944-40-35-8A](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-8A) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:73a81b792a8f4d17add2ef8b09ae78d33109d42790fdf26c81f0eec0edc36e12 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.") may be positive (that is, an asset) or negative (that is, a liability). Changes in [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.") related to market risk benefits shall be recognized in net income, with the exception of fair value changes attributable to a change in the instrument-specific credit risk of market risk benefits in a liability position. The portion of a fair value change attributable to a change in the instrument-specific credit risk of market risk benefits in a liability position shall be recognized in other comprehensive income (see paragraph [944-40-45-3](https://asc.understandingaccounting.org/asc/944/40/#944-40-45-3)). ##### [944-40-35-8B](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-8B) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:dc56292014d075412f3bbc77b082863737f00b71966c720644d8fe10e8237d5c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Upon derecognition of a market risk benefit, an insurance entity shall derecognize any related amount included in accumulated other comprehensive income. An insurance entity only shall include in net income any gain or loss that is realized as a result of the insurance entity's nonperformance (that is, the settlement or extinguishment of an obligation for an amount less than the contractual obligation amount). On the date of [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.") (for annuitization benefits) or upon extinguishment of the account balance (for withdrawal benefits) the balance related to the market risk benefit shall be derecognized, and the amount deducted (after derecognition of any related amount included in accumulated other comprehensive income) shall be used in the calculation of the liability for future policy benefits for the payout annuity (including the establishment of a deferred profit liability to the extent that the market risk benefit amount deducted exceeds the amount of the liability for future policy benefits or the recognition of an immediate loss to the extent that the amount of the liability for future policy benefits exceeds the market risk benefit amount deducted). ##### [944-40-35-9](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-9) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:9f0925c3ac48bb3dece028cb41ae6cc90ad4ae03233e66f76f5e671e14b12fc3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance entity shall regularly evaluate estimates used and adjust the additional liability balance, with a related charge or credit to benefit expense (see paragraph [944-40-45-1](https://asc.understandingaccounting.org/asc/944/40/#944-40-45-1)), if actual experience or other evidence suggests that earlier assumptions should be revised. In making such revised estimates, both the present value of total excess payments and the present value of total expected assessments and investment margins shall be calculated as of the balance sheet date using historical experience from the issue date to the balance sheet date and estimated experience thereafter. ##### [944-40-35-10](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-10) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:8ccc269c1dcbe4efed57f9585b8f131909640329b06c981470522eeeb1423144 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The additional liability at the balance sheet date shall be equal to: 1. a The current benefit ratio multiplied by the cumulative assessments (cumulative assessments shall be calculated as actual cumulative assessments, including investment margins, if applicable, recorded from contract inception through the balance sheet date) 2. b Less the cumulative excess payments (including amounts reflected in claims payable liabilities) 3. c Plus accreted interest. However, in no event shall the additional liability balance be less than zero. ##### [944-40-35-11](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-11) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:860714104f88fe0ddbe0ee77682f70741a71cbb1195509834a68524b1e6e2eb8 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/). ##### [944-40-35-12](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-12) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:454e5d12b78d2522fb55453ded88973b18a3bc40dd0ca7f7f62a1ddb82ba4d37 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The insurance entity shall regularly evaluate estimates used and adjust the additional liability balance recognized under paragraph [944-40-25-27](https://asc.understandingaccounting.org/asc/944/40/#944-40-25-27) with a related charge or credit to benefit expense (see paragraph [944-40-45-2](https://asc.understandingaccounting.org/asc/944/40/#944-40-45-2)), if actual experience or other evidence suggests that earlier assumptions should be revised. ##### [944-40-35-13](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-13) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:7615171df1044a3464d9673c6a575f8f6d42baa10f9cd08b92ff69859d507c58 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In making such revised estimates, both the present value of total excess payments and the present value of total expected assessments or investment margins shall be calculated as of the balance sheet date using historical experience from the issue date to the balance sheet date and estimated experience thereafter. ##### [944-40-35-14](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-14) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:60e37f240b47ffec79eca2f2abfcdfea6913a02df23dcf6eba5a2eb18f18fab2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The additional liability at the balance sheet date shall be equal to the sum of the following: 1. a The current benefit ratio multiplied by the cumulative assessments 2. b Accreted interest (an addition) 3. c At time of annuitization, the cumulative excess payments determined at annuitization (a deduction). However, in no event shall the additional liability balance be less than zero. ##### [944-40-35-15](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-15) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:0916bee403424228aa76a20eb3773473c0f9353b8112fa945c7c465bfcb98e42 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The cumulative excess payments determined at annuitization in paragraph [944-40-35-14(c)](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-14) is the amount that shall be deducted at the actual date of annuitization. That amount shall be calculated as the present value of expected annuity payments and related [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 minus the accrued account balance at the actual annuitization date. ##### [944-40-35-16](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-16) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:e27ffce8a9625f896427f5ad5e37e4fa1032e64097ea0f3a75c5298f38ac453b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On the date of annuitization or extinguishment of the account balance, the additional liability related to the cumulative excess benefits will be derecognized and the amount deducted will be used in the calculation of the liability for the payout annuity. ##### [944-40-35-17](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-17) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:ba828271caaa3f0b2bbc9a95b723c559e7645484668c678efcdc8b85f380cfa4 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. ##### [944-40-35-18](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-18) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:9931fda9da0ec25dbd5dede4009a504399e4886d168db8570449d22d6288f7bb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. That liability shall be calculated using the methodology described in paragraphs [944-40-35-8A through 35-10](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-8A) and [944-40-35-12 through 35-16](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-12) . ##### [944-40-35-19](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-19) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:295a8441cc011e8be7641aaf638741c71582930815c02212e53ba40267261b2a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The accrued account balance for 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.") 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.") shall be calculated using the lower-tier rate because the account balance accumulated at the lower tier is the amount that would be available in cash at maturity if the contract holder elects not to annuitize the contract. ##### [944-40-35-20](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-20) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:4b78e832ccdcd1aef3899eaf3e1b47087b5f8d66c4831aef753180f2471d580b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An additional liability recognized in accordance with paragraphs [944-40-25-26 through 25-27](https://asc.understandingaccounting.org/asc/944/40/#944-40-25-26) or a market risk benefit, as applicable, shall be recognized during the accumulation phase for the annuitization benefit in excess of the accrued account balance. ##### [944-40-35-21](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-21) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:458a8c7cc1020bff07e2cdaea74d1a2daf3cd0b1765af0bfef82edf1c4651a7b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If there is an additional liability for the annuitization benefit and a contract holder elects to annuitize, the present value of annuitization payments, including related incremental claims adjustment expenses, discounted using an upper-medium grade (low-credit-risk) fixed-income instrument yield would represent the single premium used to purchase the annuitization benefit. #### Certain Participating Life Insurance Contracts ##### [944-40-35-22](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-22) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:8feabff9d90faa91d549e165284b5975b2fdada7cff8dc0fb39036ac419133fd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Terminal dividends](https://asc.understandingaccounting.org/glossary/t/#terminal-dividends "Dividends to policyholders calculated and paid upon termination of a contract, such as on death, surrender, or maturity.") accrued under paragraph [944-40-25-30](https://asc.understandingaccounting.org/asc/944/40/#944-40-25-30) shall be recognized as an expense over the life of a book of participating life insurance contracts, at a constant rate based on the present value of the base used for the amortization of deferred [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."). ##### [944-40-35-23](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-23) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:191477e89198d80ce70d60cad927dce6554249ed7ab6aee03adb34a3cad6d9c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The present value of the amortization base shall be computed using the expected [investment yield](https://asc.understandingaccounting.org/glossary/i/#investment-yield "The interest rate the entity expects to earn on the assets supporting policies, net of investment expense.") (net of related investment expenses). Accordingly, interest shall accrue on the balance of terminal dividends. ##### [944-40-35-24](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-24) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:94ea97e8447fa2e83a3a07c5de5f5407493d81757f36d56d0ebbde7314a8f7c2 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/). ##### [944-40-35-25](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-25) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:bf473fa4ed8f987076673a353083b86e30164e646ec084edfff1c8eb854fb181 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Increases in the liability for future policy benefits shall be reported as an expense in the statement of earnings. ### Financial Guarantee Insurance Contracts ##### [944-40-35-26](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-26) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:270d0eb2017e22ecb410c219f8a98a43ace2b97a45a21eb286fed2331dced985 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insurance entity shall update the discount rate on a claim liability recognized under [944-40-25-42](https://asc.understandingaccounting.org/asc/944/40/#944-40-25-42) each reporting period. An insurance entity also shall revise expected net cash outflows when increases (or decreases) in the likelihood of a default (insured event) (and related amounts of net cash outflows) and potential recoveries occur. The claim liability shall not be reduced below zero. The discount amount shall be accreted on the claim liability through earnings. ##### [944-40-35-27](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-27) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:4c5abef2f2a0f2988568832dce0e27301a6db231d28604717c3a78b8a68278bf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Revisions to the claim liability shall be recognized as claim expense in the period of the change as a change in accounting estimate. ##### [944-40-35-28](https://asc.understandingaccounting.org/asc/944/40/#944-40-35-28) Pending content: no Source downloaded (UTC): 2026-09-10T02:16:42.663Z to 2026-09-10T02:16:42.663Z Record version: sha256:6c3dc5e8e9805fa2e32f557e1965c45fbea106a7869469c6872f92d2e64d8b67 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [944-605-25-25](https://asc.understandingaccounting.org/asc/605/944/#605-944-25-25) states that the unearned premium revenue represents the insurance entity's stand-ready obligation under a financial guarantee insurance contract at initial recognition. If the likelihood of a default (insured event) increases so that the present value of the expected net cash outflows expected to be paid under the insurance contract exceeds the unearned premium revenue, the insurance entity shall recognize a claim liability (in addition to the unearned premium revenue) in accordance with paragraph [944-40-25-42](https://asc.understandingaccounting.org/asc/944/40/#944-40-25-42).