There is no authoritative guidance for DAC for mortgage insurers. As a result, mortgage insurers analogize to ASC 944 for the definition of what costs are deferrable. For subsequent measurement one acceptable accounting policy that many mortgage insurers adopt is to amortize DAC in proportion to the estimated gross profits expected to be realized over the estimated life of the policies. Under this approach, estimates are updated when necessary to reflect actual experience and changes to assumptions. Typical key assumptions for mortgage insurers include persistency and loss development.

Claim liabilities for mortgage insurers are accounted for under ASC 450-20, Contingencies -- Loss Contingencies, and ASC 944-40, Financial Services — Insurance — Claim Costs and Liabilities. While ASC 944-40-15-2 explicitly excludes mortgage insurers from its scope, mortgage insurers use the underlying principles in ASC 944-40, which are consistent with those in ASC 450-20, to establish claim liabilities. In mortgage insurance, the obligating event is considered to be the mortgage loan default, as defined in the contract. As a result, claim liabilities are established when mortgage insurers receive a notice of default on insured mortgage loans. Mortgage insurers also establish claim liabilities for estimated losses incurred on notices of default not yet reported to the mortgage insurers (i.e., IBNR). While mortgage insurers utilize IBNR, consistent with ASC 450-20, they do not establish liabilities for future claims on insured loans which are not in default at the reporting date.Real estate classified as held for sale that was acquired in settling mortgage guaranty and title insurance claims should be subsequently measured in accordance with ASC 360-10-35. Subsequent reductions in the reported amount of real estate acquired in settling claims should be recognized as an adjustment to claim costs incurred.

Mortgage insurers are required to perform a premium deficiency assessment, as noted in ASC 944-10-15-2. Guidance on premium deficiency is found in ASC 944-60-25-1 through ASC 944-60-25-09 and ASC 944-60-35-1 through ASC 944-60-35-6. While mortgage insurers are explicitly exempt from the ASC 944 guidance relating to premium and claims recognition, the recognition of a premium deficiency is required. Although recognizing a premium deficiency for mortgage insurers accelerates the recognition of losses compared to the loss recognition model based on an event of default, it is not dissimilar to recognizing losses through premium deficiencies on other insurance contracts, both long and short duration, or the result of other GAAP impairment models.

To the extent that a mortgage insurer records a premium deficiency, the premium deficiency cannot be reduced in subsequent periods by profits expected from contracts that are written after the original premium deficiency was recognized. The premium deficiency represents an additional liability for the contracts existing at the time of the premium deficiency. Any new premium deficiencies established would in effect create another premium deficiency "layer" that would also be separately analyzed in subsequent periods.