Actuarial Notes

Property and Casualty Contracts—Premiums

By National Association of Insurance Commissioners · 2025 · SSAP No. 53

Study guide: Exam 6U

Statement of Statutory Accounting Principles No. 53 of the NAIC's Accounting Practices and Procedures Manual. It establishes general statutory accounting principles for the recording and recognition of premium revenue for property and casualty contracts, including unearned premium, earned but unbilled and uncollected premium, advance premiums and the premium deficiency reserve.

On the syllabus

  • Exam 6U — objectives C1–C7; NAIC Accounting Practices and Procedures Manual, 2025, SSAP No. 53, paragraphs 1-18, available in Appendix IV of the COPLFR P&C Practice Note (as the content outline states it)

Scope of Statement

  • The statement covers the recording and recognition of premium revenue for property and casualty contracts as defined in SSAP No. 50; specific requirements for title, mortgage guaranty and financial guaranty insurance, reinsurance, SSAP No. 65 contracts and retrospectively rated contracts are in their own statements.

Summary Conclusion

  • Written premium is the contractually determined amount charged to the policyholder for the effective period of the contract; for workers' compensation contracts with premium that varies with the insured's activities it may be recorded on an installment basis.
  • Written premiums for other contracts are recorded as of the contract's effective date, with an unearned premium reserve established for the unexpired coverage.
  • Premiums are recognized as earned using the daily pro-rata or monthly pro-rata method, or over the period of risk in proportion to the insurance protection provided when that differs significantly from the contract period; additional premiums for endorsements are recorded on the endorsement's effective date.
  • Earned but Unbilled Premium
    • Insurers estimate audit premiums (earned but unbilled premium) and record them as an adjustment to premium; ten percent of the amount in excess of collateral held per policy is a nonadmitted asset.
  • Earned but Uncollected Premium
    • Premium for the extended period during which the insurer is at risk is recorded as direct and assumed written premium and charged to expense when uncollectible.
  • Advance Premiums
    • Premiums paid before the effective date are a liability and are not income until due, and are not included in written premium or the unearned premium reserve.
  • Premium Deposits on Perpetual Fire Deposits
    • At least 90% of the gross amount of such a deposit is charged as a liability.
  • Premium Deficiency Reserve
    • A premium deficiency reserve is recognized when anticipated losses, loss adjustment expenses, acquisition and maintenance costs exceed the unearned premium reserve and future installment premiums; deficiencies are not offset by anticipated profits in other policy groupings.
  • Disclosures
    • Direct premiums written through managing general agents or third party administrators are disclosed in aggregate, with detail on each when the total is 5% of surplus or more, and the amount of any premium deficiency reserve is disclosed.
  • Relevant Literature
  • Effective Date and Transition

References

  • Relevant Issue Papers

Related readings

  • Statements of Actuarial Opinion on Property and Casualty Loss Reserves Practice Note (COPLFR - 2024) — its Appendix IV reproduces this statement, as the content outline notes

Sources

  • Property and Casualty Practice Note 2025 (American Academy of Actuaries, COPLFR) — the text of SSAP No. 53 as reproduced in its Appendix IV (pp. 53-1 to 53-5, marked © 1999-2025 NAIC): status table, contents, paragraphs 1-22 and references (348 pages, sha256 299cb328818f8669014180a0e1c8543121996b2f9c94f83ea0d8f131d3afe4c3); the NAIC's own Accounting Practices and Procedures Manual is sold by the NAIC and was not read
  • CAS Exam 6U Content Outline, Fall 2026 — the citation (Accounting Practices and Procedures Manual, 2025), the assigned paragraphs and the note that the material is in Appendix IV of the COPLFR practice note