What Is P&C Insurance Accounting

P&C insurance accounting is not the same as standard business accounting.

For MGAs and wholesalers, accounting is driven by policy activity, not just invoices and payments. Premium moves across multiple parties. Commissions are earned separately from cash. Policies change after issuance. Reporting obligations extend beyond internal books to carriers and regulators. This article explains what P&C insurance accounting is, why it exists, and how it supports modern MGA and wholesale operations.

Defining P&C Insurance Accounting

P&C insurance accounting is the process of recording, allocating, and reconciling premium related financial activity based on insurance policy events.

It includes:

• Premium billed and collected
• Commissions earned and paid
• Installments and premium finance
• Endorsements, cancellations, and return premium
• Trust and fiduciary balances
• Carrier settlements and bordereaux reporting

Unlike traditional accounting, insurance accounting must stay aligned to the policy lifecycle.

Why P&C Insurance Accounting Is Different

Most accounting systems assume a simple flow. Invoice is issued. Payment is received. Revenue is recognized. Insurance does not follow this model.

Premium may be collected before it is earned. Payments may arrive partially or out of order. Policies may change mid term. Commissions may be owed before premium is fully collected.

Accounting must track what should happen, not just what has happened.

Who Needs P&C Insurance Accounting

P&C insurance accounting is critical for:

• Managing General Agents
• Wholesale brokers
• Program administrators
• Delegated authority operations
• Specialty carriers

As volume and complexity grow, general purpose accounting tools become insufficient.

Core Components of P&C Insurance Accounting

Policy Driven Financials

Every policy action creates accounting impact. Binds, endorsements, cancellations, and renewals must drive financial entries automatically. When accounting lags behind policy activity, reconciliation becomes manual.

Agency Bill and Direct Bill Handling

Agency bill and direct bill operate differently. Agency bill requires tracking gross premium, commissions, fees, and trust balances. Direct bill requires tracking commissions independently of cash flow. Treating both models the same is a common source of errors.

Learn more in: Agency Bill vs Direct Bill Accounting Explained

Receivables and Payables Management

Insurance accounting must track:

• Amounts due from insureds
• Amounts owed to producers
• Carrier settlements
• Partial and unapplied payments

Receivables and payables must remain tied to policies, not just invoices.

Earned and Unearned Premium

Premium is earned over time. Accounting must separate written premium from earned premium and maintain accurate unearned balances. This is essential for reporting, audits, and carrier settlements.

Bordereaux and Carrier Reporting

Bordereaux reporting is not just data extraction. It depends on accurate accounting for premium, commissions, and adjustments by program and period. Poor accounting leads to delayed or disputed carrier reporting.

Why Standard Accounting Systems Fall Short

Most accounting systems were built for retail businesses. They lack:

• Policy level accounting logic
• Automated premium allocation rules
• Commission specific workflows
• Trust accounting controls
• Bordereaux reporting structures

To compensate, teams use spreadsheets. Spreadsheets solve short term problems but create long term risk.

Related reading: Why Spreadsheets Still Run Insurance Accounting

How Modern MGA Accounting Works

Modern insurance accounting systems act as premium subledgers. They sit alongside agency management systems and synchronize insurance ready financial outcomes to the general ledger.

This approach allows MGAs and wholesalers to:

• Keep their existing AMS
• Automate insurance specific accounting
• Reduce manual reconciliation
• Improve audit readiness

Explore how this works in practice: Premium Accounting Overview

How Accounting Fits Into the Insurance Lifecycle

Accounting is not a back office afterthought. It connects to:

• Policy issuance
• Endorsements and cancellations
• Commission settlement
• Carrier reporting
• Delegated authority compliance

When accounting is designed around insurance workflows, downstream processes improve automatically.

Key Takeaways

• P&C insurance accounting follows policy activity, not simple invoicing
• MGA and wholesale operations require specialized accounting logic
• Agency bill and direct bill must be handled differently
• Earned and unearned premium are central concepts
• Bordereaux accuracy depends on accounting accuracy
• Spreadsheets indicate system gaps, not process failures

What to Read Next

• P&C Insurance Accounting for MGAs and Wholesalers
• Why MGA and Wholesale Insurance Accounting Breaks at Scale
• Bordereaux Reporting Starts With Good Insurance Accounting
• Introducing Selectsys Premium Accounting for MGAs and Wholesalers

FAQs

What is P&C insurance accounting?
P&C insurance accounting tracks premiums, commissions, receivables, payables, and settlements based on policy activity rather than simple invoices.

Why do MGAs need insurance-specific accounting?
MGAs manage agency bill, direct bill, commissions, and trust balances that standard accounting systems cannot handle correctly.

Is P&C insurance accounting different from general ledger accounting?
Yes. Insurance accounting focuses on premium flows and policy events, while general ledger accounting focuses on financial reporting totals.

Why do insurance accounting teams rely on spreadsheets?
Teams use spreadsheets when accounting systems cannot support insurance-specific workflows such as partial payments, endorsements, and commission reconciliation.