Calculate Profit Commission

Calculate Profit Commission #

If you want the SICS to calculate the Profit Commission, the conditions must be defined. Refer to Profit Commission condition. Conditions may be equal for all Retrocessionaire’s or one or more of the Retrocessionaire’s may have special Profit Commission condition entered. Profit Commission is calculated on cumulative figures per Insured Period. The Entry Codes included in the Profit Commission calculation is according to the definition of the selected Entry Code Group in the field Profit/Loss Basis. Which Entry Codes is part of the Entry Code Group within the Entry Code Group Category Profit/Loss is decided by your System Administrator. Which details are included in the calculation of the Profit Commission may be inspected from the ORP Business Ledger, menu option View Profit Commission Details.

If defined on the condition, Deficit from previous Insured Period(s) is (are) carried forward. Deficit carried forward is calculated for the number of years entered in the field Insured Periods or To Extinction.

Management Expenses, if defined, is calculated on cumulative Premium. If the Management Expenses are flagged To Be Booked, the Management Expenses are booked to the ORP Business Ledger with an informational Entry Code. The Premium Basis is depending on the definition of the selected Entry Code Group. Which Entry Codes is part of the Entry Code Group within the Entry Code Group Category Premium Basis for Management Expenses is decided by your System Administrator.

The Profit Commission calculated as a percent on overall level (for all currencies/Accounting Classifications) and is dependent of the result. A Profit Commission is only booked to the Retrocessionaire’s Business Ledger if the overall result is a Profit.

If bookings are made in different currencies, bookings for all currencies are converted into Main or Base currency, depending on the value selected in the field Profit/Loss Currency. If no Profit/Loss Currency is selected, Profit Commission will be booked in Main Currency. Refer to Administration condition/Currencies tab. The overall Profit Commission amount is booked in this currency only.

If the bookings included in the Profit/Loss calculation are made with different Accounting Classifications, the overall Profit Commission amount calculated, is split proportionally of the Premium and booked with the different Accounting Classifications.

Profit Commission, if defined as original, is calculated whenever you run the Retrocession Calculation order. Profit Commission, if defined as a percent, is calculated according to the values entered in the Calculation Frequency on the condition, but can not be calculated more frequent than the Accounts. Available calculation methods are;

None

No calculation of Profit Commission is performed

Original

All bookings with Entry Codes within the Entry Code Sub Category Profit Commission are multiplied with the Share of the Retrocessionaire’s. The result of the calculation is booked on the Business Ledger As Booking with the original Entry Code(s). The booking of the Original Profit Commission is independent of the result.

Example

Retrocessionaire’s Share = 10%

*) Entry Codes defined in Entry Code Sub Category Profit Commission

Percent

All bookings for the Insured Period (according to the Entry Code Group selected) are summarised. If defined on the condition, Management Expenses calculated as a percent of the Premium is deducted. If the Management Expenses are defined to be booked on the ORP business ledger (refer to flag To Be Booked on condition), the Entry Code for Management Expenses must be included in the Profit/Loss Basis. In addition, also Deficit carried forward from previous Insured Periods may be deducted before calculating the overall result. If the result is positive, the Profit is multiplied with the Profit Commission percentage. The result of the calculation is booked on the Business Ledger As Booking with the Entry Code defined in the system parameter Entry Code Usage, Calculation ‘Profit Commission’ by your System Administrator.

Example 1:

Bookings with two Accounting Classifications; Fire and BI

Entry Code defined for Calculation Profit Commission = ‘23’
Profit Commission = 25%
Management Expenses = 5%
Retrocessionaire’s Share = 10%

*) Entry Codes in Entry Code Group within Entry Codes Group Category Profit / Loss.

**) Profit Commission is calculated on overall level, i.e. of total figures for all Accounting Classifications. Calculated as follows;

AC = ‘Fire’ (800 *25%) * 1.000/4.000 = 50

AC = ‘BI’ (800 *25%) * -3.000/-4.000 = 150

***) Whether the Management Expenses are booked or just for information in the example is dependent on the flag To Be Booked being selected or not.

Note! Bookings on Retrocessionaire’s Business Ledger have reversed sign compared to the bookings on the Assumed Business. A profit to the Retrocessionaire’s is therefore shown as a negative amount.

Example 2:

Entry Code defined for Calculation Profit Commission = ‘23’
Profit Commission = 25%
Management Expenses = 5%
Retrocessionaire’s Share = 10%
Deficit Carried Forward = 2 Insured Periods (IP)

Calculation of Profit Commission when Deficit Carried Forward is defined

*) Entry Codes in Entry Code Group within Entry Codes Group Category Profit / Loss.

**) Whether the Management Expenses are booked or just for information in the example is dependent on the flag To Be Booked being selected or not.

Calculate Profit Commission when Deficit Carried Forward based on Quota Share percentage #

It is possible to calculate Profit Commission with Deficit Carried Forward adjusted by the Quota Share percentage defined for the current Insured Period compared to the Quota Share percentage defined for the previous Insured Period (from which the deficit is to be carried forward). This is possible by selecting the field ‘Calculate based on Quota Share Percentage’ on the OCC, Business tab, Accounting Info. When this option is selected, the Deficit Carried Forward amount from previous Insured Period is multiplied with the Quota Share Percent registered for this Insured Period divided by the Quota Share Percent for the current Insured Period (Refer to Premium/Limit Conditions, Limit Quota Share)

Example when Quota Share Percent changed from one Insured Period to the next; Premium/Claim Accounting Calculate based on Quota Share Percentage = selected Quota Share Percent 2017 =25%, 2018 = 15% and 2019 = 30% Profit Commission = 20% Management Expenses = 105% Profit/Loss basis = EC 10 Premium, EC 30 Claim Deficit Carried Forward = 2 Years

Calculation of Profit Commission when Deficit Carried Forward is defined

*) Entry Codes in Entry Code Group within Entry Codes Group Category Profit / Loss.
**) Whether the Management Expenses are booked or just for information in the example is dependent on the flag To Be Booked being selected or not.

Deficit Carried Forward adjusted according to Quota Share Percent;
From 2017 to 2018: 3.000 x 15/25 = 1.800
From 2017 and 2018 to 2019 : (3.000 x 30/25) + (2.000 x 30/15) = 7.600

Note! Calculate Deficit Carried Forward based on Quota Share percentage is available only when Proportional Treaty OCC is with Type of Participation Quota Share and the Premium/Claim Accounting Basis is Clean Cut.

Calculate Profit Commission on a Bouquet Calculation Group #

A Retrocessionaire may have a share in different Outward Cedent’s Contracts (OCCs). Some of the OCCs may produce a profit for the Retrocessionaire, others may produce a loss. It is then possible to calculate Profit Commission on an overall basis, across several OCCs. Profit Commission will then only be booked if the overall Profit Commission for the Retrocessionaire across all OCCs is positive (=based on profit).

Calculate Profit Commission on a Bouquet Calculation Group:

1. On each OCC, define Profit Commission conditions as described above
2. Create a Bouquet Calculation Group and include all OCCs for which you want to calculate Profit Commission on an overall basis
3. When Profit Commission is due to be calculated, e.g. at the end of an Accounting Year, you should first run ordinary Retrocession Calculation orders and Retrocession Account orders to calculate and book all other figures to the Retrocessionaires’ ledgers. These orders should be run without Profit Commission selected in the Orders.
4. When all figures being basis for the Profit Commission calculation are booked on the Retrocessionaires' ledgers, create a Retrocession Calculation Order Group. On the order, select Acc. Profit Comm under Items Included. All other fields under Items Included are cleared and disabled.
5. From the Menu select Create Orders to create the individual orders for each OCC.
6. Run the Order. Bouquet calculation of Profit Commission is performed as per description below. No other calculations or bookings than Profit Commission are done.

The following should be noted regarding the Bouquet calculation of Profit Commission:

• The system will calculate both positive Profit Commission (=when profit) and negative Profit Commission (=when loss).
• For each RP (with same Receiver), the Profit Commission on all OCCs included will be added together. If overall Profit Commission for these OCCs is positive (base on profit), both positive and negative Profit Commission will be booked for this RP. If overall Profit Commission is negative (based on loss), no Profit Commission will be booked.
• The system will only calculate Profit Commission on an overall basis if the accounts are to be sent to the same ‘Receiver’. By the term ‘Receiver’ is here meant the Partner with the Payment task on each Retrocessionaire’s Participation. If a Retrocessionaire has a share in different OCCs but these are placed through different brokers, and brokers has Payment task, an overall Profit Commission for this Retrocessionaire will be calculated for the OCCs with the same broker.
• Profit Commission is booked in Main or Base currency, dependent on the settings on the Administration conditions. An overall Profit Commission will only be calculated for OCCs with the same Main or Base currency.
• The OCCs included in the Bouquet Calculation Group can have different Profit Commission conditions. The system will always look at the overall Profit Commission (not the overall Profit) to decide if Profit Commission should be booked on a Retrocessionaire. Different Profit Commission conditions will therefore not represent a problem.
• Deficit Carried Forward should NOT be defined for the OCC/RPs when you use this functionality. If defined, the result may be wrong as loss may be brought forward several times.

Calculation example:

Profit Commission is 20% on all OCCs.

*)Overall Profit Commission is positive. Calculation: 3.600 -1.000 = 2.600

**) Overall Profit Commission is negative: -1.800. For RP1 the receiver is different on OCC4 than on OCC1 and OCC2.

***) Overall Profit Commission is negative. Calculation: 3.600 - 7.000 - 3.000 = -6.400. No Profit Commission is therefore booked on the RPs

****) Overall Profit commission is positive. Calculation: 2.400 - 2.000 + 4.000 - 1.200 = 3.200

Profit Commission - Bouquet Calculation Group when order marked as ‘Batch Template’ #

When the Retrocession Calculation and the Retrocession Account Group Orders are marked as ‘Batch Template’ these orders can be used as Templates - which will simplify the process of running the various Accounts;

Create the following Retrocession Group Orders and select the field ‘Batch Template’;
Calculation Group Order with field ‘Profit Commission’ = deselected
Calculation Group Order with field ‘Acc. Profit Comm’ = selected
Account Group Order

• Select field ‘Close Worksheet’ for all Group Orders
• Select ‘Request Scheduled Job Template’ from Group Orders
• From ‘Job Template’ select Priority and Desired Scheduler etc. Note that the order with the highest Priority will be run first.
• From Scheduler/Job Templates tab, mark the orders and select ‘Copy to Actual Job’. Group Orders and Single Orders are created from Templates and shown in tab ‘Pending Actual Jobs’ (Scheduler). Group Orders are also shown in the Accounting Order Monitor (SICS Workstation Desktop/Periodic Functions)
• From Scheduler select ‘Scheduling’ and ‘Process Scheduled Jobs’. Orders are run in sequence according to the Priority set on Job Template

To run the orders for the next Account, do the following; #

• From Accounting Order Monitor, select ‘Edit Group Order Template’ to select the next Booking Year/Period and Accounting Year/Period.
• From Accounting Order Monitor, select ‘Copy to Actual Jobs’ or select ‘Copy to Actual Job’ from Scheduler' to create Group Orders and Single Orders from the Templates.
• From Scheduler select ‘Scheduling’ and ‘Process Scheduled Jobs’