What is Premium Deficiency?
Premium Deficiency A situation where the unearned premium reserve is insufficient to cover the expected future claims and expenses on unexpired insurance policies, requiring a premium deficiency reserve under accounting rules.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Premium Deficiency” Used in Practice?
Accounting standards require insurers to recognize a premium deficiency reserve if expected claims and expenses exceed unearned premium reserves.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Premium Deficiency?
A situation where the unearned premium reserve is insufficient to cover the expected future claims and expenses on unexpired insurance policies, requiring a premium deficiency reserve under accounting rules.
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