risk transfer

This Subtopic governs receivables of health and welfare benefit plans, principally contributions receivable from employers and amounts due from insurance entities. Employer contributions are recognized only when supported by a formal commitment (e.g., a governing-body resolution, an established pattern of post-year-end funding, a tax deduction, or the employer's own recorded payable), and contributions receivable must carry an allowance for estimated uncollectible amounts. Deposits with insurance entities or service providers and premium stabilization reserves remain plan assets until applied against premiums or claims, and experience-rating refunds are recorded when probable and reasonably estimable.

ASC 944-20 sets the framework for insurance accounting based on the nature of the contract rather than the type of entity: contracts are classified at inception as short-duration (fixed short coverage period, insurer can cancel or reprice each period, 944-20-15-7) or long-duration (not subject to unilateral change, services rendered over an extended period, 944-20-15-10), with sub-models for traditional, universal life-type, participating, and financial guarantee contracts. It also defines when a contract with a reinsurer actually transfers insurance risk (significant insurance risk plus reasonable possibility of significant loss, 944-20-15-41) and prescribes recognition and with-and-without measurement for multiple-year retrospectively rated contracts. Contracts lacking indemnification or significant insurance risk are accounted for under the deposit method (340-30) or as investment contracts.