Insurance brokerage accounting glossary

Most glossaries define a word and stop. This one is grouped by the job the term belongs to, and each entry tries to answer three things an owner actually needs: where the term shows up in your system, what usually goes wrong with it, and how it gets reconciled.

Start with the premium trust accounting guide if you want the full picture of how trust cash, payables and receivables fit together, the chart of accounts guide if you are setting up the ledger, and Canadian brokerage financial compliance for how the provincial regimes differ.

This is general information, not tax, legal, or regulatory advice. Confirm specific obligations with your CPA, your lawyer, and your provincial broker regulator.

Premium trust and client money

Premium trust account

A bank account that holds money belonging to clients and insurers, kept apart from the brokerage’s operating cash. Money goes in when an agency-bill client pays; money goes out when you remit to the carrier, refund a client, or transfer earned commission to the operating account.

Where it goes wrong: a single bank account used for both trust and operating money, or an operating balance that quietly depends on trust cash. Fix it in the chart of accounts before you try to fix it in the reconciliation. See what is a premium trust account and our premium trust reconciliation service.

Trust position

The difference at a point in time between trust assets (trust cash, allowable premiums receivable, permitted trust investments) and trust liabilities (premiums payable to insurers, prepaid premium, refunds due to insureds, and sales tax payable where it is treated as a trust item). A positive figure means trust covers what you owe out of it.

This is the number a monthly close should produce. If your close ends at a bank reconciliation and stops, you do not have a trust position, you have a bank balance.

Trust shortfall (trust deficiency)

Trust liabilities exceed trust assets. Sometimes it is real, meaning the money was spent. Sometimes it is technical, meaning receivables aged past the point where the regulator counts them while the cash is still coming.

Either version is a problem you want to find on the 15th of the month, not at a filing deadline. See what happens if there is a premium trust shortfall.

Premiums payable to insurers

The liability for premium you have billed or collected on agency-bill business and not yet remitted to the carrier, net of your commission. It is the main thing standing against trust cash.

Build this balance from your own records first, then reconcile the carrier’s statement to it. Building it the other way round, by copying the insurer’s number into your ledger, hides the differences you are trying to find. See premium payable to insurers.

Allowable premiums receivable

The portion of agency-bill receivables a regulator will let you count as a trust asset. In Ontario, RIBO’s Form 1 takes total premiums receivable and subtracts debit balances over 90 days, and over-90-day credit balances cannot be applied against them because those credits are still trust liabilities.

The practical consequence: an aged receivable list that nobody cleans up will drag the reported trust position down even while the cash exists. Aging should start from the later of the invoice date or the effective date, and should not reset when a binder converts to a policy.

Prepaid premium

Money received for a new or renewal policy where the transaction has not been booked yet. It is a trust liability, because the money is not yours and the obligation has not been recorded anywhere else.

Commonly missed, and the miss goes in both directions: leave it out entirely and you overstate the trust position, or report it while it is also sitting inside the receivable balance and you double count.

Return premium and refunds due to insureds

Money owed back to a client after a cancellation, endorsement or overpayment. Reported separately from premiums payable because it is owed to a different party.

Watch for aged credit balances sitting on client accounts. Those are unpaid refunds, not a cushion.

Trust investments

Some regulators allow trust money to sit in instruments other than a bank account. Ontario’s Regulation 991 section 16(5) sets out what qualifies, and RIBO’s handbook describes them as needing to be redeemable or cashable on demand, held in the member’s registered name, denoted in trust, and not assigned, pledged or hypothecated.

If an instrument cannot be turned into cash on demand, it should not be counted as a trust asset regardless of how safe it is.

Trust reconciliation

Matching trust cash to the general ledger and to the liabilities standing against it, item by item, at a month-end date. A complete one ties three things back to the GL: the reconciled bank balance, the aged premium receivable listing, and the insurer payable listing.

One recurring error is reconciling to a date that is not month end, which lands transactions in the wrong period. Another is including transfers from the operating account that have not physically cleared into trust. See how often should a brokerage reconcile its trust account.

Agency bill and direct bill

Agency bill

The brokerage invoices the client, collects the premium, keeps its commission and remits the balance to the insurer. The brokerage handles the money, so agency bill is what creates premium trust, premiums payable and premium receivables. See agency bill vs direct bill.

Agency bill statement

The insurer’s account current or statement of what it believes you owe on agency-bill business. It is a comparison document, not a source document. Your payable comes from your own bookings; the statement tells you where the two disagree. See the agency bill versus direct bill guide.

Direct bill

The insurer bills and collects premium from the policyholder and pays you commission, usually monthly. You never hold the client’s money, so there is no trust exposure, but there is a receivable: the commission you earned and have not been paid.

Direct bill statement

The carrier’s periodic report of the policies it billed and the commission it is paying you. This is the input to direct bill reconciliation, and the place where missing policies, wrong commission rates and unapplied cancellations surface. See how to reconcile direct bill in Applied Epic.

Direct bill commission receivable

Commission earned on direct-bill business and not yet received. It belongs in the operating side of the balance sheet, never in the trust calculation.

A frequent Form 1 error in Ontario is reducing insurance premiums payable by expected direct bill commission. Those are two different balances owed by and to different parties, and netting them overstates the trust position.

Binder and binder billing

Coverage bound before the policy is issued, often invoiced as a binder. Binder billings are still real trust liabilities and belong in premiums payable.

The aging trap: a binder that is 60 days old when the policy is issued should still be 60 days old on the receivable list afterwards. Systems that reset the age on issuance will hide over-90-day balances.

Premium finance

A third party (or a related company) lends the client the premium and pays the brokerage, and the client repays the lender. It changes who owes you money and when the cash arrives, not whether the premium is trust money.

Where a brokerage finances premium through a separate entity, RIBO’s handbook is explicit that the financed amount has to be transferred into the firm’s trust account to pay insurers, and that using other trust funds instead is non-compliance with Regulation 991 section 16.

Broker of record letter

A client’s written instruction moving their account from one brokerage to another. Accounting-wise it moves future commission, and it often leaves an unresolved receivable, an unearned commission clawback or a mid-term adjustment behind.

Treat every broker of record change as a reconciliation event, not just a service event.

Binding authority

Authority delegated by an insurer letting the brokerage or an MGA bind coverage without prior referral. It affects timing: the liability to the insurer starts at binding, which is often before the policy exists in any carrier system.

Commission and carrier reconciliation

Carrier (insurer)

The insurance company behind the policy. In agency bill you owe the carrier premium; in direct bill the carrier owes you commission. Most brokerages have both relationships with the same carrier at once, which is why the payable and the receivable must never be netted.

Carrier statement

The periodic statement an insurer sends summarizing policies, premium and commission. It is the starting point for reconciliation and the single most common source of unexplained variances. See what is carrier statement reconciliation.

Carrier statement reconciliation

Matching the carrier’s statement to your own records policy by policy and commission by commission, then chasing the differences. Typical causes: a rate applied at the wrong percentage, a cancellation the carrier processed and you did not, a policy written under a different producer code, or an opening balance that was never corrected.

Left alone, these compound. RIBO’s handbook makes the same point about insurer payables: reconcile monthly, because errors caught early are small. See the carrier and commission reconciliation guide and our carrier statement reconciliation service.

Commission income

Your revenue for placing insurance, recognized when earned rather than when the cash lands. Gross premium is never revenue.

The recognition question (bound and effective, substantially performed) has real judgement in it, especially around instalment business and mid-term changes. See when does a brokerage recognize commission income and our commission income accounting service.

Contingent commission

Extra compensation an insurer pays when a book meets agreed conditions such as profitability, growth, retention or volume. Usually settled after the year it relates to, and not guaranteed.

The accounting question is when it becomes reliably measurable enough to recognize, and the answer depends on your contracts and your framework. Keep the carrier agreement, the calculation and the settlement statement together in one file. See contingent commission accounting.

Profit-sharing commission

A contingent commission driven mainly by loss ratio rather than growth or volume. Same accounting judgement, same documentation requirement, and worth tracking separately from growth-based contingents so you can see which relationship is producing what.

Producer split

The share of commission paid to a producer under their compensation arrangement. The brokerage records the full commission as income and the producer’s share as expense or a payable. Netting the two hides your real revenue and your real cost of sales.

Splits go wrong when the trigger is unclear: earned versus collected, base only versus base plus contingent, and what happens when a policy cancels flat. See producer commission split accounting.

Sub-broker

A broker placing business through your brokerage, typically because they lack the market access. Commission flows carrier to you to sub-broker, and each leg needs its own record. Sub-broker payables age quietly if nobody owns them.

MGA (managing general agent)

An intermediary holding underwriting authority from one or more carriers and distributing through retail brokerages. From the books’ point of view an MGA behaves like a carrier: it issues statements, you owe it premium or it owes you commission, and it needs its own reconciliation.

Wholesale or surplus lines broker

A specialist placing hard-to-place risks, often through MGAs or non-admitted markets. Expect longer settlement cycles, more fee income alongside commission, and more manual reconciliation.

Applied Epic and the broker management system

Broker management system (BMS)

The platform running client and policy data, documents, carrier downloads and, in some systems, accounting. The BMS is where the operational truth lives, and the general ledger should tie to it rather than drift onto spreadsheets.

Applied Epic

A broker management system from Applied Systems, widely used by Canadian brokerages, with a built-in accounting module covering agency bill, direct bill, premium trust, carrier statements and the general ledger. See does Applied Epic do accounting, the Applied Epic accounting guide, and our Applied Epic accounting service.

Applied Epic accounting module

The part of Epic that maintains the general ledger and the brokerage-specific subledgers. It gives you the reports the whole reconciliation runs on, but it will not tell you when a balance is wrong. See what is the Applied Epic accounting module.

Aged premium receivable list

Epic’s aging of agency-bill receivables, and the report that decides how much of your receivable balance counts as a trust asset. The parameters matter more than most people expect: wrong date settings pull in pre-bills that should be excluded, or push out valid receivables that should be included.

Check that the total on this list agrees with the general ledger control account every month. When the two disagree, the more conservative figure is the safer one to report.

Insurer payable listing

The subledger of what you owe each carrier on agency bill. It should tie to the general ledger and be reviewed for stale debit and credit items that no longer represent anything real.

Download

The automated feed of policy and billing data from a carrier into the BMS. Downloads reduce keying errors and create new ones: duplicated transactions, policies landing under the wrong producer or branch, and endorsements that post without a matching invoice.

Month-end close in Applied Epic

Closing the accounting period in Epic after the bank and trust reconciliations, carrier statement matching, direct bill commission reconciliation and accruals are done. Closing the period is the last step, not the first. See how to run month-end close in Applied Epic.

QuickBooks alongside a BMS

QuickBooks can carry a brokerage’s general ledger, but it has no concept of premium trust, insurer payables or commission subledgers on its own. If you use it, the brokerage-specific structure has to be built deliberately and reconciled to the BMS. See can you run an insurance brokerage on QuickBooks.

Regulators and provincial terms

RIBO (Registered Insurance Brokers of Ontario)

The body that registers and regulates general insurance brokers in Ontario under the Registered Insurance Brokers Act and Regulation 991. RIBO sets trust rules, minimum equity, E&O and fidelity requirements, and collects a position report from every member firm.

See RIBO trust account requirements and insurance brokerage bookkeeping in Ontario.

Principal broker

The registered broker who carries responsibility for an Ontario brokerage’s compliance, including trust handling and filings, and who personally certifies the Form 1 Position Report. RIBO’s handbook advises principal brokers to complete an internal Form 1 monthly rather than waiting for the filing date.

Form 1 Position Report

RIBO’s filing showing the trust position, the member’s current position and the member’s equity. Reporting dates are fiscal year end and six months after it, and the filing is due within 90 days of each reporting date. Firms with audited or review engagement statements from a licensed public accountant may apply for an exemption from the semi-annual filing.

Confirm the current requirements and deadlines with RIBO.

Regulation 991

The Ontario regulation under the Registered Insurance Brokers Act that sets the trust account rules (section 16, including the list of permitted trust investments at 16(5)), record requirements (section 17), and minimum equity (section 19). It is the reason an Ontario brokerage’s chart of accounts looks the way it does.

Insurance Council of British Columbia

The body licensing insurance agencies and salespeople in BC. Its Council Rules require a licensee to keep the books, records and other documents necessary for the proper recording of insurance transactions and related financial affairs, and its Code of Conduct requires licensees to safeguard, account for and promptly deliver money entrusted to them.

BC does not publish a Form 1 equivalent, so the agency’s own records are the evidence. See insurance brokerage bookkeeping in British Columbia.

Nominee

In BC, the individual an agency nominates who is responsible to the Insurance Council for all activities of the agency. For a general insurance agency the nominee must hold a level 3 general insurance agent licence and complete the Council’s nominee course. In practice, the nominee is the person who has to be able to explain the money.

BCFSA (BC Financial Services Authority)

British Columbia’s regulator for insurers and the wider financial sector. Relevant background for a brokerage, but the Insurance Council is the body whose rules your books answer to.

Alberta Insurance Council

The body administering certificates of authority and conduct for agents, agencies and adjusters in Alberta under the Insurance Act and the Insurance Agents and Adjusters Regulation. Alberta’s premium trust obligation comes from the Insurance Act rather than from a filing: section 504(1) deems an agent who receives premium from an insured to hold it in trust for the insurer.

See insurance brokerage bookkeeping in Alberta.

Certificate of authority

Alberta’s licence. Businesses hold them as well as individuals, so the agency itself is a licensed entity with obligations of its own, including E&O coverage that has to cover all of its agents.

AMF (Autorité des marchés financiers)

Quebec’s integrated financial regulator, which registers and supervises firms and representatives under the Act respecting the distribution of financial products and services. Quebec is the most explicit of the Canadian regimes about the accounting itself.

See insurance brokerage bookkeeping in Quebec.

Separate account (Quebec)

Quebec’s term for what other provinces call a trust account. A firm that receives or collects any amount on behalf of others must maintain a separate account at an institution whose deposits are guaranteed under the Deposit Institutions and Deposit Protection Act, and deposit those amounts in it forthwith.

The accounting for the separate account has to be kept separate and distinct from the general accounting, and supported by a register recording the client, the contract number, the amount and object of the transaction, the deposit or withdrawal date, and the recipient of any payment out.

Chambre de l’assurance

Quebec’s self-regulatory organization for professional conduct, ethics and compulsory development. Bill 92 amalgamated the Chambre de l’assurance de dommages (ChAD) and the Chambre de la sécurité financière into the Chambre de l’assurance effective 4 July 2025.

FSRA (Financial Services Regulatory Authority of Ontario)

Ontario’s regulator for insurers and for life and health agents. Property and casualty brokers in Ontario are regulated by RIBO, not FSRA. The distinction matters when you are searching for the rule that applies to you.

Month-end close and reporting

Month-end close

The monthly sequence that turns activity into statements: bank and trust reconciliations, carrier statement matching, direct bill commission reconciliation, commission and producer accruals, subledger tie-outs, then closing the period.

A close that stops at the bank reconciliation is not a close. See our month-end close service, which lays out the full business-day checklist.

Bank reconciliation

Matching the bank balance to the general ledger cash balance item by item, at a month-end date. Trust and operating accounts get separate reconciliations, always.

The point is to prove the general ledger balance is right, not to prove the bank statement is right. Uncleared transfers between operating and trust do not count as trust cash until the money is actually there.

Chart of accounts

The list of ledger accounts the brokerage uses. A brokerage chart needs segregated trust and operating banks, trust liability accounts, a direct bill commission receivable, commission income split from contingent income, and a producer payable. See the chart of accounts guide.

General ledger

The record every transaction lands in, and the source of the trial balance and the financial statements. It should mirror the broker management system rather than being maintained beside it.

Trial balance

Every ledger account and its balance at a point in time. Useful as a reconciliation checkpoint: subledger totals for receivables, insurer payables and producer payables should all agree to their control accounts on the trial balance.

Financial statements

Balance sheet, income statement, cash flow statement and notes, prepared under ASPE or IFRS. For a brokerage, the statements are only as good as the trust and commission reconciliations behind them. See brokerage financial reporting KPIs and our reporting service for principals.

ASPE (Accounting Standards for Private Enterprises)

The Canadian framework most private brokerages report under, set out in the CPA Canada Handbook. RIBO’s Form 1 guidance says financial information should be reported consistently with generally accepted accounting principles including ASPE or IFRS.

IFRS 15

The IFRS revenue recognition standard, relevant to brokerages reporting under IFRS rather than ASPE. Confirm application with your CPA.

Working papers

The supporting file behind the year-end statements: reconciliations, schedules, aging reports and calculations. RIBO’s handbook notes that if a third-party accounting firm prepares your regulatory filings, you have to obtain and retain a copy of their working papers.

A clean working paper file is the single biggest lever on year-end cost.

Year-end engagement

The external accountant’s work at fiscal year end: statement preparation, the T2, and any assurance a regulator, lender or buyer requires. The cleaner the monthly close, the smaller this gets. See monthly brokerage bookkeeping.

Outsourced brokerage accounting

Moving the recurring accounting work (trust reconciliation, carrier statements, commission, month-end close) to an external team while the brokerage keeps ownership of the decisions and the client relationships. The split of responsibilities is what makes or breaks it, so it should be written down before the first close.

See should you outsource your brokerage’s bookkeeping (which also covers the in-house versus outsourced tradeoff), the outsourcing guide, and what brokerage bookkeeping costs.

Compilation engagement (CSRS 4200)

A non-assurance engagement in which a CPA compiles financial information without expressing an opinion, under CPA Canada’s Canadian Standard on Related Services 4200. BrokerLedger does not perform compilation engagements for its own bookkeeping clients.

Review engagement

A limited-assurance engagement: more procedures than a compilation, fewer than an audit. In Ontario, having review engagement or audited statements prepared by a licensed public accountant is what opens the door to applying for an exemption from RIBO’s semi-annual Form 1 filing. BrokerLedger does not perform review engagements for its own clients.

Audit engagement

An opinion on whether the financial statements are fairly stated, and the highest level of assurance a CPA firm provides. Sometimes required by a lender, an acquirer or a regulator. BrokerLedger refers assurance work to independent licensed public accounting firms.

Tax, payroll and records

CRA (Canada Revenue Agency)

The federal tax authority. Sets the rules for books and records, the T2, payroll remittances, GST/HST where applicable, and information returns.

GST/HST

Insurance is generally treated as an exempt financial service, so commission for arranging insurance is typically outside GST/HST, while some broker fees may be taxable depending on the facts. This is fact-specific. See GST/HST on insurance brokerage commission.

GST and QST

Quebec’s sales taxes, administered by Revenu Québec. Configure the tax accounts from the treatment confirmed by the brokerage’s Quebec tax adviser; commission and fee treatment depends on the facts.

Retail sales tax (RST) on premium

Provincial tax on insurance premium in some provinces. Ontario brokerages report RST payable on the Form 1 where the corresponding receivable or cash is treated as a trust asset. The common error is reporting only next month’s remittance instead of the full amount owing, which understates trust liabilities.

T2

The corporate income tax return an incorporated brokerage files annually. Prepared by your external accountant, from the books you hand over.

T4 and T4A

Federal information returns for employment income and source deductions (T4) and other income including some contractor and commission payments (T4A). See our payroll and year-end service.

Record retention

The CRA baseline is generally six years from the end of the last tax year the records relate to. Quebec’s regulations set five years for books and registers, and at least five years for client records from the last of closing, last service or expiry without renewal. RIBO’s handbook points to six years plus the current fiscal year for books and records, and suggests considering ten years for commercial lines.

The federal and provincial clocks can start on different dates. Keep each record until every applicable deadline has passed. See how long must a Canadian brokerage keep its records.

PIPEDA

Canada’s federal private-sector privacy law, which sets how a brokerage and its accounting provider collect, use and protect personal information. Relevant to how books, statements and client files are stored and shared.

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If a term you ran into is not here, send it to us and we will add it. If you want the terms applied to your actual books rather than defined, start with monthly brokerage bookkeeping or read bookkeeping for insurance brokers.