How to Select a Reinsurance Accounting System for Your Pet Insurance MGA

Reinsurance accounting is where precision meets significant money. Every month, your MGA must calculate exactly how much premium is ceded to reinsurers, track claims recoveries, prepare bordereaux, and settle treaty accounts. Errors don't just cost money they damage the reinsurer relationships your MGA depends on for capacity.

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What Are the Fundamentals of Reinsurance Accounting?

Reinsurance accounting tracks all financial flows between your MGA, the fronting carrier, and reinsurers, including ceded premium calculations, bordereau preparation, loss recoveries, commissions, and treaty settlements. Getting these calculations right every month is essential to maintaining reinsurer trust and program viability.

1. What Reinsurance Accounting Tracks

Function	Description	Frequency
Ceded premium calculation	Premium share going to reinsurer	Monthly
Ceding commission	Commission retained by MGA on ceded premium	Monthly
Loss ceding	Claims share recoverable from reinsurer	Per claim / monthly
Bordereau preparation	Detailed policy/claims reports for reinsurer	Monthly
Treaty settlement	Net payment between parties	Monthly/quarterly
Reserve reporting	Reserves on ceded business	Quarterly
Experience reporting	Loss ratio and performance metrics	Quarterly
Treaty reconciliation	Verify both parties agree on numbers	Monthly

2. Reinsurance Financial Flows

Gross Premium (from policyholder)
    ↓
MGA Retains: Commission + Retained Premium Share
    ↓
Ceded Premium → Reinsurer (per treaty terms)
    ↓
Claims Paid (by MGA on behalf of carrier)
    ↓
Loss Recovery → Reinsurer reimburses ceded share
    ↓
Net Settlement = Ceded Premium - Loss Recovery - Ceding Commission

3. Treaty Types and Accounting Impact

Treaty Type	Accounting Complexity	Key Calculation
Quota share	Low-medium	Fixed % of every policy/claim
Surplus share	Medium	Variable % based on retention
Excess of loss	Medium-high	Claims exceeding retention point
Stop loss	Medium	Aggregate losses exceeding threshold
Facultative	High	Individual risk placement

For reinsurance fundamentals, see our introductory guide.

What Are the Core System Requirements?

A reinsurance accounting system must handle treaty configuration, premium and loss ceding, bordereau generation, settlement calculations, and reconciliation as critical functions. Data integration with your PAS and claims system is equally important for accuracy and efficiency.

1. Core Functionality

Feature	Description	Priority
Treaty configuration	Define treaty terms, limits, rates	Critical
Premium ceding	Calculate ceded premium per policy	Critical
Loss ceding	Calculate recoverable per claim	Critical
Bordereau generation	Automated premium and loss bordereaux	Critical
Settlement calculation	Net settlement per period	Critical
Reconciliation	Compare MGA records vs reinsurer	High
Reporting	Treaty performance, experience	High
Document management	Store treaty contracts, correspondence	Medium
Multi-treaty support	Handle multiple concurrent treaties	High
Audit trail	Complete history of all calculations	Critical

2. Data Requirements

Data Source	Fields Needed	Integration
PAS (policy data)	Policy number, premium, effective date, status	API/database
Claims system	Claim number, paid amount, reserves, status	API/database
Rating data	Breed, age, location factors	PAS
Financial data	Commissions, fees, expenses	Accounting system

What Vendor Options Are Available for MGAs?

Vendor options range from PAS-embedded modules suitable for early-stage MGAs to specialized standalone platforms like SICS and Sapiens for growing programs. The right choice depends on your policy volume, treaty complexity, and budget.

1. Reinsurance Accounting Systems

System	Best For	Monthly Cost	MGA Focus
PAS-embedded module	Early-stage MGAs	Included in PAS	Varies
SICS	MGA-focused solution	$2K–$8K	Excellent
Sapiens ReinsuranceMaster	Mid-to-large MGAs	$3K–$15K	Good
Swiss Re RECA	Large programs	$5K–$20K+	Good
Excel/Spreadsheets	Pre-launch, very small	$0	Manual
Custom-built	Specific requirements	$30K–$100K build	Custom

2. PAS-Embedded vs Standalone

Factor	PAS-Embedded	Standalone System
Integration	Seamless (same database)	API integration required
Functionality	Basic to moderate	Full-featured
Customization	Limited	High
Cost	Included	$2K–$15K/month additional
Reporting	Standard reports	Advanced analytics
Multi-treaty	Usually supported	Full support
Audit trail	PAS-level logging	Dedicated audit logs

3. When to Move Beyond PAS-Embedded

Trigger	Why Standalone Is Needed
Multiple concurrent treaties	Complex cession calculations
Quota share + excess of loss combined	Multi-layer calculations
Facultative placements	Individual risk tracking
Reinsurer requesting specific formats	Custom bordereau generation
Settlement disputes	Detailed reconciliation needed
Audit findings	Need better documentation

How Should You Manage Bordereaux?

Bordereau management requires meticulous attention to data quality, format compliance, and timely submission. Premium and loss bordereaux must contain complete policy-level and claim-level detail, reconcile exactly to treaty terms, and be delivered within 30 days of period end.

1. Premium Bordereau

Field	Description	Required
Policy number	Unique policy identifier	Yes
Insured name	Policyholder name	Yes
Effective date	Policy start date	Yes
Expiration date	Policy end date	Yes
State	Policy state	Yes
Gross premium	Total premium	Yes
Ceded premium	Premium ceded to reinsurer	Yes
Ceding commission	Commission retained	Yes
Net ceded	Ceded - commission	Yes
Coverage type	Accident, illness, wellness	Yes
Species/breed	Pet details	Yes (for pet insurance)

2. Loss Bordereau

Field	Description	Required
Claim number	Unique claim identifier	Yes
Policy number	Associated policy	Yes
Date of loss	Incident date	Yes
Date reported	When claim was filed	Yes
Condition/diagnosis	Claim type	Yes
Paid to date	Total paid on claim	Yes
Case reserves	Outstanding reserves	Yes
Ceded paid	Reinsurer's share of paid	Yes
Ceded reserves	Reinsurer's share of reserves	Yes
Claim status	Open, closed, reopened	Yes

3. Bordereau Quality

Quality Metric	Standard
Accuracy	100% every number must be correct
Completeness	Every ceded policy and claim included
Timeliness	Submitted within 30 days of period end
Format	Per reinsurer specification
Reconciliation	Totals match treaty terms exactly

What Does the Implementation Roadmap Look Like?

Implementation typically follows a four-phase approach over 6 to 12 months, starting with treaty configuration and premium ceding, then adding claims integration, followed by automation, and finally advanced features like multi-treaty support and analytics.

1. Phase 1: Foundation (Months 1–2)

• Configure treaty terms in system
• Build ceded premium calculation logic
• Create premium bordereau template
• Set up monthly calculation workflow
• Test against manual calculations

2. Phase 2: Claims Integration (Months 3–4)

• Integrate claims data for loss ceding
• Build loss bordereau template
• Create settlement calculation
• Set up reconciliation process
• Build basic reporting

3. Phase 3: Automation (Months 5–6)

• Automate monthly bordereau generation
• Automated settlement calculations
• Build reconciliation dashboard
• Create reinsurer-facing reports
• Set up audit trail logging

4. Phase 4: Advanced (Months 7–12)

• Multi-treaty support
• Advanced analytics (ceded loss ratio, development)
• Premium accounting integration
• Automated treaty settlement payments
• Carrier audit preparation tools

What Are the Costs of Different Approaches?

Costs vary dramatically based on your approach, from zero additional cost for PAS-embedded modules to over $240K annually for enterprise systems. The right investment level depends on your policy count, treaty complexity, and the cost of errors in your reinsurance accounting.

1. System Costs

Approach	Year 1 Cost	Ongoing Annual	Best For
Spreadsheet	$0	$0	<2,000 policies
PAS-embedded	$0 additional	$0 additional	2,000–10,000 policies
SICS or similar	$24K–$96K	$24K–$96K	5,000–50,000 policies
Enterprise system	$60K–$240K+	$60K–$240K+	50,000+ policies
Custom build	$30K–$100K	$10K–$30K	Specific requirements

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Frequently Asked Questions

What is reinsurance accounting?

Tracks financial flows between MGA, carrier, and reinsurers ceded premiums, loss recoveries, commissions, bordereau, and treaty settlements.

Do you need a dedicated system?

Under 5,000 policies: spreadsheets and PAS work. At 5,000+, dedicated system reduces errors. At 10,000+, manual processes are unsustainable.

What vendors serve MGAs?

PAS-embedded (most common start), SICS (MGA-focused), Sapiens, Swiss Re RECA. Start simple, upgrade as complexity grows.

What is a bordereau?

A detailed report of ceded policies (premium bordereau) or claims (loss bordereau) submitted monthly to reinsurers. Must reconcile exactly to treaty terms.

How long does implementation take?

Typically 6 to 12 months across four phases: treaty configuration, claims integration, automation, and advanced features like multi-treaty support.

What is the difference between PAS-embedded and standalone systems?

PAS-embedded modules offer seamless integration but limited functionality. Standalone systems require API integration but provide full-featured accounting, advanced analytics, and dedicated audit trails.

How do you reconcile reinsurance accounting with carrier reports?

Compare ceded premium and loss calculations monthly. Both parties must agree on gross premium, cession percentages, ceded amounts, and net settlements before bordereau submission.

What happens if bordereau data contains errors?

Errors cause incorrect settlements, reinsurer disputes, delayed recoveries, and audit findings. Persistent inaccuracies can lead to unfavorable renewal terms or loss of reinsurer confidence.

External Sources

• https://www.reinsurance.org/
• https://content.naic.org/

Internal Links

• Explore Services → https://insurnest.com/services/
• Explore Solutions → https://insurnest.com/solutions/