Actuarial Notes

Unpaid Claims, Losses and Loss Adjustment Expenses

By National Association of Insurance Commissioners · 2025 · SSAP No. 55

Study guide: Exam 6U

Statement of Statutory Accounting Principles No. 55 of the NAIC's Accounting Practices and Procedures Manual. It establishes statutory accounting principles for recording liabilities for unpaid claims and claim adjustment expenses on life and accident and health contracts and unpaid losses and loss adjustment expenses on property and casualty contracts, for direct and reinsurance-assumed obligations alike.

On the syllabus

  • Exam 6U — objectives C1–C2; NAIC Accounting Practices and Procedures Manual, 2025, SSAP No. 55, paragraphs 1-6 and 11-19, available in Appendix IV of the COPLFR P&C Practice Note (as the content outline states it)

Scope of Statement

  • The statement applies to all insurance contracts as defined in SSAP No. 50 and to direct and reinsurance-assumed obligations equally.
  • It does not address policy reserves for life and accident and health policies, or liabilities for punitive damages, which follow SSAP No. 5R.

Summary Conclusion

  • Claims, losses and loss/claim adjustment expenses are recognized as expenses when a covered or insured event occurs, and a liability is established for unpaid amounts with a corresponding charge to income; for claims-made policies the covered event is the reporting of the incident.
  • Property/Casualty
    • The future costs considered in the liability are reported losses, incurred but not reported (IBNR) losses, which may include bulk provisions for deficiencies in known case reserves, and loss adjustment expenses.
    • Loss adjustment expenses are classified as Defense and Cost Containment (DCC) and Adjusting and Other (AO), each with a list of included items.
    • Payments to third-party administrators and management companies are evaluated against the prepaid asset criteria of SSAP No. 29 and do not offset the liability until they are paid to the policyholder or claimant.
  • Life, Accident and Health
  • Managed Care
  • Managed Care and Accident and Health
  • General
    • The liability is based on the estimated ultimate cost of settling the claims, including the effects of inflation and other societal and economic factors, and is not discounted unless authorized for specific types of claims by specific SSAPs.
    • No single projection method is inherently better than any other in all circumstances, and the results of more than one method should be considered.
    • Management records its best estimate for each line of business and in aggregate; where it develops a range, the best estimate within the range is recorded, the range is realistic rather than the set of all possible outcomes, and there is no specific requirement to include a provision for adverse deviation.
    • When no point in the range is a better estimate than any other, the midpoint of management's range is accrued.
    • Estimated salvage and subrogation recoverables, if anticipated, are deducted from the liability; changes in estimates are recorded in the period the change becomes known under SSAP No. 3.
  • Disclosures
    • Disclosures include the beginning and ending balances of the liabilities, incurred and paid amounts for current and prior years, the reasons for prior-year changes, significant changes in methodologies and assumptions, and amounts paid and reserved for asbestos and environmental claims.
    • The dollar amount and number of claims paid on extra contractual obligation or bad faith lawsuits are 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. 55 as reproduced in its Appendix IV (pp. 55-1 to 55-10, marked © 1999-2025 NAIC): status table, contents, paragraphs 1-19 and references (348 pages, sha256 299cb328818f8669014180a0e1c8543121996b2f9c94f83ea0d8f131d3afe4c3); paragraphs 7-10 (life, accident and health and managed care) were not summarized; 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