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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

 

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