# ASC 944-60-25: Financial Services—Insurance — Premium Deficiency and Loss Recognition — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/944/60/#25-recognition) 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): 2026-09-10T02:17:52.429Z to 2026-09-10T02:17:52.429Z Record version: sha256:0235e67796427bb9192973d86208704526a18244c29786c970005af2c55fb4dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 944-60-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/944/60/#25-recognition) SEC content: no ##### [944-60-25-1](https://asc.understandingaccounting.org/asc/944/60/#944-60-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T02:17:52.429Z to 2026-09-10T02:17:52.429Z Record version: sha256:eb4d3ce3ceeb9761797303c493c1d6703b6634d3e5780f38d9a4b60ab022a215 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [450-20-55-17A](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-17A) states that Subtopic 450-20 does not prohibit (and, in fact, requires) accrual of a net loss (that is, a loss in excess of deferred premiums) that probably will be incurred on insurance policies that are [in force](https://asc.understandingaccounting.org/glossary/i/#in-force "Policies and contracts written and recorded on the books of an insurance carrier that are unexpired as of a given date."), provided that the loss can be reasonably estimated. ##### [944-60-25-2](https://asc.understandingaccounting.org/asc/944/60/#944-60-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T02:17:52.429Z to 2026-09-10T02:17:52.429Z Record version: sha256:1efe338ac123e8bc4cd987d99c4cab2de8ac7335ee2e926d95c177d87ca9aa1b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") loss on insurance contracts exists if there is a premium deficiency relating to short-duration or long-duration contracts. ##### [944-60-25-3](https://asc.understandingaccounting.org/asc/944/60/#944-60-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T02:17:52.429Z to 2026-09-10T02:17:52.429Z Record version: sha256:6a872ff80662a5fa59842f8d286acc6a355005a61395964efdee94dfd4b4762d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Insurance contracts shall be grouped consistent with the entity's manner of acquiring, servicing, and measuring the profitability of its insurance contracts to determine if a premium deficiency exists. ### Short-Duration Contracts ##### [944-60-25-4](https://asc.understandingaccounting.org/asc/944/60/#944-60-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T02:17:52.429Z to 2026-09-10T02:17:52.429Z Record version: sha256:eb4305c75e11cee1644eb6200f0449aad16e2c2e345150bd0a593614b9c8f330 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A premium deficiency shall be recognized if the sum of expected [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 and [claim adjustment expenses](https://asc.understandingaccounting.org/glossary/c/#claim-adjustment-expenses "Expenses incurred in the course of investigating and settling claims."), expected [dividends to policyholders](https://asc.understandingaccounting.org/glossary/d/#dividend-to-policyholders "Nonguaranteed amounts distributable to policyholders of participating life insurance contracts and based on actual performance of the insurance entity as determined by the insurer. Under various state insurance laws, dividends are apportioned to policyholders on an equitable basis. The dividend allotted to any contract often is based on the amount that the contract, as one of a class of similar contracts, has contributed to the income available for distribution as dividends. Dividends to policyholders include annual policyholder dividends and terminal dividends."), unamortized [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."), and [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.") exceeds related unearned premiums. ##### [944-60-25-5](https://asc.understandingaccounting.org/asc/944/60/#944-60-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T02:17:52.429Z to 2026-09-10T02:17:52.429Z Record version: sha256:581cd94ff2195f06a54f40dc3c4c7fa46e47e48c9af24e07b5c1e08d3ec55b04 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A premium deficiency shall first be recognized by charging any unamortized acquisition costs to expense to the extent required to eliminate the deficiency. ##### [944-60-25-6](https://asc.understandingaccounting.org/asc/944/60/#944-60-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T02:17:52.429Z to 2026-09-10T02:17:52.429Z Record version: sha256:0b9c43f025c9d60a4f9cb25a0e4ed1cf71336ecb7536c97eaae142b5d7cbdcca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the premium deficiency is greater than unamortized acquisition costs, a liability shall be accrued for the excess deficiency. ### Long-Duration Contracts ##### [944-60-25-7](https://asc.understandingaccounting.org/asc/944/60/#944-60-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T02:17:52.429Z to 2026-09-10T02:17:52.429Z Record version: sha256:cc2af3f187b6297aca86a57e5a74cb1c24023317fd99ad4a3b73148a8c1927e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Original policy benefit assumptions for certain long-duration contracts ordinarily continue to be used during the periods in which 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.") is accrued under Subtopic 944-40. However, actual experience with respect to investment yields, [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, or expenses may indicate that [existing contract](https://asc.understandingaccounting.org/glossary/e/#existing-contract "A contract that is currently held by the contract holder and excludes nonintegrated contract features.") liabilities, together with the present value of future gross premiums, will not be sufficient to do both of the following: 1. a Cover the present value of future benefits to be paid to or on behalf of policyholders and settlement costs relating to a block of long-duration contracts 2. b Recover unamortized present value of future profits. ##### [944-60-25-8](https://asc.understandingaccounting.org/asc/944/60/#944-60-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T02:17:52.429Z to 2026-09-10T02:17:52.429Z Record version: sha256:24abe308ee356c5151b0695aba8cbdba4195037596cf1eea871934928b3d8a3f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The premium deficiency shall be recognized by a charge to income and either of the following: 1. a A reduction of unamortized present value of future profits 2. b An increase in the liability for future policy benefits. ##### [944-60-25-9](https://asc.understandingaccounting.org/asc/944/60/#944-60-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T02:17:52.429Z to 2026-09-10T02:17:52.429Z Record version: sha256:c657565222269fb43ef5e82b3a15d4d6a8155aae5537c53ed452adb075085dea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A premium deficiency, at a minimum, shall be recognized if the aggregate liability on an entire line of business is deficient. In some instances, the liability on a particular line of business may not be deficient in the aggregate, but circumstances may be such that profits would be recognized in early years and losses in later years. In those situations, the liability shall be increased by an amount necessary to offset losses that would be recognized in later years.