• In this project, we studied a typical universal life (UL) contract issued in the United States.
  • We studied three alternative approaches of recognizing renewal premiums and their effect on expected earnings.
    • The first was to ignore their recognition until received.
    • The second was to recognize the amount of expected renewal premium, while the
    • third only recognized the minimum required premium level that would keep the contract in force.
  • Many actuaries wonder why this subject even needs to be discussed, as the answer seems obvious. Why is this an issue?
    • The problem is that these renewal premiums are not guaranteed; they don't have to be paid and thus are not under the control of the insurer.
    • The definition of an asset is that it has to be under the current control of the entity. In fact, in sales illustrations, policyholders may not desire to pay a premium.

--  Sam Gutterman

2004 - SOA - International Accounting Standards—Current Developments, Society of Actuaries - 24p