1. QuestDirect.org 101010 Building Pooling and IBNR Allocations Madeline Osit Beacon Application Services

2. QuestDirect.org Objectives Review Allocations functionality and considerations for insurance allocations Understand how allocations can be leveraged to automate pooling arrangements and how to identify opportunities for automation Understand how allocations can be used to automate IBNR calculations Review case studies

3. QuestDirect.org Agenda Background Considerations for Insurance Allocations Allocations Functionality Automating Pooling Arrangements –When to use Allocations for Pooling –Typical Scenarios –Case Studies IBNR Allocations –Challenges in automating IBNR allocations/calculations –Configuration and customization –Case Study

4. QuestDirect.org Background Insurance accounting presents unique challenges in the need for complex calculations/allocations Traditionally have been addressed via spreadsheets with intense manual intervention - sometimes even after PeopleSoft has been implemented Allocations presents the opportunity to automate some of these calculations for better precision, reporting and traceability of results Challenge is to manage the complexity of these calculations and the volumes they produce, while maintaining controls and traceability

5. QuestDirect.org Background: Types of Allocations 1.Fixed rate expense allocations such as rent based on square footage 2.Overhead allocations to geography/line of business for management and statutory reporting, usually based on premiums, claims or related statistics 3.Automation of pooling arrangements 4.IBNR Calculations

6. QuestDirect.org Considerations for Insurance Allocations Thin vs. Thick Ledger Data Warehouse Strategy

7. QuestDirect.org Considerations for Insurance Allocations Volumes –Multi-step allocations to multiple chartfields with cascading effects and an iterative nature make volumes high and sometimes difficult to predict Complexity –Complexity of pooling arrangements/IBNR calculations determine whether they are suitable for allocations

8. QuestDirect.org Considerations for Insurance Allocations Solutions: For very high volumes, a separate ledger(s) can be used for allocation results and reporting Summary accounts (with or without an allocation ledger) can also be used to manage volumes Plan for Performance Testing and Tuning well before planned production date

9. QuestDirect.org Allocations Functionality

10. QuestDirect.org Definition - Allocations The PeopleSoft Allocations functionality is simply a math processor. Using the pages in the Allocation Step Definitions, the inputs and outputs to the mathematical process are defined.

11. QuestDirect.org Overview Used to distribute money (or statistical) amounts across any chartfield or combination of chartfields Within a business unit or across multiple business units Single or multi-step allocations Can use trees to build allocation specifications Effective dated for control

12. QuestDirect.org Allocation Terminology Allocation TypeCalculation type for the pool and basis (what type of math) PoolSource the amount(s) to be allocated. This amount can come from a ledger or any table, or you can specify a fixed amount. BasisRules How and in what proportion the pool amounts are distributed to the various targets. TargetDestination where the amounts defined by the pool and basis are allocated. OffsetEntries that balance the targets. These entries usually reflect the clearing of pool amounts as they are applied to the targets. Amount FieldsThe mapping of the fields where the pool and basis amounts are allocated to the target and offset.

13. QuestDirect.org Regular vs InterUnit Steps Regular Allocation Steps create the Target and Offset Journal Entries in the same Business Unit InterUnit Allocation Steps record InterUnit Journal entries – It uses the InterUnit Processer to create multiple journals: one on each Business Unit

14. QuestDirect.org Simple Allocation Example

15. QuestDirect.org Allocation Types Copy at a %Copies pool amounts to the target or offset with possible percentage changes. Spread Evenly Divides pool amounts equally by the specified basis fields to derive the target amounts. For example, this type can be used to divide the pool equally in thirds among department IDs 0100, 0200 and 0300. Allocate on Fixed Basis Allocates on a fixed % basis. Prorata with Record Basis Divides the pool amount among the targets based on amounts determined from the basis record (either actuals or statistical). Arithmetic Operation Defines the allocation calculation as a mathematical operation between the pool and basis (add, subtract, multiply, divide).

16. QuestDirect.org Output Options Journals – supports accruals Direct Update is also an option, but not often used

17. QuestDirect.org Automating Pooling Arrangements

18. QuestDirect.org When to Use Allocations for Pooling Complexity of rules will dictate whether they can be automated Consider the cascading effect of the allocations when assessing volumes

19. QuestDirect.org Typical Scenarios Rates are stored in Statistical Accounts Rates are generally updated annually (and retesting for performance should be done at that time) Depending on volumes and control requirements, determination is made as to whether a separate allocation ledger should be implemented In some cases, summary accounts are also required to address volumes

20. QuestDirect.org Case Studies

21. QuestDirect.org IBNR Allocations

22. QuestDirect.org Case Study

23. QuestDirect.org Questions?

24. QuestDirect.org APRIL 7-11, 2014 Sands Expo and Convention Center Las Vegas, Nevada QuestDirect.org/COLLABORATE COLLABORATE 14- Quest Forum is THE source for PeopleSoft roadmaps & news. It matters where you register! All PeopleSoft education and events run through Quest