Exchange rate and mid-term change policy transaction

In a multicurrency system, a policy transaction which changes the policy in mid-term may or may not result in a change in premium. Policy transactions which change the policy in mid-term are policy changes, cancellations, and reinstatements.

In the default configuration, if a mid-term change policy transaction does not change the cost of a coverage in the as-rated currency, PolicyCenter does not generate a transaction. The policy premium is not affected. If, however, the cost of a coverage does change, then PolicyCenter gets the current exchange rate and creates a transaction representing the change in cost. PolicyCenter converts the as-rated currency to the settlement currency and stores both amounts on the transaction.

The following example shows the transactions that PolicyCenter generates for a coverage in a mid-term policy change. For simplicity, the example assumes that the coverage premium is not prorated from the date of the change.

Example: change to coverable does not affect cost

A customer has a multicurrency commercial property policy. Location coverables can have a coverage currency in euros or British pounds (GBP). The settlement currency is euros. A month into the policy period, the customer calls to report that the name of one of their British locations has changed from The Meadows to The Villages. This type of change does not affect the cost of the coverable. When the policy was bound, the exchange rate from British pounds to euros was 1.2. Now the exchange rate is 1.1. The customer service representative starts a policy change transaction. In the base configuration, PolicyCenter rates all the coverages. Because this policy change does not affect the cost of the coverable in the as-rated currency, PolicyCenter does not generate a transaction. The following table shows the transaction that PolicyCenter generates for this policy change.

Policy Transaction	As-rated Amount (GBP)	Exchange rate	Billing amount (euro)	Transaction billing amount (euro)
Submission	£1000	1.2	€1200	€1200
Policy change	£1000	1.1	€1100	No transaction

Example: change to coverable affects cost

Two months into the policy period, the customer in the previous example calls to increase the coverage limit on one of the buildings at The Villages. This change affects the cost of the coverable. When the policy was bound, the exchange rate from British pounds (GBP) to euros was 1.2. Now the exchange rate is 1.3. For simplicity, the example assumes that the coverage premium is not prorated from the date of the change. PolicyCenter re-rates the cost of the coverable. PolicyCenter generates a transaction using the new cost and new exchange rate. The following table shows the transaction that PolicyCenter generates for this policy change.

Policy Transaction	As-rated Amount (GBP)	Exchange rate	Billing amount (euro)	Transaction billing amount (euro)
Submission	£1000	1.2	€1200	€1200
Policy change	£1200	1.3	€1560	€360