Insurance brokerage bookkeeping in Ontario

In Ontario, general insurance brokers are registered and regulated by the Registered Insurance Brokers of Ontario (RIBO) under the Registered Insurance Brokers Act and R.R.O. 1990, Regulation 991. The Financial Services Regulatory Authority of Ontario (FSRA) regulates insurers and life and health agents, but for a property and casualty brokerage RIBO is the body that governs how you hold client money and what you report. Your bookkeeping answers to Regulation 991, not to a generic standard.

Ontario's trust rules are specific enough to design a chart of accounts around. RIBO's Principal Broker Handbook says trust monies received by the firm must be deposited into the trust account within three banking days of receipt, that financial institution accounts and trust investment vehicles must be clearly denoted IN TRUST at all times, and that only investments permitted by Regulation 991 s.16(5) can be held in trust and reported (guaranteed investment certificates up to five years, treasury bills, short-term money market mutual funds, bankers' acceptances, and highly rated short-term corporate debt securities). Trust investments must be redeemable on demand, and cannot be assigned, pledged or hypothecated.

The filing is what pulls everything together. All member firms, whether sole proprietors, partnerships or corporations, complete a Form 1 Position Report as of the close of business at fiscal year end and again six months after that date, and file it with RIBO no later than 90 days after each reporting date. The principal broker certifies it personally. Form 1 reports three things: the trust position (trust cash, allowable premiums receivable, permitted trust investments, against insurance premiums payable, prepaid premiums, refunds due to insureds and retail sales tax payable), the member's current position, and the member's equity, which must comply with Regulation 991 s.19 at all times. Members who have audited or review engagement statements prepared by a licensed public accountant may apply for an exemption from the semi-annual filing.

Two details from the Form 1 rules drive real bookkeeping decisions. First, premiums receivable over 90 days are treated as non-trust assets and come out of the trust asset total, and over-90-day credits cannot be netted against them. A brokerage that lets receivables age can end up in a technical trust deficit while it still holds the cash. Second, the trust bank figure has to be the reconciled balance from the firm's own records at a month-end date, not the bank statement balance, and outstanding transfers from the general account do not count until the money is physically in the trust account. That is why RIBO tells principal brokers to complete an internal Form 1 monthly, checking that the bank reconciliation ties to the general ledger balance, that the premium receivable list ties to the general ledger, that the insurer payable sub-listing ties to the general ledger, and that over-90-day receivables are identified.

Records and coverage round it out. RIBO's handbook points to keeping backups of books and records, including customer records, for six years plus the current fiscal year under Regulation 991 s.17(9), and suggests considering ten years for commercial lines because of the longer negligence exposure. The firm's books of account must separately record money received in trust for insurers, money received in trust for members of the public, all disbursements out of trust, bank statements, deposit books and cashed cheques, and monthly totals of trust assets and trust liabilities. Regulation 991 also sets minimum E&O and fidelity coverage that RIBO must approve, with RIBO endorsements on both policies. When RIBO runs a spot check, its financial investigator reviews at least the two most recent Form 1 filings and reconciles them to the firm's books. Confirm the current requirements, limits and deadlines directly with RIBO.