DTCC Insurance Services

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DTCC Insurance Services Industry
Update Prepared For BISA Annual Technology
Operations Conference
November 13, 2006
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Agenda Topics

• DTCC Overview / Update
• NAVA STP Standards Initiative
• SIFMA/NAVA Retirement Income Standards Initiative

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DTCC Depository Trust Clearing Corporation
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DTCC Overview

• Principal post-trade infrastructure for the US
  Financial System
• Formed in 1973 by Broker Dealer community and
  exchanges to eliminate paper and automate
  securities processing
• Merged entity of NSCC and DTC - DTCC is holding
  company
• SEC regulated industry utility, run as
  not-for-profit
• 100 owned by our participants
• Connected to a network of almost 3,000
  participants and providers
• DTCC is a major hub for the industrys mutual
  fund, annuity and life insurance transactions

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Operational BenefitsSimplified, Automated
Processing

• DTCC Model
• Central link
• Efficient

• Proprietary Model
• Inefficient
• Time Consuming

DTCC
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DTCC Statistics (2005)

• Value of total DTCC transactions processed
• 1.4 quadrillion or 5.5 trillion per day
• Net Annual Fee Reductions
• 161 million
• Rebates paid to participants
• 528 million
• NSCC Average daily transaction value
• 500 billion

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DTCC Insurance Services

• Division of NSCC established in 1997
• Provides automated, centralized and standardized
  insurance processing framework
• Links Insurance Carriers with Broker/Dealers,
  Banks, and other distributors
• Supports annuities and life insurance products
• Recognized as a compliance solutions provider
• Aligned with key industry associations such as
  NAVA, SIA and ACORD

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Insurance Services Value Proposition

• Automate, standardize and streamline processing
  and information exchange between distributor and
  carrier participants
• Reduce operating costs
• Aggregate money settlement
• Automate compliance oversight and tracking
• Provide secure communications
• Grow revenue

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Current Insurance Functionality

• Asset Pricing (AAP)
• Commissions (COM)
• Positions Valuations (POV)
• Financial Activity Reporting (FAR)
• Applications/Premium (APP)
• Subsequent Premium (SUB)
• Licensing Appointments (LNA)
• ACATS/IFT
• Money Settlement (MSD / MSS)

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New Insurance Development

• Replacements
• Automate transfer of annuity and life insurance
  assets between carriers
• Fund Transfers
• Automate the fund transfer, or reallocation of
  underlying funds, within variable insurance
  products
• Attachment messaging
• Automate the exchange of images, e-forms, and
  e-signatures needed to support pre and post-issue
  processing

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NAVANational Association of Variable Annuities
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NAVA STP Standards Initiative
March 2006, NAVA formed Executive Council and
launched Industry Standards Initiative around new
business. Mission To create a set of standards
establishing a common process for doing
electronic new business submission for annuities
that includes e-signature and standard
interpretations of all state and federal
regulations for which we get regulatory
acceptance.
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NAVA STP Standard Initiative

• Scope
• All distribution channels
• All types of annuities
• Standards will address the most stringent
  requirements
• Demonstrate to regulators that industry has
  undertaken standards to address their concerns
• All electronic process for point-of-sale
  transactions

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NAVA STP Standard Initiative

• Defines trusted operational processes
• Identifies documents to be used
• Creates compliance framework
• Defines how E-Signatures will be provided
  applied
• Defines how documents will be managed through the
  process
• Defines how legal records will be managed through
  their lifecycle

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Concurrent Task Forces

• Suitability
• Forms Disclosures
• E-Signature E-Forms
• E-Delivery
• Data Messages
• Data Conformity

• E-Docs Records Management
• Process Framework
• Outreach
• Privacy
• Government Relations
• Trading Partners

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Next Steps

• Socialization with other Trade Groups (Oct 06)
• Industry Review Approval of Standards (Dec 06)
• Formal Rollout to Regulators (Mar 07)
• Define Phased Implementation Strategies (Jan/Jun
  07)
• Define Certification Audit Process (Jun/Dec
  07)

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SIFMA / NAVA Steering CommitteeSIFMA
Securities Industry and Financial Markets
Association (formerly known as SIA)NAVANationa
l Association of Variable Annuities
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SIFMA / NAVA Retirement Income Standardization
Initiative

• Drivers
• Retirement income market is now evolving at a
  record pace
• To support boomers, insurance carriers are
  creating new and innovative product designs that
  need to integrate into a mainstream retail
  distribution model
• Ongoing requests from distributors to integrate
  traditional annuitization and immediate annuity
  products into existing interfaces for
  consolidated statements

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SIFMA / NAVA Retirement Income Standardization
Initiative

• Obstacles
• Carriers have been reluctant as these products
  dont have liquid account values
• Immediate annuities have not been sufficiently
  represented in Annuity Order Entry platforms
• File formats and standard models have been
  enhanced for payout features, but there is no
  widely adopted standard usage model for how this
  information should be used

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SIFMA / NAVA Retirement Income Standardization
Initiative

• Tentative Scope
• Order entry (including pre-sales integration)
• Commissions
• Client statements
• Customer service
• Income payments
• Money settlement

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SIFMA / NAVA Retirement Income Standardization
Initiative

• Next Steps
• Formation of joint task force comprised of
  distributors, carriers, and vendors to assess the
  opportunity, define the scope, and recommend an
  approach on how to move forward with retirement
  income standards.

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For More Information

• DTCC Insurance Services
• Email Lana Macumber at lmacumber_at_dtcc.com
• NAVA STP Standards Initiative
• Email Deb Tucker at dtucker_at_navanet.org
• SIFMA / NAVA Retirement Income Standardization
• E-mail Chris Arden of Hartford Life at
  Christiane.Arden_at_hartfordlife.com