R.C.S.A. § 38a-78-14
Premium reserves
Cite as Conn. Agencies Regs. § 38a-78-14
(a) General.
(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 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 must 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 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.
(b) Minimum Standards for Unearned Premium Reserves.
(1) The minimum unearned premium reserve with respect to any contract is 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) 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. 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 should be tested periodically to determine their
continuing adequacy and reliability.