AIAF 114 Chapter 2 Practice Exam Questions and Answers| New Update with
100% Correct Answers
When premiums earned during any specific accounting period are less than incurred losses plus
underwriting expenses incurred during the period, there will be an Underwriting loss.
A principal liability of insurers is the unearned premium reserve. Which one of the following
statements best describes the unearned premium reserve? 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 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)? 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?
hey are netted against ABC's loss and loss adjustment expense reserves on the balance
sheet
Under GAAP, which one of the following expenses incurred by insurers is matched to earned
premiums? Policy acquisition costs
Which one of the following is amortized when valued under statutory accounting principles
(SAP)? Invested bond assets
Which one of the following is a characteristic of the balance sheet of the National Association of
Insurance Commissioners (NAIC) Annual Statement? It classifies surplus into three major
parts: contributed surplus, unassigned surplus, and treasury stock
100% Correct Answers
When premiums earned during any specific accounting period are less than incurred losses plus
underwriting expenses incurred during the period, there will be an Underwriting loss.
A principal liability of insurers is the unearned premium reserve. Which one of the following
statements best describes the unearned premium reserve? 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 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)? 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?
hey are netted against ABC's loss and loss adjustment expense reserves on the balance
sheet
Under GAAP, which one of the following expenses incurred by insurers is matched to earned
premiums? Policy acquisition costs
Which one of the following is amortized when valued under statutory accounting principles
(SAP)? Invested bond assets
Which one of the following is a characteristic of the balance sheet of the National Association of
Insurance Commissioners (NAIC) Annual Statement? It classifies surplus into three major
parts: contributed surplus, unassigned surplus, and treasury stock
