3 DAY ROLLING SETTLEMENT
BUSINESS SPECIFICATION
Distribution: IRIS User Group
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Author(s): Ana Thomas
Applicability: IRIS v9.0
Rebus Reference IR 4670
Customer Reference N/A
Version: 1
Revision/Authorisation Date: 18/02/00
Authorised by: Rebus Date: / /
Customer Date: / /
©Copyright Rebus Insurance Systems Ltd. 2000
NOTE
Only signed hard copies and electronic masters of documents will be controlled. Any other copy may not be current 3 DAY ROLLING SETTLEMENT
1. AMENDMENT HISTORY
Reason Date New Reference Version 1 18/02/00 Q:\LMD\Development\3 Day Rolling Settlement\02 Initial Analysis\I00F4670.01.doc
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Contents
1. Amendment history...... 2 2. Introduction...... 5 3. 3 day rolling settlement...... 6 3.1 Introduction...... 6 3.2 Deferred Instalments...... 6 3.3 Reports...... 6 3.4 Comma-Delimited Files...... 7 3.5 EDI Messages...... 7 3.5.1 Introduction...... 7 3.5.2 Company Daily Signings Messages...... 8 3.5.2.1 ILUCSM...... 8 3.5.2.2 DSIGN...... 8 3.5.3 Company Settlement Messages...... 8 3.5.3.1 ILUCSB...... 8 3.5.3.2 WSETT...... 8 3.6 LPC Enquiries...... 9 3.7 Settlement Currencies...... 9 4. Phase 1 Enhancements to the IRIS system...... 10 4.1 Introduction...... 10 4.2 Daily Signing Messages...... 10 4.2.1 Changes in the messages...... 10 4.2.1.1 ILUCSM...... 10 4.2.1.1.1 Settlement Indicator...... 10 4.2.1.1.2 Actual Payment Date...... 10 4.2.1.2 DSIGN...... 11 4.2.1.2.1 Settlement Indicator...... 11 4.2.1.2.2 Actual Payment Date...... 11 4.2.1.2.3 Work Date, Start of Period, End of Period...... 11 4.2.2 File Changes...... 11 4.2.3 Posting Accounts...... 11 4.3 Central Settlement Messages...... 11 4.4 Settlement Currencies...... 11 5. Phase 2 Enhancements to the IRIS system...... 12 5.1 Introduction...... 12 5.2 From the Settlement Message to the Ledger...... 12 5.2.1 Menus...... 12 5.2.2 Load Data - loading the settlement messages...... 13 5.2.2.1 LIRMA (WSETT)...... 14 5.2.2.2 ILU (ILUCSB)...... 14 5.2.3 Generate Cash...... 15 5.2.4 Reconcile Weekly Settlement Account...... 16 5.2.5 Settlement File Status...... 17 5.2.6 Parameter Maintenance...... 17 5.2.7 Data Area Manager...... 17 5.3 Posting Accounts...... 18 5.3.1 Posting Accounts for 3 Day Settlement...... 18 5.3.1.1 Daily Signings...... 18
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5.3.1.2 Deferred Instalments...... 19 5.3.2 Housekeeping – The Creation of the New Posting Accounts...... 19 5.3.3 File Changes...... 19 6. Costing Quotation:...... 20
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2. INTRODUCTION
The London Processing Centre (LPC) will be introducing a three day rolling settlement. Under these new terms, transactions will be settled three days after release for payment. These new settlement terms will be implemented on 31st July 2000. After this date, the three day rolling settlement will be the default settlement. Weekly and monthly settlement will still be available for companies in run-off with prior agreement.
The three day rolling settlement is being introduced in order to increase efficiency, by reducing the time between the signing and settlement of transactions processed by the LPC. It will apply to all transactions (premiums, claims and treaties) and all settlement currencies.
On the 14th December 1999 the IRIS User Group asked Rebus to produce a business specification to describe the modifications necessary to IRIS to deal with this change in terms. This specification will describe these changes. It will be divided into two phases. Phase 1 will describe the changes required to process the new messages. Phase 2 will describe the changes required to automate the settlement process.
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3. 3 DAY ROLLING SETTLEMENT
3.1 Introduction As of July 31 2000, all transactions processed for central settlement under 3 day terms will be settled three working days after they have been released for settlement. If this falls on a bank holiday or other holiday, the settlement will be on the next working day. For example:
Released on Monday 3rd July 2000 - settled on Thursday 6th July 2000 Released on Wednesday 5th July 2000 - settled on Monday 10th July 2000
This arrangement will include transactions due to be settled on Good Friday. In the past, these have been moved forward to the preceding day. This will no longer be the case. They will now be settled on the next working day.
Live companies will no longer be able to settle on a weekly or monthly basis. Three day settlement will be compulsory. Companies in run-off will be able to choose their settlement terms but the default will now be three day settlement. Three months notice will be required to change to weekly or monthly settlement or to continue with these terms once the implementation date arrives. Weekly settlement will continue to be on the Friday following the week in which the transactions are released. Monthly settlement will be on the last Friday of the month following that in which the transactions are released.
3.2 Deferred Instalments Under 3 day settlement terms deferred premium instalments will be settled on the instalment due date or the next working day if this falls on a weekend, bank or national holiday.
For companies operating weekly settlement, deferred premium instalments will be settled on the Friday of the week in which they are due. Likewise, if this falls on a weekend or bank or national holiday, this will be deferred to the next working day.
On 31st July 2000 companies operating under 3 day settlement will have all outstanding instalments posted again with a new settlement date set to the instalment due date or next working day. All companies and brokers affected will receive reports showing the instalments that have been changed.
3.3 Reports Company settlement reports will be sent out 2 working days prior to settlement for companies operating on 3 day settlement, 4 working days prior to settlement for companies operating on weekly settlement and 1 month prior to settlement for companies operating on monthly settlement.
The reports that brokers receive will depend on the settlement terms of the companies that they deal with. They will probably receive a mixture of the above reports.
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3.4 Comma-Delimited Files This is a new facility to be provided by the LPC and will be available from 31st July 2000. These files will be sent as e-mail attachments. It will allow companies to:
Download the files into PC spreadsheets
Load the files onto a company host insurance recording system
Thus further analysis of the data will be possible as well as incorporation of the data into reports.
These files will be available to all companies irrespective of their settlement terms. They are as follows:
DL6001 Detailed Statement of Items
DL6003 Central Settlement Payment Advice
DL6006 Reallocation Report for Defaulting Stamps
DL6009 Daily Signings Statement
These files may be used for independent reports outside IRIS. They could also be loaded onto the IRIS system to form the equivalent of the EDI settlement message. However, this would require further enhancements which are not included as part of this specification and we recommend that existing EDI settlement messages are used.
Companies requiring comma-delimited files will need to register with the LPC to receive them. Test messages will be available from April 2000. The LPC have stated that in future they will charge for paper reports if they are available in electronic form.
3.5 EDI Messages
3.5.1 Introduction Some EDI messages will be changed in order to enable processing under the new settlement terms. These are:
ILU Company daily Signing Message (ILUCSM) LIRMA Company daily Signing Message (DSIGN) ILU Company Settlement Message (ILUCSB) LIRMA Company Settlement Message (WSETT) ILU Company SDD Amendment Message (ILUCSC) - not required
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3.5.2 Company Daily Signings Messages
3.5.2.1 ILUCSM There will be an additional field, the settlement indicator. It will have one of the following values:
A 3 day W Weekly S Suspended (monthly) D Direct – Defaulting Company B Direct – Defaulting Broker Z Direct – Suppressed Line E Next Day (Catastrophe)
For companies on 3 day settlement the actual payment date will reflect the 3 day actual payment date. For all other companies this date will be unchanged.
3.5.2.2 DSIGN There will be a settlement indicator as outlined above. For companies on 3 day settlement, the Work Date, Start of Period and End of Period will all be set to the current signing date. For other companies these dates will be unchanged. For companies on 3 day settlement, the Actual Payment Date/Settlement Date will reflect the three day period. It will remain unchanged for companies on weekly or monthly settlement.
3.5.3 Company Settlement Messages
3.5.3.1 ILUCSB This message is going to be available in two versions:
Version 1 This is the current version of the message. Companies on weekly or monthly settlement terms will receive these messages.
Version 2 This message will be received by companies operating on 3 day settlement and will be received daily. The message header will contain the version number. The settlement run number will now contain a 5 digit run number in the format YYDDD.
3.5.3.2 WSETT Member 01 record For companies on 3 day settlement: End of Period will be set to the signing date.
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M01 For companies on 3 day settlement: Week Ending will contain the current signing date For other companies these dates will be unchanged.
M02 For companies on 3 day settlement: Period Sett will contain the APD/Settlement date. Period From and To will be the same and set to the current signing date. For other companies these dates will be unchanged.
3.6 LPC Enquiries There will be some changes to the LPC enquiries. These have no effect on processing and have no impact on IRIS.
3.7 Settlement Currencies As from 31st July 2000 the LPC will accept transactions in six new settlement currencies. These are:
Danish Krone (DKK) Hong Kong Dollar (HKD) Norwegian Krone (NOK) South African Rand (ZAR) Swedish Krone (SEK) Swiss Franc (CHF)
These new currencies may be used for business incepting from 31st July 2000. Currencies available for ILU and LIRMA will now be the same.
In order to reduce costs, settlement currencies agreed at the time of placing business or processing claims will apply to all underwriters on the risk.
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4. PHASE 1 ENHANCEMENTS TO THE IRIS SYSTEM
4.1 Introduction Currently, daily signings messages are put into a company’s mailbox. The product INTERCEPT is used to translate the data to temporary files that can then be used by IRIS. The processing of these messages is menu driven. This processing begins with the option ‘Load Data’ from the IRIS menu. This starts a series of programs which: Retrieve messages from the mailbox Put the data into INTERCEPT files Validate and reformat the data Put the data into IRIS files
Further validation is done from the menu. Once this is complete, the option ‘Create Closings’ can be taken from the menu. This does further validation and populates the bureau closings logs with transactions which have achieved a certain level of validation. This process assigns the closing to the correct weekly or monthly account. Batch Update will then transfer these closings to the proper closings logs (as if they had been entered manually).
An error report is produced by the option ‘Transaction Validation’ and this lists transactions which need to be corrected in some way for instance there might be some codes missing or some codes might be incorrect. These can be corrected using ‘Closings Edit’ from the same menu. Once the transaction is correct it is automatically updated to the closings logs.
At this stage further processing is done using the Closings Menu. ‘Closings Update’ transfers the closings to the statistics files and ‘Post Closings’ updates the ledger. So the ledger now contains insurance items – premiums, claims, and treaties.
When money is paid or received, cash items are entered using the INCAS module. These are put on the ledger and then have to be matched to the insurance items. This is done using the option ‘Allocations’ from the INCAS module.
4.2 Daily Signing Messages IRIS will have to be enhanced in order to deal with all three settlement terms namely 3 day, weekly and monthly as well as to enable it to process the new style messages.
4.2.1 Changes in the messages
4.2.1.1 ILUCSM
4.2.1.1.1 Settlement Indicator The settings on INTERCEPT will need to be changed so that it can pick up the settlement indicator. These settings will tell INTERCEPT where to look for the new field.
4.2.1.1.2 Actual Payment Date The contents of this field will change but the processing will remain the same.
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4.2.1.2 DSIGN
4.2.1.2.1 Settlement Indicator The program that maps LIRMA data will have to be changed in order to capture this field as well.
4.2.1.2.2 Actual Payment Date The contents of this field will change but the processing will remain the same.
4.2.1.2.3 Work Date, Start of Period, End of Period The content of these is going to change but the processing will not need to change.
4.2.2 File Changes INTERCEPT translates the data to temporary capture files. These will need to be changed to include the settlement indicator. Also, the bureau closings postings log, the closings postings log and the statistics postings log will need to be changed to include the settlement indicator.
4.2.3 Posting Accounts Currently closings are put into weekly or monthly posting accounts depending on the settlement terms i.e. W01, W02 etc. for weekly settlement and M01, M02 etc. for monthly settlement. Our proposal is that initially we keep using weekly accounts for 3 day settlement. This is going to mean more work for the users, as ‘Cash’ items will have to be entered more frequently in order to keep up with the more frequent settlement. Phase 2 will have proposals for the long-term, which will reduce this workload by automating cash generation and allocation.
Therefore, transactions that are settled on Monday to Friday of one week will go into the weekly posting account for that week
For instance, if Friday January 7 is week 01 then items that are settled on Monday January 3 to Friday January 7 will go to posting account W01. Thus, the processing that assigns posting accounts will have to be changed in order to do this. It will need to check the settlement terms and assign the posting account accordingly.
4.3 Central Settlement Messages To be addressed in Phase 2.
4.4 Settlement Currencies No new processing or enhancements are required in IRIS to accommodate the new settlement currencies. However, in order to settle in a new currency, a bank account will need to be opened in that currency and because of this it will also have to be made an accounting currency (in order for reconciliation to take place).
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5. PHASE 2 ENHANCEMENTS TO THE IRIS SYSTEM
5.1 Introduction Prior to settlement the LPC issues settlement messages which detail all the transactions which are about to be settled. For weekly settlement these are sent on the Saturday of the previous week. For monthly settlement they are sent the previous month. Currently IRIS does not process these. The LPC issues a report listing these transactions and these are checked manually against the signings already received. Then ‘cash’ items are entered into INCAS for each settlement transaction. These cash items are then matched against the insurance items (the signings) using ‘On-Line Allocations’ from the INCAS menu. Alternatively, insurance items can be grouped together by assigning all of them the same pre-allocation flag and then allocating them. The insurance items can be selected in one go or it can be done gradually with items being added over some time. Thus, the whole process of matching settlement to signings is quite a time consuming process as it is all manual.
This part of the specification will look at the option of automating this process. Settlement messages would be received in the same way as signings messages. These would then be used to generate ‘Cash’ entries on the ledger and these could then be automatically allocated to the correct signing(s).
5.2 From the Settlement Message to the Ledger
5.2.1 Menus There will be separate settlement menus for LIRMA and ILU.
BUREAU BUREAU Menu
Select one of the following:
1. LIRMA Signings 10. LIRMA Reconciliation Reports 2. LIRMA Loss Advice (ELASS) 11. ILU Reconciliation Reports 3. LIRMA Settlement 12. LPSO Reconciliation Reports 4. ILU Signings 5. ILU Settlement 6. LPSO Signings 7. LPSO Control Message 8. SCM Advices 9. Lloyd's Consortium Processing
19. Enquiry 20. Underwriting 21. Insurance Accounts 24. Signoff Selection or command ===>
F3=Exit F4=Prompt F9=Retrieve F12=Cancel F13=Information Assistant F16=AS/400 main menu
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LIRMAS MENU: LIRMA SETTLEMENT
Select one of the following:
1. Load Data 11. Settlement File Status 2. Generate Cash 12. Parameter Maintenance 3. Reconcile Weekly Settlement 13. Data Area Manager Account
16. Status File Cleardown
19. Enquiry 20. Underwriting 21. Insurance Accounts
24. Sign off Selection or command ===>
F3=Exit F4=Prompt F9=Retrieve F12=Cancel F13=Information Assistant F16=AS/400 main menu
ILUS MENU: ILU SETTLEMENT
Select one of the following:
1. Load Data 11. Settlement File Status 2. Generate Cash 12. Parameter Maintenance 3. Reconcile Weekly Settlement 13. Data Area Manager Account
16. Status File Cleardown
19. Enquiry 20. Underwriting 21. Insurance Accounts
24. Sign off Selection or command ===>
F3=Exit F4=Prompt F9=Retrieve F12=Cancel F13=Information Assistant F16=AS/400 main menu
5.2.2 Load Data - loading the settlement messages This is option 1 from the settlement menu. It is the first step in the processing of the settlement messages and is very similar to the ILU and LIRMA signings downloads.
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This option will display a screen from which the user takes F6 to submit the download. The screen will display details of the previous download with the status of it. If it has not completed successfully, another download will not be allowed until the error has been corrected and the download has been successful.
LIRMA Submit Download #TPRC0R0
Previous download details:
Status . . . : 7 LIRMA download complete Job . . . . : QDFTJOBD User . . . . : UNMRXF Number . . . : 086801 Date . . . . : 2/11/99 Time . . . . : 12:18:23
F3=Exit F6=Continue F12=Previous
The ILU screen will be the same but with the text ‘ILU’ instead of LIRMA.
5.2.2.1 LIRMA (WSETT) These messages will be downloaded using the product INTERCEPT as well as existing programs in a similar way to the handling of the LIRMA signings message, DSIGN. The data will be validated in the same way, reformatted and mapped to the IRIS files that hold just the settlement data.
Member 01 record For companies on 3 day settlement the end of period will now be the signing date. This message contains operational information useful to the LPC for identifying the message. It can be ignored.
M01 record No change to processing required.
M02 record No change to processing.
5.2.2.2 ILU (ILUCSB) These messages will be downloaded using the product INTERCEPT as well as existing programs in a similar way to the handling of the ILU signing message, ILUCSM. The layout of this message will have to be added to INTERCEPT so that it can read and understand the
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The existing program which processes the run number will need to be changed to deal with the changed Settlement Run Number.
Once the download is complete both WSETT messages and ILUCSB messages will be on the same files. There is a currency totals file, a broker totals file and a details file.
5.2.3 Generate Cash This is option 2 from the settlement menu. This will call a set of existing programs that will ultimately write cash items for each currency total and detail message received.
When this option is taken a screen will be displayed with a list of members and their settlement dates.
LIRMA Generate Settlement Cash #BURZ0C1
Settlement Details to be processed
Type option, press Enter 1=Select
Opt Member Date _ F78 14/07/95
F3=Exit F6=Continue F12=Previous
The ILU screen will be the same but with the text ‘ILU’ instead of LIRMA.
The user has to select one of downloads for processing. This submits a job that produces reports for the currency totals and for the detail amounts. It will then post the detail amounts to the ledger and allocations files using the correct posting account for 3 day, weekly or monthly settlement. For 3 day settlement there are a number of proposed solutions for the type of posting account to which they are assigned (see section 5.3). The currency totals are also posted to the ledger and allocations files. They are assigned to whichever bank account has been set up for that settlement currency.
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5.2.4 Reconcile Weekly Settlement Account This option will display a screen showing a list of members and one of these must be selected for processing. Taking F6 will submit a program that matches cash settlement items with insurance items.
LIRMA Reconcile Settlement Accounts #BURZ1C1
Weekly Settlement Accounts to be processed
Type option, press Enter 1=Select
Opt Member Account Date Loaded Settled Remaining _ F78 0/0/W27 7/07/95 547 547 _ F78 0/1/W27 7/07/95 547 547 _ F78 0/0/W29 21/07/95 947 947 _ F78 0/0/W30 28/07/95 1123 1123 _ F78 0/0/W28 7/07/00 1123 1123 _ F78 0/1/W28 7/07/01 547 547 _ F78 0/1/W27 7/07/01 547 547
F3=Exit F6=Continue F12=Previous
The matching criteria will need to be set in a data area. This will be set using Data Area Maintenance. The matching criteria are as follows:
Type 1: company code ledger account subaccount accounting currency settlement (bureau) reference
Type 2: As type 1 and additionally, member reference
Type 3: As type 2 and additionally, matching amounts
Once the records are matched the program writes to the allocations file and updates the ledger.
It will be possible to set a data area so that the ‘Generate Cash’ and ‘Reconcile Weekly Settlement Account’ can run automatically. They can both be set to run automatically, or just one or neither. If they are both set to manual, both options have to be run from the menu. If the ‘Generate Cash’ is automatic, it will run the ‘Load Data’ processing is complete. If the
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‘Reconcile Weekly Settlement Account’ is automatic, it will run after the ‘Generate Cash’ whether this ran manually or automatically.
5.2.5 Settlement File Status This option will display the following screen:
LIRMA Settlement File Status #BUIZ0C1
Type option, press Enter 1=Reinstate 2=Amend 4=Delete
Member Number Number Opt Number Date File Status Loaded Remain Status 2 F78 7/07/95 Cash Postings Generated 547 547 P _ F78 14/07/95 Data Loaded 665 665 _ F78 21/07/95 Cash Postings Generated 947 947 _ F78 28/07/95 Cash Postings Generated 1123 1123 _ F78 7/07/01 Cash Postings Generated 547 547
F3=Exit F12=Previous
This will work in a similar way to the ‘Signings File Status’. The screen will display the file status and the user will be able to amend, reinstate or delete a file. Before the postings have been generated, the status can be amended to a prior status with the exception of the status of ‘E’ signifying that an error has occurred. If a file has been deleted in error, it can be reinstated. The values for the status are: D Deleted E Error I In use (unspecified) 1 In-use: Loading 2 In-use: Generate Cash G In-use: Posting Cash 3 In-use: Reconcile A/C's L Data Loaded P Cash Postings Generated R Reconciled Settlement A/C's
If there is an error the file will have to be deleted and the messages downloaded again. However, this is an unusual occurrence and could be due to a faulty message.
5.2.6 Parameter Maintenance This is a duplicate of the option from the signings screens and will work in the same way.
5.2.7 Data Area Manager This is a duplicate of the option from the signings screens and will work in the same way. The list of data areas will now include those created specifically to process settlement messages. These are:
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UTILRLAV – ILU reconcile A/C match type UTPSRSAV – LIRMA reconcile A/C match type UTILRLAU - ILU automatic processing flag UTPSRSAU – LIRMA automatic processing flag
5.3 Posting Accounts
5.3.1 Posting Accounts for 3 Day Settlement
5.3.1.1 Daily Signings 3 day rolling settlement will lead to daily settlement. However, with this enhancement settlement is going to be automatic. The posting of settlement items can be handled in several ways with the choice being defined in a data area:
1. Items could be posted to broker accounts. As these accounts would then hold so many items, the settlement date would also be used to match settlement items to signings. This would require the date to be added to closings, statistics and ledger files. 2. Items could be sent to weekly accounts. This is the method that Phase 1 adopts.. 3. Items could be sent to daily posting accounts. The 3 character account code would be the week the settlement falls in and the sub-account code indicates the day. e.g. Monday – Friday on week 25 could be: W25A – W25E (but ‘D’ might be used already for deferred items) W25A – W25F with W25D used for deferred items W251 – W255 (1 – 5 corresponding to Monday to Friday W25M, W25T, W25W, W25H, W25F for Monday, Tuesday, Wednesday, Thursday and Friday
All of the above solutions would be possible with this enhancement. A company would choose their preferred method and this would be set on the system using a data area.
The program that assigns posting accounts will have to be changed in order to do this processing: If posting to a broker account it will have to use the 4 digit broker number (used within the message) to cross-reference to the IRIS broker account code which would then be used as the posting account. If posting to a weekly account, it will do the same processing as Phase 1 but unlike phase 1 the settlement will be carried out automatically by the settlement processing. If posting to a daily account, it will have to find out the day of the week on which settlement is going to take place and assign a sub-account accordingly. The sub-account file will be changed to hold the day of the week. If daily accounts are used then the housekeeping function for sub-accounts will let the user enter a day of the week for a sub-account.
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The changed screen layout for sub-account maintenance is shown below and indicates how a sub-account can now be changed to indicate which day of the week it should be associated with. INCAS Codes Sub-Account Codes #CMIZ0R8
Type Sub-Account Code, press Enter
Company 0
Ledger 1
Sub Account D
Sub Account Name DEFERRED
Suspense? Y
Day of the Week? Y/N Y Day MON Monday
F3=Exit F12=Previous
5.3.1.2 Deferred Instalments The program that assigns posting accounts will also have to be changed in order to change the processing of deferred instalments. They are now going to be settled on their due date.
5.3.2 Housekeeping – The Creation of the New Posting Accounts If daily posting accounts are to be used then more than 300 new daily settlement accounts per bureau would need to entered within IRIS. To assist users in this task a new program will be written to automatically create the daily settlement accounts. The users will therefore have the option of manually entering the accounts themselves or using this program (that will be included as part of the upgrade that contains the phase 2 enhancements).
5.3.3 File Changes The settlement date will need to be added to the closings header log, bureau closings header log, the statistics header file, the allocations file, the pre-allocations file and the ledger file.
The day needs to be added to the sub-account file. This will be a 3 character field that will hold one of the following valid values MON, TUE, WED, THU or FRI..
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6. COSTING QUOTATION:
Development Total ...... : 125 days
This quotation is valid for 90 days or until the customer release level changes, whichever is the sooner.
The estimate includes the following :-
Detailed software design Programming Unit testing Peer testing Database upgrade Documentation upgrade Help Text upgrade Project management Delivery and load instructions System testing
This enhancement will form part of the standard IRIS package and will be covered by the existing maintenance agreement.
If you wish to proceed with this enhancement, you should sign a copy of the front sheet of this document and return it to Rebus. This will authorise Rebus to commence implementation of the enhancement.
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