CIA (e)Bulletin/(e)Bulletin de l'ICA

Canadian Institute of Actuaries/Institut canadien des actuaires

December 2010
Your Institute

By Micheline Dionne, FCIA

We took advantage of the November meeting to give the Board of Directors an operating mode and structure that meet the increased requirements of risk management and transparency and enable us to further recognize the contribution of our associate members. We also proceeded with status updates on a number of hot-button issues.


We adopted several recommendations made by the Task Force on Governance:
  • Greater care will be taken in training our future Board members so they can hit the ground running;
  • We intend to submit for your approval amendments to our bylaws that would enable us to relieve a Board member of his or her duties under exceptional circumstances;
  • Daniel Pellerin was asked to recruit the members of our new Risk Management Committee charged with identifying the risks facing the CIA and to specify its exact mandate by June 2011;
  • John Dark will coordinate the efforts of a task force responsible for establishing a Code of Conduct for the Board. Such a code has been in place for years at the Society of Actuaries (SOA) and the Casualty Actuarial Society (CAS); and
  • We reviewed the mandate of the committees and task forces reporting to the Board to ensure that they respond to our needs, and we identified those that are no longer relevant or whose mandate has already run its course. We have asked each of the councils to do likewise.

Measures aimed at associates

After several attempts at redefining the benefits, obligations and conditions that go with the status of CIA associate, the task force chaired by Jason Vary finally arrived at a formula that made it possible to go ahead with the project. The eligibility conditions will be harmonized with those in place for becoming an ASA, ACAS and CERA (Chartered Enterprise Risk Analyst), and the fees will be reviewed to encourage early membership of young associates. We also intend to formalize the status of future associates through the title of ACIA. You will be consulted on this initiative, likely in June. Once CIA exam credits can be earned without going through another association, it will be imperative to recognize students' efforts at the half-way point. The goal of this reform is to forge a closer relationship with our future members, by not only recognizing their contribution but also offering them services that meet their expectations.

Ongoing files

  • The CIA will apply to become a CERA award signatory. To date the SOA and the United Kingdom have already been accepted, and it is expected that the CAS will be as well.
  • The CIA held a retreat on pension plan reform in conjunction with the SOA and the C.D. Howe Institute on December 8. Having attended this event, I can tell you that there is a very strong desire for action in this area. We will need to take a close look at the results of the federal-provincial ministerial meeting on pension plan reform, set to take place on December 20.
  • We had an update on CIA research projects. I will report here only on the two concerning the pension plan mortality tables. The first project, which deals with the mortality experience for the Canada Pension Plan (CPP) and the Régime de rentes du Québec (RRQ), is being reviewed by the Pension Experience Subcommittee of the Research Committee and should be available early in 2011. As for the second, which deals with employer pension plan experience, reams of data have been collected, and it will take from six to nine months to analyse them. Both projects are behind in disseminating their results, but they are being closely monitored by the Member Services Council (MSC) and the Board, given the impact these new tables will have on the valuation of future pension plan commitments.

Recruitment of new CIA Executive Director

To close, I would like to share with you some excellent news. The Board has approved the recommendation made by the group charged with recruiting the CIA’s new Executive Director, who will take up his duties on January 4. A lawyer by training, Michel C. Simard has previously worked for the Canadian Nurses Association and the HealthPartners charitable organization. He also had a stint as a Citizenship and Immigration Canada judge and worked in the ethics field at the Université du Québec en Outaouais. Public policy debates have always been a passion for him, and we are very eager to take advantage of his vast experience in the field of public relations.

On behalf of the entire Board, I would like to extend my warmest thanks to the Secretariat’s Lynn Blackburn for serving as Interim Executive Director and keeping the ship afloat for three months. Our thanks also go out to the entire Secretariat team for supporting Lynn in her role.

If you have any questions or comments that you would like to share, please contact me at

Micheline Dionne, FCIA, is President of the Canadian Institute of Actuaries.

By Ty Faulds, FCIA

For anyone working in a financial reporting role, you are undoubtedly paying a lot of attention to any developments concerning International Financial Reporting Standards (IFRS). As we close out 2010 and move forward into 2011, I thought this would be a good opportunity to remind you about the various activities related to IFRS that have kept the Practice Council occupied.

Although IFRS 4 Phase 2 has been generating a lot of discussion lately, I wanted to remind you that Phase 1 comes into effect on January 1, 2011. Last year, the Practice Council conducted a review of the various actuarial notes produced by the International Actuarial Association (IAA), and adopted several of these documents as educational notes and research papers. I would encourage you to review the April 2009 (e)bulletin article by Jacques Tremblay (my predecessor as Practice Council chair), which provides a good summary of our work on this initiative. In addition, I would also refer you to the report issued by the IFRS Contract Classification Working Group (an industry-sponsored group), which provides a useful discussion on how Canadian insurers have classified common Canadian insurance products under IFRS. To further supplement our guidance on this topic, the Practice Council released two additional research papers this fall, addressing disclosure requirements for insurance contracts. Separate papers were produced for life and for P&C business.

In December 2005, the Auditing and Assurance Standards Board issued Guideline AuG-43, Audit of Policy Liabilities of Insurance Companies. I’m sure that many of you have since become quite familiar with the requirements of this guideline. Because IFRS will be replacing Canadian accounting standards, a replacement process for AuG-43 needed to be developed. The CIA has been working with the CICA on the development of the Non-authoritative CICA–CIA Guide to Audits of Financial Statements that Contain Amounts that have been Determined Using Actuarial Calculations. This guide is currently moving through the approval processes of both the CIA and CICA, and will be released as soon as possible once approved.

One of the more obvious impacts of Phase 1 is the treatment of reinsurance on financial statements. Under IFRS, reinsured business must be reported on a gross basis, with the reinsurance recoverable shown as a separate item. Given that CALM will continue to be in effect at least until Phase 2 is implemented, additional guidance was needed here, as the calculation of a gross CALM liability may not be straightforward. To that end, the Practice Council has recently issued an Educational Note on the Valuation of Gross Policy Liabilities and Reinsurance Recoverables.

Looking ahead to Phase 2, much of our work will depend on the final version of the International Financial Reporting Standards governing insurance contracts. The IASB issued an exposure draft in July, and the CIA completed our response in November. The final version of the standards is not expected until at least June of 2011. Although several aspects of the exposure draft were discussed, there were four primary areas of interest for us:

  • The discount rate on contracts whose cash flows do not depend on the performance of specific assets;
  • The limitation to three specific methods for determining the risk adjustment;
  • The residual margin; and
  • Unbundling.
Depending on the direction of the final standard, the Practice Council recognizes that additional guidance will likely need to be produced in anticipation of the formal implementation date, which is targeted to be in 2013.

A key determination will be to decide what needs to be covered through formal Standards of Practice, and what will fall to other guidance, such as educational notes and research papers. The CIA plans to work very closely with the Actuarial Standards Board (ASB) to ensure this allocation is done correctly. As an ex officio member of the ASB, I will be able to keep a close watch on developments at that end. I should mention that the ASB has established a working group, chaired by Mike Hale, to make a first assessment of what additional guidance will be needed. If you participated in the CIA webcast on December 8, you will be up to speed on their latest thinking. Obviously, anything outside of Standards of Practice will fall to the Practice Council to develop. We also intend to closely monitor activity at the International Actuarial Association level, to ensure we are apprised of the latest discussions in that forum.

It appears that 2011 will continue to present the Practice Council with several projects of interest. I would like to thank everyone who contributed to our efforts in 2010, and wish everyone a smooth and relatively uneventful year end.

Ty Faulds, FCIA, is Chair of the Practice Council.

We are frequently urged to do our bit for the environment, whether that is by turning to public transport rather than the car, switching off unnecessary lights or just using less water. But why should we?

In a 2009 study, more than 97 percent of climate scientists who took part concluded that human activity was a significant contributing factor in changing global temperatures. Its authors added: "It seems that the debate on the authenticity of global warming and the role played by human activity is largely nonexistent among those who understand the nuances and scientific basis of long-term climate processes."

Burning fossil fuels creates pollutants that cause smog, which has been linked to problems like respiratory diseases and cancer. But it also creates greenhouse gases, which experts say leads to shorter, warmer winters. Consequently, invasive species like the Asian longhorn beetle are devastating trees, and the likelihood of forest fires increases. Also, the Great Lakes, which make up 20 percent of the world's fresh water supply, evaporate more quickly, which could lead to shortages.

According to the National Quality Institute, Canada faces numerous effects of that climate change:
  • More extreme weather events, such as droughts in the Prairies and ice storms in eastern Canada;
  • Milder winters, hotter summers and higher smog levels, leading to increased cases of asthma and respiratory problems;
  • Changes in some animals’ reproductive cycles and rates;
  • Melting glaciers, which put people at risk of floods and lack of drinking water; and
  • Declining water levels in the Great Lakes, which will dry out rivers and streams and leave forests vulnerable to fire.
Health Canada warns that the effects of climate change are widespread, and serious. It has identified categories of impacts, including temperature-related mortality, weather-related natural hazards, contamination, diseases spread by mosquitoes and other carriers, and exposure to ultraviolet rays.

It says that the changing climate can lead to problems throughout society, such as:
  • Extra pressure being placed on health care services following weather phenomena like floods;
  • Social networks being affected by power outages caused by extreme weather;
  • Livelihoods being harmed by crop failures and droughts;
  • Unavailability of shelter, as occurred after the Saguenay River flood in Québec in 1996; and
  • Damage to critical infrastructures, including those related to food production, water management, sanitation systems and health.
As an example of the threat posed by severe weather, it cites the 1998 ice storm which led to 28 deaths and economic losses of $5.4 billion. Although Health Canada says there are some limited benefits to global warming, such as longer growing seasons in some regions, and possibly fewer deaths and injuries associated with cold weather, it adds that climate change can affect millions of Canadians, with the most vulnerable groups including children, seniors, low income and homeless people and the disabled.

Messages like that have been heeded by the government of Ontario, among others. It produced an environmental action plan which says: "Climate change is a crisis we caused together, and a responsibility we all share, together. So it’s important we act, not only because we can’t ignore the science, not only because we bear the responsibility, and not only because we have an obligation to our children."

Institute News
Encouraging the development of actuarial science around the world. Promoting the role of actuaries with supranational organisations. The integration within the global profession of future actuarial associations, large and small, the China Actuarial Association likely being the next one. These are just some of the challenges facing the International Actuarial Association (IAA) and its new Secretary General, Jean-Louis Massé.
Following his election by the IAA Council in Vienna last October, next month M. Massé, pictured right—a former President of the Canadian Institute of Actuar ies and the IAA—will succeed Yves Guérard and begin a four-year mandate at the IAA, the international association of 82 actuarial associations, with its 25-plus committees and subcommittees and seven sections open to all actuaries interested in specific top ics.  

He said: "Now I realize how big the shoes of my predecessor were. Fortunately, I’m surrounded by a lot of good people.

"We have a new Executive Committee that meets every month, and its members take an issue close to their hearts and drive it, which makes things move faster than ever. So the IAA Secretariat will have to go through changes to keep up with the accelerated speed of the profession, and it will have to grow more."

M. Massé, FCIA, FSA, FIAI, Hon FFA, a 63-year-old retiree from Montréal, has enjoyed a career which included working for CP Rail, Standard Life and Université du Québec à Montréal, plus volunteering for the SOA, CIA and IAA. As an officer of the IAA, he sees his new role as being "a link between the institutional memory of the Secretariat and the new visions brought by the new president every year, the president-elect and the immediate past president, i.e., the other officers", as the association tackles a wide range of important issues affecting the world’s actuaries.

"In Canada and North America, the growth of non-traditional work will be a challenge, and the Chartered Enterprise Risk Analyst designation is our solution. It has a lot of potential, and can show that actuaries can be useful for non-traditional employers. For many years now, Wall Street has discovered what graduates from actuarial universities can do for them. Can Main Street be next? I am optimistic.

"CERA is not yet so big worldwide, but it is growing in those countries where the profession is well established. In most countries, the actuarial profession is very small, so we are showing them what actuaries can do in traditional areas. We are working to broaden knowledge of the profession worldwide and develop the small associations. It is good for the profession but, more importantly, it enhances the financial security of the general public.

"China wants to join us, and it has thousands of students, bright and young—grey-haired actuaries are few but in demand. Does anyone know how to grow old fast? The same is true in Russia, where the government embodied the role of Appointed Actuary in the general insurance law only to realize that there were not enough actuaries in the country to fill the jobs. India is also growing and mentors are in demand there too. Those are places I personally visited and heard their pleas for help, but they are not the only ones. Many national associations are looking at the IAA for help: thus the push, inter alia, for more international standards of actuarial practice and a wider sharing of actuarial professionalism course material."

M. Massé, a father of one who has been married to Céline for 25 years, said his new position is another interesting challenge in a long career. "Following the footsteps of IAA pioneers, including Paul McCrossan and Yves Guérard, and hundreds of actuaries—active or retired—the world over who participated or do now participate actively in IAA affairs, I volunteer my contribution (which in comparison to many is small, but hey, I do what I can) to doing something good for society on a global scale. If that is what drives you, there are plenty of role models to choose among past leaders and it is a good organization to be involved with."

Jean-Louis Massé, left, the new Secretary General of the International Actuarial Association, and his predecessor, Yves Guérard.


By Lesley Thomson, FCIA

On July 30, 2010, the International Accounting Standards Board (IASB) published its long-awaited exposure draft of the International Financial Reporting Standard (IFRS) on Insurance Contracts. The comment deadline was November 30, 2010, and at the time of writing of this article, 239 comment letters have been submitted. Regulators, actuarial and accounting bodies, insurance companies, consulting firms, industry groups, analysts and individuals from around the world have provided their views to the IASB.

Not surprisingly, the opinions are wide-ranging. The CIA submitted its comments on November 24 (comment letter #21 on the website), and while some of our concerns are echoed in other comment letters, others appear to be uniquely Canadian.

I’ll start by admitting that I haven’t read all 239 comment letters. However, the IASB staff has, and they also undertook an extensive program of outreach activities to complement the formal consultation. Those activities included live and recorded webcasts, Q&A sessions, participation in conferences, and meetings with industry trade groups, individual preparers, accountants, actuaries, auditors, regulators and users from a number of countries. They are listening, and this article summarizes what they tell us they’ve heard so far.

First, there is a high level of support for the IASB developing an IFRS for insurance contracts. The current diversity in accounting practices around the world isn’t useful, and most believe it would be better to have an imperfect standard than no standard at all. Canada’s view is mixed in this respect. While we support the goal of a consistent standard around the world, some here don’t wish to take what they see as a step backwards from the approach we have in place today.

The critical issue raised in almost all jurisdictions (including Canada) is the volatility in income that would arise under the proposed measurement model. The main culprit is the discount rate for non-participating contracts, which would be based on risk-free rates plus an adjustment for (il)liquidity. Assets supporting liabilities would be measured at fair value, so fluctuations in credit spreads on those assets would not be matched by corresponding changes in the value of liabilities.

Alternatives proposed for the discount rate include:
(a) An asset-based rate, possibly adjusted to reflect defaults and other adverse deviations to the return. One variation of this alternative would use the rates used to price contracts;
(b) A rate locked-in at inception ("amortized cost");
(c) A rate that reflects sector non-performance risk—for example, a high-quality bond rate; and
(d) An approach that puts a portion of the change in value through Other Comprehensive Income.

Another widespread concern (shared by Canada) is that the criteria for unbundling components are not clear, and that unbundling involves significant cost to preparers for little, if any, benefit to users.

One area where Canada appears to be a lone voice in opposition is the residual margin, an amount added to the initial liability that ensures no front-ending of profit, and in fact ensures a minimum loss at issue. This feels like a step backward to the days where strain at issue was a fact of life, and we have to find ways to convince users that sales are good thing.

Many other concerns have been raised, and the IASB staff has a huge job sorting through it all and facilitating the IASB discussions needed to get to a final standard. The IASB still hopes to have the final standard in place by June 2011, with an effective date likely a few years after that. The feedback was pretty much unanimous that we need a long time to implement the significant changes that the IFRS for Insurance Contracts will bring.

Lesley Thomson, FCIA, is Chair of the CIA Task Force on International Accounting and Actuarial Standards (Insurance).


Despite the widespread economic slowdown, there could be good news on the horizon for current or future Canadian actuaries.

Allianz, the world’s largest insurer by market capitalization, says actuaries are in critically short supply, so it is increasing its efforts to recruit more of them to its global workforce of more than 150,000 people.

The shortage of skilled actuaries is part of an international problem, as demographic changes across much of the developed world mean there are fewer and fewer workers available. Allianz, which is based in Germany, says this year marks the first time in the European Union that there will be more people retiring than starting on the career ladder.

Allianz, which serves 75 million people in 70 countries and has Canadian operations in Ontario and Québec, is analyzing how its workforce will develop by 2020, and has launched an international recruitment program as part of a 10-year strategy. It is also continuing its successful efforts to promote women—with the number of them in a management programme rising from 24 percent to 43 percent in a year—and help families reconcile the duties of family and work.

Its website says it supports actuaries’ professional growth and offers them a chance to gain new capabilities through "challenging and rewarding tasks and projects". Allianz’s chairman, Michael Diekmann, said its global actuarial development program is "exciting for experts who want to work on the international stage and engage in a cross-border exchange of ideas."

Canadian companies say they have also been working on meeting the growing demand for knowledgeable actuaries. Anne Corner, assistant vice-president of human resources at Manulife Financial, said: "We have increased our focus on actuarial recruitment, development and organizational design in order to ensure that we have the right people getting the right development at the right time."

Manulife's executive vice-president of corporate development, Simon Curtis, added: "Manulife has always considered a strong actuarial group as being critical to achieving our strategic and business growth.

"Over the past few years we have seen increased demand for actuaries and actuarial skills across the organization, and with looming changes to accounting and solvency we see this trend only increasing."

Actuaries with three or more years’ experience can apply for positions with Allianz online here.

Invitation to global actuarial conference in India

The International Actuarial Association, the IAA’s Health Section and the Institute of Actuaries of India (IAI) are urging members to mark February 20-22, 2011, in their calendars.

That is the date of the 13th Global Conference of Actuaries, which will take place at the Renaissance Hotel, Mumbai, India. Further details have yet to be revealed, but the IAI hopes the event will offer "daring solutions" to emerging risks and that more than 1,000 actuaries will attend.

The five-star Renaissance Hotel is in Powai, a suburb in northeast Mumbai, and is a suitable base to explore the landmark Gateway of India monument, the dramatic Rajiv Gandhi Sea Link bridge and the Elephanta network of sculpted caves.

More information about the conference will be announced as it becomes available, but to read about the venue, which incorporates the largest conference centre in India, visit

Guidance for the 2010 Valuation of Policy Liabilities of Life Insurers

The purpose of this educational note is to provide guidance to actuaries in several areas affecting the valuation of the 2010 year-end policy liabilities of life insurers for Canadian Generally Accepted Accounting Principles (GAAP) purposes. It provides an update on recently published experience studies.

The guidance in this educational note represents a majority view of the members of the Committee on Life Insurance Financial Reporting of appropriate practice consistent with the Standards of Practice.

Contact with Questions: Dale Mathews, Chair, Committee on Life Insurance Financial Reporting, at

Call for Speakers for the 2011 Annual Meeting in Ottawa

You are invited to submit a proposal to speak at the 2011 Annual Meeting of the Canadian Institute of Actuaries (CIA), to be held June 29–30 in Ottawa.

The Annual Meeting attracts between 300 and 500 attendees and features approximately 36 concurrent sessions covering all areas of actuarial practice plus general business and professionalism topics.

Share your expertise with your peers and those up-and-coming in the profession. Member benefits of participating as a speaker include:
  • The opportunity to become more involved with the CIA;
  • A chance to share best practices and emerging trends; and
  • A 30 percent discount on the meeting registration fee.
Click here to submit your proposal:
Contact with Questions: Leona Campbell, coordinator, eligibility and education, at

Webcast – International Financial Reporting Standards Series – Canadian Standards

December 8, 2010

Dave Pelletier, Chair of the Actuarial Standards Board and a former CIA President
Mike Hale, former CIA President who chairs the ASB’s IFRS 4 Working Group

Previous webcasts in this series have dealt with the nature of the proposed International Financial Reporting Standards for Insurance Contracts. While recognizing the uncertainties still out there with respect to the final IFRS, this webcast will deal with the significant impact it will have on the actuarial Standards of Practice in Canada, the need for international actuarial guidance, and possible implications for regulatory capital standards.

Contact with Questions: Alicia Rollo, CHRP, director, education and professional development, at

Submission to the Department of Finance Canada

The Canadian Institute of Actuaries presented its comments in regard to the August 27, 2010 updated legislation on employee life and health trusts as supplemented by the discussion in the Explanatory Notes in Respect of Legislative Proposals Relating to the Income Tax Act and Related Acts and Regulations.

Contact with Questions: Michel St-Germain, Chair, Member Services Council, at

25th CPP Actuarial Report tabled to Parliament

The Honourable Jim Flaherty, Minister of Finance, has this week tabled the 25th Canada Pension Plan Actuarial Report to Parliament, and it is now available at:

It confirms that the legislated contribution rate of 9.9% is sufficient to pay future expenditures and to accumulate assets worth $275 billion (i.e., 4.7 times the annual expenditures) in 2020. Other key findings in the report include:
  • The ratio of assets to the following year’s expenditures is projected to grow from 3.9 in 2010 to 5.2 by 2050;
  • The number of contributors is expected to grow from 12.6 million in 2010 to 14.3 million by 2020, with contributions expected to increase from $37 billion to $56 billion in the same period; and
  • The proportion of retirement benefits relative to total expenditures is expected to increase from 72% in 2010 to 82% in 2050.
Therefore, the report says, despite a projected substantial increase in benefits paid as a result of an aging population, the plan is expected to be able to meet its obligations throughout the projection period and to remain financially sustainable over the long term.

2011 CAS Trust Scholarship Program

The Casualty Actuarial Society is once again accepting applications for its scholarship program for college students pursuing a career in actuarial science. The CAS Trust Scholarship program, funded by donations to the CAS Trust, will award up to three $2,000 scholarships to deserving students for the 2011-2012 academic year.

Applicants must be a permanent resident of the U.S. or Canada, or have a permanent resident visa, and admitted as a full-time student to a U.S. or Canadian educational institution to be eligible. Applicants must have demonstrated high scholastic achievement and a strong interest in mathematics or a mathematics-related field. Applicants must also have taken at least one exam prior to March 1, 2011.

Applications are due by March 1, 2011 and winners will be notified in late May.


Contact with Questions: Megan O’Neill, CAS communications coordinator, at

New Co-sponsored Audiocasts

The Conference of Consulting Actuaries is pleased to announce new audiocasts co-sponsored by the American Academy of Actuaries and Canadian Institute of Actuaries. Special pricing is now available for CIA members. To find out more or to register, please click on the link below.

Hybrid Plan Regulation
Wednesday, December 1, 2010

Lawrence Sher, FCA, MAAA, FSA, EA - Aon Hewitt
Richard Shea - Covington & Burling LLP
Harlan Weller, MAAA, FSA, EA - Office of Tax Policy, US Dept of the Treasury

On October 18, the IRS and Treasury issued long-anticipated final and proposed regulations on PPA provisions affecting hybrid defined benefit pension plans, such as cash balance and pension equity plans. The presenters will review the regulations and address key consulting and technical issues raised by these regulations, including transition and plan amendment issues that many plan sponsors want to attend to immediately.

Qualification Standards and Proposed New JBEA Regs
Wednesday, December 15, 2010

Jay A. Yager, FSA, MAAA, EA - Aon Hewitt
Carolyn E. Zimmerman, FSA, MAAA, EA - Internal Revenue Service

A refresher/practicum on the Qualification Standards and a discussion of the proposed changes to the JBEA regulations.

Contact with Questions: Alicia Rollo, CHRP, director, education and professional development;

Call for Proposals

You are invited to submit a proposal to speak at a 2011 event hosted by the Canadian Institute of Actuaries (CIA).

For the first time, the CIA is issuing a call for speaker proposals to encourage members and the general business community to help shape the future of the profession.

Member benefits of participating as a speaker include:
  • The opportunity to become more involved with the CIA;
  • A chance to share best practices and emerging trends; and
  • A 30 percent discount on that meeting’s registration fee.
Guest speaker benefits include:
  • A forum to showcase your expertise and position yourself as an expert with CIA audiences;
  • The opportunity to help the actuarial profession evolve; and
  • A chance to share best practices and emerging trends.
The call for speaker proposals for 2011 events is now available. Click here to access the form:

Contact with Questions: Leona Campbell, coordinator, eligibility and education, at

Webcast: Defined Contribution (DC) Plans

November 23, 2010

This webcast will be an introduction to defined contribution plans from a financial point of view, and how they are being affected by current developments in pension reform.

Neil Duffy, FCIA, Manulife Financial, and Randy Colwell, regional vice-president, group retirement services, Sun Life Financial.

Contact with Questions: Alicia Rollo, CHRP, director, education and professional development, at

Submission to the International Accounting Standards Board

The Canadian Institute of Actuaries presented its comments on the April 2010 Exposure Draft Proposed Amendments to IAS 19 from the International Accounting Standards Board.

Contact with Questions: Tyrone Faulds, Chair, Practice Council, at

Initial Communication of a Promulgation of Calibration Criteria for Investment Returns Referenced in the Standards of Practice for the Valuation of Policy Liabilities: Life and Health (Accident and Sickness) Insurance (Subsection 2360)

The Actuarial Standards Board proposes to promulgate the use of the calibration criteria for stochastic models, effective March 31, 2011.

It is proposed that the calibration criteria would be used for valuations on or after March 31, 2011 and that early implementation in 2011 would be permitted.

Please read the initial communication at the link below to find out more about this promulgation. Comments on the proposed changes are invited by December 10, 2010. Please send your comments, preferably in an electronic form, to Chris Fievoli at with a copy to John F. Brierley at

Contact with Questions: A. David Pelletier, Chair, Actuarial Standards Board, at

Educational Note: Discounting

This revised educational note on discounting has been prepared by the Committee on Property and Casualty Insurance Financial Reporting. This represents an update and replacement of the 2005 educational note Discounting to make it consistent with changes made in 2009 and 2010 to the Canadian Institute of Actuaries’ Standards of Practice related to margins for adverse deviations.

This educational note provides explicit guidance in two areas where no such guidance is provided in the Standards of Practice, namely the selection of a discount rate for the estimation of ceded liabilities, and the discounting of future costs associated with premium liabilities.

Contact with Questions: Pierre Dionne, Chair, Committee on Property and Casualty Insurance Financial Reporting, at

Discipline Bulletin – Volume 17, No. 1

This Discipline Report has been prepared by the Committee on Professional Conduct to educate and inform all members of the CIA about the disciplinary process and current disciplinary activities.

Contact with Questions: Bill Weiland, Chair, Committee on Professional Conduct at

Guidance for Assumptions for Hypothetical Wind-Up and Solvency Valuations Update – November 2010

The most recent guidance from the Committee on Pension Plan Financial Reporting (PPFRC) regarding assumptions for hypothetical wind-up and solvency valuations was provided in a memorandum dated August 30, 2010, which was based on a review of data collected as of June 30, 2010. The review concluded that for valuations with effective dates on and after June 30, 2010, an appropriate discount rate for estimating the cost of purchasing a non-indexed group annuity would be determined as the unadjusted yield on Government of Canada (GoC) long-term bonds (CANSIM series V39062) increased arithmetically by 70 bps, in conjunction with the UP94@2020 mortality tables. The August 30, 2010 guidance applied to both immediate and deferred pensions and also applied regardless of the overall size of a group annuity purchase.


The August 30, 2010 guidance as to estimated annuity purchase costs for non-indexed group annuities was based primarily on quotes provided by six insurance companies on illustrative group annuities using pricing conditions as at June 30, 2010.


In an effort to continue to monitor group annuity pricing, the PPFRC obtained illustrative quotes on a similar basis to those obtained at June 30, 2010, but based on pricing conditions as at September 30, 2010. The illustrative non-indexed quotations at June 30, 2010 and September 30, 2010 may be summarized as follows:

   Large purchase
 Small purchase
   30/06/2010  30/09/2010  30/06/2010  30/09/2010
Discount rate
4.33% 4.46% 4.28% 4.29%
Spread over CANSIM V39062
+0.74% +1.19% +0.69% +1.02%
Deferred vesteds

Discount rate
4.59% 4.07%
Spread over CANSIM V39062
+0.72% +1.32%

For the retiree group of the large non-indexed purchase, there was an increase in the excess (spread) of the average of the discount rates for the insurers that provided the three most competitive quotes, in conjunction with the UP94@2020 mortality tables, over the yield on GoC long-term bonds (CANSIM series V39062) of 45 basis points (bps). The spread for the deferred vested members of the large purchase increased by 60 bps.

There was an increase in the spread of 33 bps for the retiree group of the small non-indexed purchase, and the spread for the deferred vested members of the small purchase increased by 54 bps.

The PPFRC believes that refinements to the discount rate to reflect immediate versus deferred pensions or large versus small purchases are not warranted at this time. The illustrative quotes as at September 30, 2010 suggest that, since June 30, 2010, the average spread between non-indexed group annuity purchase discount rates and the yields on GoC long-term bonds may have increased by roughly 40 to 50 bps when the illustrative quote data are considered in aggregate.

From discussions with a few insurers, the PPFRC understands that the group annuity market was not very active during the third quarter of 2010. The PPFRC has been able to obtain limited data on recent actual group annuity purchases, which seem to corroborate an increase in discount rate spreads since June 30, 2010. Overall, the PPFRC concluded that the actual purchase data did not exhibit any pattern that invalidates the information contained in the illustrative quotes, especially given the fact that the actual purchase data were limited in quantity.

Guidance for Non-Indexed Pensions

Based on the analysis described above, the PPFRC has concluded that, for valuations with effective dates on and after September 30, 2010, an appropriate discount rate for estimating the cost of purchasing a non-indexed group annuity would be determined as the unadjusted yield on GoC long-term bonds (CANSIM series V39062) increased arithmetically by 110 bps, in conjunction with the UP94@2020 mortality tables. This guidance applies to both immediate and deferred pensions and also applies regardless of the overall size of a group annuity purchase.

The revised guidance on spreads applies to valuations with effective dates on and after September 30, 2010 up to December 30, 2010, pending any further guidance or other evidence of change in annuity pricing.


As at September 30, 2010, the unadjusted CANSIM series V39062 rate was 3.27%. This rate would form the basis for developing an appropriate underlying discount rate for valuations of non-indexed group annuities with an effective date of September 30, 2010. Prior to rounding, an applicable underlying discount rate would then be determined as 3.27% + 1.10% = 4.37%.

Validity of April 2010 Educational Note

With the exception of the revisions to the guidance contained in this memorandum and the August 30, 2010 memorandum, actuaries would continue to reference the April 13, 2010 educational note for guidance with respect to the selection of assumptions for hypothetical wind-up and solvency valuations with effective dates between December 31, 2009 and December 30, 2010. This guidance will be reviewed again with an effective date of no later than December 31, 2010.

Link: N/A

Contact with Questions: Gavin Benjamin, Chair, Committee on Pension Plan Financial Reporting, at

2009–2010 NAAC Annual Report now available

The North American Actuarial Council (NAAC) comprises the leadership of the actuarial organizations of Mexico, the United States and Canada.

Its meetings are held twice a year to share information and identify potential areas of collaboration. The 2009–2010 NAAC Annual Report is now available at the link below and I encourage members to read it. NAAC discussions and initiatives provide a unique North American perspective on many of the international issues facing our profession today. If you have questions or comments about the NAAC and the CIA’s role in international matters, don’t hesitate to contact me.

Micheline Dionne, CIA President

Contact with Questions: Mary Downs, staff liaison to NAAC at

Submission to the Ontario Ministry of Finance

The CIA presented its comments on the recently-announced proposed pension reforms for Ontario.

Contact with Questions: Monique Tremblay, Chair, Pension Advisory Task Force, at

Calendar of Events
June 5-8, 2011
Practice Education Course
Delta Ottawa
Ottawa, ON
June 29-30, 2011 CIA Annual Meeting The Westin Ottawa Ottawa, ON
22-23, 2011
CIA Seminar for the Appointed Actuary
Doubletree by Hilton - Toronto Airport Hotel
Toronto, ON

Additional information on all CIA meetings can be obtained at:, or by contacting Nancy Jenkinson at 613-236-8196, ext.104, or

For information on CIA webcasts, visit
Board and Council Updates
Member Services Council

Nikolai Serykh has been appointed a member of the Research Committee, and Chair of its Individual Life Experience Subcommittee, effective immediately.
Annie Girard, Venessa Archibald, Derek Houle and Michel Hébert have been appointed members of the subcommittee, effective immediately.

Johnny Lam has been appointed a member of the Annuitant Experience Subcommittee of the Research Committee.

Mark Edwards, Nicolas Boutin and Kathleen Thompson have been appointed members of the Group Insurance Committee, effective immediately. Harindra Sebastian and Jeremy Bell have also been appointed members of the committee, effective September 1, 2009.

Jennie Kang and Martin Leroux have been appointed members of the Enterprise Risk Management Applications Committee, effective immediately.

Loretta Kulchycki, Cynthia Potts, Meagan Orr, John Dark, Franklin Reynolds, Kelley McKeating, Chris Townsend, Ronald Miller and Frank Grossman have been appointed members of the Task Force on Comprehensive Membership Survey, effective immediately.

Evelyn Somer has been appointed a member of the Communications Committee, effective immediately.

Benoît Miclette has been appointed a member of the Op-Ed Team, effective immediately.

For Information Only:

Stephen Beal has resigned as a member of the Individual Life Experience Subcommittee of the Research Committee, effective January 1, 2010. Elizabeth Fitzmaurice and Marc Tardif have also resigned, effective January 1, 2008, as has Emile Elefteriadis, effective immediately. Marc-André Belzil has resigned as chair of the subcommittee, effective October 1, 2010.

Cathy Shum-Adams and Marc-André Melançon have resigned as Chair and member of the Research Committee, effective October 1, 2010

Jeffrey Neufeld, S. Conor Rankin and Andrew Ryan have resigned as members of the Group Insurance Committee, effective September 1, 2010.

Practice Council

Stephen Butterfield has been appointed a member of the Task Force on MEPP/TBPP Funding.

Edward Gibson has been appointed Chair of the Committee on Life Insurance Financial Reporting, effective January 1, 2011. Alexis Gerbeau has been appointed  Vice-chair, effective January 1, 2011, and Rahim Hirji has been appointed a member of the committee.

For information only:

Dale Mathews, Nathalie Bouchard and Tim Cavallin will resign from the Committee on Life Insurance Financial Reporting on January 1, 2011.