CIA (e)Bulletin/(e)Bulletin de l'ICA
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May 2017
 
 

Practice Council Update: Reflections on the Past Two Years

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By Pierre Dionne, FCIA

As my term as Chair of the Practice Council comes to a close, I cannot help but reflect on the last two years, and all the work that was accomplished.

Besides the usual quarterly and yearly papers we put out, namely the quarterly Guidance for Hypothetical Wind-Up and Solvency Valuations and the yearly Guidance for the Valuation of Insurance Contract Liabilities of Life Insurers and the Guidance to the Appointed Actuary for Property and Casualty Insurers, we got involved in a few special projects. First and foremost was writing guidance around the new modelling standard.

The Educational Note – Use of Models was published in its final form this past January.  A multi-disciplinary task force worked on this for several years. Although the initiative from the Actuarial Standards Board (ASB) to strengthen our standards around modelling was not popular in some circles of the CIA, I already discussed in a prior (e)Bulletin (December 2015) why this is probably an overdue improvement. The aim was to publish a no-nonsense educational note showing that most of this work is already being done, but maybe not being documented to an appropriate degree. The task force now being disbanded, should you have any questions on this educational note, feel free to reach out directly to any members of the Practice Council or the chair of your respective professional or practice committee.

ORSA Survey

In April 2015, the Committee on Risk Management and Capital Requirements (CRMCR) sent out a survey on the involvement of actuaries in the Own Risk and Solvency Assessment (ORSA) process. The results of the survey were published in April 2016 and included several recommendations for future research. Shortly thereafter, a research paper on Risk Aggregation and Diversification was published, also in April 2016. You can expect other research papers to be published in the coming years, as the CRMCR and the newly established Enterprise Risk Management Practice Committee work in concert with the Research Executive Committee to identify, write, and publish other papers in areas of interest.

Educational Notes and Educational Supplements

Over the last two years, a dozen other educational notes or educational supplements were published in the pension, workers compensation, life, and property and casualty (P&C) areas. For educational notes involving a high level of calculations, we have also adopted the habit of publishing an Excel spreadsheet demonstrating how the calculations are done, something that had not been done before.

IFRS 17 and LICAT

Looking towards the future, the International Accounting Standards Board (IASB) should finally be publishing, at the time of writing this article, the final version of its insurance accounting standard, now referred to as IFRS 17. This new accounting standard will have a major impact on both life and P&C insurers. The International Relations Council (IRC) has been keeping a close eye on this. Although the Practice Council has not been active on this file, several members of our committees are sitting on the IRC’s committees. As soon as IFRS 17 is finalized and published, the Practice Council will be hard at work producing guidance to help actuaries understand and implement the new accounting standard.

In the shorter term, there will be some guidance coming out on the new Life Insurance Capital Adequacy Test (LICAT). Although published by the Office of the Superintendent of Financial Institutions (OSFI), many committees were involved with reviewing early drafts, and responding to the official draft publication on behalf of the CIA, under very tight deadlines. Further discussions will also be held with regulators to rationalize the Dynamic Capital Adequacy Testing (DCAT) and ORSA.

New Publications

By the time this article gets published, several research papers or educational note supplements should have been recently published, explaining the basis for initial communication on several promulgations by the Actuarial Standards Board (ASB). These include a Promulgation of Prescribed Mortality Improvement Rates for Life and Health Insurance Contract Valuations, a Promulgation of Calibration Criteria for Equity Investment Returns for Life and Health Insurance Contract Valuations, and a Promulgation of the Ultimate Reinvestment Rates, and Calibration Criteria for Stochastic Risk-Free Interest Rates for Life and Health Insurance Contract Valuations.

Pension practitioners can also look forward to several papers to be published in the next few years, providing guidance on current ASB initiatives. These include increased disclosure requirements and calibration criteria for pension stochastic models.

Thanks to Our Volunteers

Of course, all this work would not have been possible without the hundreds of volunteers working on the Practice Council and its numerous committees. Volunteering, although sometimes demanding on one’s time, is ultimately an extremely rewarding experience, and a great way to accumulate continuing professional development hours, establish a peer network, and have fun! If you have not volunteered in the past, I strongly encourage you to do so. We are always looking for dedicated, professional members to contribute, both new Fellows and seasoned professionals. Give it a try; you will not regret it.

Pierre Dionne, FCIA, is Chair of the Practice Council.

 

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