Splitting Linked Transactions

One of the requirements of a Broker Ledger in a Pay As Paid environment is to only release transactions for payment when the corresponding cash has been received from the relevant third party. For example, to only pay an underwriter an amount due for a new policy, once the premium has been paid by the client.

To achieve this, Financials uses an intra-transaction reference to identify the set of ledger transactions that make up a particular business transaction (claim or premium). This reference is maintained on each ledger transaction in the group in the Link Reference 2 field.

The Pay As Paid principle must be applied if a transaction within a linked set of transactions is split. When one of the linked transactions is split, the remaining transactions in the set are automatically split in the same proportions. For example, if a client only pays half of an outstanding premium, the premium posting is split manually to reflect this. When this split is posted, the system automatically splits the corresponding underwriter and commission transactions in same proportion, that is, in half.

In some cases not all of the linked transactions are split, or the linked transactions are grouped prior to being split.

If, subsequently, one of the split transactions is split further, the system splits the related transactions in the same way. To achieve this it assigns a Split Link Reference to each set of split transactions to enable them to be grouped together for further processing, if required.

This processing is best illustrated using an example. Different colors are used to identify the related transactions and links.

Stage 1: A new premium is sold, resulting in the following new journal posting. All the transactions in the journal have the same transaction reference and intra-transaction reference.

Tx Ref Account Amount Intra-Tx Ref (Link Ref 2) Split Link Ref
ABC Client 100 DR 1  
ABC Underwriter  90 CR 1  
ABC Commission  10 CR 1  

Stage 2: The client pays only GBP 50 of the outstanding premium and this is posted to the client account using Ledger Entry. The same intra-transaction link reference is assigned to the cash posting.

Tx Ref Account Amount Intra-Tx Ref (Link Ref 2) Split Link Ref
ABC Client 50 CR 1  

Stage 3: The original client premium posting is split in Account Allocations (ACA) to record the part payment, resulting in the following new set of transactions on the client account. A split link reference is assigned to each split transaction.

Tx Ref Account Amount Intra-Tx Ref (Link Ref 2) Split Link Ref
ABC Client 50 DR 1 1
ABC Client 50 DR 1 2

Stage 4: The system automatically splits the other postings with the same Transaction Reference/Intra-Transaction Reference. The appropriate split link reference is assigned to each split transaction to group each set of related split transactions.

Tx Ref Account Amount Intra-Tx Ref (Link Ref 2) Split Link Ref
ABC Underwriter 45 CR 1 1
ABC Underwriter 45 CR 1 2
ABC Commission  5 CR 1 1
ABC Commission  5 CR 1 2

Stage 5: The client cash receipt is matched to the outstanding premium.

Tx Ref Account Amount Intra-Tx Ref (Link Ref 2) Split Link Ref Allocation Marker
ABC Client 50 DR 1 1 Allocated
ABC Client 50 DR 1 2 Not Allocated
ABC Client 50 CR 1   Allocated

Splitting Linked Transaction Exceptions

In general, when a transaction is split the system automatically splits any transactions that contain the same intra-transaction link in the same proportions. However, there are some exceptions to this rule, as follows:

  • Any linked transactions that have been fully matched and marked as True Rated are not split.
  • Any revaluation postings that contain the same intra-transaction link reference are accumulated by Allocation Marker and only the total by Allocation Marker is split. The Allocation Marker on the revaluation postings are taken from the revalued transactions.

The Agency/Broker Account Type on the original split transaction, and on each of the linked transactions, also determines whether or not the linked transactions are split.

Agency/Broker Account Type on Split Transaction Split processing
Client Split all linked transactions, regardless of the Agency/Broker Account Type.
Carrier Split all linked transactions, regardless of the Agency/Broker Account Type.
Other If linked transactions exist for BOTH the Client and Carrier account types, do not split any of these linked transactions.

If linked transactions exist for the Client but not for the Carrier, split any linked Client transactions.

If linked transactions exist for the Carrier but not for the Client, split any linked Carrier transactions.

If linked transactions do not exist for either the Client or Carrier, split these linked transactions (for Other and Nominal account types).

Nominal Do no split any linked transactions.