Group companies across the Zurich Financial Services Group (Zurich) hold large amounts in operational cash; dispersed over dozens of mostly regulated balance sheets. Traditional liquidity management techniques can only partially be used for regulated funds, as inter-company positions as well as cross guarantees and pledges are restricted.

To comply with local corporate laws and local independent directors and regulators and to address concerns about the spill-over of corporate defaults through traditional cash pooling arrangements, a mandatory central clearing of all local accounts is not possible.

Instead, a daily physical availability of funds in the domain of Zurich’s local CFOs, needs to be ensured. In order to roll-out a liquidity structure globally and to achieve a high degree of acceptance across Zurich, a unique solution was sought that covers free and regulated assets and at the same time provides the local entities with the independence and flexibility to meet local corporate law, considerations of independent directors as well as insurance regulation.

The full, automated integration into general ledger and sub-ledger systems needed to be achieved in spite of the fact that a variety of local general ledger systems are in use.

Pierre Wauthier, Group Treasurer at Zurich, explains, “Deutsche Bank was selected to support Zurich in the development and implementation of a prototype solution to cover four countries within the Group. In reaching this decision, the bank’s commitment to jointly develop an innovative solution, as well as their technical flexibility and global reach played a decisive role.”

After the successful implementation of an initial set of four countries, the solution is currently being reviewed for further roll-out. The major building blocks are:

• For regulated assets: a newly developed deposit-funded-loan structure with insurance-specific documentation, account and booking set-up.

• For non-regulated assets: daily, physical cash concentration across legal entities, banks, countries and time zones with precise cut-off times and reverse sweeps mirroring overnight deposits.

• Full integration of both pooling cycles with accounting and treasury systems and Zurich’s global forecasting tool through Zurich’s global SWIFT access.

• Daily, physical return of all pooled cash to all participating Zurich units.

• Autonomous, daily determination of pooling volumes by local participating units via a globally rolled out forecasting tool.

• Fully automated straight through processing: after entering local forecasts all subsequent process steps (cash transfers, account/interest/expense reconciliations and sub-ledger accounting) are fully automated with centrally managed, automated accounting postings into the general ledgers of all participating entities.

Whereas the traditional liquidity management techniques have only focused on non-regulated assets, the solution implemented at Zurich allows active management of the overall liquidity position including regulated assets.