SIGMA Information for Captives Adopting ASU 2015-09 Disclosures

Michelle Bradley, ACAS, MAAA, ARM, CERA, CCIS

Get on BoardSummary:

The Financial Accounting Standard Board’s (FASB) accounting update related to disclosures about short duration contracts (ASU 2015-09) requires that insurance entities disclose specific information related to the liability for unpaid claims and claims adjustment expenses. This information applies to captive insurance companies. Detailed information regarding the update can be found on the website.

ASU 2015-09 and Captives:

It is our understanding that to receive an unqualified audit opinion the disclosures should be included with captive financial statements. While many captive domiciles may issue a waiver for implementation, the audit opinion would still be qualified for the captive if the disclosures are omitted. The disclosures do not affect the statement of actuarial opinion in terms of the reasonableness of loss reserves.

Summary of Disclosures:

Page 2 of the ASU 2015-09 document lists five required disclosures. These disclosures relate to ultimate incurred development, paid development, claim counts, IBNR summaries by year and a reconciliation of net to gross losses. The claim count disclosures relate to both frequency (number of claims) and to a qualitative description of the process in determining/counting a claim (e.g., how are notice only claims, closed no payment claims and multiple claimant claims counted). Pages 15-18 of the ASU 2015-09 document contain sample exhibits. SIGMA has developed exhibit templates that are similar in format to the suggested layout.

SIGMA Approach:

Some of the information required for the disclosures may already be contained in your actuarial report. SIGMA recommends that the disclosures be included in a stand-alone section of the actuarial report. Therefore, this appendix can be specifically filed with the financials for the required disclosures. Based on our understanding, most risks/coverages will need to not be aggregated and will require approximately 3-4 exhibits each. The disclosures may not be required for small risks with insignificant loss history.

If you are interested in SIGMA adding exhibits to satisfy the required disclosures, please contact us as soon as possible. Upon notification, we will review your current report and issue a recommendation on the approximate number of exhibits required by risk and in total along with the associated cost. We recommend having your auditor sign off on the proposed actuarial approach prior to the next actuarial evaluation.

We welcome your feedback by posting a comment, or contacting Michelle Bradley at
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