Problem
1. Define Reinsurance and explain why insurance companies get into reinsurance?
2. Explain Pro rata reinsurance and its types with examples.
3a. Demonstrate the provisions brought out by The Tax Reform Act of 1986 on unearned premium reserve in determining taxable income for most lines of business, as referred by IRC Section 832(b)(4)(B and IRC Section 832(b)(7)(B).
3b. Calculate the net deduction for unearned premiums if an insurance entity's unearned premium reserve increased from $80,000 to $100,000, and if the unearned premium reserve decreased from $80,000 to $60,000, in determining taxable income.
4. Bring out the significant components of income tax expense attributable to continuing operations for each year.
5. What are the primary methods used to assess guaranty funds assessments for property and liability insurance firms.