§ 84a.5. Premium reserves.
(a) General requirements.
(1) Unearned premium reserves are required for all contracts, except single premium credit health and accident insurance contracts, with respect to the period of coverage for which premiums, other than premiums paid in advance, have been paid beyond the date of valuation.
(2) If premiums due and unpaid are carried as an asset, the premiums shall be treated as premiums in force, subject to unearned premium reserve determination. The value of unpaid commissions, premium taxes and the cost of collection associated with due and unpaid premiums shall be carried as an offsetting liability.
(3) The gross premiums paid in advance for a period of coverage commencing after the next premium due date which follows the date of valuation may be appropriately discounted to the valuation date and shall be held either as a separate liability or as an addition to the unearned premium reserve which would otherwise be required as a minimum.
(b) Minimum standards for unearned premium reserves.
(1) The minimum unearned premium reserve with respect to a contract is the pro rata unearned modal premium that applies to the premium period beyond the valuation date, with the premium determined on the basis of one of the following:
(i) The valuation net modal premium on the contract reserve basis applying to the contract.
(ii) The gross modal premium for the contract if no contract reserve applies.
(2) The sum of the unearned premium and contract reserves for contracts of the insurer subject to contract reserve requirement may not be less than the gross modal unearned premium reserve on the contracts, as of the date of valuation. The reserve shall never be less than the expected claims for the period beyond the valuation date represented by the unearned premium reserve, to the extent not provided for in the claim reserves or contract reserves.
(c) Premium reserve methods. The insurer may employ suitable approximations and estimates, including groupings, averages and aggregate estimation, in computing premium reserves. The approximations or estimates shall be tested periodically to determine their continuing adequacy and reliability.
Authority The provisions of this § 84a.5 amended under sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P.S. § § 66, 186, 411 and 412); and 40 Pa.C.S. § 7124(c)(1) and (2).
Source The provisions of this § 84a.5 amended July 14, 2006, effective January 1, 2007, 36 Pa.B. 3367; amended October 22, 2021, effective October 23, 2021, 51 Pa.B. 6600. Immediately preceding text appears at serial pages (320428) to (320429).
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