Premium Deficiency Reserve As mentioned earlier, one view of the unearned premium reserve is that of deferred revenue. But what if it is determined that the deferred revenue will not be sufficient to cover the corresponding losses and expenses? Most accounting systems require the booking of an additional liability (sometimes called a “premium deficiency reserve”) in such a situation. The premium deficiency reserve is generally equal to the difference between the losses and expenses expected from the runoff of the unexpired policy term, and the unearned premium liability already held with respect to the unexpired.
