{"data":{"id":"us-ky/krs-304.6-180","jurisdiction":"us-ky","citation":"KRS 304.6-180","heading":"Deficiency reserve -- Recognition of premium deficiency reserve.","body":"(1) If in any contract year the gross premium charged by any life insurer on any policy\nor contract, which is subject to subsection (2) of KRS 304.6 -140, is less than the\nvaluation net premium for the policy or contract calculated by the method used in\ncalculating the reserve thereon, but using the minimum valuation standards of\nmortality and rate of interest, the minimum reserve required for such policy or\ncontract shall be the greater of either the reserve calculated according to the\nmortality table, rate of interest, and method actually used for such policy or\ncontract, or the reserve calculated by the method actually used for such policy or\ncontract but using the minimum standards of mortality and rate of interest and\nreplacing the valuation net premium by t he actual gross premium in each contract\nyear for which the valuation net premium exceeds the actual gross premium. The\nminimum valuation standards of mortality and rate of interest referred to in this\nsection are those standards stated in KRS 304.6 -140 and 304.6-145. Provided that\nfor any life insurance policy issued on or after January 1, 1986, for which the gross\npremium in the first policy year exceeds that of the second year and for which no\ncomparable additional benefit is provided in the first year for such excess and which\nprovides an endowment benefit or a cash surrender value or a combination thereof\nin an amount greater than such excess premium, the foregoing provisions of this\nsection shall be applied as if the method actually used in calculating  the reserve for\nsuch policy were the method described in KRS 304.6 -150, ignoring the second\nsubsection of that section. The minimum reserve at each policy anniversary of such\na policy shall be the greater of the minimum reserve calculated in accordance wi th\nKRS 304.6-150, including the second subsection of that section, and the minimum\nreserve calculated in accordance with this section.\n(2) When the anticipated losses, loss adjustment expenses, commissions and\nacquisition costs, and maintenance costs excee d the recorded unearned premium\nreserve and any future installment premiums on existing policies, a premium\ndeficiency reserve shall be recognized by a property and casualty insurer by\nrecording an additional liability for the deficiency, with a correspond ing charge to\noperations. Commission and other acquisition costs need not be considered in the\npremium deficiency analysis to the extent they have previously been expensed. For\npurposes of determining if a premium deficiency exists, insurance contracts shall be\ngrouped in a manner consistent with how policies are marketed, serviced, and\nmeasured. A liability shall be recognized for each grouping where a premium\ndeficiency is indicated. Deficiencies shall not be offset by anticipated profits in\nother policy groupings. If a premium deficiency reserve is established, disclosure of\nthe amount of that reserve shall be made in the financial statements. If a reporting\nentity utilizes anticipated investment income as a factor in the premium deficiency\ncalculation, disclosure of this shall be made in the financial statements.\n(3) When the anticipated losses, loss adjustment expenses, commissions and other\nacquisition costs, and maintenance costs exceed the recorded unearned premium\nreserve, contingency reserve, and the estimated future renewal premium on existing\npolicies, a mortgage guaranty insurer shall recognize a premium deficiency reserve\nby recording an additional liability for the deficiency with a corresponding charge to\noperations. Commissions and other acqui sition costs need not be considered in the\npremium deficiency analysis to the extent they have been expensed. If a mortgage\nguaranty insurer utilizes anticipated investment income as a factor in the premium\ndeficiency calculation, disclosure of this shall be made in the financial statements.\n(4) When the expected claims payments or incurred costs, claim adjustment expenses,\nand administration costs exceed the premiums to be collected for the remainder of a\ncontract period, an individual or group accident an d health insurer or health\nmaintenance organization shall recognize a premium deficiency reserve by\nrecording an additional liability for the deficiency, with a corresponding charge to\noperations. For purposes of determining if a premium deficiency exists,  contracts\nshall be grouped in a manner consistent with how policies are marketed, serviced,\nand measured. A liability shall be recognized for each grouping where a premium\ndeficiency is indicated. Deficiencies shall not be offset by anticipated profits in\nother policy groupings. Such accruals shall be made for any loss contracts, even if\nthe contract period has not yet started.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=16791","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:57:38Z","sha256":"d4bcd45a04b602c1933fe85d07775c2b7fa6ae1f15c9c7387c7f9c6a98626137","source_id":"us-ky","stale":false,"prev":"us-ky/krs-304.6-171","next":"us-ky/krs-304.6-190"},"notice":"GroundRules: Original legal text. Not legal advice."}