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

Canadian Institute of Actuaries/Institut canadien des actuaires

March 2012
Your Institute


By Jim Christie, FCIA

CIA President

As I write this article the March Board meeting is still a week away, but you will be reading this bulletin just after the Board wraps up its March 27 discussions. We are trying to increase the timeliness with which the Institute lets the membership know what the Board is discussing. As part of this effort I have selected several issues which, at the time of writing, were on the Board’s agenda for the March meeting.

Strategic Vision: perhaps the most critical item to be discussed is finalizing the Board’s vision of where the Institute should be in 10 years. To help focus that discussion, the President, Past President, and President-Elect developed a draft vision to serve as a working document for the Board’s consideration. We expect the Board will make some refinements but the final version will likely include most of the following concepts: 

  1. The CIA is viewed as an educational body, not just an accreditation body. It takes full accountability for the educational path to FCIA (which may involve outsourcing) with the FCIA recognized as being a high-quality stand-alone educational designation (i.e., not having to be aligned to another designation).
  2. Being a member of CIA is regarded as essential for all actuaries practising in Canada. All actuaries practising in Canada are active members of the CIA and view the CIA as their primary actuarial affiliation and the body with which they are most engaged.
  3. Through its research on financial welfare and risks, the CIA is widely recognized by the public as the leading contributor to dialogue, analysis, and solutions in all areas related to understanding and quantification of the costing of non-investment market-related future contingencies.
  4. Actuaries play a significant role in setting healthcare funding and priorities (i.e., having a health actuary for the planning and optimization of health expenditures). Actuaries also have a significant presence in all financial institutions, including banks.
  5. There is a continuum of practice between all practice areas.
Education: a task force (TF) established at the last Board meeting was charged with developing a broad coordinated education strategy for the Institute. The TF has now developed a strategy consistent with the draft vision document. The TF is recommending that the Board create a new Task Force on Strategic Education Implementation to begin work immediately with the Eligibility and Education Council (EEC) and the Secretariat to develop an action plan with specific timelines and milestones to guide implementation over the immediate and long term.

International Actuarial Association (IAA): while there are many pressing Canadian-specific issues, the Institute still needs to keep abreast of international actuarial issues. The IAA is the organization which represents the actuarial profession globally. The Board will receive an overview of the IAA from David Congram, FCIA, who is a member of the IAA Executive Council.

Committee on International Relations (CIR): in order to ensure the Board stays current on all international issues, the Committee on International Relations reports at every Board meeting. The Board will be considering changes to the governance structure of the CIR to enable the committee to be continually attuned to the Board positions on any international issues. These changes will make the governance of the CIR similar to that used for the councils.


Board Governance: the Board will be finalizing proposed bylaw changes to allow, in exceptional circumstances, the removal of a Board member from office. CIA members will then be asked to vote on these bylaw changes either by proxy or in person at the June annual meeting.

Budget: the Secretary-Treasurer will be reporting on actual financial results through December 31. He will then be recommending the 2012–2013 CIA budget to the Board for its approval.

Waiver of Dues: changes to the current Waiver of Dues Policy are being considered to update family/parental leave. The proposed policy, approved by the EEC on March 15, adopts more commonly-used definitions of parental/family leave which provide consideration not only for maternity/parental leaves but also for family care.

Membership Projections: the Board will receive a study by the resident actuary, Chris Fievoli, that demonstrates that membership levels will remain stable, and not be adversely affected by the upcoming retirement of the baby boom generation. However, in order to maintain a steady overall membership growth, the Institute will need to see that same steady growth in the number of new FCIAs each year.

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 Bruce Langstroth, FCIA

These are interesting times.

The world economy has (depending on perspective) either emerged from or is still emerging from a financial crisis that is unique in its severity. Around the world, governments and regulators have responded to the financial crisis and the stresses that it placed on financial institutions by strengthening regulatory oversight and requirements. Driven in part by the financial crisis, perhaps, we’re seeing an unprecedented level of regulatory convergence. The frameworks for determining required capital (Minimum Continuing Capital and Surplus Requirement, or MCCSR, and Minimum Capital Test, or MCT) which have been relatively stable for many years are to be dramatically updated—and the changes will include expanded opportunities for using internal models in the determination of required capital. And, finally, the valuation standards we have been accustomed to for so many years are to be replaced by a new and different standard as described in IFRS 4.

More importantly, these are interesting times for the actuarial profession in general and the Practice Council in particular. What has been a time of relative stability is becoming a time of change.

Regulatory requirements are changing, both in terms of orientation (principles versus prescription) and in terms of substance. The Office of the Superintendent of Financial Institutions (OSFI) has recently introduced new or updated guidelines relating to the determination of internal capital targets (Guideline A-4), governance over the use of reinsurance (Guideline B-3), and stress testing (Guideline E-18), and has indicated that guidelines relating to new requirements such as Own Risk and Solvency Assessment are coming. Unlike guidelines of days gone by, these guidelines articulate principles rather than specific actions or requirements and leave it to the individual companies and (frequently) actuaries to determine the specifics of implementation.

In their traditional forms, the MCCSR and MCT formulas have been relatively mechanical and guidance has not been required to support work in this field. Permission to use internal models for determining capital for segregated funds led inevitably to the need for standards and guidance in relation to their use. Expected changes to the MCCSR and MCT formulas will provide expanded scope for the use of internal models.

The valuation framework described by the IFRS 4 Exposure Draft—and subsequent decisions made by the International Accounting Standards Board/Financial Accounting Standards Board (IASB/FASB) since its publication—is dramatically different than the framework employed in Canada today, and there will be many questions to be answered as the world moves to implement this standard in the coming years.

In this time of change, one may expect an increased demand for standards and guidance. The Practice Council plays an important role in providing professional guidance within Canada, as outlined in its Terms of Reference:

The Practice Council shall have such duties as may be prescribed to it by the Board, in accordance with the following purpose:

(a) to direct and manage the development of all practice-related material other than Standards of Practice, in all areas of actuarial practice;

(b) to adopt all practice-related material other than Standards of Practice, in all areas of actuarial practice;

(c) to provide interpretative opinions on all Standards of Practice and other practice-related material, in all areas of practice; and

(d) to monitor the work of other professional standard-setting bodies and provide comments on draft professional standards issued by these bodies, where appropriate.

The changes discussed above, and others that have yet to emerge, will dramatically change the landscape of actuarial practice within Canada. In some cases, new standards or changes to existing standards will be required. In many cases, new or updated guidance material will be required and the Practice Council and its committees and task forces will be very busy developing that material so that members can be prepared for the changes as they emerge.

Bruce Langstroth, FCIA, is Vice-Chair of the CIA Practice Council.

 
MOVERS AND SHAKERS


Every year, hundreds of actuaries give their time and expertise to volunteer on the CIA's Board, committees, councils and task forces, and their contribution to the Institute's success is greatly appreciated. The CIA will be making a special effort to thank all its volunteers as part of National Volunteer Week, which runs from April 15–21. It is also urging all those who work with CIA members who volunteer to thank them for their efforts on the Institute’s Board, councils, committees and task forces.
 
The CIA’s Committee on Volunteer Initiatives (CVI) has a wide range of resources for those interested in volunteering to serve the Institute in any capacity, and it actively encourages members to express an interest in being more involved in the profession. The committee and Secretariat are always happy to answer questions about volunteering, and point prospective committee and task force members in the right direction.
 
For those who have never volunteered, or are relatively new to the ethos of volunteering, joining that first committee or organization can be a daunting experience. Fortunately, prospective members can call on the CIA’s extensive resources, and the New Member Committee has been formed to promote education, networking and volunteering opportunities specifically targeted to new Fellows and Associates.
 
But if that is still not enough, the website of Volunteer Canada should prove useful.
 
Formed in 1977, the Ottawa-based national organization is committed to "increasing and supporting volunteerism and civic participation through ongoing programs, special projects and national initiatives, by developing resources and by engaging in research and training across the country".
 
If you need extra information on volunteering, the site offers:
  • An interactive quiz that enables you to discover your "volunteer type": are you a Type A, a rookie, or a groupie? Do you want to help individuals, your community, or perhaps the whole world? It also links you to openings that suit your personality and talents; and
  • Resources to help manage volunteers.
 The CIA relies on its volunteers to support and develop the actuarial profession in Canada. Thanks to the hard work and resources of the CVI, and Volunteer Canada’s website, there is no time like the present to step forward and volunteer.
 
For more information on volunteering, contact Carmelina Foti, coordinator of member services and volunteer initiatives, at 613-236-8196 ext. 126 or carmelina.foti@actuaries.ca.
 
 
 
 
 
Institute News


In today's ever-changing world of business, staying up to date with key developments is essential for success. With that in mind, the CIA has introduced an extra way of keeping members informed.


Actuaries and the public can now follow the Institute on Twitter, at @CIA_Actuaries.

Twitter is an information network that launched in 2006. It now has over 100,000,000 active users. This group accounts for some 250,000,000 tweets each day. You choose who to follow, and others will follow you. Lady Gaga has the most Twitter followers with 20,804,731. President Obama has 13,030,020 and Stephen Harper has 206,416.

Tweets will be sent to:
  • Highlight forthcoming events, speakers, and sessions, as they are arranged;
  • Publicize new papers, submissions, and public positions;
  • Reveal decisions and other events affecting actuaries; and
  • Pass on relevant or important information from other organizations.
Twitter buttons on the CIA's public website and Members Site allow anybody to follow the CIA's English or French accounts, and we encourage all members to click on the appropriate button here or directly at our Twitter page.

Combined with our announcements, listservers and the monthly (e)Bulletin, Twitter enables the Institute to ensure that all its members, and the wider population, can remain fully abreast of all its activities as they occur. It will also be a powerful tool for all those who attend CIA events, such as the Annual Meeting in Toronto from June 21–22, as they will be able to learn instantly about schedule and room changes, imminent sessions, and more, all in real time.

As with all social networking tools, its effectiveness is dependent on its visibility, so please feel free to retweet any posts you feel would be of interest to your Twitter followers, and highlight the CIA's internet presence.

By doing so, you help ensure that the work of the CIA and its members can reach the widest possible audience, constantly raising the profile of the Canadian actuarial profession.

 
   
 
Members of the organizing committee and staff at the Secretariat are hard at work on preparations for the 2012 CIA Annual Meeting, which will take place from June 21–22 at the DoubleTree by Hilton Hotel Toronto Airport.


They will soon be seeking sponsors for the event, and we would like to take this opportunity to thank those organizations who contributed to making last year's meeting such a success.

Valani Consulting, Aurigen and the Society of Actuaries were the major benefactors, but many others also backed the event, which attracted hundreds of actuaries and other financial professionals to Ottawa for two days of seminars, presentations and networking.

The sponsors play an essential role in helping to defray some of the costs associated with such a large meeting, and in keeping the registration fee as low as possible. Their support enables the CIA to provide numerous sessions presented by experts in their field, plus fascinating keynote speeches, meals, receptions and more.

We greatly appreciate the financial backing of all those who came forward to sponsor aspects of the meeting large or small, particularly in today's difficult financial climate.

This year's meeting already promises to be another key event in the actuarial calendar, and further details of how you can attend, and how your organization can become a benefactor, will be released soon.

 


Ellen Whelan, FCIA, FSA, has moved from being a group actuary at Mercer’s Toronto office and leader of their post-employment specialty group to being a group actuary at Eckler and president of MoneyMatters, a company she launched to teach children financial literacy.

David Vanasse, ASA, an Associate of the CIA, has been named president of BFL Canada Consulting Services in Montréal, QC.

Jonathan Jacob, FCIA, FSA, CFA, has become senior vice-president, responsible for client-specific investment solutions in fixed income and other areas, and assistance in investment risk management, at Greystone Managed Investments, which is based in Regina, SK; Toronto, ON; and Winnipeg, MB.

_______________________________________

 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 (e)Bulletin section, Actuaries on the Move, is 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 professionalswhether 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-mailone line of information can be enough, but feel free to add more if you so wishto 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.
 
Alan M. Bayly, FCIA, FSA, spent 38 years in actuarial science with the London Life Insurance Co.

Born in 1916, he graduated from the University of Manitoba with a BSc (Honours) degree, and passed his first actuarial examination in 1937. After joining London Life, where he met his wife Helen, he enlisted in the Royal Canadian Air Force, serving as a fighter pilot and instructor during World War II.

He became a Fellow of the Society of Actuaries in 1949 and the CIA in 1965, and served on the CIA's Mortality Committee in the 1950s, and its Council in the 1960s. 

Described as a man of many interests, including reading, travel, music, and many sports, he retired early in 1976 and enrolled at the University of Western Ontario to study geology. He lost Helen in 1995, and was living in a retirement home in London, ON, at the time of his death in his ninety-sixth year.
 
THIS MONTH'S PUBLICATIONS
ICA 2014 Call for Papers and Presentations

Join your actuarial colleagues and peers from around the world for the International Congress of Actuaries (ICA) 2014, to be held March 30–April 4 in Washington, DC.

The ICA 2014 Scientific Committee is assembling an agenda of topical sessions on key issues facing actuaries, and has issued a Call for Papers and Presentations which is now available at www.ICA2014.org/callforpapers.

Anybody interested in presenting a paper or making a presentation is invited to submit an abstract to the Scientific Committee by September 30, 2012.

The 2014 congress’ theme is "Learn, Interact, Grow", and the committee’s goal is to provide an environment where attendees can learn new ideas by sharing concepts and approaches while growing the body of actuarial knowledge and improving the tools used in an actuary's daily practice.

Link:
www.ICA2014.org/callforpapers

Contact with Questions
: David Core, ICA 2014 Secretariat, at dcore@casact.org

Joint Project Publishes Research Paper on Deflation/Inflation


The North American Actuarial Council Collaborative Research Group—a joint initiative between the CIA, Society of Actuaries (SOA) and Casualty Actuarial Society—has published a research paper examining the impact of inflation upon an economy and the property/casualty and life insurance industries.


The 30-page paper, entitled The Effect of Deflation or High Inflation on the Insurance Industry, highlights the potential for decreased price stability since the 2008 financial crisis. The authors explain that on the one hand, the risk of a recession-induced period of deflation is real, and the fear of this scenario has led the U.S. Federal Reserve and the central banks of other countries to use policy tools to prevent deflation from taking hold. Meanwhile, the risk of a significant inflation rate increase has grown, largely due to expansionary fiscal policies adopted since the 2008 crisis.

The paper consists of six sections, focusing on:
  • Background information on inflation, problems connected to measuring it, and some of its effects on an economy;
  • Historical inflation rates;
  • The effects of inflation or deflation on insurance industries;
  • Risk mitigation strategies for insurers;
  • A publicly-available model that can be used to develop inflation/deflation projections under a regime-switching format; and
  • Conclusions.
As part of a package of documents that includes the paper and model, the authors have also written a user’s guide to the new model, which explains that the inflation generator is available for a variety of actuarial applications.

To read the paper and other material, visit here.

Contact with Questions: Steve Siegel, SOA research actuary, at ssiegel@soa.org

Efficient Link to Mortality Tables

The CIA often receives questions from the membership and others about where to locate a particular mortality table, whether it is published by the CIA or some other organization.

After reviewing how the tables were stored and how actuaries use them, we decided to create a link from the CIA home page to the SOA Mortality and Other Rate Tables page, where all Canadian tables and those from other countries are stored.

This makes the process of finding the various tables far easier than ever before.

Link: http://mort.soa.org/

Contact with Questions: Chris Fievoli, CIA resident actuary, at chris.fievoli@actuaries.ca or 613-656-1927

Practice Education Course (PEC)

In order to obtain the Fellow of the Canadian Institute of Actuaries (FCIA) designation, all students who completed the Society of Actuaries examinations must attend and pass the PEC in order to become an FCIA.

The PEC can be taken if the candidate satisfies any one of the following conditions:
  • The candidate has credit for Courses P, FM, M and C (with full VEE), all FAP requirements (all eight FAP modules and both the interim and final assessments) and both FSA exams (N.B., FSA modules are NOT required) under the Society of Actuaries’ examination system; OR
  • The candidate has obtained his/her Fellowship designation from a recognized actuarial organization.
Please note that no exceptions will be made to the above requirements.

Registration is open for the Practice Education Course to be held from Sunday, June 3, through Wednesday, June 6, 2012 in Ottawa, Ontario.

Candidates who have satisfied the eligibility requirements should complete a registration form and return it to the CIA Secretariat along with payment of the registration fee by April 1. Registration forms and other information can be obtained on the CIA website at the link below.

Registration is on a first-come, first-served basis depending on the date of receipt of the registration form and payment of the registration fee. Candidates will generally be accepted, space permitting. However, due to size considerations, space may be limited for some practice area specialties.

Link:
Registration.

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

ERM Webcasts

Value-Based ERM: A Best Practice Approach

Wednesday, February 29, 2012
12:15 p.m. to 1:15 p.m. (EST)

Speaker: Sim Segal, president, SimErgy Consulting LLC

Most enterprise risk management (ERM) programs suffer from three main shortcomings: (1) an inability to quantify strategic risks; (2) an unclear definition of risk appetite; and (3) a lack of integration into decision-making. In this webcast, we introduce a best practice approach called value-based ERM, and discuss how it resolves these difficulties and helps chief risk officers easily build buy-in for their ERM programs. Includes case studies.

The 10 Key ERM Criteria

Wednesday, March 28, 2012
12:15 p.m. to 1:15 p.m. (EDT)

Speaker: Sim Segal, president, SimErgy Consulting LLC

This webcast presents the 10 key criteria that define best practices for an ERM program, and which can be used to benchmark the robustness of any ERM program. We will discuss common industry practices and evaluate them against each of these 10 criteria, and discuss the advantages and disadvantages for each key criterion.

Five Keys to Successful Risk Identification

Wednesday, April 25, 2012
12:15 p.m. to 1:15 p.m. (EDT)

Speaker: Sim Segal, president, SimErgy Consulting LLC

Since risk identification is the first step in the ERM process cycle, most assume that by now standard practice must be best practice, but this is not the case. This webcast discusses the critical mistakes commonly made in risk identification that can derail an ERM process, and the five keys to successfully avoiding them.

Link: Webcasts

Contact with Questions: Leona Campbell at leona.campbell@actuaries.ca; telephone: 613-236-8196 ext. 124

ALM 101 Webcast

Tuesday, March 6, 2012
Noon to 1:30 p.m. (EST)
Presenter: Charles Gilbert, president, Nexus Risk Management

Recent history has highlighted the importance of sound asset liability management (ALM); many of the large losses and failures suffered by insurance companies, as well as the entire pension crisis, could have been easily avoided. Pension plans, insurers and their stakeholders learned the lessons painfully as financial markets ruthlessly punished those with inadequate ALM discipline. More education for decision-makers is needed. Simplistic yet popular duration-matching strategies are not enough to protect pension plans and insurance companies from the multiple dimensions of the interest rate risk exposure they face.

The webcast will provide an overview of the evolution of ALM, present fundamental concepts and discuss the uses and limitations of common risk metrics. ALM 101 is aimed at ACIAs and new FCIAs and is designed to be at the basic/intermediate level. It will be followed by a question-and-answer period.

Link:
Webcasts

Contact with Questions: Leona Campbell at leona.campbell@actuaries.ca; telephone: 613-236-8196 ext. 124

CAA/IPEBLA 2012 Conference at Montego Bay, Jamaica

The Caribbean Actuarial Association (CAA) and International Pension and Employee Benefit Lawyers Association (IPEBLA) will hold a conference in Montego Bay, Jamaica, from April 22–24, 2012, entitled Building Bridges: Connecting Law, Regulation and Actuarial Practice.

The program, which is available here, will cover current issues relating to public and private pension plan design, governance, investment, operation and supervision, plus deferred income arrangements for executives. The event attracts lawyers and actuaries who service the pension and benefits industry in their own countries and internationally. This is an ideal opportunity for regulators, trustees, investment managers and administrators to enjoy presentations by well-known experts, including representatives from the International Monetary Fund and the Caribbean Community and Common Market (CARICOM), and participate in discussions on topics relevant to the pension and benefits industry worldwide.

Registration at an early-bird rate of $500 USD is now open here. A preferred room rate has been arranged until March 7 at the hotel hosting the conference, the spacious Half Moon. To reserve a room at the reduced rate, visit the hotel’s website, click on "Groups", and enter the attendee code 539490, then click on "Sign In".

Contact with Questions: ipebla@managingmatters.com or 416-693-7775

AcSB Exposure Draft on Employee Future Benefits Issued for Comment

On January 24, the Canadian Accounting Standards Board (AcSB) issued the exposure draft Employee Future Benefits, proposing amendments to the standards for employee future benefits that will affect private enterprises, not-for-profit organizations, and pension plans, that have chosen the deferral and amortization approach for their defined benefit plans.

The AcSB welcomes comments on this exposure draft until May 25, 2012 (see the Comments Requested section of the draft for further details on how to comment).

Link: Exposure draft


Contact with Questions: Nancy A. Estey, CA, principal, Accounting Standards Board, at nancy.estey@cica.ca

Submission to Nova Scotia Department of Labour and Advanced Education

The Canadian Institute of Actuaries (CIA) is pleased to offer comments on Nova Scotia’s Draft Pension Benefits Regulations made under the Pension Benefits Act.

Link: Submission

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

Registration Now Open for 2012 ERM Symposium

The 10th Enterprise Risk Management (ERM) Symposium is scheduled for April 18–20 at the Marriott Wardman Park in Washington, DC.

This is the first time the symposium has been held outside Chicago, and here are a few highlights:
  • Five general sessions and more than 25 concurrent sessions featuring risk management experts;
  • Seminars on hot issues;
  • Networking opportunities to renew and expand your list of contacts;
  • A track of sessions featuring academics presenting research from leading universities; and
  • Exhibitors demonstrating their services and knowledge.
Link: Symposium

Contact with Questions: Dave Core, director of professional education and research, Casualty Actuarial Society, at 703-562-1729, or dcore@casact.org

Discussion Paper: The Role of Individual Savings and Financial Literacy

In 2010, the Board of Directors of the Canadian Institute of Actuaries requested that a task force be formed to prepare a discussion paper on the role of individual savings and financial literacy in supporting the retirement goals of Canadians.

This paper defines "individual savings" in the context of the Canadian retirement income system. It addresses the risks and obstacles that can impede retirement saving and describes the specific challenges facing middle-income Canadians saving for retirement.

Link: Discussion paper

Contact with Questions: Paul Reaburn, Chair, Individual Savings and Financial Literacy Task Force, at paulr@dion-durrell.com

Research Paper: Calibration of Equity Returns for Segregated Fund Liabilities

The Committee on Life Insurance Financial Reporting has created a designated group to draft this paper to provide support for an updated promulgation of calibration criteria for investment returns with respect to the valuation of segregated fund guarantees.

Link: Research paper

Contact with Questions: Alexis Gerbeau, Chair, Designated Group, at alexis.gerbeau@standardlife.ca

Notice of Intent to Revoke Current Standards of Practice and Introduce a New Subsection in Part 2000

When most of the Standards of Practice were consolidated in 2002, the existing Standards of Practice relating to dividend determination and illustration were left intact. The objective of the Actuarial Standards Board is to incorporate appropriate Standards of Practice relating to dividend determination within Part 2000 – Practice-Specific Standards for Insurance. It has now produced a Notice to Intent to Revoke the Current Standards of Practice Entitled Recommendations – Dividend Determination and Illustration and Explanatory Notes in Amplification of Certain Dividend Recommendations, and Introduce a New Subsection Relating to Participating Policy Dividend Determination (and Illustration), in Part 2000 – Practice-Specific Standards for Insurance.

Parties wishing to comment on this notice of intent should direct those comments to Stephen Haist at shaist@eckler.ca by March 31, 2012, with a copy to CIA resident actuary Chris Fievoli at chris.fievoli@actuaries.ca.

Link: Notice of intent


Contact with Questions: Stephen Haist, Chair, Designated Group, at shaist@eckler.ca

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

The Actuarial Standards Board proposes to promulgate the use of the calibration criteria for equity returns described below, effective October 15, 2012. A research paper is being concurrently released by the CIA’s Committee on Life Insurance Financial Reporting that provides a rationale for this proposed promulgation for calibration criteria for equity returns.


Comments on the proposed changes are invited by March 31, 2012. Please send your comments, preferably in an electronic form, to Chris Fievoli at chris.fievoli@actuaries.ca with a copy to Alexis Gerbeau at alexis.gerbeau@standardlife.ca.

Link:
Initial communication

Contact with Questions
: Alexis Gerbeau, Chair, Designated Group, at alexis.gerbeau@standardlife.ca

Discipline Notice – Notice of Suspension

A Discipline Notice has been prepared by the Committee on Professional Conduct to inform CIA members of the suspension of Mr. Ashley B. Crozier.

Link: Discipline notice


Contact with Questions: Wayne Berney, Chair, Committee on Professional Conduct, at wberney@shaw.ca

Educational Note Supplement: Assumptions for Hypothetical Wind-Up and Solvency Valuations with Effective Dates from December 31, 2011, to December 30, 2012

Introduction


The purpose of this memorandum is to provide preliminary guidance from the Committee on Pension Plan Financial Reporting (PPFRC) for estimating the cost of purchasing group annuities for purposes of hypothetical wind-up and solvency valuations with effective dates of December 31, 2011, and later (but no later than December 30, 2012). Since this guidance may have an effect on valuations currently in preparation with an effective date of December 31, 2011, or later, the guidance is being released on an expedited basis in advance of formal approval by the Practice Council of a planned educational note.

An educational note was published in May 2011 on Assumptions for Hypothetical Wind-Up and Solvency Valuations with Effective Dates Between December 31, 2010, and December 30, 2011. Over the course of 2011, the PPFRC reviewed its guidance on the cost of purchasing group annuities on a quarterly basis. The most recent update to the guidance was contained in an educational note supplement issued in November 2011 and was effective as of September 30, 2011.

Methodology

This guidance is partially based on quotes provided by eight insurance companies on illustrative group annuity business using pricing conditions at December 31, 2011. These data were collected on the same basis as the illustrative quotes as of December 31, 2010 (as described in the May 2011 educational note), and the methodology used is consistent with the methodology adopted as of each quarter-end in 2011. The illustrative quote information was supplemented with data on the pricing of actual group annuity purchases during the fourth quarter of 2011 provided by certain actuarial consulting firms.

Analysis

The results of the illustrative non-indexed quotations at December 31, 2011, based on the UP94 generational mortality tables, are summarized below and compared to the previous illustrative quote information provided by the insurers as at September 30, 2011.

Average of the three most competitive quotes
(using UP94 generational mortality tables)
  Large purchase
Small purchase
30/09/2011
31/12/2011
30/09/2011
31/12/2011
Retirees
   
Discount rate
3.57%
3.28%
3.56%
3.36%
Spread over CANSIM V39062
+0.89%
+0.87%
+0.88%
+0.95%
Deferred vesteds
   
Discount rate
3.59%
3.46%
3.52%
3.50%
Spread over CANSIM V39062 
+0.91%
+1.05%
+0.84%
+1.09%

The illustrative quotes suggest that an appropriate discount rate for estimating the cost of purchasing immediate non-indexed group annuities be determined as the unadjusted yield on Government of Canada (GoC) long-term bonds (CANSIM series V39062) increased arithmetically by approximately 90 basis points (bps), in conjunction with the UP94 mortality table with generational projection.

The actual group annuity purchase data obtained by the PPFRC for the fourth quarter of 2011 were also considered. In particular, the data on the actual purchases of non-indexed annuities during the month of December 2011 that were available to the PPFRC produced an average spread of approximately 90 bps above the prevailing unadjusted yield on GoC long-term bonds (CANSIM series V39062).

While the illustrative quotes do indicate differences in the pricing for immediate and deferred annuities, some of the insurers provide their quotes on the basis that the immediate and deferred annuities are comingled in the same purchase. As a result, and based on both the illustrative quotes and the actual group annuity data, the PPFRC has concluded that there is not sufficient evidence at this time to differentiate the guidance on pricing of group annuities for large and small annuity purchases, and immediate and deferred annuities.

Guidance for Non-Indexed Pensions

Based on the analysis described above, the PPFRC has concluded that, for valuations with effective dates on and after December 31, 2011, but no later than December 30, 2012, 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 90 bps, in conjunction with the UP94 generational mortality tables. This guidance applies to both immediate and deferred pensions and also applies regardless of the overall size of a group annuity purchase.

Example

As at December 31, 2011, the unadjusted CANSIM V39062 rate was 2.41%. This rate would form the basis for developing an appropriate underlying discount rate for valuations of non-indexed group annuities with effective dates of December 31, 2011. Prior to rounding, an applicable underlying discount rate would then be determined as 2.41% + 0.90% = 3.31%.

Guidance for Indexed Pensions

As in prior years, data regarding the pricing of annuities indexed to the Consumer Price Index (CPI) are extremely limited. None of the data obtained regarding actual annuity purchases during the fourth quarter of 2011 pertains to indexed annuities. In most cases, the contributing insurers did provide illustrative quote data for the sample blocks on a CPI-indexed basis. It may be noted that the premiums for the illustrative quotes on this and prior occasions are substantially higher than the guidance provided by prior educational notes.

The PPFRC intends to conduct further research in 2012 regarding the pricing of indexed annuities. The analysis will include confirmation as to whether the insurers would be willing to actually transact on the basis reflected in the illustrative annuity quotes. This research may result in the revision of future guidance for estimating the cost of purchasing indexed annuities.

Accordingly, an acceptable proxy for estimating the cost of purchasing a group annuity where pensions are fully indexed to the rate of change in the CPI would be the unadjusted yield on GoC real return long-term bonds (CANSIM series V39057) in conjunction with the UP94 generational mortality tables. This guidance applies to both immediate and deferred pensions and also applies regardless of the overall size of a group annuity purchase.

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.

Additional Comments

The PPFRC is preparing its annual educational note on this topic reflecting the above analysis.

The PPFRC intends to continue monitoring group annuity pricing on a quarterly basis. Actuaries may use the spreads indicated above for valuations with effective dates on and after December 31, 2011, up to December 30, 2012, pending any further guidance or other evidence of change in annuity pricing.

The PPFRC has observed that the duration of obligations being purchased may have had a significant impact on annuity pricing during 2011. Furthermore, the PPFRC believes that the differential in the hypothetical annuity quotes between deferred vested and retired members may be related to differences in the duration of the obligations of each group. The PPFRC intends to review the effect of duration on the pricing of group annuities. This review may result in the refinement of future guidance to better reflect the effect of the duration of the obligations being valued.

It may be noted that the spreads for group annuity pricing have been volatile during the past three to four years. Actuaries may wish to be mindful of this volatility when communicating advice related to future hypothetical wind-up and solvency valuations.

The PPFRC would like to express its gratitude to BMO Assurance, The Co-operators, Desjardins Financial Security, Great-West Life, Industrial Alliance, Manulife, Standard Life and Sun Life Financial for providing the committee with the data required to issue this guidance.

Link: Educational note supplement

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

December 2011 Risk Management Newsletter Now Available in Both Official Languages

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

Link: Newsletter


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

Major ERM/CERA Advertising Campaign

A major new advertising campaign will highlight the CIA’s extensive work in the field of enterprise risk management (ERM) and its status as a Chartered Enterprise Risk Analyst (CERA) award signatory.

Animated banner adverts will soon be included on the websites of the Financial Post and Les Affaires, the weekly business newspaper based in Montréal. The Financial Post has also interviewed former CIA President Mike Hale, a member of the steering committee that drafted the global CERA treaty, for an article that will run on a dedicated CIA page containing detailed information about the Institute’s involvement in this increasingly-important area. The adverts will be published later this month, and a further announcement will be made when they go online.

Contact with Questions: Les Dandridge, director, communications and public affairs, at les.dandridge@actuaries.ca 
 
Calendar of Events
April 18, 2012
Professionalism Workshop Hilton Montreal Bonaventure Montréal,
Québec

April 25, 2012
Webcast
Five Keys to Successful Risk Identification N/A
June 3-6, 2012 Practice Education Course Delta Ottawa Ottawa,
Ontario
June 20, 2012
Professionalism Workshop  DoubleTree by
Hilton Hotel Toronto Airport
Toronto, Ontario
June 21-22,
2012
Annual Meeting DoubleTree by
Hilton Hotel Toronto Airport
Toronto, Ontario
September 14-15, 2012
Actuarial Evidence Seminar
The Waterside Inn Port Credit, Ontario
September 20-21, 2012
Seminar for the Appointed Actuary
Fairmont Royal York Hotel Toronto, Ontario
September 27, 2012
Investment Seminar
St. Andrew's Club
Toronto, Ontario
November
2012 (TBD)
Professionalism Workshop TBD
Toronto, Ontario
November 5, 2012
Pension Seminar
Hilton Montreal Bonaventure Montréal,
Québec
December 6, 2012 Professionalism Workshop Hilton Montreal Bonaventure Montréal,
Québec
June 20-21,
2013
Annual Meeting
Hilton Montreal Bonaventure Montréal,
Québec

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
Eligibility and Education Council (EEC)

Patrick Chamberland has been appointed Chair of the Committee on Continuing Education’s Investments Subcommittee, effective immediately.

Taehan Bae, Claudia Gagné, José Garrido, Neville Henderson, David Landriault, Howard Lyons, and Keith Sharp have been appointed members of the Committee on Academic Relations.

Thomas Hinton (Chair), Steven Cheng, Wes Foerster, Bruce Langstroth, and Bruno Valdevit have been appointed to the Practice Education Course (PEC) Organizing Committee, effective January 1, 2012. The committee will report directly to the EEC. The Task Force on The Future of the PEC has been disbanded with thanks.

Thomas Hinton (Chair), Luc Bergeron, Mark Edwards, Frédéric Jacques, David Stalker, Steve Sullivan, and Carole Vincent have been appointed to the Individual Life and Annuities (ILA) Organizing Committee for the 2012 Practice Education Course.

Stephen Cheng (Chair), Trevor Cartlidge, Corinne Escaravage, Nikolina Gateva, Bruno Legris, Jared Mickall, Michael Millns, Haripaul Pannu, Jean-François Poitras, Bruno Valdevit, Tulio Walles Mora, and Alexandru Zaharia have been appointed to the Pension Organizing Committee for the 2012 Practice Education Course.

Bruce Langstroth (Chair), Ken Chin, Michael Correa, Loretta Di Caro, Bruno Gagnon, Martin Laframboise and Linda Maillet have been appointed to the Group Organizing Committee for the 2012 Practice Education Course.

Wes Foerster (Chair), Alan Bates, Melissa Bui, Blake Hill, Myriam Roux, and Julia Viinikka have been appointed to the Investment/Finance Organizing Committee for the 2012 Practice Education Course.

Gary Walters (Chair), Claire Bilodeau, Dave Dickson, Angelita Graham, John Have, and Christina Lambie have been appointed to the 50th Anniversary Task Force.

The Committee on Education and Examinations has been disbanded, effective immediately, with thanks.

The Professionalism Workshop will be coordinated by the Secretariat, reporting to the EEC.

The Task Force on Co-sponsorship of Exams has been disbanded with thanks.

For information only:

Nadine Gorsky has resigned as Chair of the Committee on Continuing Education’s Investments Subcommittee, effective immediately, and leaves with the committee’s thanks.

Nathalie Jutras has resigned from the Committee on Eligibility, and leaves with the committee’s thanks.

Ben Marshall and Mathieu Boudreault have resigned from the Accreditation Committee, and leave with the committee’s thanks.

Member Services Council (MSC)

The New Members Committee has been created, with a mandate to promote education, networking and volunteering opportunities specifically targeted to new Fellows and Associates. It will be responsible for ongoing measurement and monitoring of the value of Associate status in the Institute, and will report to the MSC. Sophia Banduk, Queenie Huang and Michael Butler have been appointed to the committee.

Practice Council

Kelley McKeating (chair), Bob Reynolds, Gordon Lang, Michael Hawkins, Greg Gillis, Scott Sadler and Brigitte Breton have been appointed to the Task Force on Fair Market Value of Life Insurance Policies for Ownership Transfer and Related Purposes. The task force is mandated to prepare a research paper outlining the relevant considerations for performing fair market valuations of life insurance policies for the purpose of ownership transfer (for tax planning or charitable giving) or for property equalization (after a marriage breakdown). The paper will also discuss appropriate methods and assumptions for such valuations. This initiative relates to in-force life insurance policies where the policy owner wishes to transfer ownership to or from a closely-held corporation for tax reasons, or to a charitable organization, again for tax reasons. This also relates to in-force life insurance policies that must be valued for property equalization purposes after a marriage breakdown.

Alison Begley and Mike Palmer have been appointed members of the Committee on Life Insurance Financial Reporting.

For information only:

Angela Jonkhans has completed her term on the Committee on Life Insurance Financial Reporting, and leaves with the committee’s thanks.