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

Canadian Institute of Actuaries/Institut canadien des actuaires

September 2011
Your Institute

 
By Jim Christie, FCIA
CIA President

As this is my first article as your President, I thought I would use this space to reflect upon what the CIA has accomplished in the past year and my hopes for what we can achieve in the coming year.

Perhaps the most significant change for the CIA in the last year was the approval of the changes for our Associate members which will come into effect June 1, 2012. These changes were based on recommendations of a special task force that considered the value proposition for our existing and potential Associate members. The changes will bring the requirements for an Associate of the CIA in line with the requirements for Associates of the SOA and CAS, and allow for the formal use of the ACIA designation. In addition those Associates with five or more years of enrolment as an Associate will be entitled to vote in Institute elections. As well as these changes, the CIA will be undertaking a number of other initiatives to encourage university actuarial students to become involved with the Institute much earlier in their careers.

This summer, the CIA was granted the right to award the Chartered Enterprise Risk Analyst (CERA) credential by the CERA global board. This will help position the Institute in the Canadian risk management space. I hope to see our first Canadian cohort of CERAs awarded in 2012.

Changes to Rules of Professional Conduct 6 and 13 were approved in March. The changes to Rule 13 engendered spirited debate, showing that our members are both passionate about and deeply interested in how our actuaries act in their professional lives.

In June the CIA Secretariat moved new office space at 360 Albert Street, Ottawa. The new quarters provide a more pleasant work atmosphere and a more efficient floor plan with no increase in annualized occupancy cost.

I would now like to shift to my personal goals for the upcoming year.

First, I want the CIA Board to enhance its focus and actions on strategic issues and push the actuarial aspects of running CIA activities to the Education and Eligibility Council, the Practice Council and the Member Services Council.

I will encourage the Secretariat to continue their initiatives to find ways to work collaboratively with our councils, committees and task forces to increase the effectiveness of their volunteer efforts.


Last year the CIA Board took a major step toward expanding the process for actuarial qualification in Canada by opening an option that will formally utilize the excellent actuarial programs that exist at many Canadian universities. This option, previously known as the Future Education Methods (FEM) project, is now called the University Accreditation Program. In November the CIA Board will consider the recommendations of its Accreditation Committee regarding which Canadian universities have sufficiently well-established actuarial education programs to allow the CIA to grant exam credits to those students who achieve sufficiently high grades in university courses that map to the SOA/CAS syllabus for the early technical actuarial exams: 2/FM, 3/MFE, 3/MLC and 4/C. If all goes well, universities will introduce this into their September 2012 calendars and our first exam credits will be issued in June 2013. At this point these credits will be valid only for ACIA and FCIA qualifications. We will encourage the SOA and CAS to consider allowing similar credits, since no promises on SOA or CAS recognition can be made to students at this time.

At the other end of the qualification process we need to consider the future of the Practice Education Course. Passing the PEC was added to the criteria for an FCIA about 10 years ago, when the SOA removed country-specific material from its syllabus. Shortly thereafter the CAS created a Canadian-specific exam track and consequently FCASs were exempted from the PEC requirement. Now the SOA has added country-specific material back into its syllabus, though the extent of additions varies significantly by practice speciality. If the PEC is to continue, we need to determine if it should be transformed.

Having taken steps to address the value proposition for Associates, we now need to address the value proposition for Fellows. While many Fellows need an FCIA designation to sign specific actuarial reports, many of our members have no formal need for an FCIA designation. We must ensure that the CIA offers sufficient value to actuaries practising in Canada, so that we attract all of them in Canada to become members of the CIA.

One way of enhancing the stature of the actuarial profession is by taking on issues in the public eye, e.g., health care, retirement funding, demutualizing P&C insurers, and pension legislation reform. I believe we can best do this by acting in an honest broker role, i.e., by providing fact-based commentary on each issue and objectively critiquing potential options, and presenting an optimal solution in the public interest.

Last, but by no means least, we need to monitor and, as much as possible, influence international actuarial and accounting developments. With the recent adoption of IFRS as Canadian GAAP, we have moved into an era where international accounting and actuarial standards may directly affect the activities of actuaries practising in Canada.

If you have any questions or comments, please feel free to write me at president@actuaries.ca.

Jim Christie, FCIA, is President of the Canadian Institute of Actuaries.
 
Spotlight


By Phil Rivard, FCIA

This article marks my first as Chair of the Practice Council, a role I assumed at the Annual Meeting in June. I would like to offer my thanks to Ty Faulds, who ably served as council chair for the past two years, and now continues his volunteering activities as a member of the Actuarial Standards Board. There are a number of interesting developments in many of our practice areas, and I look forward to working with the council to provide support to our members over the coming months.

As you are aware, actuarial standards have been the responsibility of the Actuarial Standards Board for a number of years now. However, the Practice Council still has an important role to play in the development of educational notes and research papers, which expand upon the basic guidance contained in the Standards of Practice. Over the past few months, we have issued a number of these documents, and have several others under active consideration. I would like to use this opportunity to recap some of the work the council has recently completed.

Not surprisingly, a fair amount of our attention has been focused on retirement issues. Last week, we released an educational note designed to provide guidance to pension plan sponsors on the selection of a discount rate for accounting purposes (under Canadian, US, or international standards). Concurrent with the release of this note, we were pleased to announce a partnership with Natcan Investment Management to provide an accounting discount rate curve, which we believe will provide a useful benchmark for the valuation of pension and benefit plan liabilities. In addition, we continued to regularly update our educational note supplement that provides guidance for the annuity proxy assumptions used in a hypothetical wind-up or solvency valuation.

In order to improve our guidance on multi-employer and target benefit pension plans (MEPPs and TBPPs), an educational note was issued focusing on the financial risks associated with these plans. Such plans are in a unique position, as the financial risks can have a direct effect on the benefits received by plan members.

Turning to the individual insurance side, Bill C-57 (2005) has been on the radar screen of life actuaries for a number of years now, as it will require the production of fairness opinions for blocks of business such as participating policies and adjustable policies. The accompanying regulations were recently released, leading to the production of a draft educational note which will provide guidance for members in the development of these opinions. At the time of writing, this is still very much a work in progress as we await a draft guideline from OSFI and concurrently collect comments from members on the draft CIA document.

The increased popularity of critical illness (CI) insurance in the past decade created a challenge for actuaries involved in capital management, as the MCCSR guidelines were not entirely clear on how CI should be handled, resulting in a wide range of practice. In response to this, the Committee on Risk Management and Capital Requirements prepared a research paper which was sent to OSFI in June of this year. Among the main recommendations were to use a similar approach to individual life insurance when it came to volatility, and to not incorporate a catastrophe component.

In addition, an educational note addressing investment return assumptions for non-fixed income investments for life insurers was released in March. This note, prepared by the Committee on Life Insurance Financial Reporting, complements guidance produced in prior years. An educational note is currently in progress dealing with the valuation of universal life insurance contracts.

For our members practicing in the public personal injury compensation plan (PPICP) area, the Committee on Workers’ Compensation produced a research paper on the funding of these plans. The paper contains a summary of the various approaches to funding currently used by these plans, and also offers some guiding principles to be followed.

Other research papers under consideration include guidance on the calibration of equity returns for segregated fund liabilities, and considerations on the quantification of economic risk for economic capital purposes.

I encourage all members to review any guidance applicable to their practice area, which can be found on the CIA website. Also, please watch the CIA Announcements for information on any newly released educational notes or research papers. Finally, if you are interested in assisting the Practice Council in the development of guidance material, or have a good idea to share, please feel free to contact me at privard@segalco.com. The PC welcomes the input from all members as we continue to work to fulfil our mandate.

Phil Rivard, FCIA, is Chair of the Practice Council.
 
MOVERS AND SHAKERS


You know you are not alone when you visit
Business Insider; in fact, a real-time graphic (below) shows you exactly how many people are browsing each second. And given the amount of material on the site, it is little wonder that thousands of people visit every day.

Run by H
enry Blodget, once ranked as the No. 1 internet and e-commerce analyst on Wall Street, Business Insider has been named one of the world's top financial blogs due to the variety of material on offer. Besides the expected spread of frequently-updated business news, the site also scores hits due to its entertainment, sport and lifestyle headlines.

A large number of experienced experts and analysts contribute to the business section, with a day's articles including a look at the future of Google, the changing fortunes of hedge funds, the impact of a Costco contract dispute, and the twentysomething "idiots" earning $500,000.


The site sets itself apart from its competitors with a number of in-depth sections such as War Room (strategy), which has covered such topics as polygraph testing in the workplace, lessons learned by those who survived the Great Depression, the honesty of tele-commuters versus office-based staff, how to be upgraded to first class for free, and the wackiest things people have listed on their résumé (including the job candidate who said he had been arrested for assaulting his previous boss).


Other useful sections for financial professionals include:

  • Data Center, which compiles hundreds of charts and other pieces of corporate, government and economic information;
  • Travel, offering such advice as which are the best headphones for travelling, where to see the best views of Las Vegas, and reviews of the world's best hotels;
  • Blackboard, a directory of key companies and people; and
  • Jobs, featuring postings from across North America and around the world.
Pros: the variety of news on offer; interesting presentation.
Cons:
the site aggregates stories from elsewhere; pages can be crowded.

Address:
www.businessinsider.com
 
Institute News


Here is the first official photo of members of the Canadian Institute of Actuaries' Board of Directors for 2011-2012. They are:
  • Front row: Anne Vincent (Director), Micheline Dionne (Past President), Simon Curtis (President-elect), Jim Christie (President), Richard Bisson (Director),and Michel St-Germain (Director).
  • Second row: Jacques Lafrance (Director) and Sylvie Charest (Director).
  • Third row: Martin Roy (Secretary-Treasurer) and William Chinery (Director).
  • Fourth row: Claude Ferguson (Director), Louis Adam (Director) and David Dickson (ex officio, Chair, Eligibility and Education Council).
  • Fifth row:  Jacqueline Friedland (Director), Marc-André Melançon (ex officio, Chair, Member Services Council), and Chris Townsend (Director).
  • Back: Paul Winokur (Director).
Not pictured are: Stephen Bonnar (Director) and Phil Rivard (ex officio, Chair, Practice Council).
 


Networking is a key part of any successful professional's career, and the CIA is offering you a fresh opportunity to inform your peers about your achievements and progress.

Our new (e)Bulletin section, Actuaries on the Move, will be a chance for you to publicize your new job, title, credentials or other information.

This is an opportunity to tell thousands of fellow actuaries and financial professionals - whether they are ex-colleagues, former college friends, potential employers, future clients, etc. - about, for example:
  • Your new job;
  • A change of title or area of responsibility;
  • Your new qualifications;
  • A change of contact details;
  • Awards or other recognition; or
  • Publication of academic papers or articles.
Simply send an e-mail - one line of information can be enough, but feel free to add more if you so wish - to the CIA's English Editor at andrew.melvin@actuaries.ca and we will aim to include it in the next issue of the (e)Bulletin.

Please include a daytime telephone number and, whenever possible, a colour hi-res photograph. Information must be received at least a week before the final working day of the month to be considered for inclusion in the next issue.

 
Daniel Comtois, ASA (1974)
Mario Georgiev, FCIA (1980)
Michael Hutchison, FCIA (1965)
 
THIS MONTH'S PUBLICATIONS
Mortality Study: Canadian Standard Ordinary Life Experience 2008–2009 Using 86–92 Tables

This is the sixtieth annual report submitted by the Individual Life Experience Subcommittee of the Research Committee detailing the intercompany mortality experience for Canadian standard ordinary life insurance policies. This is the sixteenth year that the subcommittee has collected data in a seriatim format. It calculated exposure using the Actuarial Exposure method, in which a full year of exposure is credited in the year of death.

Links:
Study

Tables 86-92

Contact with Questions: Nikolai Serykh, Chair, Individual Life Experience Subcommittee, at nserykh@munichre.ca

Mortality Study: Canadian Standard Ordinary Life Experience 2008–2009 Using 97–04 Tables

This is the sixtieth annual report submitted by the Individual Life Experience Subcommittee of the Research Committee detailing the intercompany mortality experience for Canadian standard ordinary life insurance policies. This is the sixteenth year that the subcommittee has collected data in a seriatim format. It calculated exposure using the Actuarial Exposure method, in which a full year of exposure is credited in the year of death.


Links:
Study

Tables 97-04

Contact with Questions: Nikolai Serykh, Chair, Individual Life Experience Subcommittee, at nserykh@munichre.ca

Submission to Finance Canada: Demutualization Framework for Federal Property & Casualty Insurance Companies

The Canadian Institute of Actuaries presented its comments to the Department of Finance Canada on the document entitled Consultation on a Demutualization Framework for Federal Property & Casualty Insurance Companies.


Link: http://www.actuaries.ca/members/publications/2011/211081e.pdf

Contact with Questions: Marc-André Melançon, chair, Member Services Council, at mamelancon@rgare.ca

2012 ERM Symposium: Call For Papers

The 2012 ERM Symposium offers an opportunity for professionals from numerous disciplines to gather and discuss the latest developments in enterprise risk management (ERM). In conjunction with the event, a call for papers has been issued.

The symposium seeks papers that explore risk management topics, with a focus on analysis and practical tools related to financial and operational risks, the interaction between risks, integrated ERM, and creating value through ERM.


Abstracts for your proposed paper are due by October 14, 2011, and should be submitted to Barbara Scott at bscott@soa.org.


Final versions of papers must be completed and submitted no later than January 13, 2012. Selected papers will be presented at the symposium in Washington, D.C., from April 18–20, 2012, and prizes for the best papers will be awarded.


Links:
ERM Symposium: http://www.ermsymposium.org/2012/index.php
Call for Papers: http://www.ermsymposium.org/2012/call-for-papers.php

Contact with Questions: For questions on the call for papers, please contact Steven Siegel, SOA research actuary, at ssiegel@soa.org

Webcast—Killer Risks: Torpedoes in the Water

Wednesday, September 28, 2011
Noon to 1:30 p.m. EDT

Speaker: Sim Segal, president, SimErgy Consulting


There are several killer risks that most organizations commonly overlook. In this webcast, we identify these risks, discuss their root causes and characteristics, and offer suggestions on how to mitigate them.

Link: click here (members must first log in to the members site to receive member pricing)

Contact with Questions: Leona Campbell, coordinator, eligibility and education, at leona.campbell@actuaries.ca

Webcast—Managing and Measuring Segregated Fund Guarantee (Variable Annuity) Risks

Tuesday, September 13, 2011
Noon to 1:30 p.m. EDT

Speakers:
Jonathan Edwards, senior capital markets analyst, OSFI
Mark Evans, vice-president and actuary, Aegon USA
Josh Braverman, SVP, head of derivatives, AXA Equitable

Segregated fund guarantees are a significant element of the strategy and risk profile within the Canadian life insurance industry. This webcast highlights the important considerations when managing and measuring the risks associated with these guarantees, including the following topics:

  • Governance and Oversight of Market Risk at Insurance Companies—A Regulatory Perspective
  • Market risks of variable annuities;
  • Reviewing roles and responsibilities of key stakeholders; and
  • Risk oversight, risk measurement and risk reporting.
  • Segregated Fund Hedging Fundamentals
  • Risks;
  • Hedge considerations;
  • Attribution;
  • Hedge effectiveness; and
  • Hedge objective.
  • Effective Product Design for Hedging and Hedging Volatility Exposures
Target level of expertise: moderate.

Link: click here (members must first log in to the members site to receive member pricing)

Contact with Questions: Leona Campbell, coordinator, eligibility and education, at leona.campbell@actuaries.ca

CIA Website News Service Upgraded

The CIA has a new provider for the news service provided on the Members Site. Meltwater News gives us access to many more Canadian news outlets of all types and more than doubles the number of search terms used. In addition, visitors will be able to use a scroll bar to move quickly through the news headlines, scanning for articles of interest.

Link: the news service is found on the Members Site homepage. Simply log into the Members Site and the news service is on the landing page.

Contact with Questions: Josée Racette, Project Manager, Communications and Public Affairs, at josee.racette@actuaries.ca

Submission to OSFI: Minimum Capital Test/Branch Adequacy of Assets Test for Federally Regulated Property and Casualty Insurance Companies

The CIA presented its comments on the draft guideline on OSFI’s Proposed 2012 Changes to the Minimum Capital Test/Branch Adequacy of Assets Test for Federally Regulated Property and Casualty Insurance Companies.

Link: http://www.actuaries.ca/members/publications/2011/211079e.pdf

Contact with Questions: Phil Rivard, Chair, Practice Council, at privard@segalco.com

Committee on Professional Conduct: Investigation Team Recruitment

The CIA’s Committee on Professional Conduct (CPC) is currently seeking interested Fellows from various practice areas, to conduct, on an ad hoc basis, investigations into complaints against CIA members. Investigators will be remunerated at CIA rates for staff actuaries, currently $150/hour. A maximum payout will be specified for each investigation. That amount will normally be $5,000 but could go up to $10,000 in complex cases.

Eligibility Criteria


To be eligible, candidates must meet the following criteria:
  • A minimum of 10 years Fellowship;
  • Not serving as a CIA Board member;
  • Prepared to undergo a one-day training seminar on investigative techniques on own time at a date to be determined, the costs of which will be borne by the CIA;
  • Prepared to sign a formal engagement letter for each investigation;
  • Prepared to investigate more than one complaint, but not concurrently.
Successful candidates will be appointed to specific investigations commensurate with their area of practice and a determination that there are no conflicts of interest. All successful candidates will be required to sign confidentiality agreements at the commencement of an investigation. Investigators will be covered by the Institute’s liability policy.

If interested, please submit your résumé by September 15, 2011 to Erin Waldegger, Executive Assistant, at the coordinates below. All résumés will be reviewed by members of the CPC.


Questions about the nature of the engagements may be directed to Wayne Berney, CPC Chair at wberney@shaw.ca.

Request for Proposals — Development of a Network Model for Identification and Regulation of Systemic Risk in the Financial System

The Casualty Actuarial Society, Canadian Institute of Actuaries and Society of Actuaries Joint Risk Management Section is launching a three-phase research project to develop options for a design of a network model of the financial system for use by a new federal body charged with identifying and regulating systemic risk.

The background, research objectives and outline for proposals can be found at the link below.

Proposals must be received by November 1, 2011; however, notice of intent to submit a proposal must be sent by October 15, 2011.

Link: click here

Contact with Questions: Steven Siegel, SOA Research Actuary, at (847) 706-3578 or ssiegel@soa.org

Webcast—Financial Crisis: A Failure of ERM Theory or Practice?

Wednesday, August 10, 2011
Noon to 1:30 p.m. EDT

Speaker: Sim Segal, president, SimErgy Consulting

In the wake of the financial crisis, many have asked whether this was a failure of enterprise risk management (ERM) or a failure of banks to practice ERM. In this webcast, guest presenter Sim Segal answers this question by examining bank risk management practices, evaluating them against the 10 key ERM criteria, and producing an ERM scorecard for the banking sector.

Link: click here (Members must first log in to the members’ site to receive member pricing)

Contact with Questions: Alicia Rollo, CHRP, director, education and professional development; alicia.rollo@actuaries.ca

Annual Meeting e-Report Now Available

Immediately following the CIA Annual Meeting, we were convinced that it was a success from almost every angle, and we wanted to share some of the experience with members.


The link below will take you to the 2011 Annual Meeting e-Report where you will read and see some of the highlights. Of special note, we have recorded the General Business Session and for those who would like to watch the video, a link is included inside the e-Report.

Links:
Electronic report
General Business Session video

Contact with Questions: Nancy Jenkinson, manager, meeting services, (613) 236-8196 ext. 104, or at nancy.jenkinson@actuaries.ca

Submission to the Office of the Superintendent of Financial Institutions – Draft Guideline E-16

The Canadian Institute of Actuaries offered the following comments to the Office of the Superintendent of Financial Institutions on Draft Guideline E-16 – Participating Account Management and Disclosure to Participating Policyholders and Adjustable Policyholders.

Link: http://www.actuaries.ca/members/publications/2011/211078e.pdf

Contact with Questions: Phil Rivard, Chair, Practice Council, at privard@segalco.com

Submission to the International Actuarial Association

The Canadian Institute of Actuaries offered its comments to the International Actuarial Association on the due process for adoption of International Actuarial Standards of Practice (IASPs).

Link: http://www.actuaries.ca/members/publications/2011/211074e.pdf

Contact with Questions: Mike Lombardi, Chair, Committee on International Relations, at mlombardi@rgare.com

Final Communication of a Promulgation of Prescribed Mortality Improvement Rates Referenced in the Standards of Practice for the Valuation of Insurance Contract Liabilities: Life and Health (Accident and Sickness) Insurance (Subsection 2350)

The Actuarial Standards Board is promulgating the use of the mortality improvement rates described in the appendix, effective October 15, 2011. Early implementation is permitted.

The concurrently released final Standards of Practice outline a minimum insurance contract liability basis with respect to the mortality improvement assumption for both insurance and annuity business, and reference prescribed mortality improvement rates.


Link: http://www.actuaries.ca/members/publications/2011/211072e.pdf

Contact with Questions: Dave Pelletier, Chair, Actuarial Standards Board, at dave@davep.ca

Final Revised Standards of Practice for the Valuation of Insurance Contract Liabilities: Life and Health (Accident and Sickness) Insurance (Subsection 2350) Relating to Mortality Improvement

These final Standards of Practice for subsection 2350 were approved by the Actuarial Standards Board on July 12, 2011. The opportunity has been taken to make some small drafting changes to the current Standards of Practice.

The effective date of the final Standards of Practice is October 15, 2011. Early implementation of the final Standards of Practice is permitted.


Links:

Final Standards of Practice (clean):
http://www.actuaries.ca/members/publications/2011/211070e_clean.pdf
Final Standards of Practice (red-lined):
http://www.actuaries.ca/members/publications/2011/211070e_rl.pdf
Memorandum:
http://www.actuaries.ca/members/publications/2011/211071e.pdf

Contact with Questions: Edward Gibson, Chair, Designated Group, at edward.gibson@empire.ca

Annual Meeting: Results of Membership Confirmation – Changes to the CIA Bylaws

At the General Business Session of the 2011 Annual Meeting, held on June 29, 2011, the Board’s decision to adopt Amending Bylaw 2011-1 regarding the ACIA designation for Associates and voting rights for Associates after five years of enrolment as an Associate was confirmed.

A proxy voting period was available from May 30 to 3:00 p.m. on June 27, 2011. Members who did not vote by advance proxy were able to vote on-site at the meeting. The votes received by proxy were added to the votes received on-site at the General Business Session.


The motion to adopt the Amending Bylaw was carried by a majority of voting members. The total voting results were as follows:


Amending Bylaw 2011-1 (Associate Bylaw Changes)
Total Votes received: 428
Votes FOR: 297
Votes AGAINST: 127
ABSTENTIONS: 4

Current Associates are encouraged to update their member information with respect to their qualifications (ASA, ACAS, CERA) which may not be on record with the CIA. Associates who may not meet the new minimum requirements will be contacted directly by the Secretariat in the coming weeks.


Further information on these bylaw changes, which come into effect June 1, 2012, will be communicated in an upcoming (e)Bulletin article.


Please watch for further highlights of the 2011 Annual Meeting in future announcements.


Contact with Questions: Michel Simard, CIA Executive Director, at executive.director@actuaries.ca

Board Minutes Updated on CIA Website

The CIA Secretariat has become aware that several Board meeting minutes were inadvertently missing from the website. The missing documents have now been posted. We apologize for the oversight and any inconvenience this may have caused.

Link: click here

Contact with Questions:
Michel Simard, CIA Executive Director, at executive.director@actuaries.ca

Submission to the Ontario Civil Rules Committee

The Canadian Institute of Actuaries (CIA) presented its comments pertaining to the Civil Rules Committee’s review of Rules 53.09 and 53.10 of the Ontario Rules of Civil Procedure.

Link: http://www.actuaries.ca/members/publications/2011/211068e.pdf

Contact with Questions: Phil Rivard, Chair, Practice Council, at privard@segalco.com

Correction to Paragraph 2320.02 of the Standards of Practice

An inadvertent typographical error was recently noted in paragraph 2320.02 of the English version of the Standards of Practice. The word "zero" was missing from the following sentence:

.02 The amount of insurance contract liabilities using the Canadian asset liability method for a particular scenario is equal to the amount of supporting assets, including reinsurance recoverables, at the balance sheet date that are forecasted to reduce to zero coincident with the last liability cash flow in that scenario.

This omission has now been corrected and we apologize for any inconvenience this may have caused.


Link: click here

Contact with Questions: Lynn Blackburn, director, member services and standards development, at lynn.blackburn@actuaries.ca

Webcast – The PPFRC New Standards of Practice – Questions and Answers

July 21, 2011

The Actuarial Standards Board published Revised Practice-specific Standards for Pension Plans on June 14, 2010. The revised Standards of Practice, which came into effect on December 31, 2010, require a number of changes to the disclosure requirements of external user reports that provide advice on the funded status or funding of a pension plan. The new requirements under the revised Standards of Practice have resulted in questions from practitioners. The responses to many of these questions have broad applicability to pension practitioners. The Committee on Pension Plan Financial Reporting (PPFRC) has thus decided to respond to such queries in the form of an educational note, which is in the process of being drafted.

During this webcast, Gavin Benjamin (PPFRC Chair) and Greg Heise (PPFRC Vice-chair) will provide a preview of the questions and answers contained in the educational note.

Link: click here

Contact with Questions: Leona Campbell, eligibility and education coordinator, at leona.campbell@actuaries.ca

Submission to the Office of the Superintendent of Financial Institutions

The Canadian Institute of Actuaries presented to the Office of the Superintendent of Financial Institutions its comments on the recently released draft of the Stress Testing Guideline for Plans with Defined Benefit Provisions.

Link: http://www.actuaries.ca/members/publications/2011/211065e.pdf

Contact with Questions: Tyrone Faulds, Chair, Practice Council, at ty.faulds@londonlife.com

Risk Management: Part two – Systemic Risk, Financial Reform, and Moving Forward from the Financial Crisis

The Enterprise Risk Management Applications Committee is pleased to announce that the 20 essays that comprise Risk Management: Part two – Systemic Risk, Financial Reform, and Moving Forward from the Financial Crisis, presented by the Society of Actuaries, the Casualty Actuarial Society and the Canadian Institute of Actuaries, have been translated into French and are now available on the CIA’s homepage.

Link: http://www.actuaries.ca/members/publications/2011/211050e.pdf

Contact with Questions: Les Dandridge, director, communications and public affairs, at les.dandridge@actuaries.ca

Standards of Practice for Capitalized Value of Pension Plan Benefits for a Marriage Breakdown – Revised Effective Date of January 1, 2012

On January 5, 2011, the Actuarial Standards Board (ASB) released the Final Standards of Practice for Capitalized Value of Pension Plan Benefits for a Marriage Breakdown (MB SOP) (Section 4300), with an effective date of July 1, 2011. Subsequently, on May 5, 2011 the ASB announced a deferral of the effective date of the MB SOP, pending completion of a review of the standard by the Actuarial Standards Oversight Council (ASOC). That review has now been completed. The ASOC determined that due process had been followed in the adoption of the MB SOP.

In light of this decision by the ASOC, the ASB has established a revised effective date of January 1, 2012 for this MB SOP. Until January 1, 2012, the current standard will remain in effect.

Link: Final Standards – Final Standards of Practice for Capitalized Value of Pension Plan Benefits for a Marriage Breakdown (Section 4300)

Contact with Questions: Nancy Yake, Chair, Designated Group, at nancy.yake@sympatico.ca

Webcast: Changes to the Bylaws – Associate Membership

On Wednesday, June 15, an English-language webcast will take place from 11:45 a.m. to 12:30 p.m. EDT and a French-language webcast will take place from 1:00 to 1:45 p.m. EDT.

Don’t miss this opportunity to obtain further information and ask questions about the proposed changes to the CIA Bylaws with respect to enhancements to the Associate enrolment category.


There is no fee to attend these webcasts.


Links:
English webcast

French webcast
Memo to Members

Contact with Questions: Jason Vary, Chair, Task Force on Associate Implementation, associatechanges@actuaries.ca

March 2011 Risk Management Newsletter Now Available in Both Official Languages

The CIA has produced a French version of the Risk Management Newsletter that is available in both official languages on the Society of Actuaries (SOA) website. The Joint Risk Management Section is sponsored by the CIA, Casualty Actuarial Society and SOA to promote education and research in the area of enterprise risk management and establish leading risk management techniques.

Link: click here

Contact with Questions: Les Dandridge, director, communications and public affairs, at les.dandridge@actuaries.ca

Research Paper – A Recommendation on Critical Illness Capital Requirements

OSFI asked the CIA Committee on Risk Management and Capital Requirements (CRMCR) to review the current practices with respect to critical illness (CI) capital requirements being employed within the minimum continuing capital and surplus requirements (MCCSR) calculations by Canadian companies, and recommend a single approach, because the MCCSR guidelines were not clear as to how CI should be handled and there was an apparent diversity in practice, leading to a wide range of results.

To read the research paper, please access the link below.


Link: http://www.actuaries.ca/members/publications/2011/211060e.pdf

Contact with Questions: Wally Bridel, Chair, Committee on Risk Management and Capital Requirements, at wbridel@munichre.ca

Minor Amendment to Educational Note: Evaluation of the Runoff of P&C Claim Liabilities when the Liabilities are Discounted in Accordance with Accepted Actuarial Practice

The Committee on Property and Casualty Insurance Financial Reporting has revised this educational note. The primary purpose of this document is to provide guidance to property and casualty (P&C) actuaries who are required to prepare an evaluation of the runoff of the claim liabilities when claim liabilities are discounted.

If you have any questions or comments regarding this educational note, please contact Pierre Dionne at pdionne@ccr.fr.


Link: http://www.actuaries.ca/members/publications/2011/211064e.pdf

Contact with Questions: Pierre Dionne, Chair, Committee on Property and Casualty Insurance Financial Reporting, at pdionne@ccr.fr

Revised Exposure Draft to Revise the Standards of Practice – Dynamic Capital Adequacy Testing – Section 2500

This revised exposure draft was approved by the Actuarial Standards Board (ASB) on June 1, 2011. Changes are highlighted against the original exposure draft, as issued on July 7, 2010. As with the original exposure draft, this revised exposure draft represents a revision to the existing Standards of Practice – Dynamic Capital Adequacy Testing – Section 2500. The ASB determined that the separation of the previous subsection 2530 Method from the subsection 2520 Investigation was unnecessary. As a result, they have merged, requiring a renumbering of much of the standard.

Comments on this revised exposure draft are invited by August 15, 2011, preferably in an electronic format, to Jacques Tremblay at jacques.tremblay@oliverwyman.com with a copy to Chris Fievoli at chris.fievoli@actuaries.ca.


Link: http://www.actuaries.ca/members/publications/2011/211062e.pdf

Contact with Questions: Jacques Tremblay, Chair, Designated Group, at jacques.tremblay@oliverwyman.com

Notice of Intent: Amendment to the Practice-specific Standards for Pension Plans – Assumptions for Hypothetical Wind-up and Solvency Valuations

The Actuarial Standards Board (ASB) and the CIA’s Committee on Pension Plan Financial Reporting (PPFRC) believe it would be in the interest of the public and the profession to review and, possibly, revise the Practice-specific Standards for Pension Plans with respect to the selection of assumptions for hypothetical wind-up and solvency valuations.

The ASB is soliciting feedback on this notice of intent from members of the CIA and other stakeholders. Comments on the proposed changes are invited by September 15, 2011. Please send them, preferably in an electronic format, to Michael Banks at michael.banks@mercer.com, with a copy to Chris Fievoli at chris.fievoli@actuaries.ca.


The notice of intent will be discussed during Session 20 (Update from the Pension Plan Financial Reporting Committee) at the CIA Annual Meeting on June 29, 2011 (4:15 p.m.).


Link: http://www.actuaries.ca/members/publications/2011/211057e.pdf

Contact with Questions: Michael Banks, Chair, Designated Group, at michael.banks@mercer.com

Educational Note Supplement: Guidance for Assumptions for Hypothetical Wind-Up and Solvency Valuations Update – Effective March 31, 2011

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 an educational note dated May 10, 2011, which was based on a review of data collected in early 2011. The review concluded that for valuations with effective dates on and after December 31, 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 V39062) increased arithmetically by 100 bps, in conjunction with the UP94@2020 mortality table. This guidance applies to both immediate and deferred pensions and also applies regardless of the overall size of a group annuity purchase.

Methodology


The May 10, 2011 guidance as to estimated purchase costs for non-indexed group annuities was partially based on quotes provided by six insurance companies on illustrative group annuities using pricing conditions as at December 31, 2010, and supplemented by data on actual group annuity purchases during the fourth quarter of 2010 and early 2011 provided by certain actuarial consulting firms.


Analysis


In an effort to continue to monitor group annuity pricing, the PPFRC obtained illustrative quotes on a similar basis to those obtained at December 31, 2010, but based on pricing conditions as at March 31, 2011. In addition, the PPFRC obtained limited data on the pricing of actual group annuity purchases in the first quarter and early second quarter of 2011 from certain actuarial consulting firms.


The illustrative non-indexed quotations at December 31, 2010 and March 31, 2011 may be summarized as follows:


AVERAGE OF THE THREE MOST COMPETITIVE QUOTES
(USING UP94 GENERATIONAL MORTALITY TABLES)
  Large Purchase
Small Purchase
  31/12/2010
31/03/2011
31/12/2010
31/03/2011
Retirees  
 
 
 
Discount rate
4.33% 4.43%
4.15%
4.48%
Spread over CANSIM V39062
+0.85% 
+0.73%
+0.67%
+0.78%
Deferred vesteds
       
Discount rate
4.39%
4.50% 
4.06% 
4.48% 
Spread over CANSIM V39062 
+0.91%
+0.80%
+0.58%
+0.78%

Note that the discount rates in the above table have been determined using the UP94 mortality table with generational projection using improvement Scale AA rather than the UP94@2020 mortality table used in the May 10, 2011 educational note. This change has been made to be consistent with the mortality table used to determine commuted values under section 3500 of the Standards of Practice – Practice-specific Standards for Pension Plans effective February 1, 2011. The change in the underlying mortality table results in discount rates that are about six basis points (bps) higher for the retirees and about 16 bps higher for the deferred vesteds in the illustrative quotes.

If considered in isolation, the illustrative quotes suggest that an appropriate discount rate for estimating the cost of purchasing non-indexed group annuities be determined as the unadjusted yield on GoC long-term bonds (CANSIM V39062) increased arithmetically by 70 to 80 bps, in conjunction with the UP94 mortality table with generational projection. The pricing information for the actual group annuity purchases for non-indexed pensions in the first quarter and early second quarter of 2011 that was available to the PPFRC produced an average spread which was in the range of 60 to 70 bps above the prevailing unadjusted yield on GoC long-term bonds (CANSIM V39062). These spreads are significantly lower than the average spread on actual group annuity purchases for immediate pensions in the fourth quarter of 2010 of 104 bps, based on the UP94@2020 mortality table. Overall, the PPFRC concluded that, effective March 31, 2011, a revision to the guidance contained in the May 10, 2011 educational note is appropriate and this revised guidance would give some weight to both the illustrative and actual purchase data collected.


Both the illustrative quotes and the data on actual group annuity purchases do not show significant differences in pricing between large and small annuities and between immediate and deferred annuities.


The guidance below for both non-indexed and indexed pensions is based on the UP94 mortality table with generational projection.


Guidance for Non-indexed Pensions


Based on the analysis described above, the PPFRC has concluded that, for valuations with effective dates on and after March 31, 2011, 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 70 bps, in conjunction with the UP94 mortality table with generational projection. 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 March 31, 2011 up to December 30, 2011, pending any further guidance or other evidence of change in annuity pricing.


Example


As at March 31, 2011, the unadjusted CANSIM V39062 rate was 3.70%. This rate would form the basis for developing an appropriate underlying discount rate for valuations of non-indexed group annuities with effective dates of March 31, 2011. Prior to rounding, an applicable underlying discount rate would then be determined as 3.70% + 0.70% = 4.40%.


Guidance for Indexed Pensions


The data regarding the pricing of annuities indexed to the Consumer Price Index (CPI) continue to be extremely limited. None of the data obtained regarding actual annuity purchases during the first quarter and early second quarter of 2011 pertain to indexed annuities. The contributing insurers did provide illustrative quote data for the sample purchases on a CPI indexed basis. However, similar to previous periods, the illustrative quotes are either qualified to the effect that the insurer would not actually transact on that basis and/or the premiums quoted for the most part are substantially higher than would be suggested by prior educational notes.


Despite the significant limitations with data, the PPFRC has concluded that it would be appropriate to update the mortality table used to estimate the cost of purchasing indexed annuities to be consistent with the mortality table used to estimate the cost of purchasing non-indexed annuities.


Accordingly, an appropriate proxy for estimating the cost of purchasing a group annuity where pensions are fully indexed to the rate of change in the CPI is the unadjusted yield on GoC real return long-term bonds (CANSIM V39057) in conjunction with the UP94 mortality table with generational projection. As at March 31, 2011, the unadjusted CANSIM V39057 rate was 1.15%.


In situations where pensions are partially indexed, indexed to a measure other than the CPI or contain a deferred component, the actuary would make appropriate provisions for such situations consistent with the guidance provided in the May 10, 2011 educational note and other relevant educational notes.


Rounding


Each actuary would use discretion in determining whether to round discount rates for the non-indexed or indexed pensions, as applicable, to the nearest multiple of five, 10 or 25 basis points. Consistency in the application of such rounding would be followed.


Validity of May 2011 Educational Note


With the exception of the revisions to the guidance contained in this memo, actuaries would continue to reference the May 10, 2011 educational note for guidance with respect to the selection of assumptions for hypothetical wind-up and solvency valuations with effective dates between December 31, 2010 and December 30, 2011.


Link: http://www.actuaries.ca/members/publications/2011/211061e.pdf

Contact with Questions: Gavin Benjamin, Chair, Committee on Pension Plan Financial Reporting, at gavin.benjamin@towerswatson.com

Update on the University Accreditation Program

In October 2010, the Accreditation Committee released a draft version of the university accreditation program and in March 2011, the CIA Board approved some changes to the program which came about as a result of feedback collected from members and universities towards the end of 2010 and early in 2011.

University applications for accreditation are due by June 30, and accreditation panel visits will be taking place between July and September. The list of universities to be accredited for implementation in September 2012 will be finalized by October 31, 2011.


The accompanying memo provides more information from the Accreditation Committee on the CIA’s university accreditation program as well as a link to the final program documentation.


Links:
Memo to members
UAP Policy

Contact with Questions: Alicia Rollo, CHRP, director, education and professional development; alicia.rollo@actuaries.ca

2011 CIA Elections Results

Congratulations to the CIA members who were elected to the Board in the 2011 elections:

President-elect is:
Simon R. Curtis

Secretary-Treasurer is:
Martin Roy

New Directors are:
Claude A. Ferguson
Jacqueline B. Friedland
Michel St-Germain
Christopher J. Townsend

The President-elect will serve a one-year term in that position, followed by a year as President and a further year as Immediate Past President. The Secretary-Treasurer will serve a two-year term. Directors are elected for three-year terms.

These elected members will commence their terms effective following the close of the Annual Meeting on June 30, 2011.


On behalf of all members, thank you to those candidates who let their names stand for election but were unsuccessful.


Contact with Questions: Karen J. Hall, Chair, Elections Committee, at (604) 443-2590 or by e-mail at karen.hall@aonhewitt.com

 
Calendar of Events
October 13
Webcast
Emerging Risks of Grave Importance: Providing Clarity and Understanding N/A
October 19
Webcast
Economic Roundtable N/A
November 2, 2011 Pension Seminar DoubleTree by
Hilton Hotel Toronto Airport
Toronto, Ontario
November 3, 2011 Investment Seminar DoubleTree by
Hilton Hotel Toronto Airport
Toronto, Ontario
November 10, 2011 Professionalism Royal York Hotel Toronto, Ontario
November 15, 2011
Enterprise Risk
Management Workshop

Metro Toronto Convention Centre
Toronto, Ontario
December 1, 2011 Professionalism Hilton Bonaventure Montréal, Québec
June 3-6, 2012 Practice Education Course Delta Ottawa Ottawa,
Ontario
June 21-22, 2012 Annual Meeting DoubleTree by
Hilton Hotel Toronto Airport
Toronto, Ontario

Additional information on all CIA meetings can be obtained at:
www.actuaries.ca/meetings/calendar_of_meetings_e.cfm, or by contacting Nancy Jenkinson at 613-236-8196, ext.104, or nancy.jenkinson@actuaries.ca.

For information on CIA webcasts, visit http://www.actuaries.ca/webcasts/index_e.cfm.
 
Board and Council Updates
Board

Micheline Dionne has been appointed Chair of the Committee on International Relations, effective immediately. Mike Lombardi has been appointed a member of the committee.

Bob McKay has been appointed CIA representative to the IAA Advice and Assistance committee, effective October 2011.

John Dark has been appointed a member of the Committee on Finance, effective July 1, 2011.

Bill Solomon has been appointed a member of the Pension Review Task Force, effective July 1, 2011.

Christopher Townsend has been appointed CIA liaison to the Casualty Actuarial Society, effective July 1, 2011.

Dave Dickson (Chair), Jason Vary (Vice-chair), Stephen Bonnar, Trevor Cartlidge, Alana Farrell, Angelita Graham, John Have, Jim Lewis, Anne Vincent, Neville Henderson, Paul Winokur and Jim Christie (ex officio) have been appointed as the Eligibility and Education Council for 2011–2012, effective July 1, 2011.

Marc-André Melançon has been appointed Chair of the Member Services Council, effective July 1, 2011.

Phil Rivard (Chair), Alan Exley, Jacqueline Friedland, Derek Gerard, Jacques Lafrance, Bruce Langstroth, Richard Larouche, Dale Mathews, Daniel Pellerin, Hélène Pouliot, Les Rehbeli and Lesley Thomson have been appointed as the Practice Council for 2011–2012, effective July 1, 2011.

William Weiland (Chair), Wayne Berney (Vice-chair), Douglas Brooks, Stephen Butterfield, Micheline Dionne (ex officio), Stephen Eadie, Luc Farmer, Normand Gendron, Ian Karp, Danielle Lamarche, Claude Lockhead, Bonnie Lysyk, Liam McFarlane, Jim Murta and John Tarrel were appointed as the Committee on Professional Conduct for 2011–2012, effective July 1, 2011. William Weiland later left the committee and Wayne Berney was appointed chair, both effective July 14, 2011. Dave Dickson and Bob Howard were later appointed to the committee, effective retroactively to July 1, 2011.

J. Edward (Ted) Nixon (Chair), Martin J. K. Brown, David Congram, Gilles Dufresne, Brian FitzGerald, Neville S. Henderson, C. S. (Kit) Moore, Daniel E. Murphy, James G. Paterson, Philip J. Pothier, Allan H. Shapira, David A. Short, William Solomon, Monique Tremblay and Nancy A. Yake were appointed as the Tribunal Panel for 2011–2012, effective July 1, 2011.

The Task Force on International Financial Reporting Standards (IFRS) 4 Phase 2 (Insurance) has been disbanded with thanks.

The Task Force on International Financial Reporting Standards (IFRS) Readiness has been created with a mandate to "coordinate efforts among the Practice Council, the Actuarial Standards Board and the Committee on International Relations" until January 1, 2014. It consists of the Immediate Past President as Chair, the President as Vice-chair, and the President-elect, the chair of the Actuarial Standards Board, the chair of the Practice Council, the chair of the Committee on International Relations, the chair of the Task Force on International Accounting and Actuarial Standards (Insurance)—or its successor entity—and the chair of the Task Force on International Pension and Employee Benefits Standards—or its successor entity—as members, effective July 1, 2011.

Member Services Council

The P&C Research Subcommittee, a subcommittee of the Research Committee, has been created with the following mandate: "It has the responsibility, but not the exclusive responsibility, of identifying the need for research projects as well as experience and other studies that are of interest to the P&C membership of the CIA and/or the Canadian public and that are likely to be helpful in developing Institute recommendations in matters of public policy." Marc-Olivier Faulkner has been appointed chair of the subcommittee, and a member of the Research Committee, both effective immediately.

Kim Young has been appointed Chair of the Pension Experience Subcommittee of the Research Committee and a member of the Research Committee, both effective immediately.

Stephen W. I. Cheng has been appointed Chair of the Communications Committee, effective immediately.

For information only:

Frank Grossman has resigned as Chair of the Communications Committee, effective immediately.

Gavin Benjamin has resigned as Chair of the Pension Experience Subcommittee of the Research Committee, and as a member of the Research Committee, both effective immediately. Jason Wiebe has also resigned as a member of the Research Committee, effective immediately.

Practice Council

Sylvain St-Georges has been appointed as a regulatory representative to the Committee on Life Insurance Financial Reporting (CLIFR). Stéphane Santerre, Mario Robitaille and Stéphane Lévesque have been appointed members of the committee.

Dylan Moser, Jim Cole and Dani Goraichy have been appointed members of the Committee on Pension Plan Financial Reporting.

Eric Fontaine and Paul Tytarenko (non CIA-member) have been appointed members of the Committee on Investment Practice.

Glenalan Cameron, Leonard Pressey, Pascal Verrette, Kelly Levy and Andrea Sherry have been appointed members of the Committee on Risk Management and Capital Requirements.

Cindy Forbes has been appointed Chair of the Committee on the Appointed/Valuation Actuary.

Wendy Achoy, Sébastien Cliche, Martin Cyrenne, Douglas Isaac (non-CIA member), Uros Karadzic, Melissa Kirshenbaum, Geoffrey Melbourne, Boris Pavlin (non-CIA member), Marlene Puffer (non-CIA member), Martin Raymond, and Guillaume Turcotte David Walsh have been appointed to the Task Force on Pension and Post-retirement Benefit Accounting Discount Rates. The task force's mandate has been confirmed as:

Canadian, U.S. and international pension and other post-employment benefits accounting standards require that a plan's discount rate be set with reference to yields on high quality corporate bonds. Due to the scarcity of Canadian long-term high-quality corporate bonds, the development of appropriate discount rates for Canadian pension and other post-employment benefits plans can be a challenge. This has particularly been the case during the capital market turmoil of late 2008 and early 2009.

The task force will prepare an educational note that includes best practices for actuaries who are providing advice to plan sponsors on the selection of appropriate accounting discount rates.

The task force's review will include the following:
1. The requirements of the relevant accounting standards regarding the selection of discount rates.
2. Which bonds should be included in and excluded from the analysis (based on factors such as issue size, credit quality, callability features, etc.).
3. Determining pricing for the bonds included in the analysis.
4. Whether (and if so, how) to exclude "outlier" bonds.
5. Developing an appropriate yield curve and spot rate curve.
6. Approaches to address the scarcity of long-term high-quality corporate bonds in Canada.

A Task Force on External Peer Review has been created, and Hélène Pouliot (chair) and Jacqueline Friedland have been appointed to it. The task force has the following mandate:

The mandate of the Task Force on External Peer Review is to work with OSFI to review the Guideline E-15 requirements for the external peer review of the Appointed Actuary's work.

The first objective of the review is to reassess the need for external peer review given OSFI's intention to increase their own review of the actuarial function. Then, should the TF determine that external peer reviews are still needed, the objective of the TF would be to recommend changes to Guideline E-15 and supporting actuarial guidance to better meet the needs of all users.

The Task Force on International Pension and Employee Benefit Standards and the Task Force on International Accounting and Actuarial Standards (Insurance)  have been disbanded with thanks.

For information only:

Martin Ouellet completed his term on the ALM Working Group, reporting to the Committee on Investment Practice, effective January 1, 2011.

Bill Osenton has resigned from the Standards of Practice Editing Committee.

Tim Bishop completed his term on the Committee on Investment Practice, effective December 31, 2010, Andrey Marchenko completed his term effective June 30, 2011, and Harold Hugel resigned from the committee effective June 30, 2011.

Greg Heise completed his term on the Committee on Pension Plan Financial Reporting, effective August 1, 2011.

Wally Bridel, Elizabeth Boulanger, Bill Beatty and Michael White have completed their terms on the Committee on Risk Management and Capital Requirements, effective July 1, 2011.

Eric Jobin and Leonard Pressey have resigned from CLIFR, effective April 1, 2011.