01.13. Deposit Accounting

Card Set Information

Author:
COC2
ID:
206570
Filename:
01.13. Deposit Accounting
Updated:
2013-03-11 21:43:03
Tags:
Deposit Accounting
Folders:

Description:
Deposit Accounting
Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user COC2 on FreezingBlue Flashcards. What would you like to do?


  1. Deposit Accounting
    • The method of accounting for premium when the policy or reinsurance agreement does not qualify as insurance.
    • The premium is not recognized as income but as a deposit to the insurer's surplus.
    • Losses paid are not an expense but rather return of capital.
  2. Deposit Accounting Rules
    • contract with specific: no risk transfer, timing risk but negligible amount at risk, retro reinsurance
    • typical deposit accounting: handled contract-by-contract; amount received recorded as a deposit liability (no effect on income); deposit = PV of future obligations
  3. Approaches for Deposit Accounting
    • bank deposit approach: initial deposit grows w interest; ending deposit does not depend on pattern of cash flows
    • prospective approach: current value = PV of future payments, irrespective of initial deposit
    • retrospective approach: deposit is a function of initial deposit, past payments, and current estimate of all future payments. Interest rate = IRR for past payment = initial deposit

What would you like to do?

Home > Flashcards > Print Preview