August 19, 1998


INFORMATIONAL MEMORANDUM:  R&D-98-038

TO:      All Reinsured Companies
         All Risk Management Field Offices
         
FROM:    Tim B. Witt
         Deputy Administrator

SUBJECT: Conversion from Manual Escrow Processing

In accordance with Risk Managment Agency's (RMA's) simplification initiatives, a new
electronic process for funding escrow will be implemented on October 13, 1998.  This is
effective for 1998 and subsequent reinsurance year escrow funding.  All prior reinsurance year
escrow requests will continue to be submitted via hard copy.

Detailed information regarding the electronic process was provided to your representatives at the
June 4, 1998, Data Processing Manager's meeting and in a subsequent teleconference held with
company accounting and data processing personnel.

The new process will decrease the number of days currently needed to process escrow requests,
streamline escrow funding for the companies and RMA, and provide an automated means of
reconciliation between escrow funded amounts and losses processed through the data acceptance
and reinsurance accounting systems.  The attachment outlines the process for transitioning to this
new system, and needs to be made available to your accounting and data processing personnel.  If
you have any questions or comments, please contact either Calvin Brewer at (816) 926-7030 or
Jeff Bazille at (816) 926-5396.

DISPOSAL:

This Informational Memorandum is for the purpose of transmitting/updating information and the
disposal date is June 30, 1999, for administrative tracking purposes.  The attachment will remain
in effect until superseded by an update to Manual 13.

Attachment


TRANSITIONING TO AN ELECTRONIC PROCESS FOR ESCROW FUNDING

1.     Risk Management Agency (RMA) will process 1998 reinsurance year hard copy escrow
       requests received through October 8, 1998.  Hard copy escrow requests received after that
       time will be returned to the company, and escrow funding for those losses will be through the
       new electronic process.  

2.     The total of the hard copy escrow requests that were funded by October 9, 1998, will be the
       "Escrow Funded" amount on the October 1998 reinsurance year accounting report.  

3.     RMA will compare the electronic loss data transmitted through October 10 (cutoff) based on
       minimal edits with the hard copy escrow requests included on the October accounting report.
       Minimal edits include checking to determine if it is a valid policy and checking that the loss
       amounts for the Record types 20 and 21 equal on a claim basis.  If the electronic loss data
       exceeds the hard copy escrow requests, RMA will fund the difference to the escrow account.
       If the electronic loss data is less than the hard copy escrow requests, then RMA will not fund
       electronic loss data until this difference is made up.  Once the difference is made up, escrow
       funding will resume on a daily basis.  

4.     The escrow database will produce a list of each company's claims and amounts which passed
       edits through October 10, 1998, which will be available on the Reporting Organization
       server. 

5.     On Tuesday, October 13, daily processing of escrow from the loss data transmitted
        (20/21 records) by companies will begin.  Any losses electronically processed through the
       Data Acceptance System (DAS) after October 10 will be included in escrow funding
       processed October 13, 1998, and will not be reflected as "Escrow Funded" on the October
       accounting report.  

6.     Losses initially accepted for escrow funding by RMA based on minimal edits but rejected in
       DAS for other edits will be deducted if not accepted in DAS by accounting cutoff.  This is
       consistent with the way adjustments are currently made.

7.     The amounts funded to the escrow account will continue to be paid according to the Escrow
       Agreement.