▞ System for Internal Funds Administration

Internal Funds Administration (IFA)

Administration of internal funds within an investment scheme of life insurance that are created by an insurance company for the purpose of "unit linked" products. The solution was developed for Aegon, Životná poisťovňa a.s. (life insurance company in Slovakia) as a substitute for in-house application, which was unable to meet the growing requirements.

 

Business Background

"Unit linked" life insurance products serve the purpose of collecting funds from customers of the insurance company and to invest them collectively into various investment instruments. The client funds are collected in internal funds created by the insurance company and for the client share units are issued. The collected funds are used to purchase various financial instruments according to the chosen strategy. The instruments forming the internal fund's assets are regularly marked to market prices and are calculated daily value of share units of the internal fund. The client redeems his funds by redeeming his share units.

The purpose of the IFA is to automate processes and activities associated with the administration of investment "unit" schemes such as mutual funds, unit trusts or investment funds, life insurance not only for the purpose of life insurance as well as management companies, custodian, or the needs of private banking and wealth management.

Functionality

IFA provides the following functions and tools:

  • Definition of a funds, their investment strategies, and the upper and lower limits for each investment instrument.
  • Automatic creation of orders for purchasing and selling of financial instruments, once their volume in the portfolio of internal fund falls below or exceeds a given limit.
  • Processing of orders that includes consolidation of instructions relating to a specific financial instrument across all internal funds, internal netting of purchase and sales orders in order to achieve that the final instruction submitted for execution covers only the resulting difference minimizing the transaction costs paid to 3rd parties.
  • Pairing of confirmations of executed trades with instructions and generation of transactions on accounts of the internal funds.
  • Valuation of internal funds using market prices and internal calculations to determine the internal fund value and net value of the share unit. The following types of financial instruments are currently available:
    • units, shares, stocks;
    • bonds;
    • term deposits;
    • foreign currency;
    • other instruments (options, swaps, forwards and so on) in extension upon request.
  • Automatic actions triggered by the planned events, such as payment of bond coupons or principals, maturities of deposits etc.
  • Issuance of new share units as the new cash arrives into internal fund or units are redeemed.
  • The calculation of earnings / losses from purchases and sales or trading securities in the portfolio using the First in First off method or average prices.
  • Principle 4 eyes is kept for the required actions executed in the system. Recording of audit logs.
  • Control of access rights at the application level (possible integration with LDAP systems to achieve SSO).
  • Various reports and data exports for sales and accounting purposes.

Technology

Technologies Model Driven Architecture and Model Driven Design, part of the development platform ALBIQ from F4S, were used in the development of IFA, consequently reducing the time and costs of the development as well as operating costs on the side of the future users. The application is web-based, multilayer built based on JEE platform, containing web rich GYU, a service layer and SQL database. Part of the solution is the reporting instrument Jasper Reports.