Announcements

Call for Volunteers to Represent CIA on IAA Committees

The CIA is seeking volunteers to serve as its representatives on the following International Actuarial Association (IAA) committees:
The terms of reference for these committees can be found at the IAA website.

We are looking for members who possess excellent collaboration skills, can fairly represent the interests of the Canadian actuarial profession, and can bring energy and enthusiasm to their assignment. Successful applicants will be expected to make a three- to five-year commitment to this role.

The CIA representative on each committee would be expected to perform the following roles:
  1. Participate in the work of the committee;
  2. Be prepared to travel internationally, probably twice a year, to participate in committee meetings; and
  3. Participate in conference calls in advance of and following each IAA meeting.
As well, the representative will be expected to secure a sponsor (such as an employer) to fund any travel expenses.

Interested members are asked to contact CIA resident actuary Chris Fievoli at chris.fievoli@actuaries.ca by January 31, 2013. Applicants will be reviewed by a selection committee, who will then determine who is chosen.

Contact with Questions: Chris Fievoli at chris.fievoli@actuaries.ca

Press Release: CIA Pleased Retirement Savings are Back on Agenda

In the wake of the finance ministers’ meeting on December 16–17, 2012, the CIA issued a press release concerning the importance of retirement savings.

To read the full text, please click on the link below.


Link: http://www.actuaries.ca/members/publications/2012/212109e.pdf

Contact with Questions: Josée Racette, project manager, communications and public affairs, at josee.racette@actuaries.ca

Educational Note – Future Income and Alternative Taxes

The attached educational note was approved by the Practice Council on October 3, 2012, and applies to the insurance contract liabilities of all contracts written by life insurers. The key topics discussed are insurance contract-related tax cash flows, insurance contract-related balance sheet items, recoverability, and tax-preferred assets relevant to the valuations of both direct written business and reinsurance received.

Link: http://www.actuaries.ca/members/publications/2012/212096e.pdf

Contact with Questions: Edward Gibson, Chair, Committee on Life Insurance Financial Reporting, at edward.gibson@empire.ca.

Draft Educational Note – Alternative Settlement Methods for Hypothetical Wind-Up and Solvency Valuations

The attached draft educational note was approved by the Practice Council on December 14, 2012. It contains guidance on alternative settlement methods for pension plans with very large liabilities, and for certain plans where it may not be possible to purchase annuities due to capacity limits in the Canadian group annuity market. The Actuarial Standards Board is proposing revisions to the Standards of Practice which would complement the methodologies proposed in this draft educational note.

Link: http://www.actuaries.ca/members/publications/2012/212107e.pdf

Contact with Questions: Gavin Benjamin, Chair, Committee on Pension Plan Financial Reporting, at gavin.benjamin@towerswatson.com

Deadline Extended: Notice of Intent – Amendment to the Practice-Specific Standards for Pension Plans – Assumptions for Hypothetical Wind-Up and Solvency Valuations

In conjunction with the release of the draft educational note Alternative Settlement Methods for Hypothetical Wind-Up and Solvency Valuations, the Actuarial Standards Board has extended the deadline for comments on the notice of intent (NOI) entitled Assumptions for Hypothetical Wind-Up and Solvency Valuations. This NOI proposes revisions to the Standards of Practice which would complement the methodologies proposed in the draft educational note. The new comment deadline is January 29, 2013.

Link: http://www.actuaries.ca/members/publications/2012/212084e.pdf

Contact with Questions: Michael Banks, Chair, Designated Group, at michael.banks@mercer.com

Educational Note: Determination of Best Estimate Assumptions for Investment Return (PPICP)

The attached educational note was approved by the Practice Council on October 3, 2012. It reflects relevant changes in the Public Personal Injury Compensation Plans Standards of Practice effective March 15, 2011, and is intended to assist actuaries in selecting best estimate assumptions for the investment return for the purpose of setting discount rates for the valuation of the benefits liabilities of a public personal injury compensation plan.

Link: http://www.actuaries.ca/members/publications/2012/212106e.pdf

Contact with Questions: Stan Warawa, Chair, Committee on Workers’ Compensation, at stan.warawa@worksafebc.com

Highlights from the November 28, 2012, Board Meeting

The highlights from the most recent Board meeting, held on November 28, 2012, are now available. To view the document, please access the link below.

Link: http://www.actuaries.ca/members/publications/2012/212108e.pdf

Contact with Questions: Michel Simard, CIA Executive Director, at executive.director@actuaries.ca

CPD Deadline Coming Fast

For those of you waiting to see what is going to happen to the world on December 21 before meeting their Continuing Professional Development (CPD) requirement for 2011-2012, this is a friendly reminder that you will have only 10 days left after that date to accrue any more necessary hours. Compliance with the Institute’s Qualification Standard with respect to CPD is a prerequisite for members to provide actuarial services, and the minimum requirement is 100 hours over a two-year calendar period, with at least the following:
To complete your CPD records, see the CPD Information Tracking Tool. For more information, visit My CPD (please ensure you are logged into the Members Site).

As you fill in your CPD record, please pay attention to the following rules of thumb:
The Committee on Eligibility is revamping the CPD Information Tracking Tool, so any comments on how the tool could be improved are welcome and should be sent to Leona Campbell as per her contact info below.

Please note that the compliance statement filing period opens on January 1, 2013.

Tracking tool: http://www.actuaries.ca/members/toolkit/update_cpd_info_e.cfm
My CPD: http://www.actuaries.ca/members/professional/my_cpd_e.cfm
CPD Q&A: http://www.actuaries.ca/members/publications/2009/209002e.pdf

Contact with Questions: Leona Campbell, coordinator, eligibility and education, at leona.campbell@actuaries.ca. Tel: 613-236-8196 ext. 124; fax: 613-233-4552

2012 ERM Symposium Monograph Released


A monograph of the papers presented at the 2012 Enterprise Risk Management (ERM) Symposium has been released, featuring award-winning essays on such subjects as ERM stochastic analysis tools and an approach to analyzing the impact of risk treatment alternatives.


The monograph, which can be obtained from the Society of Actuaries (SOA) at the link below, also includes papers on topics like ERM for non-financial companies, policyholder behaviour, flaws in operational risk management for insurance, and weaknesses in regulatory capital models.

Link: click here

Contact with Questions: Barbara Scott at the SOA at bscott@soa.org

Minor Revision to Standards: Harmonization of the Appointed Actuary’s Report with IASB (IAS 1) Terminology

The attached minor revision to the Standards of Practice was approved by the Actuarial Standards Board on November 28, 2012. The wording of the Appointed Actuary’s Report (paragraph 2140.17) and the related definitions (subsection 1110, paragraphs .27.2 and .35) have been modified to reflect the terminology of the International Accounting Standards Board’s (IASB) International Accounting Standard (IAS 1) Presentation of Financial Statements. The entire Standards of Practice will be reviewed at a later date to ensure consistency with IASB terminology.

Link: http://www.actuaries.ca/members/publications/2012/212105e.pdf

Contact with Questions: Marthe Lacroix, Chair, Designated Group, at marthe.lacroix@lacapitale.com

International Actuarial Association Section Membership Dues


The CIA is once again collecting membership dues on behalf of all sections of the International Actuarial Association (IAA): AFIR/ERM, ASTIN, AWB, IAAHS, IACA, LIFE, and PBSS. Below is a link to the 2013 IAA section dues subscription form.

Anyone wishing to join any of the IAA sections must complete the attached form and submit the appropriate amount in dues. If you have already paid your section dues for this year through another association, please do not submit them again. You may contact Lidia Frassine (see below) to ensure that your payment has been recorded.

Link: click here

Contact with Questions: Lidia Frassine at 613-236-8196 ext. 102 or by e-mail at lidia.frassine@actuaries.ca

Submission: IAA Educational Monograph on Discount Rates

The Canadian Institute of Actuaries presented its comments to the International Actuarial Association (IAA) on the exposure draft of the educational monograph Issues Associated with the Determination of Discount Rates for Financial Reporting Purposes.

Link: http://www.actuaries.ca/members/publications/2012/212103e.pdf

Contact with Questions: Micheline Dionne, Chair, Committee on International Relations, at mdionne@rgare.ca

Educational Note Supplement: Guidance for Assumptions for Hypothetical Wind-Up and Solvency Valuations Update – Effective September 30, 2012 and Applicable to Valuations with Effective Dates between September 30, 2012, and December 30, 2012

Background: Previous Guidance

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 supplement dated August 16, 2012. That guidance concluded that for valuations with effective dates on and after June 30, 2012, an appropriate discount rate for estimating the cost of purchasing a non-indexed group annuity would be determined as the unadjusted average yield on Government of Canada (GoC) marketable bonds with maturities over 10 years (CANSIM series V39062) increased arithmetically by 80 bps, in conjunction with the UP94 generational mortality tables. That guidance applied to both immediate and deferred pensions and also applied regardless of the overall size of a group annuity purchase.

Methodology

The guidance published on August 16, 2012, as to estimated purchase costs for non-indexed group annuities was partially based on quotes provided by seven insurance companies on illustrative group annuities using pricing conditions as at June 30, 2012, and supplemented by data from certain actuarial consulting firms on actual group annuity purchases during the second quarter of 2012.

Analysis

In an effort to continue to monitor group annuity pricing, the PPFRC obtained illustrative quotes on a similar basis to those obtained at June 30, 2012, but based on pricing conditions as at September 30, 2012. The illustrative non-indexed quotations at June 30, 2012, and September 30, 2012, may be summarized as follows:

AVERAGE OF THE THREE MOST COMPETITIVE QUOTES
(USING UP94 GENERATIONAL MORTALITY TABLES)
  Large Purchase
Small Purchase
  30/06/2012
30/09/2012
30/06/2012
30/09/2012
Retirees
       
• Discount rate
2.98%
2.86%
3.05%
2.94%
• Spread over CANSIM V39062
+ 0.73%
+ 0.64%
+ 0.80%
+ 0.72%
Deferred vesteds
       
• Discount rate 
3.25%
3.21%
3.31%
3.23%
• Spread over CANSIM V39062
+ 1.00%
+ 0.99%
+ 1.06%
+ 1.01%

If considered in isolation, over the three-month period, the illustrative quotes show a decrease which may be up to approximately 10 bps in the spread of the discount rates over the unadjusted average yield on GoC marketable bonds with maturities over 10 years (CANSIM V39062), in conjunction with the UP94 generational mortality tables.

The pricing information for the actual group annuity purchases for non-indexed pensions in the third quarter of 2012 that was available to the PPFRC produced an average spread which was approximately 70 bps above the prevailing unadjusted average yield on GoC marketable bonds with maturities over 10 years (CANSIM V39062).

As a result, the PPFRC concluded that, effective September 30, 2012, a revision to the guidance contained in the educational note supplement published on August 16, 2012, is appropriate.

Guidance for Non-indexed Pensions

Based on the analysis described above, the PPFRC has concluded that, for valuations with effective dates on and after September 30, 2012, an appropriate discount rate for estimating the cost of purchasing a non-indexed group annuity would be determined as the unadjusted average yield on GoC marketable bonds with maturities over 10 years (CANSIM series V39062) increased arithmetically by 70 bps, in conjunction with the UP94 generational mortality tables. 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 September 30, 2012, up to December 30, 2012, pending any further guidance or other evidence of change in annuity pricing.

Example

As at September 30, 2012, the unadjusted CANSIM V39062 rate was 2.22%. This rate would form the basis for developing an appropriate underlying discount rate for valuations of non-indexed group annuities with effective dates of September 30, 2012. Prior to rounding, an applicable underlying discount rate would then be determined as 2.22% + 0.70% = 2.92%.

Guidance for Indexed Pensions

The data regarding the pricing of annuities indexed to the Consumer Price Index (CPI) continue to be extremely limited. Only one actual annuity purchase during the first three quarters of 2012 pertained to indexed annuities. In most cases, the contributing insurers did provide illustrative quote data for the sample blocks on a CPI-indexed basis. It may be noted that the premiums quoted for the illustrative quotes on this and prior occasions are substantially higher than the guidance provided by prior educational notes. The PPFRC is in the process of conducting further research regarding the pricing of indexed annuities. This research may result in the revision of future guidance for estimating the cost of purchasing indexed annuities.

Until any revised guidance is issued, the guidance for estimating the cost of purchasing indexed annuities contained in the May 24, 2012, educational note continues to apply.

Validity of May 2012 Educational Note

With the exception of the revisions to the guidance contained in this educational note supplement, actuaries would continue to reference the May 24, 2012, educational note for guidance with respect to the selection of assumptions for hypothetical wind-up and solvency valuations with effective dates between September 30, 2012, and December 30, 2012.

Actual Annuity Pricing

The purpose of this educational note supplement is to provide actuaries with guidance related to the establishment of assumptions for hypothetical wind-up and solvency valuations. It is worth noting that the pricing for an actual group annuity purchase depends on many factors, with the result that the actual price may differ from the guidance provided herein. Some of the factors that may affect pricing of a particular purchase include, but are not limited to:
Link: http://www.actuaries.ca/members/publications/2012/212104e.pdf

Contact with Questions: Gavin Benjamin, Chair, Committee on Pension Plan Financial Reporting, at gavin.benjamin@towerswatson.com

Educational Note – Guidance for the 2012 Valuation of Insurance Contract Liabilities of Life Insurers


The attached educational note was approved by the Practice Council on November 1, 2012. It provides guidance to actuaries in several areas affecting the valuation of the 2012 year-end insurance contract liabilities of life insurers for Canadian Generally Accepted Accounting Principles purposes, and includes an update on recently published experience studies.

Link: http://www.actuaries.ca/members/publications/2012/212102e.pdf

Contact with Questions: Edward Gibson, Chair, Committee on Life Insurance Financial Reporting, at edward.gibson@empire.ca