PS 8 Update from OSFI and the ASB

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2 SESSION/SÉANCE : PS 8 Update from OSFI and the ASB SPEAKER(S)/CONFÉRENCIER(S) : Dave Pelletier

3 ASB What we ll cover Standards activity of interest to insurance practitioners over the last 14 months Future direction of actuarial standards in Canada, reflecting: International accounting standards International actuarial standards The economic and demographic environment Other projects in the insurance area

4 Our members Michael Banks Jim Christie, vicechair Luc Farmer Ty Faulds Conrad Ferguson Steve Haist Jay Jeffery Marthe Lacroix Dave Pelletier, chair Phil Rivard, ex-officio Michel Simard, exofficio Jacques Tremblay Nancy Yake

5 Final standards approved P&C Ratemaking Revisions to DCAT Revisions to general standards on subsequent events Standardized wording for insurance fairness opinions ( Bill C-57 ) Mortality improvement in life insurer valuation

6 Other exposure drafts published Life insurance dividends (including repeal of non-csopped standards still technically in effect)

7 Other notices of intent issued Modelling (under study) Life insurance costing (not proceeded with) Insurance valuation narrowing the range of practice Reporting of assumptions greater consistency across practice areas Actuarial opinion wording with respect to internal models used in connection with regulatory capital for segregated fund guarantees

8 Promulgations Calibration criteria for seg fund models Mortality improvement in life insurer valuation

9 Other activity Improved due process Guidelines on operations of DGs and on re-exposure Improved style and process manual Working group on IFRS 4 Phase II Revised terms of reference Comment on ED of International Standard of Actuarial Practice 1 on General Actuarial Practice Several meetings (many along with CIA leadership) with industry bodies, regulators, and other stakeholders

10 Future direction some external factors International accounting standards International actuarial standards The economic and demographic environment

11 International accounting standards Work on an international insurance accounting standard underway since 1997 Some irreconcilable differences between FASB and IASB A review draft or re-exposure draft expected late 2012 or early 2013 from IASB Effective date probably after 2015 Canada, as an IFRS country, will presumably adopt

12 International accounting standards (cont d) Implications for our standards: Remove significant portions dealing with current valuation requirements (unless required by regulators for total asset requirement purposes or required for entities not subject to IFRS) Likely a less prominent role than in the past for made in Canada actuarial standards with greater reliance on IFRS and international actuarial standards; not intended to create a made-in-canada IFRS New standards may be required to support revised total asset requirements

13 International actuarial standards IAA Exposure Draft of ISAP 1 on General Actuarial Practice issued June 2011; final standard approval targeted for end of 2012 or first half of 2013 Other ISAPs in process: Social security valuation ED expected shortly Work in connection with IAS 19 draft SOI published ERM draft SOI published ISAPs subject to adoption by local standard setters on a country by country basis IAA producing International Actuarial Notes (analogous to CIA Educational Notes ) as well

14 International actuarial standards (cont d) Do we converge towards ISAPs: At all? By modifying our standards to be congruent with the ISAPs? By adopting the ISAPSs with some modifications to make them fit Canada? By simply adopting them? Philosophically, we d tend to opt for consistent standards worldwide, but

15 International actuarial standards (cont d) Some practical issues: The US different, in part since FASB and the IASB not fully on the same page Our highly integrated CSOP makes integration of a standard from the outside, with different language and format, tougher We may still have philosophical differences with some parts of the ISAPs Going forward: Important that the CIA (and ASB) contribute to, review, and comment on additional international standards in development As we continue to revise Canadian standards, reflect work taking place internationally Attempt to achieve philosophical objective of supporting worldwide consistency while adequately dealing with the practical issues of doing so

16 Economic & demographic environment Low interest rates Financial market volatility Mortality improvement Impact on both insurance and pension standards

17 Possible future projects Convergence with ISAP 1 general standards Cross-practice review of standards regarding discount rates, investment return assumptions and margins (theme of consistency) Standards regarding illustrations for various practice areas; for example: Insurance dividends, universal life Pensions projected pensions, defined benefit vs. defined contribution comparisons

18 Possible future projects insurance standards Impact of IFRS 4 Phase II (but not a made-in-canada IFRS ) and of associated ISAPs Refinements to current standards in the event of: Further significant delay in the IFRS revisions Canada not confirming adoption of revised IFRS OSFI total asset requirements based on something more akin to CALM than IFRS 4 Phase II Revisions to current standards in light of continuing low interest rates (including assumptions for non-fixed income assets) ASB currently establishing a designated group for this purpose

19 SESSION/SÉANCE : PS 8 Update from OSFI and the ASB SPEAKER(S)/CONFÉRENCIER(S) : Gaetano Geretto Dave Pelletier

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