Reinsurance Accounting
Why is reinsurance accounting favorable? what is the difference between reinsurance accounting and other types of accounting frameworks?
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Why is reinsurance accounting favorable? what is the difference between reinsurance accounting and other types of accounting frameworks?
Comments
As per the text:
When a contract is accounted for as reinsurance, all premiums, allowances and expenses under the contract are included in revenues and expenses, and claims recoveries under the contract are estimated in the valuation of insurance policy liabilities and are also included in revenues and expenses. This is referred to as “reinsurance accounting”, and when this is not appropriate under generally accepted accounting principles, “deposit accounting” must be applied to the contract instead. Under “deposit accounting”, the premium paid or received is initially recorded as an asset or liability (the “deposit”)
It doesn't say in the text why it is more favourable and it wouldn't be relevant for us anyway since we are actuaries and not accountants
Thanks !
Could this potentially have anything to do with front-end booking of profits?
I think it makes it seem like we are front-ending in the first sentence. Maybe we do not have to earn it? I am not sure
No problem thanks a lot
!