Section 903

Section 903.520 Allocation of Expenses to Lines of Business

a) Allocation of Expenses

1) The allocation of expenses to lines of business shall be by expense groups. Each classification of expense within each expense group shall be allocated separately to lines of business on the bases of allocation prescribed as follows.

2) All bases employed in such allocations shall be applicable and appropriate to the expense group of which such expense is a part.

3) Example - Expenses which are allocated to lines of business as an Overhead on Salaries shall be calculated in relation only to the salaries included in the same expense group.

Expenses Included in the Expense Group, Loss Adjust. Expenses		Bases of Allocation to Lines of Business

Claim Adjust. Services: Direct Reinsurance Assumed Reinsurance Ceded
		Actual Actual Actual

Commission & Brokerage -Direct
Commission & Brokerage -Direct		See Commission & Allow. (Subpart C, Section 903.420(c)(2))
		See Commission & Allow. (Subpart C, Section 903.420(c)(2))

Allowances to Managers		See Commission & Allow. (Subpart C, Section 903.420(c)(2))
and Agents		See Commission & Allow. (Subpart C, Section 903.420(c)(2))

Salaries		See Spec. Inst. Relating to Allocation of Salaries & Other Expenses (Subpart E)



Employee Relations &
Welfare		Overhead on Salaries

Pensions		Overhead on Salaries

Directors' Fees		Overhead on Salaries

Traveling & Entertain.		Special Studies

Rent & Rent Items		Overhead on Salaries

Equipment		Overhead on Salaries
Printing & Stationery		Overhead on Salaries

Postage, Telephone & Telegraph, Exchange & Express

		Overhead on Salaries

Legal & Auditing		Special Studies

Income from Spec. Serv.		Special Studies

Miscellaneous		Special Studies


Expenses Included in the Expense Group, Acquisition, Field Supervision & Collection Expenses
		Bases of Allocation to Lines of Business

Commission & Brokerage: Direct
Commission & Brokerage: Direct		Actual, but Subject to Instructions Under Comm. & Allow. (Subpart C, Section 903.420(c)(2))




Reinsurance Assumed		Actual

Reinsurance Ceded		Actual

Contingent-Net		Special Studies

Policy & Membership Fees		Actual

Allowances to Managers & Agents		Spec. Studies, but
Allowances to Managers & Agents		Subject to Instructions under Commission & Allowance (Subpart C, Section 903.420(c)(2))


Advertising		Premiums

Salaries		See Special Instructions Relating to Allocation of Salaries & Other Expenses (Subpart E)


Employee Relations & Welfare		Overhead on Salaries

Pensions		Overhead on Salaries

Directors' Fees		Overhead on Salaries

Travel. & Entertain.		Special Studies

Rent & Rent Items		Overhead on Salaries

Equipment		Overhead on Salaries

Printing & Stationery		Overhead on Salaries

Postage, Telephone & Telegraph, Exchange & Express
Postage, Telephone & Telegraph, Exchange & Express		Overhead on Salaries

Legal & Auditing		Special Studies

Income from Spec. Serv.		Special Studies

Miscellaneous		Special Studies


Expenses Included in
the Expense Group,		Bases of Allocation to
General Expenses		Lines of Business

Comm. & Brokerage- Direct		See Comm & Allowances (Subpart C, Section 903.420(c)(2))

Allowances to Managers & Agents		See Comm. & Allowances (Subpart C, Section 903.420(c)(2))

Boards, Bureaus & Assn.		Special Studies

Surveys & Underwriting Reports
Surveys & Underwriting Reports		Special Studies

Audit of Assureds' Records
Audit of Assureds' Records		Special Studies

Salaries		See Spec. Instructions Relating to Allocation of Salaries & Other Expenses (Subpart E)

Employee Relations & Welfare		Overhead on Salaries
Employee Relations & Welfare

Pensions		Overhead on Salaries

Directors' Fees		Overhead on Salaries

Travel. & Entertain.		Special Studies

Rent & Rent Items		Overhead on Salaries

Equipment		Overhead on Salaries

Printing & Stationery		Overhead on Salaries

Postage, Telephone & Telegraph, Exchange & Express
		Overhead on Salaries


Legal & Auditing		Special Studies

Income from Spec. Serv.		Special Studies

Miscellaneous		Special Studies


Expenses Included in the		Bases of Allocation
Expense Group, Taxes		to Lines of Business

Taxes, Licenses & Fees: State & Local Ins. Taxes Ins. Dept. or State Licenses & Fees
		Special Studies

		Special Studies

Payroll Taxes		Overhead on Salaries

All other (excluding Fed. Income & Real Estate)
		Special Studies

b) Definitions

1) The term Actual means that the expenses are susceptible of direct and accurate allocation, and companies shall allocate directly to lines of business and shall not employ any apportionments or estimations.

2) For definitions of the terms Special Studies, Premiums and Overhead on Salaries, see Subpart B, Section 903.310(b).

c) Other Bases Permitted or Prescribed

For those expense classifications permitting the basis Overhead on Salaries or Premiums, any other basis of allocation may be adopted which yields more accurate results. The bases Overhead on Salaries and Premiums shall not be used if clearly inappropriate.

d) Other Instructions Applicable

In making any allocations to lines of business, companies shall observe the General Instructions Regarding Allocation Bases (see Subpart E, Section 903.620)

e) Records Required

The methods followed in allocating to lines of business shall be described, kept and supported as set forth under Detail of Allocation Bases (see Subpart E, Section 903.630(g)).

f) The effects of the application to each operating expense classification of all bases of allocation shall be shown on records kept in clear and legible form. Such records shall be readily available for examination.