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The Actuarial Standards Board - An Update

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By Dave Pelletier, FCIA

This article is an update of activity of the Actuarial Standards Board (ASB) since my first report as ASB Chair for the (e)Bulletin in October. A lot has been happening.

Approved final standards and promulgations

A significant result was approval of the revised final standard dealing with actuarial work in connection with public personal injury compensation plans (essentially workers’ compensation plans and the Société de l'assurance automobile du Québec—SAAQ). The effective date is March 15, but with a deferred effective date of December 31, 2014 for a couple of aspects to enable practitioners and entities to prepare for their implementation. Designated Group Chair Nick Bauer and his team are to be thanked for bringing this to a successful conclusion.

After many years of discussion, the ASB approved a revised standard for actuarial evidence work dealing with marriage breakdown. The story doesn’t end there, however, and I’ll return to this item later in this article.

Also approved as final were a minor revision to the portion of the Standards of Practice dealing with Margins for Adverse Deviation for property and casualty insurers as well as a promulgation on calibration criteria utilized with insurer stochastic modeling and segregated fund valuation. Updated guidance in this latter area is expected to be forthcoming over the next year based on work underway directed by the CIA’s Committee on Life Insurance Financial Reporting.

Exposure drafts

Just one exposure draft has been approved for publication since October. In February, at long last, we published the exposure draft of revisions to portions of the general standards dealing with the recognition of "events". This has proven to be a tricky area to get right (the notice of intent was published in April 2009!), and we look forward to comments on it by the deadline of May 31, 2011. ASB member Stephen Butterfield co-chairs this Designated Group along with Kevin Lee.

Notices of intent

Since October, we’ve issued one notice of intent, which is with regards to Bill C-57, federal legislation actually passed some time ago which comes into effect later this year now that final supporting regulations have been published. It provides for an insurer’s Appointed Actuary to opine on a number of matters involving participating and adjustable policies. Nick Bauer (in theory retired from the ASB) is Chair of the Designated Group, which has an ambitious timetable to publish an exposure draft by May and reach adoption of the final standard by October. The comment deadline on the notice of intent is March 31, 2011.

Other work underway

There is considerable work ongoing on several other areas, and the ASB will have a very full agenda at its upcoming meetings. The major areas are:
  • A revised exposure draft of a new standard dealing with ratemaking in P&C insurance, which is now expected for our June meeting;
  • An exposure draft dealing with amendments to the standards dealing with post-employment benefit plans, also expected for our June meeting;
  • Revisions to the life insurance standards to be submitted for final review at a special May meeting and approval at our June meeting, dealing with the use of mortality improvement in insurers’ valuations of life insurance and annuity products, as well as an associated promulgation of a scale of mortality improvement rates;
  • Revisions to the general Standards of Practice, being targeted for approval at our meeting later this month;
  • Revisions to the actuarial evidence standards, other than those dealing with marriage breakdown, for which we’ll be considering a draft notice of intent at our meeting later this month;
  • A revised exposure draft of the portion of the insurer standards dealing with dynamic capital adequacy testing (DCAT). Numerous comments were received on the original exposure draft, with changes significant enough to require a revised exposure draft, a preliminary draft of which we’ll be reviewing this month;
  • Ongoing monitoring of the developments at the International Accounting Standards Board with respect to the revisions it is making to its financial reporting standard dealing with insurance contracts (IFRS 4). This in turn has brought about increased activity on the part of the International Actuarial Association (IAA) as it looks to increase the degree of convergence of actuarial standards worldwide, develop "model" standards for consideration by member associations and standard-setters worldwide, and improve its own due process with respect to the development and adoption of such standards. Ultimately this work at the international level will have significant impact on certain of our Canadian standards. In the meantime, the Working Group established by the ASB to oversee our activity in this area has produced an outline of what standards it would consider desirable to support actuarial work in connection with the revised IFRS 4, but the end result will depend heavily on what comes from the IAA.
The request for review

There exists a process (it can be found at the Actuarial Standards Oversight Council (ASOC) website) for the review of the due process that led to a standard of practice adopted by the ASB. That process calls for a petition with a minimum of 50 signatures by FCIAs addressed to the Chair of ASOC within 90 days after adoption of a standard. Such a petition, signed by 83 members, has come forward with respect to the standard dealing with actuarial evidence work in connection with marriage breakdown. In accordance with that review process, the ASB will be preparing a report for ASOC regarding the steps taken over the years that led to the adoption of that standard. The normal timeline laid out in the review process could potentially extend over five months from the date of receipt of the petition; however, we feel that the practitioners in this area, the profession generally, and the public are better served if we’re able to assist ASOC in accelerating the process, while not sacrificing the thoroughness of the review. Whether the timeline can be beaten remains to be seen.

It’s important to note that such requests for a review with respect to a standard focus on whether due process was appropriately followed during the development and adoption of the standard, not on the standard itself. In the course of earlier public discussions about the development of the standard, the appropriateness of the due process itself was questioned. Prior to the request for the review coming forward, the ASB initiated an assessment of its due process, but we’ve now deferred any action pending the outcome of the review.

ASB membership

We were pleased to welcome an additional member, Marthe Lacroix, a property and casualty practitioner from Québec City, onto the Board effective January 1. The terms of several members expire in the next several months, and we plan to bring on three new members on July 1. A key consideration for ASOC as it appoints those new members will be balanced representation by practice area.

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

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