Special accounting rules exist for universal life insurance contracts.

These are policies where the policyholders have flexibility over the premiums paid, where the insurance risk is low, and where the investment risk is mainly borne by the policyholder. For example, the death benefit typically varies with changes with interest rates or other market rates.

The accounting rules require premiums be treated as a deposit rather than as revenues.

These premiums then form the basis of the insurance reserves, along with any interest or investment returns which accrue to the policyholder.

Note that the reserves for universal life contracts are separately identified on the face of the balance sheet as policyholder account balances.

Because premiums are now recorded within reserves, revenues now only reflect fees which are charged to the policyholder's account.

Typically, this would include the cost of insurance in respect of any guaranteed benefits, surrender fees, and asset management charges.

It's also important to note that the benefits expense no longer reflects a change in reserves but now incorporates the interest and investment returns credited to the policyholders, along with any guaranteed benefits paid in excess of the account value.