claims-made policy

Expenses2

1. 720-20Insurance Costs720 Other Expenses

   ASC 720-20 tells a policyholder (a noninsurance entity, or an insurer buying coverage outside its core operations) how to account for insurance it purchases, covering three contract types: retroactive contracts, claims-made contracts, and multiple-year retrospectively rated contracts. If a contract does not actually transfer insurance risk, the premium (less amounts retained by the insurer) is accounted for as a deposit under Subtopic 340-30 (720-20-25-1). For retroactive coverage of already-incurred liabilities, the premium is expensed immediately, a receivable is recorded for expected recoveries, and any excess of receivable over premium is a deferred gain amortized over the recovery period (720-20-25-3 through 25-4; 720-20-35-2).

2. 720-954Health Care Entities720 Other Expenses

   ASC 720-954 governs how health care entities account for insurance-related and other operating expenses, principally retrospectively rated insurance policies, claims-made policies, malpractice loss accruals, multiprovider captive insurance arrangements, and stop-loss insurance. The core rules turn on whose loss experience drives the premium: if the entity's own experience, the minimum premium is expensed over the coverage period and recoveries are deferred until estimated losses exceed the stipulated maximum premium; if a group's experience, additional premiums or refunds are accrued based on group experience to date, including asserted and unasserted, reported and unreported claims.