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Inexpensive premium: If the chance of an insured occasion is so high, or the cost of the occasion so large, that the resulting premium is giant relative to the amount of safety provided, then it isn’t seemingly that the insurance coverage will likely be bought, even when on supply. Furthermore, because the accounting occupation formally acknowledges in financial accounting requirements, the premium can’t be so large that there is not an inexpensive probability of a big loss to the insurer. If there isn’t a such probability of loss, then the transaction could have the form of insurance, however not the substance (see the U.S. Financial Accounting Requirements Board pronouncement quantity 113: “Accounting and Reporting for Reinsurance of Short-Duration and Long-Length Contracts”).
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