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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 previous report for the (e)Bulletin in March.

Approved Final Standards

As I prepared to write this piece, I was surprised to realize that we had approved five new or revised standards since the last article!

Probably the quickest standard ever to move through the ASB from start to finish was the addition to the insurance Standards of Practice arising from federal Bill C-57 dealing with fairness opinions given by insurers’ appointed actuaries. It moved from the notice of intent published February 14 (yes, this year) through the exposure draft stage and then on to publishing of the final standard on September 7. Thanks to Nick Bauer and his designated group for their speedy work.

One that hadn’t moved quite as quickly was that dealing with recognizing events in work. It had proved to be quite complex, in part because it crosses all practice areas, but we were pleased to approve and publish the final standard (prepared by the designated group co-chaired by Stephen Butterfield and Kevin Lee) in September.

Another standard that had taken some time to complete was that dealing with mortality improvement in the valuation of insurer liabilities. Finally it and the associated promulgated mortality improvement scale assumption were approved and published in July. Our thanks go to the Committee on Life Insurance Financial Reporting (CLIFR), which was the designated group involved in putting that together.

As well, the ASB had established a designated group chaired by John Brierley to undertake a limited-scope review of the General Standards of Practice. The result of their work, following an exposure draft in 2010, was approved and published in May.

Finally, the ASB undertook, through a designated group chaired by Jacques Tremblay, a review of the Dynamic Capital Adequacy Testing (DCAT) standard. This went through two exposure drafts, and the final was approved by the ASB at its meeting on October 19. It will be published shortly.

As well, as stated in the last article, there had been a request for review submitted to the Actuarial Standards Oversight Council (ASOC) regarding whether due process had been followed in the preparation of the revised standard for actuarial evidence work dealing with marriage breakdown that had been approved by the ASB late last year. ASOC determined that due process had been followed. During the period of the review, the ASB had deferred the original effective date of the standard; following the completion of the review, it set January 1, 2012 as the effective date.

Exposure Drafts

Three exposure drafts have been approved for publication since March. Two of them (dealing with Bill C-57 and DCAT) led quickly to final standards being approved, as discussed above. The third one was a revised exposure draft dealing with ratemaking in the property and casualty insurance area. The ASB and the associated designated group, chaired by Shams Munir, look forward to comments on that draft, but quickly—the comment deadline is October 31!

Notices of Intent

Since March, we’ve issued two notices of intent. One dealt with revisions to the actuarial evidence Standards of Practice other than those dealing with marriage breakdown. Nancy Yake is chair of that designated group. It received a number of good comments, and is commencing work on an exposure draft that the ASB expects to see in the first quarter of 2012.

The second is a proposal to add a section to our general standards on modelling. This designated group is chaired by Richard Gauthier; it too looks forward to comments very soon on the notice of intent, as the deadline there as well is October 31. Given that this is a new area of the Standards of Practice, member comments at this stage are particularly important to help shape their direction.

Our Due Process

The ASB has undertaken a review of its due process. A draft of proposed changes was run by the ASOC, CIA Board, and CIA Practice Council, and then re-discussed and further modified by the ASB at its October 19 meeting. We intend to tentatively approve (subject to final consultation with the ASOC) a revised due process at our November 30 meeting. The proposed revised due process, in both clean form and marked up relative to current due process, is available here (clean) and here (marked up).

The degree of mark-up might look intimidating at first, but the two principal themes of the proposed changes are getting the process for each proposed standard off to a good start (in part through requiring more upfront from the designated group proposing a notice of intent) and providing more definition regarding consultation throughout the process. Any further comments or suggestions from the CIA membership (it’s also undergoing legal review) are welcome by November 15.

Strategic Direction

Our terms of reference require us to review our strategic direction annually. At our October 19 meeting, the ASB approved the document on its strategic direction through 2012, and it is now available here. This approval followed consultation on a preliminary draft with the ASOC, CIA Board, the Practice Council and its committees, and the regulatory community in Canada.

ASB Membership

Rotating off the board on June 30 was John Brierley, who deserves our thanks for his strong contribution (most recently on the revisions to the General Standards of Practice) during his four years on the ASB.

Moving effective July 1 from an ex officio role into the status of voting member of the ASB is Ty Faulds, previously Chair of the Practice Council. And we were delighted to welcome effective July 1 two new members to the ASB, Jay Jeffery and Luc Farmer, both of whom have proven to be good, active participants already.

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

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