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DTCC’s Insurance & Retirement Services (I&RS) rolled out new functionality for Settlement Processing for Insurance (STL), a service that automates and centralizes the settlement of pre- and post-issue money settlement activities between I&RS carrier and distributor clients. STL, which streamlines insurance withdrawals, full and partial surrenders, mandatory (systematic) required distributions and life insurance premium submissions, has been expanded to now support the liquidation of insurance policies or contracts originating from account transfers.

“The new STL features were requested by the account transfers community to advance documentation and settlement automation in the industry,” said Cory Stark, DTCC Director, I&RS Product Management. “While this focuses on ease of money settlement, by leveraging STL, it is a step in the overall goal to drive full automation.”

Addressing Pain Points

Previously, when brokers requested annuity assets originating from account transfers to be liquidated, they relied on physical check mailings and/or wire transfers to receive cash. This manual process was identified by Automated Customer Account Transfer Service (ACATS) clients as a pain point during industry discussions, and DTCC’s Equities Clearing Services (ECS) team realized that there was a great opportunity to partner with I&RS to leverage the STL service to meet ACATS clients’ needs.

A consortium of ACATS brokers and insurance carriers was formed to review this opportunity. As a result of this group’s analysis, STL was enhanced to support fulfilling requests for liquidating annuity assets as soon as the next day’s settlement. Settlement of liquidated funds is now instructed into the brokerage account and made available for future investment opportunities.

“As soon as these enhancements were identified, our team fast-tracked the process to get them up-and-running,” explained Craig Gurien, DTCC Director, Equities Clearing. “We value client input and want to support their needs as soon as possible to quickly bring efficiency to the industry.”

A pilot program with Jackson National Life Insurance Company® (Jackson®) and Fidelity Investments was created to gain insights into the new STL features and adjust the user experience as needed. These firms quickly began utilizing the functionality and seeing a positive impact on process efficiency.

“The new STL features further enhance the customer experience through increased settlement options, in addition to moving the industry one step closer towards modernization,” said Hilary Cranmore, Vice President, Customer Contract Services at Jackson®. “We appreciate the partnership with DTCC and Fidelity to help modernize the industry and make it easier to transact with annuity products.”

Collaboration in Action

The new functionality lessens the liquidation settlement of annuities barrier and automates the settlement of the liquidated asset (i.e., annuity contracts, mutual funds contracts, IRA’s, 403B, retirement plan accounts) to the requesting broker. The liquidation of these assets is comparable to a ceding carrier’s full surrender in the 1035 exchange/transfer space.

“Working closely with DTCC, our team at Fidelity identified an opportunity to help the broader industry fund TOAs by leveraging existing DTCC functionality,” explained Evan Oliveaux, Vice President of Operations and Services Group at Fidelity Investments. “By modifying an existing DTCC process – carrier-to-carrier transfers – to work for carrier-to-broker dealer transfers, Fidelity will be the first brokerage firm in the industry to move from TOA check deposits to cash settlement via DTCC for transfers from Insurance firms. Moving to cash settlement is a great operational efficiency and cost savings, which we believe will result in a better client experience.”

NSCC clients adopting STL save time and resources leveraging NSCC’s money settlement, while mitigating risk and creating standardization. “We are excited to assist other DTCC businesses’ needs by adding efficiencies that are cost-effective and also benefit our client’s usage of the STL service,” said Stark.

If you are interested in learning more about I&RS and the STL service, please reach out to [email protected] or fill out this Contact Us form.