4.3 Fund Financial Statements
4.3.4 Proprietary Funds Financial Statements
126.96.36.199 Risk Pools – Statement of Net Position – Additional Reporting Instructions
All risk pools are required to report using the enterprise fund model. The following financial reporting guidance is specifically designed for pools where there is transference of risk from the participant to the pool. Pools acting solely in banking and/or claims servicing agent capacity will not use the accounting described in the following pages. They do not have a transfer of risk and should report claims-servicing revenue and administrative costs. Amounts collected or due from participants, and amounts paid or to be paid for settling claims, should be reported simply as a component of net position or liability.
Reporting requirements for account balances on the Statement of Net Position:
Receivables for Member Contributions/Assessments – Receivables should only be recognized when formally assessed by the governing body or a legally enforceable claim exists, based on the terms of membership agreement. Legal authority in a statute alone does not give sufficient cause to report a receivable.
Equity in Joint Venture – Joint Self-Insurance – If a risk pool has a measurable equity interest in a joint venture (example: Government Entity Mutual, Inc.) it must report its equity interest as an asset. This is a joint venture and should follow equity interest accounting.
Claims Reserve Liabilities (IBNR, Open Claims and ULAE) – The largest liabilities for most risk pools are claims reserve liabilities for IBNR, open claims and unallocated loss adjustment expenses. These liabilities should be reported net of anticipated recoveries (i.e. salvage or subrogation).
IBNR (Incurred But Not Reported) – This is the estimated liability for claim-generating events that have transpired but have not yet been reported to the risk pool. This includes an estimate for known loss events that are expected to be presented as claims, unknown loss events that have not yet been presented as claims and future development of existing claims. This amount is usually estimated by an actuary.
Open Claims – This is the liability representing the costs for settling all known claims as of the statement of net position balance sheet date.
ULAE (Unallocated Loss Adjustment Expense) – This liability is an estimate of overhead costs that cannot be allocated to specific claims. This amount is usually estimated by an actuary; however, a risk pool may internally estimate this based on actual or historical costs. Costs associated with claims or risks that have been transferred to the member and are no longer retained by the pool should not be reported.
Claims reserve liabilities for IBNR, open claims and ULAE liabilities should each be reported as separate lines on the Statement of Net Position or Balance Sheet. In addition, the current and non-current portions should be reported for each. The current portion can be estimated internally, using historical information or other methods. Any method used needs to be reasonable and used consistently.
Unearned Member Contributions/Assessments – Payments or receivables for future periods that have not met revenue recognition criteria. Revenue should be recognized over the period of insurance coverage.