Treasury Today Country Profiles in association with Citi

RSA logo

RSA Insurance, Winner, One to Watch

Photo of Max Pell, Xchanging, Daniel Ferguson from RSA Insurance accepting on behalf of William McDonnell, Paul Duffy, Deutsche Bank

Inefficient operations and processes left RSA, like many market participants, dealing with the challenges of excessive liquidity, counterparty default risk, and complex reconciliation and settlement processes. With the ability to write premiums in around 140 countries, the company also experienced limitations in the management of currency variations. “The Sorrento initiative is aimed at addressing the systemic issues that arise from these ineffective processes and delivering market-level improvements in operational efficiency, transparency, control and capital efficiency,” explains William McDonnell, RSA’s Group Financial Controller.

Photo of Max Pell, Xchanging, Daniel Ferguson from RSA Insurance accepting on behalf of William McDonnell, Paul Duffy, Deutsche Bank.

William McDonnell

Group Financial Controller

With a 300-year heritage, RSA is one of the world’s leading multinational insurance groups. Today, RSA employs around 23,000 people, serving 17m customers in around 140 countries.

in partnership with

In 2012, Project Sorrento was the proposed solution to the problems of accounting and settlement in the international open insurance market, put forward by Xchanging and Deutsche Bank. This was designed to provide RSA with scalable netting and settlement services for both premium and claim transactions using virtual banking technology-based cash management software, owned and operated by Xchanging.

The service was aimed to allow the development and implementation of an ACORD (Association for Cooperative Operations Research and Development) messaging hub for delivering low cost technical accounting messaging. This would include a data transformation engine that enables RSA to use its structured data to participate in the solution without the requirements for complex, lengthy and expensive back office system change or integration initiatives. A central reference ledger was also planned to be developed to use the exchange of structured data to create a shared, harmonised counterparty position for all insurance transactions.

The service was aimed to be delivered as a SAAS ‘utility’, supported by a transactional pricing model that allows participants to exchange fixed cost in people and knowledge for flexible cost in the automated management of accounting and settlement. ACORD driven operational processes will be integrated with SWIFTNet driven cash management to provide a straight through reconciliation solution.

Within this project, Deutsche Bank would facilitate the settlement service for all or selected transactions around the world, in multiple currencies and across all time zones. “This service will work on a netted basis, thereby reducing settlement charges and the cash flow demands on the group,” adds McDonnell. The company would also have a real-time control and visibility on their days sales outstanding (DSO), days payables outstanding (DPO) and on the cash balance within the platform due to MT942 SWIFT reporting. The platform was designed to operate on a multibank, open basis, actively pulling the funds from ‘donor’ accounts held with third-party banks.

“The solution aims to significantly reduce costs and the duration of accounting and settlement by up to 50% through automation. It also promises to improve cash flow through market level netting of premiums and claims (1:5 ratio for the value of cash moved per cycle to the value of accounts settled is expected)” says McDonnell. Single net payments and receivables per settlement currency across all counterparty balances will result in substantially reduced volumes of cash movements with reduced costs of contingent liquidity arising from netted liabilities. Notably, the Sorrento project provides substantial support for Pillar II and Pillar III of Solvency II through these improvements in accuracy, control and reporting on payables and receivables. Deployment was scheduled to begin with a pilot implementation in Europe during 2012.