Under Solvency II you'd profit $5m straight away. You'd record $10m of premiums as either cash if received up front, or as cash inflows as part of your premium provisions if not received up front. And you'd record a liability for $5m claims you expect to pay out on. Hence your own funds increase in $5m from writing the business, which is a profit of $5m. Of course, I'm ignoring the risk margin here. And also ignoring any deferred tax assets or liabilities arising, or for that matter any discounting and so on.
Under GAAP / accrual accounting you'd record $10m of premiums as either cash if received up front or premium receivables if not received up front. And you'd record $10m of UPR. You wouldn't have any profit at this point. But by the time you reach the end of the year, as at 31 Dec, you'd have written off $5m of the UPR and would only have $5m UPR remaining. You might have paid out some claims as well, and you might also have reserves in respect of claims that have happened but you haven't paid out on yet. If your loss ratio is bang on 50% and you always get things exactly right, then the claim payments plus your reserves would be $2.5m in total. For longer tailed business like liability a lot of that $2.5m would probably be in the reserves, and for shorter tailed business like property comparatively more of that $2.5m would have been in payments. Hence as at 31 December you'd have profited $2.5m. Rinse and repeat over the next 6 months to realise another $2.5m of profit assuming we got the loss ratio right again etc.
I suppose one could argue that GAAP accounting is more prudent, as 'prudence' is indeed one of the 'principles' of accrual accounting and under Solvency II you are meant to do things on a 'best estimate' basis which is neither optimistic nor pessimistic. Note a company's net assets / own funds could be higher or lower under Solvency II compared to GAAP though, as there are lots of differences between the two.
Whether this puts more pressure on actuaries to get things spot on is an interesting question... In practice actuaries will tend to come up with a best estimate or 'central estimate' for reserves using triangulation methods and other techniques. Then this gets split into cashflows using a payment pattern and discounted (and a risk margin added) to come up with Solvency II technical provisions. The central estimate also gets adjusted separately for the preparation of GAAP accounts: a margin for prudence might be added by actuaries and/or management (deciding on what reserves they actually want to book), the full amount of UPR (plus maybe AURR) will be held as a liability rather than just the expected losses. There are other minor differences too. I wouldn't say this puts extra pressure on actuaries particularly, apart from time pressure as they might have to be involved in the presentation of their estimates on two (or more) different accounting bases! At some companies accounting or finance might handle most of this though, with the actuaries mainly just being in charge of the central reserve estimate.
A lot of detail skipped over, but hopefully this was helpful.
