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April 2017
 
 

Actuarial Standards Board Update

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By Ty Faulds, FCIA

ASB Membership

The Actuarial Standards Board (ASB) is very pleased to welcome Conrad Ferguson back to our board to take over the chair role when my term ends this June. The current membership of the ASB includes Stephen Cheng, Ty Faulds (Chair), Conrad Ferguson (Vice-chair), Jacqueline Friedland, Alexis Gerbeau, Edward Gibson, Mario Marchand, Josephine Marks, Geoffrey Melbourne, Dave Oakden, Catherine Robertson, and Tony Williams, and on an ex officio basis, Pierre Dionne, the Chair of the Practice Council, and Michel Simard, Executive Director of the CIA. Please feel free to approach any of us with any suggestions or questions you might have.

General Initiatives

General Standards

The designated group’s (DG) (chaired by Paul Della Penna) exposure draft to Revisions to the General Standards (Part 1000) was published on February 8, 2017 with a comment deadline of April 30, 2017. Final standards are expected to be effective on or after August 31, 2017. As it is not expected that these changes would affect normal practice, early implementation will likely be permitted.

Peer Review

In my last update, I mentioned that the ASB had asked the DG on General Standards to look at integrating peer review into part 1000 of the standards in a way that is generally reflective of what the UK has recently done, and would make us more consistent with the International Standards of Actuarial Practice (ISAPs). As a reminder, the UK practice standards have introduced a new standard on the Review of Actuarial Work that has addressed a number of the concerns you raised when we last considered the treatment of peer reviews. The purpose of the UK standard is the following:

To set out the responsibilities of all Members in relation to the application of Work Review, which may include Independent Peer Review, to promote the quality of Actuarial Work.

After discussion with the DG, in order to ensure full due process is followed for this initiative, the ASB decided to set up a separate DG (chaired by Jacqueline Friedland). We expect to release a notice of intent on these changes shortly.

The Use of Models

Thanks to the extensive feedback received on this initiative and to the DG (chaired by Bob Howard) for their careful consideration of your suggestions, the Revisions to General Standards to Reflect the Use of Models were approved at our December 7, 2016 meeting. These were published on January 26, 2017 with an effective date of January 1, 2018. Early implementation is encouraged.

Mortality Improvements

As mentioned in my last update, the Task Force on Mortality Improvement (chaired by Alexis Gerbeau) was notified of a potential delay in the Statistics Canada publication of 2013 deaths. In order not to further delay the publication of their cross-sector report while still assessing the implications of the slowing down of mortality improvement trends observed in the UK and the U.S., the task force decided to base their analysis in part on an examination of the historical rates of mortality improvement up to 2011 in the general Canadian population data recorded in the Human Mortality Database, supplemented by additional data for the Canadian Old Age Security Program plan up to 2015. The task force’s report is expected to be released in the near future and a webcast to discuss it is planned.

Pension Initiatives

We expect to release exposure drafts for a number of pension initiatives before the Annual Meeting in June and will be discussing them there. These include the following:

  • Amendments to Section 3500 of the Practice-Specific Standards for Pension Plans – Pension Commuted Values (DG chaired by Gavin Benjamin);
  • Revisions to Subsection 3260 of the Practice-Specific Standards for Pension Plans – Reporting: External User Report; Advice on the Funded Status or Funding of a Pension Plan (DG chaired by Geoffrey Melbourne); and
  • Amendments to Establish Standards of Practice in respect of Calibration of Stochastic Models used for the Purposes of Certification of Pension Plan Funding Requirements (new Subsection 3270 Stochastic Modelling) (DG chaired by Todd Saulnier).

We would appreciate your feedback on these proposed changes as they are released.

In addition, we expect to release a notice of intent to Incorporate the Principles of ISAP 3 – International Accounting Standards (IAS) 19 Employee Benefits into the Canadian Standards of Practice (DG chaired by Catherine Robertson). This model standard includes a level of detail not normally found in our standards which we will be discussing how best to handle with the DG.

The ASB will consider whether changes should be made in the mortality improvement guidance for pension commuted value and marriage breakdown after we review the task force’s report.

A DG focused on assumptions underlying marriage breakdown capitalized costs is expected to be formed in the near future after enough progress has been made on pension commuted values.

Insurance Initiatives

With many thanks to the DG chaired by Josephine Marks, the revisions to the Practice-Specific Standards for Insurance (Part 2000) arising from our quinquennial review was published on February 3, 2017 with an effective date of April 15, 2017. Early implementation of this standard is permitted. With this behind us, we are now well-positioned to release initial communications and exposure drafts for a number of the insurance initiatives before the Annual Meeting in June and will be discussing them there. These include the following:

  • An initial communication for the revision of the Promulgation of Prescribed Mortality Improvement Rates and Associated Margins for Adverse Deviations within the Practice-Specific Standards on Insurance Contract Valuation: Life and Health Insurance (DG chaired by Dominic Hains).
  • An exposure draft to incorporate changes as a result of the new Life Insurance Capital Adequacy Test guideline from the Office of the Superintendent of Financial Institutions and the corresponding Capital Adequacy Requirements Guideline for Life and health insurance from l’Autorité des marchés financiers (DG chaired by Stéphanie Fadous).
  • An initial communication for the revision of the Promulgations of the Ultimate Reinvestment Rates and Calibration Criteria for Stochastic Risk-Free Interest Rates in the Standards of Practice for the Valuation of Insurance Contract Liabilities: Life and Health (DG chaired by Jean-Yves Rioux).
  • An initial communication for the revision of the Promulgation of Calibration Criteria for Equity Returns Referenced in the Standards of Practice for the Valuation of Insurance Contract Liabilities: Life and Health (DG chaired by Dean Stamp).

I have discussed these initiatives in more detail in my previous updates and look forward to your feedback on the proposed changes when they are released.

Public Personal Injury Compensation Plans

Earlier this year, the ASB formed a DG to review Part 5000 – Public Personal Injury Compensation Plans (PPICP) as it has been more than five years since this standard was reviewed. The primary goals of this DG will be to provide additional clarity and broaden the scope of the section to provide more complete and appropriate information to the stakeholders to enable more informed decision making. The review will also consider possible inconsistencies with other standards and the potential impact of IFRS 17. Recruiting for this DG is underway and is expected to be completed shortly.

International Developments

The ASB remains committed to converging to the model standards (ISAP’s) released by the International Actuarial Association (IAA) and, in addition, to the update on peer review (convergence to ISAP 1) and notice of intent to incorporate the principles of ISAP 3 mentioned above; the release of the Final Standards of Practice – Establishment of Social Security Practice-Specific Standards (Part 7000) (DG chaired by Ed Gibson) on March 1 with an October 15, 2017 effective date was another major step toward this goal. Early implementation of this standard is permitted.

While the IAA just released ISAP 1A – Governance of Models on November 21, 2016, the development of this standard was closely followed as we developed the changes to our standards reflecting the use of models. We consider our standards substantially converged to this model standard and do not plan on making any further changes at this point.

The IAA also released ISAP 5 – Insurer Enterprise Risk Models on November 21, 2016. The ASB will consider any changes required to converge to this model standard during the ASB’s next planning cycle.  

Ty Faulds, FCIA, is Chair of the Actuarial Standards Board.

 

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