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In response to client requests to generate settlement efficiencies for a broader set of transaction types, The Depository Trust & Clearing Corporation’s (DTCC) Insurance & Retirement Services group (I&RS) is expanding its automated services to include settlement for insurance and annuity product replacement transactions.

“Settlement of a replacement transaction is currently a manual process for carriers and can take significant time and resources to complete,” said Cory Stark, DTCC Director, Product Management. “By expanding our Settlement Processing for InsuranceSM (STL) functionality to a greater number of transaction types, I&RS aims to deliver to our clients reduced costs, increased accuracy and reduced risk for these types of transactions.”

Also known as a 1035 Exchange, annuity replacements generally take place when a new policy or contract is purchased in lieu of an existing annuity. DTCC’s I&RS is focused on finalizing the requirements for supporting automated annuity replacement settlement and gaining carrier client commitment to work towards a March 2015 launch. The settlement functionality will be available to all settlement-eligible I&RS carrier and distributor clients of National Securities Clearing Corporation (NSCC).

Formerly called Settlement Processing for Withdrawals and Insurance, the original STL functionality automated the movement of annuity withdrawals from carriers to clients’ brokerage accounts, reducing manual processes that involved the mailing of checks directly to customers. Since first being brought to market in April 2013, the STL functionality has grown very quickly, with more than 279,000 transactions processed (YTD) and close to $1.3 billion dollars settled so far this year.

Client benefits

Eric Michaud, Director, New Business and Operations Relationship Management, New York Life Insurance Company (NYL), New York, said one of the key reasons his firm implemented STL is because it helps NYL deliver funds to broker/dealer accounts faster, and allows broker/dealers to keep the funds within client brokerage accounts. NYL anticipates that STL for replacements will help move funds faster among carriers and further improve the representative and broker/dealer experience.

“STL already works very well to fund annuities coming from a broker/dealer’s brokerage account to an insurance carrier since the funds apply to carrier administrative systems automatically,” Michaud said. “When STL is expanded to include transfer/replacement funds coming from other carriers it will provide a similar efficiency and allow policies to be issued quicker.”

STL’s cost savings have the potential to be realized all the way to the individual investor level, said Scott Nielsen, Director of Operations, Transamerica Capital Management, based in Cedar Rapids, Iowa.

“It costs roughly $25 to cut a wire payment, or overnight delivery fees but with STL, all those fees will be eliminated,” Nielsen said. “The more carriers we can get on board, the more processing efficiencies we’re going to see and it will only continue to help us improve our customers’ experience.”

For more information, email or contact your I&RS relationship manager.

Website: Settlement Processing for Insurance. Settlement Processing for Insurance is a service functionality within the suite of Insurance and Retirement Processing Services of NSCC, a DTCC subsidiary.