Bad Debt Premium vs Non-admitted Premium

[PattyB-N]

If a company is writing off premium receivables over 90 days as bad debt (reducing assets and offsetting to expense), should the company instead be reporting these premiums as non-admitted?

[Lisa]

Patty,
SSAP No. 51R Life Contracts includes the guidance on uncollected premiums balances. Paragraph 12 in that SSAP states ?gross premiums that are due and unpaid as of a reporting date, net of loading, shall be classified as uncollected premiums. Uncollected premium balances which are less than 90 days past due meet the definition of an asset, as defined in SSAP No.4 ? Assets and Nonadmitted Assets and are admitted assets to the extent they confirm to the requirements of this statement.?

Paragraphs 2 and 3 of SSAP No. 4 Assets and Nonadmitted Assets should be referenced as they address the definition of an asset and a nonadmitted asset.

Typically, uncollected premiums 90 days or more past due are treated as a nonadmitted asset.

Regards,

Lisa Mullen
Regulatory Education Director at Sovos

[PattyB-N]

Sorry to be so vague, but my question is with reference to a P&C company and SSAP No. 6. If uncollected premium receivables are being written off at 90 days to bad debt, is this an acceptable practice in lieu of non-admitting these amounts (at 90 days)?

[Jeff]

Hi Patty

SSAP 6 says that you should apply the nonadmitted rules and then, if you believe there are additional amounts uncollectible, in excess of what has been nonadmitted, then those balances should be charged off to operations.

The practice you are proposing, while more conserve (bad debt reduces income while nonadmitted only reduces surplus), it is not in conformity with the principles laid out in SSAP 6.