Assignment 1

Question 1

Generally accepted accounting principles (GAAP)

Answer 1

A common set of accounting standards and procedures used in the preparation of financial statements to ensure consistency of presentation and reported results.

Question 2

Statutory accounting principles (SAP)

Answer 2

The accounting principles and practices that are prescribed or permitted by an insurer’s domiciliary state and that insurers must follow.

Question 3

Mark-to-model

Answer 3

The valuation of an asset based on financial models instead of market price.

Question 4

Mark-to-market

Answer 4

The value of an asset or liability based on its current market price.

Question 5

Deferral-matching

Answer 5

An accounting approach in which the focus is to coordinate the timing of income and expense recognition so that both occur when the triggering event that is the focus of the contract occurs.

Question 6

Accounts receivable

Answer 6

A current asset representing monies owed to a business by customers for goods and services rendered.

Question 7

Reinsurance recoverables

Answer 7

Amounts for losses and loss adjustment expenses owed to an insurer under reinsurance agreements covering paid losses.

Question 8

Deferred acquisition costs

Answer 8

The recognition of the cost of acquiring a new customer over the duration of an insurance contract.

Question 9

Reserve

Answer 9

The amount the insurer estimates and sets aside to pay on an existing claim that has not been settled.

Question 10

Unearned premium

Answer 10

The portion of policy premium for the unexpired portion of the policy.

Question 11

Asset-liability

Answer 11

An accounting approach that focuses on the value of assets or liabilities that exist as of the balance sheet date.

Question 12

Case reserve

Answer 12

A loss reserve assigned to an individual claim.

Question 13

Earned premiums

Answer 13

The portion of written premiums that corresponds to coverage that has already been provided.

Question 14

Written premiums

Answer 14

The total premium on all policies written (put into effect) during a particular period.

Question 15

Deposit premium

Answer 15

The amount a policyholder pays at the beginning of a policy period, pending the determination of the actual premium owed.

Question 16

Reinstatement premium

Answer 16

A premium that applies to reinsurance contracts or primary policies to reinstate the original policy limit after it has been exhausted by the covered event in order to cover another possible event under the reinsurance or primary policy.

Question 17

Incurred losses

Answer 17

The losses that have occured during a specific period, no matter when claims resulting from the losses are paid.

Question 18

Prospective reinsurance

Answer 18

Reinsurance purchased to cede future losses.

Question 19

Loss portfolio transfer

Answer 19

A type of retroactive plan that applies to an entire portfolio of losses.

Question 20

Retrocession

Answer 20

A reinsurance agreement whereby one reinsurer (the retrocedent) transfers all or part of the reinsurance risk it has assumed or willa ssume to another reinsurer (the retrocessionaire)

Question 21

Retrocessionaire

Answer 21

The reinsurer that assumes all or part of the reinsurance risk accepted by another reinsurer.

Question 22

Bordereau

Answer 22

A report the primary insurer provides periodically to the reinsurer that contains a history of all loss exposures reinsured under the treaty.