Funds Overview

Insurance products can be configured to use funds as an investment tool for the policy owner. Both variable and fixed funds are supported in OIPA. Funds must be defined and allocation structures must be configured to allow a user to select the way money is divided and applied to the available funds.

Different types of funds accrue money at various rates. A business rule can be configured to define fixed rates, or a separate system can be used to bring in the fund values for variable types of funds. Configuration is also needed to define how funds are valued for a policy.

Fund Types

Funds vary in the way they are valued. OIPAclassifies fund types and defines the algorithm applied when performing valuation on the various types of funds. An explanation of the standard calculations performed on each fund types is provided below, along with the type code for the fund.

Important   Fund types are defined in AsCodeFundType and should never be changed. Changing codes could adversely affect the valuation process.

Fund Asset Classes

OIPA offers the ability to organize funds into Fund Asset Classes. Examples of Fund Asset Classes are Fixed Income and Equities. Funds can then be associated to these classes and defined in an allocation model.

Benefit Funds

OIPA offers the ability to configure Benefit Split functionality. This allows a periodic payment from a variable annuity policy to pay out to more than one beneficiary. The underlying location of these payments is made from funds linked to a policy’s current investment. To support this, benefit funds must be setup. Refer to the Benefit Split section for more information.

Valuation of Funds

Valuation is done at the parent level if no child funds are present. If child funds exist, then valuation is done at the child fund level. The OIPA Variable Annuity product template demonstrates how to configure valuation using parent funds. The OIPA Unit Linked product template demonstrates how to configure valuation using child funds.

The value of a fund is taken from the AsNetAssetValue table for variable funds. For fixed funds, the value is found in the InterestRateCalculation business rule.

Benefit funds are used for payout annuities or the annutization of a product with child funds. The benefit fund can be configured to use the unit fund value but then will subtract the assumed interest rate (AIR) charge that is configured via the FundScreen rule. So although the benefit funds are technically children of the child fund, their value is different than that of the child fund and can be used as the value that will be paid out.

Chart of Accounts and Funds

In OIPA you can setup a Chart of Accounts (CoA), which tracks in and out money movements. Tracking money in and out can be performed according to funds. Please see the Chart of Accounts section for setting up CoA records that will generate fund processing.

Redemption Fees and Funds

Redemption fees can be applied to a withdrawal based on redemption criteria. The FundScreen business rule must be configured to support two dynamic fields for funds: Redemption Factor and Redemption Duration. Each fund must also have a redemption value assigned. The RedemptionAmountFormula rule governs the calculation process. View the Redemption Fee Prototype for sample configuration.

Related Topics

Configure Funds, Fund Database Tables, Child Funds, Currency Codes for Funds, Fund Screens in OIPA, Allocation Models

     
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