INTERNATIONAL FORUM OF ACTUARIAL ASSOCIATIONS MINUTES OF THE COMMITTEE MEETING ZEIST, THE NETHERLANDS 25 APRIL 1997

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1 Final August 17, 1997 INTERNATIONAL FORUM OF ACTUARIAL ASSOCIATIONS MINUTES OF THE COMMITTEE MEETING ZEIST, THE NETHERLANDS 25 APRIL 1997 Present: Avi Bar-Or Félix Arias Bergadá Jean Berthon Edward Bonach Cecil Bykerk Morris Chambers Robert Collett Chris Daykin Paul Grace Sam Gutterman John Haley Steve Handler Georg Harbitz David Hartman Neville Henderson Christian Houtekie Luis Huerta Curtis Huntington James Kehoe Ernest Kuhn Peter Kuys (1 st part only) Iain Lumsden James MacGinnitie Paul McCrossan Willem Meijer Bruce Moore Reg Munro Walther Neuhaus Harry Panjer Dennis Polisner Catherine Prime George Psaras Walter Rugland Masaki Takaoka Yoshitada Tanaka (IAJ Interpreter) Bjarni Thordarson Paul Thornton J. H. Webb Hideyuki Yoshida Staff: Nicole Séguin Brian Wooding INTRODUCTION 1. The Chairman, Chris Daykin, welcomed Committee members to Zeist and thanked the Actuarieel Genootschap for their assistance in making the necessary meeting arrangements.

2 - 2 - AGENDA 2. The agenda was approved unanimously with the addition of several items for discussion under Other Business. These related to a/ use of the IFAA mailing list, b/ the distribution, with IFAA mailings, of documents provided by other associations, c/ the IFAA Handbook, d/ the IFAA Web Site and e/ contacts with the International Association of Insurance Supervisors and the International Social Security Association. PRESENTATION BY THE CIA 3. The Chairman then introduced Neville Henderson, the President of the Canadian Institute of Actuaries, who, after some brief remarks and the expression of good wishes, presented the IFAA with a rosewood gavel and an inscribed base as a gift from the CIA. APPROVAL OF THE MINUTES OF THE IFAA COMMITTEE MEETING, BRUSSELS, 27 SEPTEMBER The minutes, as corrected, were approved unanimously. VOTING ARRANGEMENTS 5. It was agreed that this item should be deferred until such time as a recorded vote became necessary. UPDATE ON THE FUTURE OF THE IAA 6. This item was brought forward as a convenience to the presenter, Peter Kuys. He reported on the work which had been done by the Provisional Executive Committee of the IAA since it had been constituted in September 1996 in Brussels. Several meetings had been held and had focused on a revised structure and organization for the IAA. A summary of preliminary conclusions had been circulated to some members for comment and, at a meeting on the previous day, the preliminary conclusions had been revised to take account of the comments received. The revised document will be sent out to the same individuals for comment by mid-june, and those comments will be considered by the Provisional Executive in Paris in July. A formal proposal for objectives and structure will be prepared at that time and submitted for comment to all IAA Sections, to be followed by a discussion at the IAA Council in Brussels in September Final agreement on the constitutional changes will be sought at a General Assembly of the IAA at the Birmingham International Congress in June 1998.

3 Chris Daykin pointed out that, for the IFAA to be able to present the formal views of its members at the IAA Council in September 1997, it would need to be able to approve its position in Australia on August 17, 1997 and would need to be aware of the Provisional Executive s proposals by 17 June 1997 at the latest. The possibility of adjusting the Provisional Executive s timetable was mentioned, as was the possibility of circulating a draft proposal to IFAA members on 17 June Peter Kuys undertook to raise this concern with the Provisional Executive. 8. Peter Kuys presented the following key points as reflecting the Provisional Executive s thinking at this stage: the IAA should be converted from an association of individual actuaries into an association of actuarial associations; any individual member of an association which is a member of the IAA should automatically become a member of the IAA. The cost of the IAA would be borne by subscriptions from the associations assessed on a per capita basis, rather than by individuals directly; the governance structure would be very similar to the one used by the IFAA, making the IAA an association of associations; once the IAA had become an association of associations, the activities of the IFAA could be moved up into the holding structure of the IAA; Sections, including ASTIN and AFIR should be retained as they are. They are concerned mainly with actuarial science and membership in them would be on an individual basis with annual fees continuing to be paid by their own members; there is a feeling that other scientifically oriented sections are needed and more initiatives to this end need to be taken, provided always that the growth is at a sustainable and deliberate rate. 9. In essence the new IAA will be the present IFAA but with a broader set of activities. 10. Chris Daykin thanked Peter Kuys for his presentation, suggested that open discussion be withheld until the Provisional Executive s paper was available and commented that the new structure appeared to be consistent with what some IFAA members had proposed and could hopefully be realized without disturbing all the activity currently in progress in professional affairs, public interface, education and advice and assistance. SUBCOMMITTEE ACTIVITIES: APPOINTMENT OF PROVISIONAL MEMBERS TO SUBCOMMITTEES 11. Chris Daykin announced the following provisional appointments. These will be presented for Committee approval at the meeting in Australia. Advice and Assistance Subcommittee Luis Huerta, Colegio, Mexico

4 - 4 - Education Subcommittee Ulrich Orbanz, DAV, Germany Maximo Borrell & Lydia Ros, Col.legi, Catalunya IASC Employee Benefits Subcommittee Dennis Polisner, SoA, USA Rudolf Gouws & Reg Munro, ASSA, South Africa IASC Insurance Accounting Standards Subcommittee Kurt Wolfsdorf, DAV, Germany Toshiyuki Okita, IAJ, Japan (Replaces Tetsuya Matsunami whose name appears in the agenda motion) Bruce Moore, AAA, USA Mo Chambers, CIA, Canada ACCREDITATION SUBCOMMITTEE 12. Terms of Reference Walt Rugland introduced the following proposed change to the terms of reference (change in bold). The change was intended to assign to the Accreditation Subcommittee responsibility for monitoring IFAA associations compliance with the commitments made on admission. MOTION That the Accreditation Subcommittee Terms of Reference be revised to read: That a Subcommittee of at least 5 representatives and no more than 7 representatives from diverse associations, in addition to the IAA representatives, be established by the Committee to examine applications for Full Membership or Associate Membership, and to bring recommendations forward to the Committee on a timely basis, including specific situations where member associations do not maintain compliance with the requirements of membership; and that, in addition, the Chairman, Deputy Chairman and Past Chairman be ex officio members of the Accreditation Subcommittee. Carried Unanimously

5 Report Walt Rugland reviewed for members Attachment A to the agenda papers. He indicated that the Code of Conduct requirement (Type A) for the following associations was now virtually complete: Spain (Catalunya), Iceland, Sweden, Japan (JSCPA). A significant number of associations had commitments (Type B) to introduce a disciplinary process by July 1998 (2001 for Associate Members). ADVICE AND ASSISTANCE SUBCOMMITTEE 14. Terms of Reference The following revised terms of reference were introduced. It was clarified that, when the need arose, the Subcommittee would recommend the formation of a new subcommittee to the IFAA Committee for approval; it would not, itself, approve the new subcommittee. MOTION That the original Terms of Reference for the Subcommittee be replaced by the following: To provide advice and assistance when requested by member associations, associations seeking to become members, and those wishing to establish new associations. The subject areas of this advice are matters relating to rules of professional conduct, disciplinary procedures, due process, education, standards of practice, relationships with regulatory and other bodies and association administrative procedures. If appropriate the advice would be by way of referring the request to an existing IFAA Subcommittee. When a request comes from an external body to be advised of the views of actuarial associations world wide, or for other advice, the Subcommittee should gather information on the request and mobilize internal IFAA resources needed to start work on a response pending formal approval. These resources may include the formation of a new IFAA Subcommittee. To identify issues which it may be appropriate for the IFAA to address and take initiatives on, and to recommend how such matters should be dealt with by the IFAA. Such a recommendation would normally be to the Executive, and may need to be addressed by the Committee. Carried Unanimously 15. Report Catherine Prime made the following points: an article has been submitted to the IAA Bulletin summarizing advice and assistance activities which have already occurred. This information was not complete. Further activities are planned. The Subcommittee needs to continue collecting information to develop a complete picture of all assistance activities. The Secretariat has been tasked with gathering this information and there may be resource implications;

6 - 6 - the Subcommittee dealt with a request for advice from an expatriate actuary in Zimbabwe as to how the local group could develop a more professional structure. Ghana will be asked to provide advice as it is organizationally somewhat more developed than Zimbabwe; a request from a non-ifaa member in Russia seeking advice on how to structure a life insurance industry was also considered. This was seen as being a major consulting assignment outside the role of the Subcommittee, but appropriate information with names of additional contacts will be forwarded; new IASC initiatives have been noted and, in keeping with the Subcommittee acting as a conduit, agreement was reached with the IFAA Chairman to propose the formation of a new Subcommittee on IASC Insurance Accounting Standards. This new Subcommittee will report later in the Committee meeting; the Subcommittee noted the good reception given to professional seminars organized by Max Lacroix under the IAA Promotion and Education Fund. Such seminars have been held in Prague, Minsk and Singapore. A number of sites for future seminars have been mentioned and, to support this activity, the Subcommittee felt it would be helpful to identify additional suitably qualified actuaries to help with the program. 16. A short discussion followed during which Steve Handler pointed out that Zimbabwian actuaries and actuarial students were often members of the Actuarial Society of South Africa. The ASSA would be pleased to offer any assistance it could to Zimbabwe actuaries. Mo Chambers commented that many well established associations would be willing to provide help to emerging associations if approached. This could ease the burden on the Subcommittee. EDUCATION SUBCOMMITTEE REPORT 17. In the absence of Malcolm Murray, who sent regrets, Cecil Bykerk chaired the morning meeting of the Education Subcommittee and presented a report containing the following points: terms of reference were reviewed and no changes were proposed; there was discussion of the expression minimum educational requirements for fully qualified actuaries. The implications of those requirements were discussed, particularly in the context of the proposed core syllabus. (It was concluded that for mutual recognition requirements only the top qualification level in an association would be taken into account and that an individual meeting the minimum requirements would not qualify for mutual recognition if a higher level of qualification existed within his or her association.); the proposed core syllabus which was discussed at the Brussels 1996 meeting had been revised and most of the morning was spent in reviewing the revisions. There was a feeling that the syllabus framework needed to be shorter and to be supplemented by addenda illustrating how topic requirements could be satisfied; the Subcommittee intended to further revise the syllabus for discussion at the Australian meeting;

7 - 7 - the target date for project completion was June 1998 at the Birmingham meeting and there was concern that there would be some difficulty in making the revisions and exposing them to associations, given that there was no intervening IFAA meeting planned for after Australia. Chris Daykin indicated that the Executive were hoping to arrange an additional Committee meeting in January or February 1998 which could relieve this concern. SUBCOMMITTEE ON THE IASC EMPLOYEE BENEFITS ACCOUNTING STANDARD 18. Name Change The following motion was put to the Committee: MOTION That, to prevent confusion with other subcommittee titles, the name of the Subcommittee on IASC matters be changed to Subcommittee on the IASC Employee Benefits Accounting Standard. Carried Unanimously 19. Terms of Reference The following revision to the terms of reference was put to the Committee: MOTION That the terms of reference of the Subcommittee on the IASC Employee Benefits Accounting Standard be revised to read: To coordinate the IFAA response to the IASC Employee Benefits Accounting Standard and to deal with matters arising out of the promulgation of that standard. Carried Unanimously 20. Report Paul Thornton summarized the events which had taken place since the last meeting of the Subcommittee in Brussels 1996 as follows: the Subcommittee met in London in January to agree on the content of the IFAA s submission to the IASC responding to the Exposure Draft E54, and to review statistical evidence which could be used by the IFAA to support its written evidence; the finalized draft was circulated to member associations and approval of the document was received via a mail ballot; the final submission was sent to the IASC in early March 1997; clarifying letters were subsequently sent to the IASC staff by Chris Daykin and Paul Thornton;

8 - 8 - Paul McCrossan also sent a clarifying paper on a market value approach for consideration at the IASC Board Meeting in April; the IASC Consultative Group, including the IFAA representatives, met in early April in London; the IASC Board met in Johannesburg in mid-april; Paul McCrossan and Paul Thornton attended both the Consultative Group and the IASC Board meetings and put forward the IFAA viewpoints; the main purpose of the Board meeting was to allow Board members to hear from the staff of the IASC what comments had been made during the consultative period. The Board did not take decisions, but were made aware of issues on which decisions would eventually have to be taken, so that they could instruct the Steering Committee; the Steering Committee is a small group of half a dozen people responsible for drafting the Exposure Draft and will be responsible for drafting the final standard for Board approval; the Steering Committee will meet in June, Paul McCrossan and Paul Thornton have been invited to attend and participate in the debate. This will be a most important meeting because once the proposed standard leaves the Steering Committee and goes to the Board for final approval, it will be extremely difficult to introduce further changes; in principle, the IASC Board could slow down the time frame for completion of this standard but they appear to be determined to move forward quickly and to maintain the September target date for a signed off standard; Paul Thornton then reported on the Subcommittee meeting held earlier in the day: members reviewed the final submission sent by the IFAA and were briefed by Paul McCrossan and himself on the sequence of events described above; members reviewed further work being undertaken by the Subcommittee to examine the impact of the E54 proposals on a notional static pension fund over a period of 25 years since the early 1970 s. This had been set up on a spreadsheet and, by changing the relevant market parameters, the effect on pension plans in various countries could be determined. The purpose of this work is to illustrate to the IFAA the significance of the E54 modifications being suggested by the IFAA relative to those of the IASC itself; the Subcommittee concluded that the most effective way to influence the IASC in the time remaining was to redraft various sections of the E54 text to incorporate the IFAA viewpoints, and to submit these revisions back to the IASC; the Subcommittee discussed the concept that the IFAA might develop a framework directive of certain actuarial principles onto which national associations could add actuarial guidance for their own members; the Subcommittee decided that first priority should be given to having the IFAA s key proposals incorporated into E54. Once that had been done, work could go forward on the framework directive and be based on the requirements of E54; the IFAA proposals respecting E54 are as follows:

9 - 9 - concerning the discount rate to be used for discounting liabilities to present values, instead of using the E54 proposal of corporate bond yields to determine the rate, the IFAA is proposing that the discount rate be appropriate to the nature of the liabilities and that liabilities be segregated into those expressed in fixed monetary terms, those expressed in price-related terms and those expressed in salary-related terms with appropriate discount rates being developed for each of these; concerning actuarial gains and losses the IFAA would prefer to see these recognized over a period rather than immediately as is currently proposed in E54; concerning the suggested framework directive, it was important at the April Board meeting of the IASC that the IFAA was able to indicate a serious intention to develop some objective standards so that accountants could rely on actuarial calculations being prepared within a given country. At least three or four associations can be expected to provide guidance to their members on an IAS because their existing standards already provide guidance concerning national accounting standards. The Subcommittee concluded that the associations should not be compelled to develop standards but that they should be encouraged to do so on a voluntary basis. National standards should be consistent with the general framework to be developed by the IFAA. 21. Chris Daykin congratulated all those who had been involved in preparing a very substantial and impressive submission for the IASC, in particular, Paul Thornton, Willem Meijer, Paul McCrossan, Dennis Polisner, the late Barry Watson and all other members of the Subcommittee who had been active in the process. This was a very critical issue for the profession world wide. The IASC were now listening to the IFAA, were sending the IFAA other material affecting actuaries and were inviting the IFAA to participate in the various meetings; all of which was helpful in establishing the IFAA s position for the future.

10 Paul McCrossan, asked to comment on the political aspects of the IFAA s entry on the IASC stage, indicated that initially there was some skepticism on the part of most members of the IASC and hostility on the part of some members to any kind of actuarial involvement. One member saw actuaries as the manipulators of financial information who had to be stopped. As the process went on and they saw that the IFAA was seriously interested in working with them to produce a standard which would be mutually acceptable, the mood began to change. However, going into the two IASC meetings earlier this month, there was still a substantial amount of skepticism about the motives of the actuaries. Following the two meetings, there appeared to be growing willingness to try to work together on problem solving, but by no means a commitment on their part to work together. The IFAA has certainly been invited to work with the IASC much more closely in developing standards, including the Insurance Accounting Standard. The IFAA has also been invited to be a regular part of the Consultative Group and there was some hope expressed that a mutually acceptable solution could be reached on E54, but no commitment to do so was made. 23. It may be that the IASC has some political problems of its own in establishing its credibility alongside long established national accounting standards boards (e.g. the ASB in the UK and FASB in the U.S.). To the extent that IASC and IFAA can reach mutual agreement on E54, it strengthens the IASC, but also strengthens the IFAA. The IASC does not seem to be prepared to reach a settlement at any price. What should now be done is to narrow the issues to those which are important to the IFAA and to present them in a way which seems to be important and useful to the IASC. While the IFAA has made exceptional progress in the past year, there still seems to be about an even chance that a mutually acceptable standard will be achieved. 24. It was recommended that IFAA members working in accounting firms and having good accounting contacts should try to influence individual IASC Board members where possible. A list of IASC contact persons will be distributed to facilitate this. FRAMEWORK STANDARD 25. Chris Daykin referred to the Draft Framework Standard which had been circulated to all Committee members. He indicated that there was a point of principle for the Committee as to whether the IFAA should be involved in setting standards of practice. Certainly the founding organizers had always envisaged that one day the IFAA would become involved in standard setting in some form, but events have moved more rapidly than expected. An important distinction is, however, that what is now being proposed is a voluntary standard which could function as a framework for associations that do want to have their own standard in this area. This would assist in the process of getting accountants internationally to recognize the role of actuaries in the process of evaluating employee benefits costs.

11 In the discussion, the following points were made: Sam Gutterman reported that the provisional Subcommittee on IASC Insurance Accounting Standards had had a preliminary discussion as to whether a guideline or standard might be useful at some time in the future, particularly if the IFAA were to recommend the adoption of an actuarial opinion at an international level. No decision had been reached; a brief survey indicated that the UK already had guidelines on FAS87 and SSAP24, the AAA had one on FAS87, the CIA had a generic standard and the Irish association has a guideline in place; the advantage of having the framework standard developed by the IFAA is that it would provide a focal point for the IASC who could then deal with the IFAA only rather than potentially 40 associations (Thornton); there are some countries, including The Netherlands, where associations cooperate with the supervisory authority leading to, for example, actuarial principles for pension funds issued formally by the supervisor. Different arrangements might therefore already apply in different countries (Meijer). 27. There were no objections among those present to taking the framework standard further. It was left that the responsible subcommittee will produce a second draft of its proposal. 28. In the UK, the Institute and the Faculty have offered to draft a UK standard which will fit in with the framework standard and other associations are invited to do the same to strengthen the IFAA s position with the accountants. 29. For the June meeting with the IASC, the IFAA position would be that there was support within the Committee for proceeding with a framework standard and that an agreed text would be presented as soon as possible. 30. Closing this item, Chris Daykin commented that the release of the IFAA Submission was a trial of the public statements process. From this, it was learned that no press release had been approved for release ahead of time and so the IFAA itself was unable to make a press release. Instead, the UK released its own statement and others were encouraged to do the same. (Note: Subsequent to the meeting, it was learned that the JSCPA and IAJ had made releases and that the SoA and AAA were cooperating on a possible US release.) NOMINATIONS SUBCOMMITTEE 31. Paul McCrossan, the Nominations Subcommittee Chairman, reported that the Subcommittee had corresponded internally on the following issues in recent months: a recommended successor for Willem Meijer;

12 various process issues aimed at ensuring an orderly leadership succession with appropriate linguistic, regional and cultural representation and assuring broad representation on the IFAA s various subcommittees; recommended criteria to be taken into account when considering nominations for Deputy Chairman, e.g. demonstrated commitment to international actuarial issues, a proven record of accomplishments and service as an IFAA Subcommittee Chairman, although the latter would not be a pre-requisite; methods by which to effect the intention of having roughly 1/3 of the Chairmen from Europe, 1/3 from the US and Canada and 1/3 from the rest of the world. 32. The Subcommittee was to meet later in the day to discuss these issues further. 33. In addition, it was announced that Willem Meijer had indicated that he would be unable to assume the office of IFAA Chairman at the conclusion of his term as Deputy Chairman. The Subcommittee had already agreed to recommend the nomination of Walter Rugland of the SoA as the next Chairman effective the Australian meeting, but the Subcommittee would now also need to recommend a nominee for the position of Deputy Chairman. Both these nominations will be officially presented in time for the Committee Meeting in Australia. PUBLIC STATEMENTS SUBCOMMITTEE 34. Chris Daykin indicated that the Public Statements Subcommittee had, at the previous Committee meeting, presented Guidelines for Making Public Statements on Behalf of the IFAA. The document was sent to all member associations for approval by mail ballot and also to the Council of the IAA for a similar vote. It had been agreed at the Founding Meeting that the IFAA would not issue public statements unless they had been prepared in accordance with Guidelines previously approved by the IAA. 35. For the IAA: 44 votes were cast 35 were fully in favor 1 was against 8 asked questions. For the IFAA: 26 votes were cast 23 were fully in favor 1 abstained 2 abstained for constitutional reasons. 36. There was correspondence on the Guidelines, most of it included with the meeting agenda paper. A few other items had been passed directly to the Public Statements Subcommittee. The Subcommittee had met earlier in the day and Chairman Jean Berthon presented his report.

13 Jean Berthon introduced the revised version of the Guidelines (see Attachment A) which had already been distributed to Committee members. He indicated that the new Guidelines had attempted to take into account the concerns raised by associations. 38. At Jean Berthon s request, David Hartman reviewed the changes in detail. Concerns expressed by Norway, Switzerland, Canada, South Africa and U.S. associations had been addressed. He then reviewed briefly the sequence of events in preparing a public statement and various contingencies which might arise. 39. In the discussion, the following additional changes were recommended: in Section 5, consensus could be replaced by unanimity ; in Section 5, concerning a shorter comment period, the text should be revised to read In certain circumstances a shorter comment period of not less than two weeks may be agreed to by the Chairman of the IFAA Committee ; in Section 6, the last paragraph should be changed to read, This official statement of the IFAA has been developed by.. The statement could be described in this way because it will have been through due process and any minority view will be specifically presented; in Section 6, ad hoc committee was replaced by relevant committee; in Section 6, the following was considered: MOTION That the text in the last paragraph of Section 6 of the Guidelines be revised to read: This statement has been developed by the X Committee of the IFAA, the members of which are listed below. The member associations of the IFAA are also listed below. Carried unanimously 40. Chris Daykin indicated that the IAA Chairman had interpreted the IAA vote as approval in principle for the Guidelines and since the changes being proposed were matters of detail and not fundamental changes in principle, it was not considered necessary to have the IAA Council re-approve the document. 41. Members agreed that the revised Guidelines should be presented for approval in Australia. Following approval the revised document will be sent to the IAA Council for information.

14 NEW SUBCOMMITTEE ON IASC INSURANCE ACCOUNTING STANDARDS 42. Chris Daykin indicated that the IFAA had heard earlier in the year that the IASC were in the process of setting up a Steering Group to produce an Exposure Draft on Insurance Accounting Standards. The IFAA had been invited by the IASC to appoint a member to their Steering Committee and the IFAA Chairman had appointed Paul McCrossan to this position. Full participation in the discussions will be possible but the position is nonvoting. After contact with the A&A Subcommittee Chairman, it was recognized that a new Subcommittee would be required to deal with this matter. Nominations were sought from all associations for members of a provisional subcommittee so that a structure could be created pending formal Committee approval. 43. The following motions were then presented: a) MOTION That a Subcommittee on IASC Insurance Accounting Standards be established to coordinated the IFAA s response to the proposed IASC Insurance Accounting Standard. Carried unanimously b) MOTION That Sam Gutterman of the Society of Actuaries be appointed Chairman of the Subcommittee on IASC Insurance Accounting Standards. Carried unanimously c) MOTION That the following persons be appointed as members of the Subcommittee on IASC Insurance Accounting Standards. Steve Handler C.G. Swanepoel Shen-Yue Kuan Iain C. Lumsden Clive Aaron William M. Abbott Juhani Heiskanen Félix Arias Albert Rocamora Eike Steinmann Richard S. Robertson Edward J. Bonach The Actuarial Society of South Africa The Actuarial Society of South Africa The Actuarial Institute of the Republic of China Faculty of Actuaries Institute of Actuaries of Australia Institute of Actuaries Actuarial Society of Finland Col.legi d Actuaris de Catalunya Col.legi d Actuaris de Catalunya Swiss Association of Actuaries Society of Actuaries Society of Actuaries Carried unanimously

15 REPORT BY THE CHAIRMAN 44. Sam Gutterman reported on the meeting of the provisional subcommittee held that morning. The meeting was crowded and participation very active. There was agreement on two principles: it is appropriate to use fair value evaluations concerning life insurance accounting; in doing so both assets and liabilities needed to be considered consistently. The was no immediate consensus on how those fair values should be determined. This will be a principal topic of future discussions. It was agreed that five subgroups will be created for this purpose. Their preliminary titles are: Valuation of insurance products under a fair value approach; Loss reserves in the context of Property and Casualty (General) Insurance; Role of the actuary (this might consider the requirement for a framework standard, for a complete IFAA standard, or for an opinion with respect to accounts); Consistency in treatment of fair value with other financial institutions (concern that multi-national company financial institutions that include both banks and insurance companies may use different accounting approaches); IASC Discussion Draft on Financial Assets and Financial Liabilities (this has a short time frame for comments but a small group will consider whether there are actuarial comments to be made). Associations were invited to submit nominees for the Subcommittee with an indication of which subgroup they wished to serve on. IFAA FINANCES 45. Chris Daykin drew attention to the financial update which was included in the agenda papers and to a further update which had been circulated to members present (Attachment B). He expressed some discomfort at having to report a prospective shortfall of about $35,000 at year end as opposed to a small surplus which had been budgeted. 46. The principal reasons for this change were an extremely high level of activity during the year, as evidenced by an extra Subcommittee meeting, and substantially increased activity in the Secretariat as reflected in the higher consulting cost, higher fax, travel and translation costs. The decision had been taken to invite Nicole Séguin, the designated Director of the new International Secretariat, to the meeting to ensure continuity in the organization as Brian Wooding will be retiring after the Australian meeting, and this had contributed to higher travel costs. Nicole Séguin was introduced to the members present.

16 These and other considerations had been factored into the new budget illustrations which had been circulated, resulting in a proposed annual fee of C$5.50 per individual actuary instead of C$5.00. This will not generate a large surplus, certainly not in the first year, but Chris Daykin said he was reluctant to propose an even higher fee. 48. He indicated that if the IFAA was expected to flourish and respond to the many challenges which it is being faced with, it would have to meet the associated costs. 49. There was a brief discussion and the following points were made: an increase is also being proposed for IAA members and this should be identified so that the total additional costs to associations is apparent (Huntington); the C$5.50 proposed fee may be insufficient to adequately provide for next year s operations and ought to be re examined (Henderson). 50. Chris Daykin indicated that Web site costs had not been reflected in the latest budget illustrations, but that it was expected that once well established the site could generate significant offsetting savings. The fee amount for the next budget would be reviewed with the Executive and a formal proposal made for approval in Australia. 51. Meanwhile, it was hoped that some of the larger associations would agree to making an advance payment of next year s fees in order to provide sufficient operating capital until the bulk of the fee revenue was received in the December 1997/January 1998 timeframe. MATTERS ARISING FROM PREVIOUS MINUTES Joint Secretariat 52. Brief reports were presented by Chris Daykin and Brian Wooding on the situation regarding the proposed joint secretariat. Some initial planning had taken place, but until the form of the final restructuring of the IAA had been agreed, it was difficult to foresee what the new secretariat would be required to accomplish, how it would be organized, what its funding would be and how the existing IFAA Secretariat would be affected. Streamlining 53. Chris Daykin introduced his paper, Streamlining Policies and Procedures, which had been distributed as Attachment D to the Agenda papers. 54. In the expectation that the Committee would need as much time as possible for the discussion of substantive items, it was proposed that routine formal items such as committee appointments and terms of reference, for example, be approved in a single block. If any concerns were raised by associations, either prior to the meeting or at the meeting, the relevant items would be treated individually. There was general agreement with this time saving procedure.

17 Concerning Chairmen of Subcommittees, it is presently required that they be members of the main Committee. This essentially prevents an association from having one of its members serve on the Committee and having some other member serve as a Subcommittee Chairman. To remove this restriction, it was proposed that Subcommittee Chairmen be automatically ex officio members of the IFAA Committee, without prejudice to the right of their associations to nominate another member to the IFAA Committee to carry their vote(s). Subcommittee Chairmen could then be chosen from among current or past representatives on the IFAA Committee or on any Subcommittee without requiring special arrangements to be made with their associations to designate them as representatives to the IFAA Committee. 56. The question was raised as to whether there were any limitations on Subcommittee membership. It was pointed out that the membership size of the Accreditation and Education Subcommittees had been established by formal motions to ensure that there was reasonable representation from different associations and that no one geographical area or association could dominate the others. During the discussion other points were made: Subcommittees were intended to be open to encourage associations to participate in IFAA activities (McCrossan, Bonach); some register of Subcommittee membership was needed to ensure that mailings and other communications reached the appropriate people (Daykin); while voting was not expected to be a common occurrence in Subcommittees, the principle of having one voting person per association would apply (McCrossan, Meijer and others); it was more important to have a large geographical representation than to have a large number of members from one area but with somewhat different skills (Meijer); while in general it was preferred that associations not nominate more than one person per Subcommittee, there could be circumstances where more than one nominee might be appropriate to ensure continuity of coverage in the Subcommittee or because of different specialties being required to meet the tasking of the Subcommittee or its sub groups (Daykin, Gutterman and others); there was concern that small associations only able to afford the cost of sending one member to a meeting should not be overwhelmed by other associations able to cover the cost of sending several delegates (Thornton); it was acceptable that proxies or alternates attend meetings on behalf of the official appointee when that person was unable to attend (Kehoe); the original restrictions on Subcommittee membership were intended as safeguards against domination of one group by another. Given the good faith and good will that has been evident within the IFAA since its inception, it may be appropriate to relax these restrictions for a test period of say, two years. At the end of that period, the situation could be reviewed to find if the good will continued to prevail, in which case it might be possible to withdraw the restrictions totally (Rugland);

18 the current process for the appointment of Subcommittee members was cumbersome and if inclusivity were to be generally accepted then some more efficient process would be desirable for processing membership appointments. 57. Chris Daykin then moved the following motion: MOTION That the paper (Attachment D) be adopted to permit smoother operations in the short term operations; that the Executive should formulate additional proposals, including changes to the Regulations, which were consistent with the direction in which the IFAA was moving, and took into account Walt Rugland s suggestion of withdrawing restrictions on subcommittee members for a trial period; and that these proposals be presented for approval in Australia. Carried unanimously Tele/Videoconferencing 58. At Chris Daykin s request, Brian Wooding presented a summary of the results of the Tele/Videoconferencing interest survey which had been carried out among Subcommittee members. The survey results were distributed to those present (Attachment C to these Minutes). 59. The survey indicated a strong interest in teleconferencing; high employee or individual support for the costs involved; and a willingness to work unusual hours to accommodate time differences. The interest in videoconferencing, and cost support for it, was roughly half that for teleconferencing. 60. Following a short discussion it was concluded that the IFAA should go ahead with a test of these arrangements at the Australian meeting. The following Subcommittees will use teleconferencing: Accreditation, Advice and Assistance, IASC Insurance Accounting Standards and possibly Education. The IASC Employee Benefits Subcommittee will attempt a videoconference for their next meeting, which is likely to take place before the Australian meetings, because it offers better personal contact and because members have studios in their offices and can therefore reduce costs below the levels indicated in the background paper previously circulated. 61. Chris Daykin indicated that the IFAA would have to be responsible for any costs incurred and not reimbursed by participants. Given the saving in time and productivity accruing to users of teleconferencing, this was not expected to create difficulties. FUTURE MEETINGS 62. Australia

19 Catherine Prime confirmed that the next Committee Meeting would be on Sunday, 17 August 1997 in the Gold Coast, Australia. The details are: The Committee meeting will be preceded by an IFAA dinner Saturday evening, 16 August and this dinner will be combined with the dinner that the Australian Institute wishes to hold for its VIP visitors to the Centenary; Subcommittee meetings will be held on the Sunday morning and the Committee will meet in the afternoon; The opening reception for the Centenary Convention will be held on Sunday evening after the IFAA Committee Meeting; Catherine Prime drew attention to the Brochure of the Institute of Actuaries of Australia which had been circulated. The following topics will be included in the IAA Centenary Program immediately following the IFAA Committee meeting: life insurance, pensions, investment practice, general insurance, professionalism, education content and the future of the profession. More details will follow in due course. Good international participation, particularly from Asian countries, is expected; It is not necessary to register for the IAA Convention in order to attend the IFAA meetings. However, the IFAA meeting is in the same hotel as the IAA Convention and IFAA accommodations booking will be handle by the IAA Convention staff; For members travelling from Cairns to the Gold Coast, the Australian Institute is making arrangements to enable them to fly to Brisbane and then be transported by coach to the Gold Coast in time for the IFAA dinner on Saturday night. Catherine Prime strongly recommended that trips to other destinations in Australia should be booked outside the country and not after arrival in Australia. 63. Papers for Australia Chris Daykin indicated that there were some practical difficulties in providing paper for the Australian meeting 3 months ahead of time because of the shorter than usual interval between the Zeist and Gold Coast meeting. He presented the following motion to alleviate this problem:

20 MOTION That the requirement for 3 months notice to members for the agenda and motions for an IFAA Committee be modified to 2 months in the case of the August 1997 meeting in Australia Carried Unanimously 64. Meeting in Early 1998 Chris Daykin indicated that there was a long interval between the Australian meeting in Australia 1997 and the Birmingham meeting on 5 June To keep things moving forward and because at least some Subcommittees needed to meet in the interim, it seemed sensible to plan for a Committee meeting in January or February. Offers had been received from the Cyprus association to meet in Paphos and from the Collegio of Mexico to meet in Cancun. These invitations would be considered and a formal proposal with a date and location would be included in the agenda papers for Australia. (Subsequent to the meeting, arrangements were made for the IFAA Committee to meet on 29/30 January 1998 in Paphos. A formal motion to this affect will appear in the agenda papers for Australia.) 65. Cape Town, South Africa Reg Munro distributed a colorful brochure on South Africa. He invited members to attend this year s convention of the ASSA which will be held on 22 and 23 October 1997 in Johannesburg. The ASSA is very much looking forward to hosting the IFAA in its Jubilee Year. The meeting will be in Cape Town on 3 November 1998, followed by the ASSA 50 th Anniversary Celebrations on 4 and 5 November Madrid - Spring 1999 This possibility is still to be confirmed. 67. Tokyo - August 1999 Chris Daykin introduced the following motion: MOTION That the IFAA General Meeting for 1999 be held in Tokyo on Sunday, 29 August 1999 in conjunction with the IAJ Centennial Celebrations. Carried Unanimously

21 OTHER BUSINESS 68. Mailing List Chris Daykin indicated that the IFAA had already developed a unique address list of association contacts and that, with the creation of the International Secretariat, this was likely to be expanded even further. Requests had already been received from some member association for access to this list and no doubt requests would be received from outside agencies before long. He asked members for their views as to how access to the list should be controlled. After a short discussion, the following was agreed: member associations are to be permitted full access to the list; regulatory authorities and international bodies such as the IASC are permitted full access to the list for the purpose of communicating with IFAA member associations; the list is not to be released in whole or part to any commercial enterprise. 69. Distribution with IFAA Mailings of Documents Submitted by Member Associations After a very brief discussion it was agreed that: associations wishing to distribute material of their own to other associations should be invited to make use of the membership list; should the Secretariat be asked to include with its own mailing material from another association, then that association should be asked to pay at least the margin cost of so doing. 70. International Association of Insurance Supervisors Chris Daykin reported that this organization had its origins in an international add on to the annual meetings of the National Association of Insurance Commissioners in the US which have been held for some time. The organization is now taking on a structure of its own and taking a stance on the development of standards internationally. There has been discussion as to whether at their next annual meeting, which is in Sydney, Australia in September 1997, they might have as a major discussion topic The Role of the Actuary. Chris Daykin has offered to moderate such a session in his capacity as an advisor to the regulator, and has suggested that Walt Rugland, who will then be the IFAA Chairman, be invited to present the position of the actuaries. Hopefully these contacts will lead to closer relations between the two organizations. 71. International Social Security Association (ISSA) Chris Daykin indicated that he happened to be the representative of this organization on the IAA Council and was also Chairman of the Permanent Committee for Statistical, Actuarial and Financial Studies of the ISSA. An ISSA technical committee is involved with the Stockholm Initiative (an attempt to open up the debate on the future of social security and to consider the balance between public and private social security). The

22 committee will meet in Berlin on 28 April, 1998 and Chris Daykin will attend. He will suggest that, if this is intended to be a public debate, then the IFAA should certainly be invited to respond to any of the positions which they develop. Hopefully this will be yet another useful connection with an international body. 72. IFAA Handbook At the Chairman s request, an IFAA Handbook has been developed to provide a concise description of how the IFAA operates, what policies and decisions are in effect and where they may be found, etc. It is expected to be particularly useful for the Officers, Committee Members, Subcommittee Chairmen and the Secretariat Staff. 73. IFAA Web Site Chris Daykin indicated that it was important that the IFAA take advantage of the facilities offered by the World Wide Web. Paul McCrossan had already reserved the domain names of and for the IFAA. Brian Wooding then presented an update on preparations for the site: there would be an initial set up cost of about C$900 and an operating cost of about C$300 per month thereafter. There might also be some incremental staff costs for document preparation but these could be minimized if members were able to present their material electronically instead of in hard copy. Costs will be reflected in the budget to be presented in Australia; these costs will eventually be offset by savings in courier, mail, fax and staff charges. Currently only half the potential users are connected to the World Wide Web, so some documents will have to be sent by the present method for the time being. Savings will be maximized when all members are using the Web; the site is expected to be operating by the end of April. Introductory text in English and French has already been prepared. The site will operate mailing lists. This will enable a subcommittee member, for example, to send messages to all other subcommittee members by using a single electronic address. In due course a document library will be established and the Web site will be linked to the sites of other associations. A password system will also be introduced eventually to protect individual privacy and once that is in place, the full membership database will be available to members online; the new Subcommittee on IASC Insurance Accounting Standards has tentatively agreed to work electronically and has settled on MS Word as the standard software. This is also the software in use at the CIA and IFAA Secretariats. This will facilitate inter-operability; Sam Gutterman reminded members that the IFAA already has a Continuing Education site housed within the SoA Web Site and encouraged all members to enter their continuing education events so that all would be aware of them; there appeared to be general enthusiasm among members for making the greatest possible use of the Web facilities.