underwriting risk

Assets1

1. 340-30Insurance Contracts That Do Not Transfer Insurance Risk340 Other Assets and Deferred Costs

   ASC 340-30 tells you how to apply the deposit method of accounting to insurance and reinsurance contracts that fail to transfer insurance risk (which requires transfer of both timing risk and underwriting risk). At inception a deposit asset or liability is recognized at consideration paid or received less explicitly identified premiums or fees retained (340-30-25-1; 340-30-30-1). Subsequent measurement depends on which of four risk categories the contract falls into: effective-yield/interest-method accretion for timing-risk-only or no-risk contracts, unexpired-coverage plus present value of expected recoveries for underwriting-risk-only contracts, and the open-year method for indeterminate-risk contracts.