Actuarial Standards Board Update

By Jim Christie, FCIA

In my second (e)Bulletin article since becoming Chair of the Actuarial Standards Board (ASB), I would like to comment on the ASB’s current efforts on Canadian actuarial standards.

The CIA has recently published a final report including new pensioner mortality tables and improvement scales based on Canadian pension plan experience. Our standards already provide for actuaries to use their best estimates of appropriate mortality for going concern pension valuations. A designated group (DG) chaired by Conrad Ferguson will be recommending to the ASB which mortality table(s) and mortality improvement scale(s) to promulgate for the pension commuted value and marriage breakdown capitalized value standards. An initial communication to CIA members and other interested parties inviting comments on the proposed promulgations will then be issued by the ASB. The DG has started its work. The ASB will need to ensure the profession and other interested parties have sufficient time to comment on any proposed recommendations.

Concurrently the ASB is also monitoring work on life insurance mortality improvement being completed by the Committee on Life Insurance Financial Reporting, and will consider the results of this work to determine if changes are necessary to the mortality improvement assumptions promulgated for life insurance.

A DG chaired by Ty Faulds put tremendous effort into developing changes to the economic reinvestment assumptions for life insurance related to the use of fixed- and non-fixed-income assets in liability valuation, the determination of the ultimate interest rate, and achieving greater consistency in the results obtained through applying stochastic vs. deterministic approaches. An exposure draft (ED) was approved and published by the ASB in December. Currently we anticipate that changes to standards will be finalized in April 2014 to be effective October 15, 2014, though early implementation is not expected to be allowed.

A DG chaired by Bob Howard is close to finalizing a discussion draft of standards for use of models which, together with a revised notice of intent (NOI), will be presented for consideration at the April ASB meeting. Release of a revised NOI including the discussion draft of standards will be an intermediate step before proceeding to a formal ED.

The International Actuarial Association (IAA) is developing International Standards of Actuarial Practice (ISAPs). ISAPs are intended to be model minimum standards and are not applicable to actuaries in any country unless adopted by the national actuarial standard-setting body. The member organizations of the IAA, including the CIA, have approved a policy of convergence whereby each national actuarial body commits to moving its own actuarial standards toward those issued by the IAA. ISAP 1 (General Actuarial Practice) and ISAP 2 (Social Security) were approved in final form by the IAA in 2012 and 2013 respectively.

The ASB reviewed ISAP 1 against our existing General Standards (Part 1000). As expected, in most circumstances part 1000 provided similar or stronger requirements than ISAP 1. Nevertheless, a few areas where ISAP 1 went further than part 1000 were identified. An NOI was published in August 2013 proposing changes to the General Standards to support convergence with ISAP 1. A DG chaired by Michael Banks that is dealing with these matters will present a draft ED for ASB consideration in April 2014. This ED will also incorporate changes to promote consistency of reporting for all practice areas pursuant to an NOI published in June 2012.

The ASB has begun a review of ISAP 2 (Social Security). There is currently no part of our standards addressing social security, so the ASB will be appointing a DG composed mainly of actuaries working in this area to recommend how to incorporate the requirements of ISAP 2 into our standards.

The IAA issued an ED on ISAP 3 (Employee Benefits under IAS 19) in November 2013. The ASB will be providing comments to the IAA on the ISAP 3 ED in early March 2014.

The International Accounting Standards Board released an ED on IFRS 4 (Insurance Contracts) in 2013. In anticipation of a final version of a revised of IFRS 4 becoming effective in 2018, the IAA has begun working on a related ISAP X. The ASB has appointed a DG chaired by Simon Curtis to monitor and comment upon statements of intent (SOIs) and EDs of this ISAP. Based on advice from the group, the ASB provided comments to the IAA on their draft statement. Ultimately the DG will recommend to the ASB what revisions to our standards are necessary to address ISAP X. Because of the timing of the expected effective date for the revised IFRS 4, it may be necessary for the ASB to begin developing Canadian standards using the IAA’s exposure draft of ISAP X, rather than the final version. We expect to have more clarity on the IAA’s timeline for ISAP X this spring.

Jim Christie, FCIA, is Chair of the Actuarial Standards Board.

Canadian Institute of Actuaries/Institut canadien des actuaires