Actuarial Notes

Underwriting Pools

By National Association of Insurance Commissioners · 2025 · SSAP No. 63

Study guide: Exam 6U

Statement of Statutory Accounting Principles No. 63 of the NAIC's Accounting Practices and Procedures Manual. It establishes statutory accounting principles for underwriting pools and associations, including intercompany pooling arrangements, and sets out the three categories of pool: involuntary, voluntary and intercompany.

On the syllabus

  • Exam 6U — objectives C1–C2; NAIC Accounting Practices and Procedures Manual, 2025, SSAP No. 63, paragraphs 1-11, available in Appendix IV of the COPLFR P&C Practice Note (as the content outline states it)

Scope of Statement

  • The statement establishes statutory accounting principles for underwriting pools and associations, including intercompany pooling arrangements.

Summary Conclusion

  • Underwriting pools and associations are categorized as involuntary, voluntary and intercompany.
  • Involuntary pools are a state mechanism to provide coverage to those with a higher than average probability of loss, with participants sharing in results in proportion to their share of similar business written in the state; they are also called residual market plans, involuntary risk pools and mandatory pools.
  • Voluntary pools are not state mandated and are often used to provide greater capacity for risks with exceptionally high insurable values, such as aircraft, nuclear power plants, refineries and offshore drilling platforms.
  • Intercompany pooling relates to business pooled among affiliated entities; it involves a conventional quota share reinsurance agreement under which all pooled business is ceded to the lead entity and retroceded to the participants in their stipulated shares.
  • Participation may be on a joint and several basis, and liabilities from pooled business are treated consistently with SSAP No. 5R.
  • Underwriting results of voluntary and involuntary pools are accounted for on a gross basis, recording premiums and losses as direct, assumed and/or ceded as applicable; intercompany pools are reported on a gross basis in the appropriate reinsurance accounts.
  • Equity interests in, or deposits receivable from, a pool are admitted assets recorded separately from receivables and payables related to the pool's underwriting results.
  • Disclosures
  • 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. 63 as reproduced in its Appendix IV (pp. 63-1 to 63-4, marked © 1999-2025 NAIC): status table, contents, paragraphs 1-13 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