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Financial Management
Ø
Trust account
financial solvency management is founded on two
pillars:
ü
New Trust Ledger (TL)
accounting
ü
New premium financial
solvency reporting system
Ø
Although developed
on general accounting principles, TL accounting is different
from general ledger (GL) accounting.
In TL
accounting:
w
Premium accounting
starts with the policy transaction (not the first
invoice);
w
Premium funds are
located in a separate ledger of accounts (separate from
agency’s general funds);
w
TL
accounting is
“policy” driven (not “invoice” driven); all accounting records
are created at the policy level;
w
There is no “closing”
in TL accounting;
w
Manual journal
entries are not used; all journal entries are computer
automated;
w
Premium payments are
“cash on hand” before they are deposited in the trust bank
account;
w
Since TL accounting
records mirror trust account transactions, more than 65
premium and return premium ledger accounts are necessary to
capture these transactions;
w
Disbursement of
premium funds (commission, remittance and refunds) is a fully
controlled process.
Ø
The premium
financial solvency reporting system includes several key
reports:
1.
Balance
Sheet
2.
Solvency Analysis
Report
3.
Statement of Premium
Receipts and Disbursements
4.
Premium Float
Analysis
5.
Trust Funds
Beneficiary Statement
6.
Audit Trails
Reports
Ø
Premium financial
solvency is reported, as required by law, at three
levels:
v
Policy
v
Carrier
v
Agency
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