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

Canadian Institute of Actuaries/Institut canadien des actuaires

May 2015
Elliott Bauer
D.W. Simpson & Company
Eckler Ltd.
Your Institute
Congratulations to the CIA members who have been elected to the Board in the 2015 Elections:

President-elect
David R. Dickson

Secretary-Treasurer
John Dark (re-elected by acclamation)

New Directors
Claude A. Ferguson
Minaz H. Lalani
Denise M. Lang
Marc Tardif

The President-elect will serve a one-year term in that position, followed by a year as President and a further year as Past President. Directors are elected for a three-year term, unless otherwise indicated above. These elected members will commence their terms following the close of the Annual Meeting on June 18, 2015.

The elections are a chance for each individual member to play a part in setting the future direction of the Institute, and this year more than 1,400 of you seized that opportunity, pushing the voter turnout to 32.6%, an increase over last year. Thank you for taking the time to vote, and please remember to do so again next year.
 
If you want to have an even greater role in the development of the actuarial profession in Canada, why not consider running for a position on the Board?

Thank you to all who stood for election.
 
Spotlight

By Jim Christie, FCIA

New ASB Chair

This is my last report on Actuarial Standards Board (ASB) activities to CIA members as my term as ASB Chair expires at the end of June. The Actuarial Standards Oversight Council has selected Ty Faulds to succeed me.

ASB Priorities

In addition to our regular ongoing work maintaining existing standards, the ASB has set the following topics as our next priority areas:

  1. Updating pension standards to specifically address target benefit plans;
  2. Creation of standards respecting pension investment returns;
  3. Evolving practice in the Own Risk Solvency Assessment / enterprise risk management field; and
  4. Consistency of standards between practice areas.

Updates of Current Activities

A designated group (DG) chaired by Bob Howard continues to work on an exposure draft (ED) on the use of models. The Practice Council is developing a companion educational note on what is or is not a model. While the DG has essentially completed the ED, the ASB would prefer to have a draft educational note released with the ED to minimize any misunderstanding and confusion among practitioners about the new standard. The ASB expects to approve issuing the ED shortly after its August meeting.

A DG chaired by Ed Gibson will be bringing an ED on social security to the June ASB meeting. This ED will incorporate the principles of International Standard of Actuarial Practice 2 (ISAP 2) – Financial Analysis of Social Security Programs into the Canadian Standards of Practice. It will propose creation of a new part 7000 in our standards as we do not specifically address social security.

ISAP 3 (Actuarial Work under International Actuarial Standard 19) was recently accepted by the International Actuarial Association (IAA). A DG chaired by Christiane Bourassa has begun to review ISAP 3 to determine how best to integrate it within our standards.

The International Accounting Standards Board is not expected to release a final version of International Financial Reporting Standard 4, or IFRS 4 (Insurance Contracts), until 2016, to be effective in 2019. In anticipation of the final version, the IAA has begun working on a related ISAP 4. A DG chaired by Simon Curtis is proactively monitoring the IAA’s progress on this ISAP. Ultimately this DG will recommend to the ASB what revisions to our standards are necessary to address ISAP 4. Given the short timeframe between the IAA adopting ISAP 4 and when Canadian actuaries will need standards for IFRS 4, the DG expects that ISAP 4 will be added as a new standalone section within our standards. The ASB reviewed a draft notice of intent (NOI) in April and expects to review a revised draft NOI next month.

A DG chaired by Josephine Marks has begun a quinquennial review of part 2000 (Insurance) of our standards. It will be presenting a draft NOI for the ASB to discuss at its June meeting.

At that meeting, the ASB expects to approve release of a final communication of a promulgation of the mortality table referenced in the Standards of Practice for Pension Plans (subsection 3530). The effective date of the promulgated table will be October1, 2015.

The ASB has approved release of an initial communication of a promulgation of the mortality table referenced in the Standards of Practice for Actuarial Evidence (subsection 4530), which was generally consistent with the pension promulgation with a May 18, 2015, comment deadline. The DG, chaired by Conrad Ferguson, will review comments on the initial communication and the ASB expects to approve a final communication in June. The effective date of the promulgated table is expected to be October1, 2015.

A DG chaired by Gavin Benjamin is focused on reviewing the assumptions underlying pension commuted values other than mortality. A second DG focused on assumptions underlying marriage breakdown capitalized costs is expected to start work later this year.

A DG chaired by Tony Williams has begun to address the calibration criteria of pension asset returns. Existing actuarial standards do not address the volatility associated with stochastic modelling of investment returns for pension funding. The DG will not be mandating a particular stochastic model for investment returns, but rather (as with life insurance) will prescribe calibration criteria for the outputs of any stochastic model used.

A DG chaired by Paul Della Penna continues work on the quinquennial review of the General section (part 1000) of our standards. It is opting to prepare a draft ED before presenting the NOI to the ASB. The DG is behind schedule and does not expect to have an NOI ready for ASB discussion until next month.

In April the ASB appointed a DG, chaired by Tony Williams, to review pension valuation disclosure standards as they relate to shared risk plans, target benefit plans, and stress testing.

Jim Christie, FCIA, is Chair of the ASB.

 
Insight Decision Solutions
MOVERS AND SHAKERS

Jean-François Paquin has been named director, asset allocation, at Air Canada Pension Investments. His previous roles have included senior investment strategist at the Ontario Teachers’ Pension Plan, and working for the Caisse de dépôt et placement du Québec, Towers Watson, and Industrial Alliance.

In the National Post Brent Simmons of Sun Life, Paul Forestell of Mercer, and Gavin Benjamin of Towers Watson considered the issue of pension risk transfers.


Networking is a key part of any successful professional's career, and the CIA is offering you a fresh opportunity to inform your peers about your achievements and progress.

Our (e)Bulletin section, Movers and Shakers, is a chance for you to publicize your new job, title, credentials or other information. This is an opportunity to tell thousands of fellow actuarial professionals—whether they are ex-colleagues, former college friends, potential employers, future clients, etc.—about, for example:
  • Your new job;
  • A change of title or area of responsibility;
  • Your new qualifications;
  • A change of contact details;
  • Awards or other recognition; or
  • Publication of academic papers or articles.
Simply send an e-mail—one line of information can be enough, but feel free to add more if you so wish—to the CIA's English Editor at andrew.melvin@cia-ica.ca and we will aim to include it in the next issue of the (e)Bulletin.

For more news of CIA members and their activities, follow the CIA on Twitter.

 
Institute News

By Robert Berendsen, FCIA

The IAIS is working on BCR, HLA, and ICS, of particular interest to G-SIIs and IAIGs, and the IAA and the CIA’s IRC are doing their part to help shape the end result. If I lost you but you are interested in capital requirements for insurers, hang in there and I’ll clarify things for you.

Explaining the Acronyms

The International Association of Insurance Supervisors (IAIS) represents insurance regulators and supervisors of more than 200 jurisdictions in nearly 140 countries, constituting 97 percent of the world’s insurance premiums. Its objectives are to (1) promote effective and globally consistent supervision of the insurance industry in order to develop and maintain fair, safe, and stable insurance markets for the benefit and protection of policyholders; and (2) contribute to global financial stability. Canada’s Office of the Superintendent of Financial Institutions, Québec’s Autorité des marchés financiers, and British Columbia’s Financial Institutions Commission are all members of the IAIS.

In this article, I will focus on the IAIS project to develop group-wide global capital standards, and in particular the development of a risk-based group-wide global insurance capital standard (ICS), to be applied to internationally active insurance groups (IAIGs) as early as 2019. The full range of IAIS activities is beyond the scope of this article.

The IAIS project includes three planned steps. The first was the development of a Basic Capital Requirement (BCR), a very simple, factor-based capital requirement, to be applied to global systemically important insurers (G-SIIs). The IAIS has a process to identify G-SIIs, and currently it has identified nine, based in Europe, North America, and Asia; none are headquartered in Canada. This identification process will be finalized by end of 2015. The development of the BCR is now complete.

The second step is the development of Higher Loss Absorbency (HLA) requirements, again to be applied to G-SIIs. The HLA will build on the BCR and will address additional capital requirements to reflect G-SIIs’ systemic importance in the global financial system. This step is expected to be completed by the end of 2015.

The third step, being conducted in parallel, is the development of the ICS, which will have wider applicability than the BCR and HLA; i.e., it will be applicable not only to G-SIIs but to all IAIGs. As with G-SIIs, the IAIS has a process to identify IAIGs, and currently that would yield as many as 50 IAIGs globally, including two or more Canada-based groups. The ICS is expected to be finalized in late 2016.

While the development of these capital standards is led by the IAIS, members of the CIA have supported and continue to support such development as active participants on relevant committees of the International Association of Actuaries (IAA) and/or the CIA’s International Relations Council (IRC). For example, the CIA provided feedback to the IAIS on the BCR in 2014 and on the ICS in February of this year.

What is the ICS?

On December 17, 2014, the IAIS released a public consultation document, Risk-Based Global Insurance Capital Standard. It was a means to share with interested stakeholders the association’s initial thinking on all key elements of the proposed ICS. It also solicited input on 169 questions on topics ranging from the appropriateness of high-level principles guiding the development of the proposed capital standard to quantification methodologies to be applied for specific risks.

Once finalized by the IAIS, the ICS will constitute the minimum standard to be achieved and one which the supervisors represented in the IAIS will implement, or propose to implement, taking into account specific market circumstances in their respective jurisdictions. The ICS is to be a group-wide consolidated standard, applicable to IAIGs and G-SIIs across their global operations. Importantly, the ICS will not necessarily affect or replace existing capital requirements for legal entity supervision in any jurisdiction.

That doesn’t mean the ICS should be of limited interest to smaller Canadian insurers. We should not be surprised to see elements of it eventually work their way into local legal entity capital requirements.

The consultation document covers all areas one might expect in a capital standard, including the scope of application, valuation bases for assets and liabilities, determination of quantity and quality of available capital resources, determination of capital requirements, and possible approaches for measuring risk. There’s also a detailed "example" over 40-plus pages of a standard method to set capital requirements.

The CIA’s Involvement

The CIA’s Committee on International Insurance Regulations prepared feedback on the ICS consultation document on behalf of the Institute. The drafting group provided feedback on more than 110 of the 169 questions. In many cases, it expressed support for the ideas proposed in the consultation document. There were also areas where the group offered suggestions for improvement. Feedback and suggestions included:

  1. Offering incentives to insurers to maintain dynamic risk management strategies;
  2. Aligning with the International Financial Reporting Standards 4 Phase 2 developments where possible, on issues of contract boundary, the inclusion of margins, and discounting;
  3. Ideas for discounting liability cash flows that are beyond the term of deep and liquid asset markets;
  4. Considering policyholder behaviour risks beyond lapse risk;
  5. Ideas on how to deal with adjustable and participating liabilities;
  6. The need to recognize geographic differentiation and diversification; and
  7. A number of detailed suggestions concerning specific asset and liability classes.

What’s Next?

Quantitative field testing for the ICS is underway, with results to be submitted by mid-August. The IAIS then plans to publish an updated consultation document in late 2015, to be followed by another round of field testing. The ICS is scheduled to be finalized by late 2016. I have no doubt the CIA, through the IRC, will continue to monitor developments on the ICS and offer further input to help shape its ultimate form. More information on the ICS and other IAIS activities, including a monthly newsletter, can be found on the IAIS website. If you want to help shape the future, there are many ways you can do that. One is to become a volunteer for the IRC or one of its committees.

Robert Berendsen, FCIA, is Chair of the Committee on International Insurance Regulations.

 

Gaetano Geretto

A background in reinsurance helped Gaetano Geretto prepare for work in enterprise risk management (ERM), but the evolving nature of this practice area continues to bring fresh challenges.

Now president of Pelecanus Strategic Advisory Services, Mr. Geretto previously served in numerous senior positions for organizations including Sun Life, Gerling Global Life, and Revios Reinsurance, and his career has often involved a strong risk management component.

He said: "I was in a business where I did some risk management as part of our normal business activities and worked with companies to spread risk. At the time companies had disparate processes, but nothing unified. Then our German parent company launched the Kontrag project as requested by its regulator BaFin, which involved putting in an ERM module. We thought it was more of a compliance exercise, but did it anyway, and it soon became the basis behind the way we managed the company. We came to say, ‘Everybody here is a risk manager.’ That helped me decide to concentrate on risk management."

Moving from reinsurance to ERM was an evolutionary process, he said. "I was already identifying risks and managing and mitigating them, but ERM had a steep learning curve, at least initially. However, as actuaries we need intellectual stimulation. We always try to see multiple variables that might not always be moving in the same direction. It’s the ultimate problem-solving conundrum. We can follow general principles,but we have to recognize that there are so many variables at play. In addition, more work has been done in a governance context involving the risk appetite frameworks and risk culture.

"In ERM you need an ability to see at 30,000 feet; if you get too far into the weeds,you can be focused on certain risks and miss the big picture. As actuaries and risk experts, we must always be inquisitive and always ask, ‘Why?’ It is a matter of being reflective and spending time listening. You cannot work in isolation, and must think more broadly."

A period spent at the Office of the Superintendent of Financial Institutions during the financial crisis proved invaluable in developing that broad perspective, Mr. Geretto added. "I learnt that all the skills in my toolkit would help me there. It was interesting work applying governance techniques, overseeing the actuarial function, and working on the development of the Own Risk and Solvency Assessmentguideline. Now, at Pelecanus Advisory, more of my time involves working with my clients and giving advice, and I am bringing together my work in industry and as a regulator."

Today, more and more organizations are capitalizing on the expertise of ERM-focused actuaries, but that was not always the case. "Ten years ago, there was a lot of resistance to ERM," said Mr. Geretto. "Everybody was comfortable in their own sandbox, and they didn’t see its value. That attitude has changed, and it has become a discipline on its own, attracting people to pursue a career in ERM. Banks and insurers are increasingly becoming places where people who have worked in line businesses and understand the risks in those businesses are ideal candidates to work in ERM.

"This is a growth area for actuaries. We can be somewhat risk averse in how we look at career development, and in that respect we can be slow to adapt. But actuarial bodies around the world are recognizing that actuaries have a place at the [ERM] table and are promoting it through the Chartered Risk Enterprise Analyst (CERA) designation. We are risk experts and bring a holistic approach to managing risk, which creates value for the company.

"However, we can do more to promote those who have stepped out of traditional sectors and into ERM. Our message should be, ‘Look at the numbers of people in chief risk officer capacities who have an actuarial background, and the people who have crossed over to become ERM experts.’ We do more than insurance risk, but we sometimes get slotted into a narrow band. There is a magnet that pulls people into our profession, and consequently head-hunters and ERM professionals who are hiring need to look at actuaries as being risk experts."

 

By Mary Millard, FCIA

It is hard to believe that the University Accreditation Program (UAP) has already been in effect for three years. With the wind-up of our third year of offering accredited courses at the University of Western Ontario and while preparing for our external examiner review, I paused to reflect on the challenges and successes of the UAP.

As we are an accredited university, students in our actuarial science programs have clearly benefited from having the opportunity to earn accreditation for some of the preliminary Society of Actuaries (SOA) and Casualty Actuarial Society (CAS) exams required for the FCIA designation, but what strikes me most is how the benefits of implementing the UAP go way beyond the accreditation itself.

At Western we implemented an informal system of peer review for our accredited courses and this is a process that has worked well, with the end result being an improvement in the quality of our course exams and grading. This peer review system has provided opportunities for collaboration with colleagues on teaching and testing strategies and is something that some of us have carried over to non-accredited courses. Our courses and programs are strengthened as a result of the peer review process.

While we hope to see a further increase in student uptake on the UAP, there is no doubt that student awareness and interest in the accreditation program is building. However, not all of them choose the accreditation path for preliminary exams and others may not qualify. These students still benefit, though, as I believe they are better prepared to write the SOA/CAS preliminary exams as a result of the accreditation process. For example, with the relatively recent changes in the SOA MLC syllabus, there is now a short answer component to this exam. Feedback from students who recently wrote the MLC exam was along the lines that the style of their university life contingency tests/exams helped better prepare them for the MLC exam.

The CIA accreditation program has been instrumental in raising the profile of the actuarial profession in general and of our actuarial science programs. I have seen this at high school open houses and other such initiatives. The fact that there is an actuarial accreditation program and students may be able to receive exemption for some preliminary professional actuarial exams with courses completed as part of their degree piques the interest of not only students but also their parents. Accreditation programs for engineering, accounting, and other professions are well established at the university level in Canada and there is general appeal in being able to use courses completed as part of a university degree towards professional accreditation. With the implementation of the UAP there has been increased interest in the actuarial profession among young students and their parents, resulting in increased interest in actuarial science programs.

There has been a lot of learning involved in the implementation of the UAP, and challenges along the way, but I think that in working out these challenges, the universities and the CIA have only strengthened their relationships. Furthermore, being able to meet and regularly connect with accreditation actuaries (AcAs) from other universities and obtain their opinions and feedback has been invaluable. I also really appreciate the support of my academic and administrative colleagues in my AcA role.

Being involved with the UAP over the past three years, both as an instructor of an accredited course and in my role as AcA, has enabled me to directly observe the many benefits of this program. I look forward to its further development and other CIA educational initiatives.

Mary Millard, FCIA, is the AcA at the University of Western Ontario.

 

Norman Henricks, FCIA(1965), FSA(1964)

Having earned a BA at Queen's University, Norman Henricks passed his first actuarial examination in 1952 with Empire Life. However, his career would be dominated by his many years at Manufacturers Life (later Manulife), and his contribution as a volunteer for the CIA. Mr. Henricks, an expert on asset/liability management, served on the Program Committee for several years, including time as chair and vice-chair, plus the Budget Committee and the Education and Examinations Committee's Tutorial Subcommittee. He was also a member of the Society of Actuaries' Program Committee.

 

 

 

1. Why did you become an actuary?

After graduating with a specialized degree in Finance and Mathematics, I was offered a summer internship at a consulting firm—I planned on starting a master’s in Mathematics the next year. I had never heard of actuarial science at the time but gave it a try, and loved it. I had an interest in mathematics and saw this as a viable career to continue to use math, get paid well, and earn a prestigious designation without having to go to graduate school.

2. When you tell people you’re an actuary, what do they think you do?

Mostly they just have a puzzled look on their face or they say something to do with insurance.

3. Who has inspired you the most during your career? Did you have a mentor in your early career?

My first set of bosses, John Crouse and Perry Dorgan. I continue to have mentors, and what surprises me most is that the mentors are not all actuaries—some are public speakers, consultants, and even comedians. It impresses me how they can hold on to a crowd’s attention for a full set.

4. What do you enjoy most about your job?

Teaching clients and making a difference in the financial security of others. I think we have a noble profession and we don’t recognize the value we provide society enough.

5. What career would you follow if you weren’t an actuary?

Architect—maybe I am just on trend with everyone else but I enjoy smart design and the concept of combining the visual elements with a practicality of use.

6. What are your hobbies?

Home renovations, furniture design, painting, and snowboarding. They are not hobbies but I also have two children—Isabel, who is four years old and Jordan, who is one—and they tend to be the highlight of my spare time.

7. What is your favourite music, book, and film?

Hip hop—Die Antwoord at the moment, The Hobbit, and Reservoir Dogs.

8. Where is your dream vacation destination?

It was climbing Manchu Picchu, but I did that in October of 2013! So the next dream is Maldives—gotta get there before it’s too late. The islands are at sea level and the sea level is rising.

9. What do you do better than anyone you know?

Anyone I know . . . Interior design and maybe freestyle rapping, but that requires a few drinks first!

10. If you could be anybody else, alive or dead, who would it be, and why?

Banksy, for his notoriety, and he has an impact on changing the world through visual art.

Riley St. Jacques is senior consulting actuary and market leader, Western Canada, at PBI Actuarial Consultants.


If you would like to be featured in Introduce Yourself, please answer the 10 questions above by completing our online form here.  

 

 
THIS MONTH'S PUBLICATIONS

 SDFAQ Actuarial Talent: Frequently Asked Questions

SDES Actuarial talent: Findings from an EIU study: Executive Summary

EECA121 Eligibility and Education Council Agenda - Meeting nÂș 121 (May 22, 2015)

215034 Seeing Beyond Risk (May 2015)

GBS2015 Agenda: General Business Session of the 2015 CIA Annual Meeting

215033 Policy on the Approval of International Submissions

215032 Educational Note Supplement: Guidance for Assumptions for Hypothetical Wind-Up and Solvency Valuations Update – Effective March 31, 2015, and Applicable to Valuations with Effective Dates Between March 31, 2015, and December 30, 2015

EB0315 (e)Bulletin March 2015

EB0415PDF (e)Bulletin April 2015 (PDF Version)

EB0415 (e)Bulletin April 2015

Tweets from @CIA_Actuaries:

It does come as bit of a shock says #actuary Rob Brown on #CPP proposed voluntary expansion http://fw.to/yffujOf via @curryb @stevenchase

A game-changer says #actuary Rob Brown on voluntary #CPP expansion consultations http://on.thestar.com/1LDTXad via @alexboutilier @torontostar

Wishing the best of luck to our future #fellows as they write the PEC exam this morning #Ottawa #FCIA

CIA #actuaries welcome government consultation on voluntary #CPP expansion – a game changer for #Canadians #cdnpoli

The Co-operators launches #flood #insurance in Alberta http://cnw.ca/LhNVe via @CNWNews

Canada’s future #actuaries are in #Ottawa for PEC, learning Cdn industry practices, professional standards, etc #FCIA

#Actuary @Claugagne looks at enjoying a financially sustainable retirement in #SeeingBeyondRisk http://bit.ly/1F24rw6

#Actuaries advise #Senate committee on amendments to Criminal Code – watch LIVE http://bit.ly/1Fl35Cf

#Actuaries, early-bird registration ends tomorrow for the CIA’s 50th annual meeting. Will you be there? http://bit.ly/cia50meeting

Report by Panel of Experts on #automobile #insurance contributions is out http://cnw.ca/Xx66R via @CNWNews #Actuary

What is a #professional, #actuarial discipline & more at #professionalism workshop in #Toronto http://bit.ly/1JV1T6f

Interested in the top-rated #career in North America? Many #actuarial job postings at http://bit.ly/ActuarialJobsBank...

 

 
Calendar of Events
Board and Council Updates

Eligibility and Education Council

The following people have been appointed to the groups named below, effective immediately:

  • Task Force to Define Professionalism Within the CIA: Anne Vincent, Alana Farrell, and Jacqueline Friedland; and
  • Property and Casualty Insurance Subcommittee of the Committee on Continuing Education: Jonathan Frost and Apundeep Lamba.
A Committee on Professionalism Within the CIA (replacing the Task Force to Define Professionalism Within the CIA) has been created with Kim Young as Chair. Membership is to be confirmed.