‘The biggest challenge in the area of cash management is, and will remain, obtaining good information about the expected cash flows to make the best possible liquidity forecasts in the short and long term,’ reveals Marcel. ‘The current trend is that banks can do their payments and bookings 24/7 – even at weekends. Thanks to instant payments, bank payments from private individuals are debited and credited within a few seconds. That will also happen in the business markets. For Achmea this acceleration means that the claims of insured parties can be paid even quicker. From a cash management and treasury perspective, you have to make sure that enough money is available to make these payments, but at the same time you do not want to be holding too much cash, as it actually costs money to have too much of a credit balance. The biggest challenge is establishing an optimal forecast of the incoming and outgoing cash flows, and of the balances of our accounts, so that we can do our payments at any time.’
The market has become increasingly volatile, with new developments quickly following one another. How do you achieve accurate cash flow forecasting in the medium term?
‘We receive forecasts from all the business units every month – for instance of Zilveren Kruis health insurances, FBTO health insurances, and Achmea’s Non-life, Pension and Life insurances. For every type of flow (premium, value transfers, benefits, proxies, costs etc.) monthly forecasts are made 18 months in advance. All flows are linked to specific bank accounts that also provide insight into the expected bank stocks for the next 18 months. The forecasts are entered into our cash management system, Cash & Liquidity Management (CLM) from Serrala, the first two months on a daily basis and the remaining 16 months on a monthly basis. In addition to the forecasts of the business, our treasury management system, SAP TRM, also includes the expected cash flows from the treasury activities in CLM. Together with the actual banking positions, our Treasury can always look ahead for 18 months to the expected banking positions and look back at the actual stocks. During a month, the forecasts are regularly adjusted for the coming days of the month in cooperation with the business. The business itself has permission to look in CLM at both the actual cash flows and the expected cash flows. After each month, a post calculation is made by the cash manager, in which the forecasts are compared with the actual cash flows. In case of large differences, the business must issue a statement for this and, if necessary, adjust the upcoming forecasts. It’s therefore about continuous alignment with the business.’
Treasury Management System
Achmea started implementing a new TMS some six years ago. What changes did this herald for Achmea’s cash-management activities and cash position?
‘We use SAP TRM for all treasury activities and Serrala CLM for cash management. Since the implementation of both systems, a lot of work has become simpler and more efficient and we can more easily extract information from both systems.’
To what extent do legislation and regulations influence cash management at Achmea?
‘We take the regulations of the banks into account, such as Basel III and the Payment Services Directive 2 (PSD2). Under Basel III, for example, the debit and credit positions in a cash pool cannot be settled with each other. As a result, the debit positions are seen as lending and banks therefore have to keep more equity on their balance sheets. The extra costs for this will be charged by the banks to customers who make use of this pooling technique. This affects all major legal entities of Achmea. In this context, cash management will regularly top off high credit balances and replenish high debit balances of accounts in a cash pool. The introduction of PSD2 brings changes in the area of access to the payment account. To this end, the banks are following an open banking strategy whereby they develop new services in combination with the opening obligation of customer information. For this purpose, an API (Application Programming Interface) can be used, which makes it possible for us to retrieve information from the banking systems. Instead of the SWIFT MT940/MT942 electronic account statements, we are now investigating whether we can harvest the necessary information differently, using APIs.’
And what exactly are the advantages of APIs?
‘They allow us to obtain information from our banks quicker and more accurately, which in turn enables us to determine a more up-to-date cash position for cash management. We also investigated whether an API can retrieve all past statement transactions distributed over a day and replace the complete daily statement the next morning. This way, the financial administrations can handle all mutations and spread a day’s workload more efficiently.’
Use information technology to optimize customer service
What is your own prognosis for the future of insurers?
‘Thanks to new technology it’s possible to obtain far more information much quicker than before. IT systems within the financial sector are more open to sharing information and communicating externally. Processes can thus be arranged more efficiently. Insurers can use this information to better serve customers and to develop new products and services.’