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The ASB - Recent, Current and Planned Activities

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By Dave Pelletier, FCIA


This is my first report as Chair of the Actuarial Standards Board to the CIA membership, and I’ll provide an update on the ASB’s activity since Charles McLeod’s last report through the (e)Bulletin in May. I’d be remiss, however, in first not thanking Charles and the other ASB members (Nick Bauer, Malcolm Hamilton, and David Short) who retired from the Board in June after several years of dedication and hard work for the profession. Their contributions were impressive, and they’ll be missed.


The other rookies on the Board this year, along with myself, are Michael Banks and Steve Haist. We look forward to working with the continuing members John Brierley, Stephen Butterfield, Richard Gauthier, Normand Gendron, and Nancy Yake, as well as Ty Faulds, who, as Chair of the Practice Council, has an important ex officio role in keeping vital lines of communication open.

Approved final standards

As Charles anticipated in his May report, the revised pension standards were indeed approved at the June meeting of the ASB, the culmination of many years of effort. They will take effect as of December 31, 2010. Early implementation is not being permitted, given that certain aspects of the revised standards conflict with the existing standards.

Also approved as final were revisions to the standards for life insurance valuation, dealing with stochastic modeling and segregated fund valuation. These additions essentially brought into the standards some of the existing guidance material in this area. These revisions call for promulgated calibration criteria for stochastic models, for which the initial communication required by our due process is being published shortly.

Exposure drafts

Three exposure drafts have been approved for publication as well since May. One is a revision of the standard dealing with Dynamic Capital Adequacy Testing (DCAT) for insurers. The comment deadline was September 10, and indeed many comments were received, particularly from P&C practitioners. Jacques Tremblay’s designated group is now working through the issues raised, which may well lead to a revised exposure draft rather than directly to a final standard.

An exposure draft dealing with the use of mortality improvement in insurers’ valuations of life insurance and annuity products was published as well. For this revision of the insurer standards, the Committee on Life Insurance Financial Reporting, chaired by Dale Mathews, is serving as the designated group. They look forward to receiving comments by December 1, and we are aiming at an eventual effective date of October 15, 2011. Also associated with this standard is the promulgation of a table of mortality improvement rates, the initial communication of which was also published. Coincident with the publishing of these documents, CLIFR published a research paper on this area, which CLIFR drew extensively upon in recommending the proposed standard.

The third exposure draft published since May deals with revisions to the General Standards of Practice. John Brierley chairs this designated group, which is to receive comments by December 1. An effective date at some point in 2011 is intended.

Notices of intent

Readers will recall that in times past, standards went through a discussion draft and then an exposure draft before getting to a final standard. With the creation of the ASB several years ago, its due process eliminated the discussion draft stage, but replaced it with a notice of intent that is intended to clearly communicate the rationale for an upcoming new or revised standard, the principles to be reflected, and any issues on which input is particularly sought to assist the ASB as it drafts the standard. It’s important that the ASB outlines its intent clearly in these notices, so that guidance from interested parties is received and can be reflected as we move to the drafting phase. It’s equally important that CIA members read and respond to notices of intent for the same reason—in this way the exposure draft is likely to be a much better document than otherwise.

Since May, we’ve issued two such notices of intent. The first dealt with amendments to the standards dealing with post-employment benefit plans. The designated group’s work is now underway, chaired by Ellen Whelan. We plan to publish an exposure draft reasonably early in 2011, aiming for an effective date in 2012.

A second one dealt with margins for adverse deviations for P&C insurance, to allow for margins below the low end of the usual range where appropriate in unusual situations. This is not expected to be controversial, and we’re making an effort to get this through the exposure draft stage and then on to final approval by year-end. Jacqueline Friedland chairs this designated group.

Other work underway

At its October meeting, the ASB discussed two other standards nearing their next phase. The Standard of Practice on Capitalized Value of Pension Plan Benefits for a Marriage Breakdown has undergone considerable discussion over the last several years, and has gone through three exposure drafts. This has been a controversial area, with an enormous amount of time and effort expended by some practitioners in this area and by members of the designated group and the ASB. The ASB expects to approve and publish the final standard shortly. It will also approve and publish shortly a revised exposure draft of a new standard dealing with ratemaking in P&C insurance, with a comment deadline of December 31.

Other projects in various phases of completion include:

  • Treatment of "subsequent events", an exposure draft of which the ASB expects to deal with in December;
  • Revisions to the standard dealing with public personal injury compensation plans (essentially workers’ compensation plans and the Société de l'assurance automobile du Québec—SAAQ). An exposure draft was issued in May, and the many comments received are now under consideration by the designated group, chaired by Nick Bauer;
  • Revisions to the actuarial evidence standards, other than those dealing with marriage breakdown. Nancy Yake will be chairing this designated group, and conducted a session gathering input (and recruiting members for her designated group) at the recent Actuarial Evidence Seminar;
  • Standards relating to Bill C-57, which, while passed by the federal Parliament several years ago, is expected to come into force in early 2011. It deals with disclosures associated with participating and adjustable policies. Nick Bauer chairs the designated group, and we expect to be publishing a notice of intent by year-end; and
  • A review of our due process. Potential areas for improvement were discussed at our October meeting, and if proceeded with will be finalized in 2011.


As Charles anticipated in May, the International Accounting Standards Board issued in July an exposure draft of a significantly revised IFRS dealing with insurance contracts (so-called IFRS 4—Phase II), for which a final standard is expected to be effective in 2013 or 2014. The impact of these changes on insurers (and at least some PPICPs) will dwarf the impact of IFRS’s arrival in Canada in 2011, and will have significant impact on our standards. To oversee the process of determining changes to our standards, the ASB has established a working group chaired by Mike Hale, and consisting of John Brierley, René Chabot, Simon Curtis, Richard Gauthier, Wendy Harrison, and myself. Another overriding issue is, given that this is an international financial reporting standard, shouldn’t it be an international actuarial standard, rather than a local one, that supports it. The working group is currently working through both what kind of international actuarial guidance can be expected (and supporting its development) and what the resulting regulatory financial framework will look like in Canada, for which we’d be expected to provide support through actuarial standards.

This will be a challenging period for the ASB, and we look forward to the active involvement of many CIA members through commenting on our notices of intent and exposure drafts, and through involvement in our various designated groups.

Dave Pelletier, FCIA, is Chair of the Actuarial Standards Board.


 

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