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. OIPA classifies 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.
- Fixed Funds (01): Interest is calculated and added to the current amount invested in the fund to determine its value. This type of fund requires an attached interest rate business rule.
- Variable Funds (02): Fund value is established by taking the current total number of units and multiplying it by the current unit price.
- Fixed Benefit Funds (03): No interest is accrued on these funds, as they are used for fixed annuity benefit split activities and are excluded from the value of the policy. These funds are treated similarly to Non-Invest funds. An attached interest rate business rule is required.
- Unitized Funds (04): These are fixed funds that are valued using prices stored on the AsNetAssetValue table. These funds are allocated to policies using a single parent fund but individual deposits and withdrawals are made using sub-funds that are available based on activity effective date. When back dating activities with this fund type, the system will not calculate gain/loss amounts for the funds. If type 02 funds exist in the same activity valuation, then their gain or loss will be calculated and written only for the type 02 funds. Accounting and valuation records are associated to the parent funds while the underlying amounts are calculated using the invested lateral fund prices.
- Non-Invest Funds (05): These funds are treated as fixed funds in OIPA. They are not included when determining a policy's value.
- Index Universal Life (09): These funds are treated like fixed funds but the interest is calculated outside of the valuation (by the InterestRateCalculation and InterestRateCode rules) usually in transaction math or a function. The funds are given a zero percent interest rate in the above mentioned rules then the interest is calculated during the crediting period within a transaction at the end of the crediting period and deposited back into the funds to get the increase in value.
- Unit Linked Funds (10): Fund value is established by taking the current total number of units and multiplying it by the current unit price.
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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