Announcements

Wanted: Student Sponsors!

The CIA is once again trying to help Jeunes Explorateurs d’un jour link up with Institute members who would like to invite a student to spend a day with them in their office. Twenty Québec high school or CEGEP students have expressed an interest in visiting actuaries for the day on April 18.

The Institute is trying to find a placement for students in the following places:
If you are interested in sponsoring one or more of these students, please visit www.jeunes-explorateurs.org or contact Jean-David Tremblay at 418-643-3673, or at jean-david.tremblay@jeunes-explorateurs.org. We ask that you also let the CIA Head Office know that you have volunteered by contacting Josée Gonthier at 613-236-8196 ext. 106.

Contact with Questions: Josée Gonthier, French editor, at 613-236-8196 ext. 106 or josee.gonthier@actuaries.ca

Exciting Volunteer Opportunity – Task Force on Mentoring

Are you interested in:
If you answered YES to any of the above, you should consider volunteering for the Task Force on Mentoring.

The task force, chaired by Sharon Giffen, FCIA, and supported by the membership, education, and professional development department, is looking for three to five additional members (Fellows and Associates) to help build the CIA’s inaugural mentoring program.

Volunteers are required to help build the parameters of the program, and to help recruit mentors and protégés between now and June 2013. They may also participate in the pilot program as a mentor or protégé, beginning in September 2013 and continuing until June 2014.

This is an exciting, short-term opportunity to contribute to the CIA and to help members reach their career development goals. If you are interested, please contact: Alicia Rollo, CHRP, director of membership, education, and professional development, at alicia.rollo@actuaries.ca; or Sharon Giffen at sgiffen@foresters.com.

Contact with Questions: Alicia Rollo, CHRP, director of membership, education, and professional development, alicia.rollo@actuaries.ca

AcSB Staff Financial Reporting Commentary, "Reporting Employee Future Benefits by Not-for-Profit Organizations"

In January 2013, the Canadian Accounting Standards Board (AcSB) staff issued the financial reporting commentary, "Reporting Employee Future Benefits by Not-for-Profit Organizations." It discusses details on a proposed new standard to be developed on this topic for not-for-profit organizations and what to do until it is finalized. It is available here.

Contact with Questions: Nancy Estey, principal, AcSB, at nancy.estey@cica.ca

Canadian Individual Critical Illness Insurance Morbidity Experience Between Policy Anniversaries in 2002 and 2007 Using Expected CIA Incidence Tables From July 2012


This is the first report submitted by the Individual Living Benefits Experience Subcommittee of the CIA Research Committee detailing the intercompany morbidity experience for Canadian individual critical illness (CI) insurance policies.

Links:
Study
Tables

Contact with Questions: Benoit Miclette, Chair, Individual Living Benefits Experience Subcommittee, at bmiclette@rgare.ca

Educational Note Supplement: Guidance for Assumptions for Hypothetical Wind-Up and Solvency Valuations with Effective Dates between December 31, 2012, and December 30, 2013

INTRODUCTION

The purpose of this memorandum is to provide preliminary guidance from the Committee on Pension Plan Financial Reporting (PPFRC) for estimating the cost of purchasing group annuities for purposes of hypothetical wind-up and solvency valuations with effective dates of December 31, 2012, and later (but no later than December 30, 2013). Since this guidance may have an effect on valuations currently in preparation with an effective date of December 31, 2012, or later, the guidance is being released on an expedited basis in advance of formal approval by the Practice Council of a planned educational note.

BACKGROUND: PREVIOUS GUIDANCE

An educational note was published in May 2012 on assumptions for hypothetical wind-up and solvency valuations with effective dates between December 31, 2011, and December 30, 2012. Over the course of 2012, the PPFRC reviewed its guidance on the cost of purchasing group annuities on a quarterly basis. The most recent update to the guidance was contained in an educational note supplement issued on December 4, 2012, and was effective as of September 30, 2012. That guidance 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 Government of Canada (GoC) marketable bonds with maturities over 10 years (CANSIM series V39062) increased arithmetically by 70 basis points (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

This guidance is partially based on quotes provided by eight insurance companies on illustrative group annuity business using pricing conditions at December 31, 2012. These data were collected on the same basis as the illustrative quotes as of December 31, 2011 (as described in the May 2012 educational note), and the methodology used is consistent with the methodology adopted as of each quarter end in 2012. The illustrative quote information was supplemented with data on the pricing of actual group annuity purchases during the fourth quarter of 2012 provided by certain actuarial consulting firms.

ANALYSIS

The results of the illustrative non-indexed quotations at December 31, 2012, based on the UP94 generational mortality tables, are summarized below and compared to the previous illustrative quote information provided by the insurers as at September 30, 2012.

AVERAGE OF THE THREE MOST COMPETITIVE QUOTES
(USING UP94 GENERATIONAL MORTALITY TABLES)
  Large Purchase
Small Purchase
  30/09/2012
31/12/2012
30/09/2012
31/12/2012
Retirees
       
• Discount rate
2.86%
2.86%
2.94%
3.01%
• Spread over CANSIM V39062
+ 0.64%
+ 0.60%
+ 0.72%
+ 0.75%
Deferred vesteds
       
• Discount rate
3.21%
3.14%
3.23%
3.24%
• Spread over CANSIM V39062
+ 0.99%
+ 0.88%
+ 1.01%
+ 0.98%
Combined
       
• Discount rate
2.95%
2.92%
3.14%
3.15%
• Spread over CANSIM V39062
+ 0.73%
+ 0.66%
+ 0.92%
+ 0.89%

If considered in isolation, over the three-month period ending December 31, 2012, the illustrative quotes may indicate a slight decrease 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 actual group annuity purchase data obtained by the PPFRC for the fourth quarter of 2012 were also considered. In particular, the data on the actual purchases of non-indexed annuities during the months of November and December 2012 that were available to the PPFRC produced an average spread of approximately 75 bps above the prevailing unadjusted yield on GoC long-term bonds (CANSIM series V39062).

While the illustrative quotes do indicate differences in the pricing for immediate and deferred annuities, some of the insurers provide their quotes on the basis that the immediate and deferred annuities are comingled in the same purchase. As such, the illustrative quotes are also shown above on a combined basis. It is recommended that this information be interpreted with caution as the actual weighting between retirees and deferred annuitants can vary by annuity purchase. In particular, the illustrative group for the small annuity purchase includes a high portion of deferred annuitants. (Information on the characteristics of the illustrative quotes can be found in the May 2012 educational note.) As a result, and based on both the illustrative quotes and the actual group annuity data, the PPFRC has concluded that it would not be appropriate at this time to differentiate the guidance on pricing of group annuities for large and small annuity purchases, and immediate and deferred annuities.

GUIDANCE FOR NON-INDEXED PENSIONS

Based on the analysis described above, the PPFRC has concluded that, for valuations with effective dates on and after December 31, 2012, but no later than December 30, 2013, 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 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.

Example

As at December 31, 2012, the unadjusted CANSIM V39062 rate was 2.26%. This rate would form the basis for developing an appropriate underlying discount rate for valuations of non-indexed group annuities with effective dates of December 31, 2012. Prior to rounding, an applicable underlying discount rate would then be determined as 2.26% + 0.70% = 2.96%.

GUIDANCE FOR INDEXED PENSIONS


As in prior years, data regarding the pricing of actual annuities indexed to the Consumer Price Index (CPI) are extremely limited. 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 for the illustrative quotes on this and prior occasions are substantially higher than the guidance provided by prior educational notes.

The PPFRC is conducting further research regarding the pricing of indexed annuities. The analysis includes confirmation as to whether the insurers would be willing to actually transact on the basis reflected in the illustrative annuity quotes. This research may result in the revision of future guidance for estimating the cost of purchasing indexed annuities.

Accordingly, an acceptable proxy for estimating the cost of purchasing a group annuity where pensions are fully indexed to the rate of change in the CPI would be the unadjusted yield on GoC real-return long-term bonds (CANSIM series V39057) 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.

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 2012 educational note and other relevant educational notes.

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:
ADDITIONAL COMMENTS

The PPFRC is preparing its annual educational note on this topic reflecting the above analysis.

The PPFRC intends to continue monitoring group annuity pricing on a quarterly basis. Actuaries may use the spreads indicated above for valuations with effective dates on and after December 31, 2012, up to December 30, 2013, pending any future guidance or other evidence of change in annuity pricing.

The PPFRC is reviewing several aspects of group annuity purchase pricing which may result in future revisions to its guidance. In particular:
It may be noted that the spreads versus GoC long-term bonds for group annuity pricing have been volatile during the past three to four years. Actuaries may wish to be mindful of this volatility when communicating advice related to future hypothetical wind-up and solvency valuations.

The PPFRC would like to express its gratitude to BMO Insurance, The Co-operators, Desjardins Financial Security, Great-West Life, Industrial Alliance, Manulife, Standard Life, and Sun Life Financial for providing the committee with the data required to issue this guidance.

Link: http://www.actuaries.ca/members/publications/2013/213010e.pdf

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

ERM Symposium Registration Goes Live

Members can now register for the Enterprise Risk Management (ERM) Symposium online. Information about the symposium sessions and speakers is available as well as material on the pre-symposium seminars.

Link: http://www.ermsymposium.org/2013/index.php

Contact with Questions: Les Dandridge, director, communications and public affairs, at les.dandridge@actuaries.ca

CIA Advertising Campaigns


The CIA is launching two advertising campaigns this year. The first is aimed at online readers of the Financial Post (FP), debuting today, La Presse (beginning February 25) and subscribers to a newsletter from Les affaires.com (distributed at the end of March). These ads and features will stay in place 24/7 until the end of March.

There are a number of animated ads that appear on pages of the FP that lead visitors to either the Leadership in HR or Risk Management sections. On these pages, there are more animated ads, and links to several CIA website pages and documents.

In addition, two articles are being written and posted to the pages, one on risk governance featuring Minaz Lalani, and one on actuarial evidence actuaries with Maryse Larouche.

La Presse will have a number of the CIA’s animated ads and the Institute will have prime locations on a dozen La Presse electronic newsletters that will be circulated over the next six weeks.

Another element of this campaign is with Les affaires.com, which circulates a newsletter to 10,000 subscribers. We have an opportunity to fill this newsletter with stories and content on the profession.

Finally, we are going to be advertising in English and French media aimed at lawyers (details still being refined). The intent is to make sure that lawyers become familiar with actuaries and what actuarial evidence actuaries can deliver for them. Stay tuned for more details.

Link:
Risk Management

Contact with Questions: Les Dandridge, director, communications and public affairs, at 613-236-8196 ext. 114 or les.dandridge@actuaries.ca

Final Standards for Practice-Specific Standards on Insurance Contract Valuation (Section 2300) to Narrow the Range of Practice on Certain Elements

The attached final standards were approved by the Actuarial Standards Board on January 31, 2013. The revisions clarify the standards in certain areas of life and health insurance contract valuation, specifically with regard to assumptions for non-fixed income asset classes where reliable historical data are not available, considerations where regulatory approval is required on adjustable products, and policyholder behaviour assumptions.

The effective date of the final standards is March 15, 2013.

Links:
Memorandum
Standards of Practice

Contact with Questions: Ty Faulds, Chair, Designated Group, at ty.faulds@londonlife.com

Final Standards – Introduction of Standards Relating to Appointed Actuary Opinions with Respect to Use of Internal Models to Determine Required Capital for Segregated Fund Guarantees

The attached final standards were approved by the Actuarial Standards Board on January 31, 2013. They provide model wording for the Appointed Actuary opinion relating to models used to determine required capital for segregated fund guarantee risks, clarifying that the actuary would be opining on the compliance with the requirements of the regulator.

The effective date of the final standards is February 7, 2013.

Links:

Memorandum
Standards of Practice

Contact with Questions: Stephen Haist, Chair, Designated Group, at shaist@eckler.ca

Revised Policy on Due Process for the Approval of Guidance Material other than Standards of Practice

This document, which was recently revised by the Practice Council, describes the Institute’s process for the approval of guidance material, other than Standards of Practice (i.e., educational notes, educational note supplements, research papers, and committee and task force reports), and outlines the roles and responsibilities of the Practice Council, Actuarial Standards Board, and committees and task forces that develop the guidance material.

Link: http://www.actuaries.ca/members/publications/2013/213006e.pdf

December 2012 Risk Management Newsletter Now Available in Both Official Languages

The CIA has just produced a French version of the Risk Management Newsletter and it is now available in both official languages on the Society of Actuaries (SOA) website. The Joint Risk Management Section is sponsored by the CIA, the Casualty Actuarial Society, and the SOA to promote education and research in the area of enterprise risk management (ERM) and to establish leading risk management techniques.


Link: click here


Contact with Questions: Les Dandridge, director, communications and public affairs, at les.dandridge@actuaries.ca

Invitation to Small-Firm Practitioners: Monthly Meeting in Milton, ON

The Independent Actuaries Network (IAN) is inviting small-firm practitioners to join its monthly dinner and meeting held in Milton, Ontario. They run on the last Tuesday of each month and begin with a social hour and buffet dinner at 6 p.m., followed by a meeting until 9 p.m. Each month one or more presenters tackle topics of interest to actuaries, including pension and actuarial evidence as well as broader subjects like enterprise risk management. The network also hosts an annual visit by the CIA President-Elect.

These meetings are an excellent form of structured continuing professional development, and regularly attract 25–35 people. The next speaker is:
Actuaries interested in attending or interested in being added to the IAN’s automated invitation list can contact Andrew Gillies at agillies@re-a.com.

Contact with Questions: Andrew Gillies at agillies@re-a.com