DTCC Connection

Oct 01, 2010 • DTCC Connection

Senior Advisory Board Meets to Discuss Automation, Standardization and Regulation

by Crystal Bueno


DTCC Insurance & Retirement Services’ (I&RS) Senior Advisory Board (SAB) met in mid- September for two days of discussions with DTCC management and staff, exchanging ideas and information on strategic planning, development, automation and standardization.


Adam Bryan, DTCC managing director, I&RS, opened the session by underscoring the importance of the SAB and the value I&RS places on customer input and guidance. “We encourage you, our customers, to speak frankly about your issues and ideas,” he said. “It is your input and leadership that drive the process; our role is to listen and act on what you tell us. We want to work with you to enable our industry to continue to cut cost, reduce risk and grow.”


Regulatory expectations

A subject that was top-of-mind for many SAB attendees was how to respond to the upcoming regulatory requirements that insurance firms face at both the state-bystate and federal levels. Firms want to ensure their sales and services fully comply with the regulatory changes sweeping the industry.


“There is a need for greater transparency of assets and transactions in financial markets,” said Bryan. “We are looking at a substantial escalation of regulation, and the insurance industry needs to prepare for what this will mean to our business. Regardless of what occurs at the federal level, insurance regulation at the state level is also changing. We all need to understand how to manage these new regulatory expectations.”


DTCC continues to look for ways to work more efficiently with customers. For example, DTCC’s web platform, Access, simplifies adoption and usage of core services — like In-Force Transactions (IFT) and Licensing and Appointments (LNA) — with no development costs or effort.


Uptake in IFT Access accelerated sharply in 2010, with the product now used by 9 carrier families and 15 broker/ dealers, representing over 70 trading relationships.


At the SAB meeting, I&RS product managers expressed a commitment to drive further adoption of Access among firms by expanding and enhancing other services on the platform, such as Attachments, Replacements and Fund Transfers, and supporting multiproduct functionality, like settlement and payment exchange.


The adoption of some of the newer I&RS products, including Replacements, was another topic of discussion.


The adoption of some of the newer I&RS products, including Replacements, was another topic of discussion. While all firms at the SAB agreed that Replacements is an innovative solution to the industry problem for carriers to send annuity 1035 exchange, transfer or rollover information and distributors to receive pending case status information in a secure and standardized environment, uptake in this new service among firms has been delayed this year by internal budget competition for other, more pressing, regulatory issues. “When the cost of technology development is weighed against the potential cost-savings of automation, firms need to think strategically over the longer term while carefully allocating limited resources presently available,” said Leonard Schmitt, DTCC group director, I&RS Relationship Management.


The SAB also discussed expediting the current I&RS membership process for some of the DTCC data services, which would make product adoption quicker and easier. I&RS is working with DTCC’s legal and membership departments to see which steps can be simplified and automated to further wring inefficiencies and delays from the sales and conversion process.


Innovation and opportunities

DTCC is preparing to launch a new data service in Q4. Called Insurance Data Solutions (IDS), it is a centralized repository for industry data, such as profile and prospectus information, which supports pre-sale, issue and post-issue processing and supervision.


IDS will offer upload, storage, inquiry and download for such data as product profile, producer licensing and appointments, fixed interest rates, asset pricing and underlying funds. “Driving automation for the insurance industry through the DTCC connection is about leveraging existing capabilities, improving access, reducing or eliminating costs, and mitigating risk,” said Jeanann Smith, DTCC director, I&RS. “In the case of IDS, by storing insurance product profile data, we are leveraging some industry capabilities that are already in place, but also offering what DTCC does best, which is standardization, centralization and economies of scale.”


DTCC demonstrated another data service that is currently under development and scheduled for pilot in early 2011. This service, tentatively named Analytic Reporting, will aggregate data derived from DTCC’s daily processing of annuity transactions, including investments, redemptions and exchanges. The resulting information could provide distributors, investment managers and carriers with detailed information on their own business performance, as well as the ability to perform benchmarking against the larger industry and peer groups.


“There is no company in the industry positioned like DTCC I&RS to extract and provide metrics to the market based on actual transactional flows,” said Bryan. “We process approximately 150 million annuity transactions each month, which means we have at our fingertips a huge amount of industry information and market intelligence.”@


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