AIAF 114 CHAPTER 2 PRACTICE EXAM
QUESTIONS WITH 100% CORRECT
ANSWERS | LATEST VERSION 2025/2026.
When premiums earned during any specific accounting period are less than incurred losses plus
underwriting expenses incurred during the period, there will be an - ANS Underwriting loss.
A principal liability of insurers is the unearned premium reserve. Which one of the following
statements best describes the unearned premium reserve? - ANS The unearned premium
reserve represents premiums paid but not yet earned
Unrealized capital gains are not included in accounting income. Under statutory accounting
principles (SAP), unrealized capital gains are included in - ANS Policyholders' surplus.
How does the accounting for pension contributions that an insurer makes for nonvested
employees differ under statutory accounting principles (SAP) and generally accepted
accounting principles (GAAP)? - ANS Under SAP, the contributions are not tax deductible;
under GAAP, the contributions are tax deductible.
ABC Insurance Company entered into a quota share reinsurance agreement with XYZ
Reinsurance. Under statutory accounting principles, how are reinsurance recoverables from XYZ
for unpaid losses and loss adjustment expenses accounted for on ABC's financial statements? -
ANS hey are netted against ABC's loss and loss adjustment expense reserves on the balance
sheet
1 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
QUESTIONS WITH 100% CORRECT
ANSWERS | LATEST VERSION 2025/2026.
When premiums earned during any specific accounting period are less than incurred losses plus
underwriting expenses incurred during the period, there will be an - ANS Underwriting loss.
A principal liability of insurers is the unearned premium reserve. Which one of the following
statements best describes the unearned premium reserve? - ANS The unearned premium
reserve represents premiums paid but not yet earned
Unrealized capital gains are not included in accounting income. Under statutory accounting
principles (SAP), unrealized capital gains are included in - ANS Policyholders' surplus.
How does the accounting for pension contributions that an insurer makes for nonvested
employees differ under statutory accounting principles (SAP) and generally accepted
accounting principles (GAAP)? - ANS Under SAP, the contributions are not tax deductible;
under GAAP, the contributions are tax deductible.
ABC Insurance Company entered into a quota share reinsurance agreement with XYZ
Reinsurance. Under statutory accounting principles, how are reinsurance recoverables from XYZ
for unpaid losses and loss adjustment expenses accounted for on ABC's financial statements? -
ANS hey are netted against ABC's loss and loss adjustment expense reserves on the balance
sheet
1 | Page @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
