Alabama Administrative Code
Title 482 - ALABAMA DEPARTMENT OF INSURANCE
Chapter 482-1-134 - HEALTH INSURANCE RESERVES
Section 482-1-134-.03 - Premium Reserves
Universal Citation: AL Admin Code R 482-1-134-.03
Current through Register Vol. 43, No. 02, November 27, 2024
(1) General.
(a) Except as noted in subparagraph (b),
unearned premium reserves are required for all 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.
(b) Single premium credit disability
insurance, both individual and group, is excluded from unearned premium reserve
requirements of this rule.
(c) If
premiums due and unpaid are carried as an asset, the premiums must 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.
(d) 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.
(2) Minimum Standards for Unearned Premium Reserves.
(a)
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 either of the following:
1. The valuation net modal premium on the
contract reserve basis applying to the contract.
2. The gross modal premium for the contract
if no contract reserve applies.
(b) However, in no event may the sum of the
unearned premium and contract reserves for all contracts of the insurer subject
to contract reserve requirements be less than the gross modal unearned premium
reserve on all such 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
elsewhere.
(3) Premium Reserve Methods Generally. The insurer may employ suitable approximations and estimates in computing premium reserves; including, but not limited to groupings, averages and aggregate estimation. Approximations or estimates should be tested periodically to determine their continuing adequacy and reliability.
Author: Commissioner of Insurance
Statutory Authority: Code of Ala. 1975, §§ 27-2-17, 27-36A-1, et al.
Disclaimer: These regulations may not be the most recent version. Alabama may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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