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Statutory Accounting Principles & Insurance Financial Statements Flashcards

7 cards from real CFE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Statutory Accounting Principles & Insurance Financial Statements flashcards as text

  1. What is an 'unearned premium reserve' in insurance statutory accounting?

    Answer: The portion of collected premiums applicable to the unexpired portion of a policy

    The unearned premium reserve represents premiums already collected but attributable to future coverage periods—if a policy is cancelled, this portion would be refunded to the policyholder.

  2. What does 'Schedule D' of the NAIC Annual Statement report?

    Answer: Investment holdings including bonds and stocks

    Schedule D of the NAIC Annual Statement reports the insurer's investment portfolio, including bonds (Part 1) and common and preferred stocks (Part 2), detailing each holding.

  3. What does the 'combined ratio' measure in property-casualty insurance?

    Answer: The sum of the loss ratio and the expense ratio

    The combined ratio is the sum of the loss ratio (losses incurred/premiums earned) and expense ratio (expenses/premiums written); a ratio below 100% indicates underwriting profitability.

  4. What is 'loss development' in the context of insurance reserving?

    Answer: The change in estimated ultimate claim costs as more information emerges over time

    Loss development refers to how initial claim estimates change (typically increase) as claims mature and more information about their ultimate cost becomes available to the insurer.

  5. What is 'reinsurance ceded' from the perspective of a primary insurer?

    Answer: Risk transferred to a reinsurer in exchange for a reinsurance premium

    'Reinsurance ceded' represents the portion of risk that a primary (ceding) insurer transfers to a reinsurer, reducing its net exposure in exchange for paying a reinsurance premium.

  6. What are IRIS (Insurance Regulatory Information System) ratios?

    Answer: A set of financial ratios used by regulators to identify insurers that may warrant further examination

    IRIS ratios are a set of financial ratios developed by the NAIC that regulators use to screen insurance companies and prioritize those needing further regulatory attention or examination.

  7. Under SAP, how is a 'surplus note' issued by an insurance company classified on the statutory balance sheet?

    Answer: As equity (surplus) rather than debt, with regulatory approval

    Surplus notes are classified as surplus (equity) under SAP with regulatory approval, because repayment of both principal and interest requires prior approval from the state insurance regulator.