The Insurance and Reinsurance Contract Determines Deposit Measurement

D

The subsequent measurement of deposits refers to how deposits are valued or assessed after an insurance and reinsurance contract has been established. To determine the subsequent measurement, we need to consider whether the contract transfers significant timing risk and/or significant underwriting risk. Let's analyze each answer choice to find the correct explanation:

A. Transfer only significant timing risk: Timing risk refers to the uncertainty associated with the timing of cash flows, such as when claims are paid out or premiums are received. If the insurance and reinsurance contract only transfers significant timing risk, it means that the contract primarily addresses the timing of cash flows rather than the actual underwriting risk. In this case, the subsequent measurement of deposits would be based on the timing risk transferred.

B. Transfer only significant underwriting risk: Underwriting risk relates to the risk of loss due to the occurrence of an insured event. If the contract only transfers significant underwriting risk, it means that the focus is primarily on transferring the risk associated with potential losses, rather than timing risk. In this scenario, the subsequent measurement of deposits would be based on the underwriting risk transferred.

C. Transfer neither significant timing nor underwriting risk: If the insurance and reinsurance contract does not transfer significant timing risk or significant underwriting risk, it means that the contract does not primarily address either of these risks. In this case, the subsequent measurement of deposits would not be based on either timing or underwriting risk.

D. All of the above: This answer suggests that the subsequent measurement of deposits is based on all of the conditions mentioned in options A, B, and C. It implies that the contract transfers both significant timing risk and significant underwriting risk, or it transfers neither of these risks. If this option is correct, the subsequent measurement of deposits would be based on either timing and underwriting risk or neither of these risks, depending on the specific terms of the contract.

Based on the explanations above, the most detailed answer would be option D, "All of the above." This indicates that the subsequent measurement of deposits can be based on either significant timing risk, significant underwriting risk, or neither, depending on the specific insurance and reinsurance contract in question.