Insurance Accounting

ACCOUNTING
OF
INSURANCE
Prepared by: Roman Riera
March 2014
General objective
Know the current insurance accounting regulations,

as well as those involved, through accounting
practices and examples, with the use of the chart of
accounts code issued by the Superintendence of
Insurance Activity, the regulatory body for insurance
companies.
Insurance Accounting
Prepared by: Lcdo.Roman Riera
Programmatic content
BASIC DEFINITIONS:
> Accounting
> Entity
> Commercial Operation
> Registry of Commercial Operations
> Accounts: Real and Nominal
> Accounting Cycle
> Equity Equation
> The check
> Structure of the Financial Statements
> Legal Regulations that Regulate the Accounting Operations of
Insurance Companies
> Accounting of Insurance companies: Single Plan of Accounts,
Main Operations of the Financial Statements, Records of
Accounting Operations.
> Assumptions of Accounting Records.
It is a technique that systematically and structurally produces
quantitative information expressed in monetary units, about
economic events. identifiable and
quantifiable actions carried out by an entity through a
process of chronological capture of
operations that clearly measures,
classifies, records and summarizes; in
order to provide pertinent information
in order to interpret the results
obtained and improve decision
making.
Entity
It is an identifiable unit that carries out economic activities,
made up of human, material and financial resources;
coordinated by an authority that decides based on compliance
with the objectives that gave rise to it.
Commercial Operation
It is the interaction of two or more people in an event in which

there is an exchange of money or elements susceptible to
be valued in money, generating a cause and effect relationship
among the participants.
Registration of the
Commercial Operations
They are the economic resources (assets and rights) that a business possesses and that
are expected to produce benefits in the future.
R
ASSET
E
They are the debts and
A obligations contracted, for which
the entity releases a resource.
L
It is the participation of the

owners in the resources of the
business.
N They are the operations
that allow the business to
INCOME receive resources from
O the sales of goods or
provision of services.
M
Y
o
N
They are the necessary
expenditures in order to
EXPENDITURE
T (Cost or
generate income in the
usual operations of the
Bills) business.
O
l
A
Accounting Cycle
It constitutes the process or sum of processes that are developed over

the course of a pre-established period of time (a year, a semester, a
quarter, a month) and that culminates with the preparation of the
Financial Statements of an entity for a specific date, in which all the
activity carried out in said period is summarized
Equity Equation
ASSET
What it has PASSIVE CAPITAL
(Goods and What you owe What you owe
Rights) to third parties to
their owners
Accounting Entry: technical formula for recording or noting
transactions under the Double Entry principle
Account Plan Account name

Logical and ordered list of accounts, with their Explicit, complete and
name, hierarchically coding that allows the unalterable
preparation of Financial Statements
Accou
Name givennt to the group of
assets, rights and obligations
Account balance Grouping Criteria

Asset = Debtor ASSETS by the degree of LIQUIDITY
Passive = Creditor LIABILITIES by the degree of
Capital = Creditor DEMANDABILITY
Egreros = Debtor CAPITAL by the degree of REAL ESTATE
Income = Creditor EXPENSES and INCOME in Operational
and Non-Operative
Operational
Structure of the Financial Statements
Capital Assets Income Bills

Passives
STATE OF SITUATION PERFORMANCE

FINANCIAL _____________________
STATE
Profit or Loss
Legal regulations that define and regulate the
accounting operations in companies
Insurance
Insurance Activity Law

1 ( GO 5,990 07/29/2010)
The General Regulations of the Insurance

2 and Reinsurance Companies Law ( GO 5,339
04/27/1999)
Accounting Standards for

Insurance Companies
3 (Providencia N 000746 03/11/2013)
Others: ISLR, LOCTI, LOTTT,

4 Administrative Rulings
Background
On July 29, 2010 , the Insurance Activity Law was

enacted in order to guarantee the socioeconomic
transformation processes promoted by the State, in
protection of the general interest represented by the
rights and guarantees of policyholders, insured and
beneficiaries of insurance. insurance and reinsurance
contracts, the contractors of prepaid medicine services
and the members of cooperatives that carry out
insurance activity in accordance with the provisions of
the Organic Law of the National Financial System.
Regulated Subjects
Insurance
Agents of
and
Companies Insurance
Reinsurance
of Brokerage
Insurance Companies
Auditors
External
runners Law of
Insurance theActivity Actuaries
Insurance Independent
carrier
Inspectors of
risks, experts
appraisers, Companies
adjusters of
Financiers medicines
losses
of premiums prepaid
sure
Insurance Activity Law
Rules governing Insurance and Reinsurance

CHAPTER III: companies
Insurance Company Accounting
The law has allowed control organizations to dictate accounting standards,

since part of the resources that companies manage are not only those of
the shareholders, but on the contrary, most of them belong to the public.
Characteristics:
1. It is specialized accounting.
2. It is governed by a single Plan of accounting accounts.
3. Its operations are supervised by a government entity.
Regulation of Accounting for Insurance
Companies
Legal Bases
Location LAW 2010 REGULATION 1999
Chapter III V
Section Quarter Third
Articles 66 to 72 92 to 95
Regulation of Accounting for Insurance
Companies
Accounting must be carried out in accordance with the accounting manuals and plan of
operations.
accounting accounts issued by the SAA and faithfully record all operations
derived from acts and contracts related by insurers
ACCOUNTING PERIOD/CLOSING OF ACCOUNTS
PRESENTATION OF THE EF
01/01 TO 12/31/XX EF PUBLICATION
Until 03/31/XX
Closing of the year Within five
economic (5) business days
Ninety (90) days following the
12/31/xx following the closing authorization of the
of the Superintendence of
financial year activity
Insurance carrier
Financial statements
Basic Structure of the Single Plan of
Accounts
Most notable games of the States
Financial: Statement of Financial Position
ASSET PASSIVE CAPITAL

Investments Eligible for Technical Reserves Subscribed capital
the Representation of Technical Reserves
Reinsurance Accounts Reinsurance Accounts Realized Surplus
(UND)
Ineligible Investments Miscellaneous Accounts Unrealized Surplus
for the Representation of Reserves
Techniques
Guarantee to the Nation
Losses
Most notable items of the Financial Statements: Performance Statement
INCOME EXPENSES
Premiums Collected: Main Benefits and claims paid
source of money for the
company
Technical Reserves from the Technical Reserves of
previous year Exercise
Acquisition Expenses /
Claims Paid by Reinsurers
Returns
General management of the Assigned Premiums
company
Accounting Records
MAIN TRANSACTIONS
Operations Log:
Public Securities: On 03/20/2006 public securities were acquired in
Bs.500,000,000.00. The nominal value is Bs.600,000,000.00. As of 03/31/2006,
public securities are quoted in the market at 80% of their nominal value.
Purchase Registration
Code Name Has to To have
202-02 Public Values 500.000.000
201-01 Available 500.000.000
Nominal Value = 600,000,000 x 80% (480,000,000.00) market value,

Therefore there is a DEVALUATION of the public value of Bs.20,000,000.00
Operations Log:
Valuation record
381-04 Adjustment of securities and other 20.000.000
assets
408-04 Reserve for devaluation of 20.000.000
securities
Now, we assume that as of 03/31/2006 the security had a market price of 120% of its
face value.
Nominal Value = Bs.600,000,000.00 x 120% = Bs.720,000,000.00 VM, is

In other words, the public title was valued at Bs. 220.000.000,00
Operations Log:
Registration of revaluation
201-02 Public Values 220.000.000
410-01 Reserve for revaluation of 220.000.000
securities
Operations Log:
Built Urban Premises: The IUAA Insurance Company, CA acquires land with its
corresponding building in order to carry out its operations for an amount of
Bs.100,000,000.
Purchase Registration
201-06 Built urban properties 100.000.000
201-01 Available 100.000.000
Considerations:
1. They are recorded at the time of acquisition at their purchase value.

2. Starting in the second year, an appraisal is carried out.
3. They are subject to depreciation of 4% annually.
Operations Log:
Share Capital: On 01/31/2013 an insurance company is established, whose share
capital amounts to Bs. 5,000,000,000; which was established by Bs. 2,000,000,000 in
cash deposited in cash and the rest in the construction for the company facilities.
Capital Registry
201-01 Available 2.000.000.000
201-06 Built Urban Premises 3.000.000.000
409-01 Social capital 5.000.000.000
Operations Log:
Issuance of Premium Receipts: On 12/04/2006, Premium Receipts are issued with
a validity of 365 days, detailed as follows:
HCM= Bs. 2.500.000.000
CAR= Bs. 3.000.000.000
FIRE= Bs. 1.500.000.000
Premium Receipts Issuance Record

212-01 Premiums Issued for 7.000.000.000
Collection
Premiums Issued for
412-01 7.000.000.000
Collection
Operations Log:
Premiums Collected: On 12/14/2006 the premium receipts issued were collected in
full, with the exception of the fire branch for which only 80% was collected.
HCM= Bs. 2.500.000.000
CAR= Bs. 3.000.000.000
FIRE= Bs. 1.200.000.000
Premium Receipts Issuance Record
201-01 Available 6.700.000.000
501-01 Exercise bonuses 2.500.000.000
521-01 Exercise bonuses 4.200.000.000
412-01 Premiums Issued for 6.700.000.000
Collection
Premiums Issued for
212-01 6.700.000.000
Collection
Operations Log:
Constitution of Reserves: He 15/02/2006 was charged
Bs.200,000,000 for general insurance premium. The validity of the policy is 365
days; that is: expires on 02/14/2007
What happened
Premium Reserve = (Premium Collected – Commission – Refund) / policy validity in

days DAILY PREMIUM ACCRUED
Consideration: Every month the reserve constitution must be

entered and released monthly.
Operations Log:
Constitution of Reserves:
Premium Reserve = 2,000,000,000 / 365 = Bs.547,945
365 – 14 (accrued days) = 351 days to accrue

Daily accrual premium = Bs.547,945 x 351 = Bs.192,328,695
Reserve Constitution Registry

321-05 Technical Reserves for the Year 192.328.695
401-02 General Insurance Premium Reserve 192.328.695
Reserve Release Record
401-02 General Insurance Premium Reserve 192.328.695
521-05 Technical Reserve from the Previous 192.328.695
Year

Insurance Accounting

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Insurance Accounting

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ACCOUNTING

Prepared by: Roman Riera

Know the current insurance accounting regulations,

It is the interaction of two or more people in an event in which

It is the participation of the

It constitutes the process or sum of processes that are developed over

Account Plan Account name

Account balance Grouping Criteria

Capital Assets Income Bills

STATE OF SITUATION PERFORMANCE

Insurance Activity Law

The General Regulations of the Insurance

Accounting Standards for

Others: ISLR, LOCTI, LOTTT,

On July 29, 2010 , the Insurance Activity Law was

Rules governing Insurance and Reinsurance

The law has allowed control organizations to dictate accounting standards,

2. It is governed by a single Plan of accounting accounts.

3. Its operations are supervised by a government entity.

ACCOUNTING PERIOD/CLOSING OF ACCOUNTS

ASSET PASSIVE CAPITAL

Nominal Value = 600,000,000 x 80% (480,000,000.00) market value,

Nominal Value = Bs.600,000,000.00 x 120% = Bs.720,000,000.00 VM, is

1. They are recorded at the time of acquisition at their purchase value.

Premium Receipts Issuance Record

Premium Reserve = (Premium Collected – Commission – Refund) / policy validity in

Consideration: Every month the reserve constitution must be

365 – 14 (accrued days) = 351 days to accrue

Reserve Constitution Registry

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