PRINCIPLES OF LIFE &GENERAL INSURANCE
TOPIC- Basics of Insurance Accounting
INTRODUCTION
Accounting is a system of recording, analysing and verifying an organization’s financial
status. In the United States, all corporate accounting is governed by a common set of
accounting rules, known as generally accepted accounting principles, or GAAP. GAAP has
emphasized “transparency,” meaning that accounting rules must be understandable by
knowledgeable people, the information included in financial statements must be reliable and
companies must fully disclose all relevant and significant information. Special accounting
rules also evolved for industries with a fiduciary responsibility to the public such as banks
and insurance companies. To protect insurance company policyholders, states began to
monitor solvency. As they did, a special insurance accounting system, known as statutory
accounting principles, or SAP, developed. The term statutory accounting denotes the fact that
SAP embodies practices required by state law. SAP provides the same type of information
about an insurer’s financial performance as GAAP but, since its primary goal is to enhance
solvency, it focuses more on the balance sheet than GAAP. GAAP focuses more on the
income statement. Some insurers have been concerned that some of the initially proposed
standards for insurance contracts will confuse more than enlighten and introduce a significant
level of artificial volatility that could make investing in insurance companies less attractive.
BASIC INSURANCE ACCOUNTING
•Loss and loss Adjustment Expense Accounting Basics
•Reinsurance Accounting Basics
•Deposit Accounting Basics
