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    Pcpar Insurance Contract

    Uploaded by

    doora keys
    This document provides information on insurance contracts, including: 1) AAA Insurance Company offers a one-year fire insurance policy with a premium of $2,000 and broker commission of 10%. 2) AAA entered a reinsurance contract with CCC Co. for the same premium and commission terms. 3) Revenue for insurance companies is generally recognized over the contract period, except for marine cargo which is recognized in the following year for the last two months. The document asks multiple choice questions related to calculating amounts due, premium revenues, and provisions for various insurance and reinsurance contracts.

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    © All Rights Reserved
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    Pcpar Insurance Contract

    Uploaded by

    doora keys
    143 views2 pages
    This document provides information on insurance contracts, including: 1) AAA Insurance Company offers a one-year fire insurance policy with a premium of $2,000 and broker commission of 10%. 2) AAA entered a reinsurance contract with CCC Co. for the same premium and commission terms. 3) Revenue for insurance companies is generally recognized over the contract period, except for marine cargo which is recognized in the following year for the last two months. The document asks multiple choice questions related to calculating amounts due, premium revenues, and provisions for various insurance and reinsurance contracts.

    Original Title

    PCPAR-INSURANCE-CONTRACT

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    This document provides information on insurance contracts, including: 1) AAA Insurance Company offers a one-year fire insurance policy with a premium of $2,000 and broker commission of 10%. 2) AAA entered a reinsurance contract with CCC Co. for the same premium and commission terms. 3) Revenue for insurance companies is generally recognized over the contract period, except for marine cargo which is recognized in the following year for the last two months. The document asks multiple choice questions related to calculating amounts due, premium revenues, and provisions for various insurance and reinsurance contracts.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    143 views2 pages

    Pcpar Insurance Contract

    Uploaded by

    doora keys
    This document provides information on insurance contracts, including: 1) AAA Insurance Company offers a one-year fire insurance policy with a premium of $2,000 and broker commission of 10%. 2) AAA entered a reinsurance contract with CCC Co. for the same premium and commission terms. 3) Revenue for insurance companies is generally recognized over the contract period, except for marine cargo which is recognized in the following year for the last two months. The document asks multiple choice questions related to calculating amounts due, premium revenues, and provisions for various insurance and reinsurance contracts.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    INSURANCE CONTRACT:

    PROBLEM A: AAA Insurance Company offers fire insurance. AAA received notice
    from its broker of sale of one-year fire insurance on January 1, 2018 for a premium of
    P2,000. The commission of the broker is at 10%.

    1. How much is the amount due from the policyholder, agent and broker?
    A. 200 C. 2,000
    B. 1,800 D 2,200
    2. How much is the amount of gross premium revenue?
    A. 200 C. 2,000
    B. 1,800 D 2,200

    PROBLEM B: On January 1, 2018, AAA insurance co. entered into reinsurance


    contract with CCC Co. for a premium of P 2,000. Commission expense incurred on
    the reinsurance contract issued is 10%.

    1. How much is the amount due from ceding company (book of reinsurer)?
    A. 200 C. 2,000
    B. 1,800 D 2,200
    2. How much is the amount of commission income recognized by cedant?
    A. 200 C. 2,000
    B. 1,800 D 2,200

    Revenue Recognition:

    The 24th method – assumes that the average date of issue of all policies written
    during any month is the middle of that month.

    General Rule: insurance companies with short duration of one year recognize
    premium as revenue over a period of contract using this method, EXCEPT for
    “marine cargo” – the last two (2) months of the year are recognized as revenue next
    year.

    Adjustment – unexpired portion of premium is considered as Insurance Contract


    Liability or Provision for unexpired premium. It will be deducted from Gross Premium
    written to compute for the gross premium earned.

    PROBLEM C: In April 2018, AAA Insurance Company writes fire insurance policies
    for a total premium of P72,000. During the same period, total premiums of 24,000
    were ceded to reinsurers.

    1. How much is the Net premium earned by the Cedant for the year ended
    December 31, 2018?
    A. 51,000 C. 24,000
    B. 34,000 D 17,000

    2. How much is the Net premium earned by the Reinsurer for the year ended
    December 31, 2018?
    A. 51,000 C. 24,000
    B. 34,000 D 17,000

    3. How much is the balance of Insurance Contract Liability as of December 31,


    2018 (provision for unearned premium, net)?
    A. 7,000 C. 17,000
    B. 14,000 D 21,000

    PROBLEM D: During 2018, XYZ Insurance Co. wrote insurance policy covering
    marine cargo risks. Premiums from the policies are shown below:

    Gross premium Premium Ceded


    JAN 50,000 30,000
    FEB 80,000 48,000
    MAR 90,000 54,000
    APR 120,000 72,000
    May 150,000 90,000
    JUN 60,000 36,000
    JUL 80,000 48,000
    AUG 95,000 57,000
    SEP 105,000 63,000
    OCT 75,000 45,000
    NOV 85,000 51,000
    DEC 100,000 60,000
    1,090,000 654,000

    The gross premium on November and December last year is at P40,000 and
    P64,000, respectively. It is the policy of the firm to reinsure 60% of the premium to
    WXY.

    1. How much is the provision for the unearned premiums as of December


    31, 2018?
    A. 74,000 C. 185,000
    B. 101,000 D 296,000
    2. How much is the net premium earned for the year ended December 31,
    2018?
    A. 403,600 C. 905,000
    B. 436,400 D 1,009,000

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