# ASC 944-40-S99: Financial Services—Insurance — Claim Costs and Liabilities for Future Policy Benefits — SEC 99 SEC Materials Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/944/40/#sec-99-sec-materials) 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): 2026-09-10T02:17:13.308Z to 2026-09-10T02:17:13.308Z Record version: sha256:72f576d767e1a60c4c60e76e017ba55119e09a0ecef168fd6ec630ace855e464 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 944-40-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/944/40/#sec-99-sec-materials) SEC content: yes #### SEC Staff Guidance ##### [944-40-S99-1](https://asc.understandingaccounting.org/asc/944/40/#944-40-S99-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:17:13.308Z to 2026-09-10T02:17:13.308Z Record version: sha256:41d324dbcc425debad5a2f911ad798d57d31fefee24acdbce80eb07fab5c5fbf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 5.W, Contingency Disclosures Regarding Property-Casualty Insurance Reserves for Unpaid Claim Costs. - Facts: A property-casualty insurance company (the "Company") has established reserves, in accordance with FASB ASC Topic 944, Financial Services—Insurance, for unpaid claim costs, including estimates of costs relating to claims incurred but not reported ("IBNR"). FN44 The reserve estimate for IBNR claims was based on past loss experience and current trends except that the estimate has been adjusted for recent significant unfavorable claims experience that the Company considers to be nonrecurring and abnormal. The Company attributes the abnormal claims experience to a recent acquisition and accelerated claims processing; however, actuarial studies have been inconclusive and subject to varying interpretations. Although the reserve is deemed adequate to cover all probable claims, there is a reasonable possibility that the abnormal claims experience could continue, resulting in a material understatement of claim reserves. - FN44 FASB ASC paragraph [944-40-30-1](https://asc.understandingaccounting.org/asc/944/40/#944-40-30-1) prescribes that "\[t\]he liability for unpaid claims 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." \[Footnote reference omitted\] - FASB ASC Topic 450, Contingencies, requires, among other things, disclosure of loss contingencies. FN45 However, FASB ASC paragraph [450-10-05-6](https://asc.understandingaccounting.org/asc/450/10/#450-10-05-6) notes that "\[n\]ot all uncertainties inherent in the accounting process give rise to contingencies." - FN45 FASB ASC paragraphs [450-20-50-3 through 50-4](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-3) provide guidance that "\[i\]f no accrual is made for a loss contingency because one or both of the conditions in FASB ASC paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) are not met, _or if an exposure to loss exists in excess of the amount accrued_ pursuant to the provisions of FASB ASC paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2), disclosure of the contingency shall be made when there is at least a reasonable possibility that a loss or an additional loss may have been incurred. The disclosure shall indicate the nature of the contingency and shall give an estimate of the possible loss or range of loss or state that such an estimate cannot be made." \[Footnote reference omitted and emphasis added.\] - FASB ASC Topic 275, Risks and Uncertainties, FN46 also provides disclosure guidance regarding certain significant estimates. - FN46 FASB ASC Topic 275 provides that disclosures regarding certain significant estimates should be made when certain criteria are met. The guidance provides that the disclosure shall indicate the nature of the uncertainty and include an indication that it is at least reasonably possible that a change in the estimate will occur in the near term. If the estimate involves a loss contingency covered by FASB ASC Topic 450, the disclosure also should include an estimate of the possible loss or range of loss, or state that such an estimate cannot be made. Disclosure of the factors that cause the estimate to be sensitive to change is encouraged but not required. - FASB ASC Topic 275 requires disclosures regarding current vulnerability due to certain concentrations which may be applicable as well. - Question 1: In the staff's view, do FASB ASC Topics 450 and 275 disclosure requirements apply to property-casualty insurance reserves for unpaid claim costs? If so, how? - Interpretive Response: Yes. The staff believes that specific uncertainties (conditions, situations and/or sets of circumstances) not considered to be normal and recurring because of their significance and/or nature can result in loss contingencies FN47 for purposes of applying FASB ASC Topics 450 and 275 disclosure requirements. General uncertainties, such as the amount and timing of claims, that are normal, recurring, and inherent to estimations of property-casualty insurance reserves are not considered subject to the disclosure requirements of FASB ASC Topic 450. Some specific uncertainties that may result in loss contingencies pursuant to FASB ASC Topic 450, depending on significance and/or nature, include insufficiently understood trends in claims activity; judgmental adjustments to historical experience for purposes of estimating future claim costs (other than for normal recurring general uncertainties); significant risks to an individual claim or group of related claims; or catastrophe losses. The requirements of FASB ASC Topic 275 apply when "\[i\]t is at least reasonably possible that the estimate of the effect on the financial statements of a condition, situation, or set of circumstances that existed at the date of the financial statements will change in the near term due to one or more future confirming events... \[and\] the effect of the change would be material to the financial statements." - FN47 The loss contingency referred to in this document is the potential for a material understatement of reserves for unpaid claims. - Question 2: Do the facts presented above describe an uncertainty that requires disclosures under FASB ASC Topics 450 and 275? - Interpretive Response: Yes. The staff believes the judgmental adjustments to historical experience for insufficiently understood claims activity noted above results in a loss contingency within the scope of FASB ASC Topics 450 and 275. Based on the facts presented above, at a minimum the Company's financial statements should disclose that for purposes of estimating IBNR claim reserves, past experience was adjusted for what management believes to be abnormal claims experience related to the recent acquisition of Company A and accelerated claims processing. It should also be disclosed that there is a reasonable possibility that the claims experience could be the indication of an unfavorable trend which would require additional IBNR claim reserves in the approximate range of $XX-$XX million (alternatively, if Company management is unable to estimate the possible loss or range of loss, a statement to that effect should be disclosed). - Additionally, the staff also expects companies to disclose the nature of the loss contingency and the potential impact on trends in their loss reserve development discussions provided pursuant to Property-Casualty Industry Guides 4 and 6. Consideration should also be given to the need to provide disclosure in MD&A. - Question 3: Does the staff have an example in which specific uncertainties involving an individual claim or group of related claims result in a loss contingency the staff believes requires disclosure? - Interpretive Response: Yes. A property-casualty insurance company (the "Company") underwrites product liability insurance for an insured manufacturer which has produced and sold millions of units of a particular product which has been used effectively and without problems for many years. Users of the product have recently begun to report serious health problems that they attribute to long term use of the product and have asserted claims under the insurance policy underwritten and retained by the Company. To date, the number of users reporting such problems is relatively small, and there is presently no conclusive evidence that demonstrates a causal link between long term use of the product and the health problems experienced by the claimants. However, the evidence generated to date indicates that there is at least a reasonable possibility that the product is responsible for the problems and the assertion of additional claims is considered probable, and therefore the potential exposure of the Company is material. While an accrual may not be warranted since the loss exposure may not be both probable and estimable, in view of the reasonable possibility of material future claim payments, the staff believes that disclosures made in accordance with FASB ASC Topics 450 and 275 would be required under these circumstances. - The disclosure concepts expressed in this example would also apply to an individual claim or group of claims that are related to a single catastrophic event or multiple events having a similar effect.