Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) General
Rules
(1) 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.
(2) If premiums due and
unpaid are carried as an asset, such 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 discounted, at rates not exceeding those in §
2315(b), 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 any contract shall be the pro rata unearned
modal premium that applies to the premium period beyond the valuation date, with
such premium determined on the basis of:
(A) The
valuation net modal premium on the contract reserve basis applying to the contract;
or
(B) The gross modal premium for the
contract if no contract reserve applies.
(2) In no event shall 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. Such reserve shall never be less than
the expected claims for the period beyond the valuation date represented by such
unearned premium reserve, to the extent not provided for
elsewhere.
(c) Premium Reserve
Methods Generally
The insurer may employ suitable approximations and estimates,
including, but not limited to groupings, averages and aggregate estimation, in
computing premium reserves. Such approximations or estimates shall be tested
periodically to determine their continuing adequacy and
reliability.
1. New section
filed 11-4-94; operative 12-5-94 (Register 94, No.
44).
Note: Authority cited: Sections
997(a)
and
10489.95,
Insurance Code. Reference: Sections
985,
997 and
10489.15(a),
Insurance Code.
