C - CIA Premium Liabilities

Question 1

PREMIUM LIABILITIES

Define Deferred Policy Acquisition Expense (DPAE)

Answer 1

• Asset recognizing prepaid acquisition expense for unexpired portion of policy
• Paid upfront when policy is issued but not expensed until premium is earned in the income statement
• Asset on balance sheet includes:
  
  • Broker commissions
  • Premium taxes
  • Renewal costs
  • Advertising

Question 2

PREMIUM LIABILITIES

2 examples of premium development to be evaluated as part of the premium liabilities.

Answer 2

1. Premium development on retro-rated reinsurance ceded
2. Audit Premiums where final prem is unknown until coverage expire.
3. Premium development on reinsurance assumed