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Insurance entities incur costs relating to the acquisition of new and renewal insurance contracts. Acquisition costs are often substantial, especially for life insurance entities when significant upfront commissions (as well as other acquisition related costs) are incurred in the process of underwriting long-duration contracts that have substantial future recurring premium payments.
Insurance entities are required to defer acquisition costs that meet certain specified criteria and charge them to expense over the lives of the related policies.
This chapter provides guidance relating to:
  • the types of costs that are deferrable as DAC
  • the DAC amortization methods
  • the types of sales inducements that are deferrable
  • the impact on DAC of internal replacements (i.e., transactions in which product benefits, features, rights, or coverages are modified)
  • DAC considerations for reinsurance contracts
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