What does Deposit Accounting mean? Read on to discover the definition & meaning of the term Deposit Accounting - to help you better understand the language used in insurance policies.
The method of accounting for premium when the policy or reinsurance agreement does not qualify as insurance. The premium is not recognized as income but as a deposit or contribution to the insurer's surplus. Losses paid are not an expense but rather return of capital. Since premium does not flow through the income statement, the insurer cannot reduce income by the increase in loss reserves.
We hope the you have a better understanding of the meaning of Deposit Accounting.