Earned premium under statutory accounting equals WP minus Change in UEPR. Which equation expresses EP under statutory accounting?

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Multiple Choice

Earned premium under statutory accounting equals WP minus Change in UEPR. Which equation expresses EP under statutory accounting?

Earned premium in SAP is obtained by taking premiums written and subtracting the change in the unearned premium reserve. The unearned premium reserve (UEPR) represents the portion of premiums that has been collected but not yet earned. If the UEPR increases over the period, more premium remains unearned, so earned premium must be reduced by that amount. If the UEPR decreases, more of the written premium has become earned, so EP increases by that decrease. Therefore, the correct expression is EP = WP − Change in UEPR. For example, if premiums written are 100 and the UEPR rises by 20 during the period, earned premium is 80, which matches the idea that 80 of the 100 written is earned in the period. The other options would misstate how unearned premium works (they either apply a fixed fraction of the change or add the change), which doesn’t align with how UEPR flows into earned premium.

Earned premium in SAP is obtained by taking premiums written and subtracting the change in the unearned premium reserve. The unearned premium reserve (UEPR) represents the portion of premiums that has been collected but not yet earned. If the UEPR increases over the period, more premium remains unearned, so earned premium must be reduced by that amount. If the UEPR decreases, more of the written premium has become earned, so EP increases by that decrease.

Therefore, the correct expression is EP = WP − Change in UEPR. For example, if premiums written are 100 and the UEPR rises by 20 during the period, earned premium is 80, which matches the idea that 80 of the 100 written is earned in the period.

The other options would misstate how unearned premium works (they either apply a fixed fraction of the change or add the change), which doesn’t align with how UEPR flows into earned premium.

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