1. Generally, the largest liability is for loss reserves. The quantification process is subject to a number of estimates. Which of the following would not be one of the estimates?
1. Investment gains/losses
2. Inflation rate
3. Interest rates
4. Judicial interpretations
5. Mortality estimates
2. The manner of recognizing revenue on insurance contracts is unique for the insurance industry. Which of the following statements is not true?
1. In general, the duration of the contract governs the revenue recognition.
2. When the risk differs significantly from the contract period, revenue is recognized over the period of risk in proportion to the amount of insurance protection.
3. For long-duration contracts, revenue is recognized when the premium is due from policyholders.
4. Realized gains and losses from investments are reported in operations in the period incurred.
5. For investment contracts, termination fees are booked as revenue over the period of the contract.