CHAPTER 4 - CPCU 540 AIAF114 EXAM
QUESTIONS WITH COMPLETE
SOLUTIONS
Earned premium on the statement of income on the NAIC Annual Statement is
calculated as - ANSWER-The sum of the year's written premiums plus the unearned
premium reserve at the beginning of the year, less the unearned premium reserve at the
end of the year
Asset classes are organized into two broad categories on the balance sheet of the
National Association of Insurance Commissioners (NAIC) Annual Statement. These are
- ANSWER-Invested assets and noninvested assets
Which one of the following is a characteristic of the balance sheet of the NAIC Annual
Statement - ANSWER-It classifies surplus into three major parts: contributed surplus,
unassigned surplus, and treasury stock
For purposes of an insurer's income statement, incurred losses are - ANSWER-
Expenses
Which one of the following statements about the various schedules to the NAIC Annual
Statement is true? - ANSWER-Schedule F provides information the insurers
reinsurance arrangements, including reinsurance assumed and reinsurance ceded
There is an accounting rule that requires revenues to be offset by the expenses incurred
to generate the revenues. This accounting rule is called the - ANSWER-Matching
Principle
The role of PHS is to - ANSWER-Provide a cushion to ensure the insurer has enough
resources to meet obligations to the policyholders
Which one of the following statements concerning the uses and differences between
GAAP and SAP is true - ANSWER-GAAP treats a business as a going concern and
focuses on measuring income, while SAP focuses on solvency and meeting
policyholder obligations
How does the accounting for pension contributions that an insurer makes for nonvested
employees differ under SAP and GAAP - ANSWER-Under SAP, contributions are a
nonadmitted asset because it is not readily convertible to cash. GAAP recognizes
pension contributions as expenses as they are incurred for all employees
Under SAP, the immediate effect of a property and liability insurance company writing a
new insurance policy is - ANSWER-A drain on PHS
QUESTIONS WITH COMPLETE
SOLUTIONS
Earned premium on the statement of income on the NAIC Annual Statement is
calculated as - ANSWER-The sum of the year's written premiums plus the unearned
premium reserve at the beginning of the year, less the unearned premium reserve at the
end of the year
Asset classes are organized into two broad categories on the balance sheet of the
National Association of Insurance Commissioners (NAIC) Annual Statement. These are
- ANSWER-Invested assets and noninvested assets
Which one of the following is a characteristic of the balance sheet of the NAIC Annual
Statement - ANSWER-It classifies surplus into three major parts: contributed surplus,
unassigned surplus, and treasury stock
For purposes of an insurer's income statement, incurred losses are - ANSWER-
Expenses
Which one of the following statements about the various schedules to the NAIC Annual
Statement is true? - ANSWER-Schedule F provides information the insurers
reinsurance arrangements, including reinsurance assumed and reinsurance ceded
There is an accounting rule that requires revenues to be offset by the expenses incurred
to generate the revenues. This accounting rule is called the - ANSWER-Matching
Principle
The role of PHS is to - ANSWER-Provide a cushion to ensure the insurer has enough
resources to meet obligations to the policyholders
Which one of the following statements concerning the uses and differences between
GAAP and SAP is true - ANSWER-GAAP treats a business as a going concern and
focuses on measuring income, while SAP focuses on solvency and meeting
policyholder obligations
How does the accounting for pension contributions that an insurer makes for nonvested
employees differ under SAP and GAAP - ANSWER-Under SAP, contributions are a
nonadmitted asset because it is not readily convertible to cash. GAAP recognizes
pension contributions as expenses as they are incurred for all employees
Under SAP, the immediate effect of a property and liability insurance company writing a
new insurance policy is - ANSWER-A drain on PHS
