01.07. Premium Accounting - Types of Written Premium
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- the amount a policyholder pays at the beginning of a policy period, pending the determination of the actual premium owed
- also called binder premium
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.
Deferral-matching vs Retrospective premium adjustments
- the portion of the written premium from transactions that relate to past coverage periods is earned immediately
- the portion that relates to future coverage period is earned over time through the establishment of an unearned premium liability
- not considered written premium under certain accounting frameworks (such as US)
- treated solely as a billing issue
- can be treated as negative premium
- can be treated as an expense
- when insurer is used as tax collector, may or may not have to disclose tax as income
- in US, surcharge is shown separately on bill and insurer isn't liable for non-collected amounts
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