Transcript Canadian Institute of Actuaries L’Institut canadien des

Canadian
Institute
of
Actuaries
L’Institut
canadien
des
actuaires
2007 General Meeting
Assemblée générale 2007
Vancouver, British Columbia
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
2007 CLIFR Fall Letter
• General reasons for early presentation
• Background
• Review of 2006 Fall Letter content
– New Educational Notes from last year
• Implications of CICA Handbook Section 3855
– financial instruments on Future Income and
Alternative Taxes – update to Fall Letter
• Use of Actuarial Judgment in Setting Assumptions
and Margins for Adverse Deviations
• Best Estimate Assumptions for Expenses
• Approximations to Canadian Asset Liability Method
(CALM)
• Margins for Adverse Deviations
• New or Revised Guidance
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
2007 CLIFR Fall Letter
• General reasons for early
presentation
– Avoid distribution near year-end
• target; AA seminar
– Allow time for implementation of
changes, if any and if applicable
– Non December 31st financial date, e.g.
banks
– To allow time to receive feedback from
practitioners
2007 CLIFR Fall Letter
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
• Background
–
–
–
–
Guidance for 2007 Valuation
Consensus view of CLIFR
Discussed since March meeting
CLIFR Committee
• Chair – Ty Faulds
• Vice Chair – Les Rehbeli
• Members – Wally Bridel, Sylvain Côté, Edward
Gibson, Greg Lawrence, Marie-Hélène Malenfant,
Dale Mathews, Jean Mongrain, Claude Norman,
Hélène Pouliot, Sheldon Selby, Mary Stock, Nazir
Valani
2007 CLIFR Fall Letter
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
• Reminder of last year content
–
–
–
–
–
–
–
–
Insurance mortality
Annuity mortality
Scenario assumptions – interest rates
Lapse study – Universal Life
Consideration in the Valuation of Segregated Fund Annuities
Currency Risks
Long-term Equity Returns
Value of Minimum Interest Guaranteed and Embedded
Options
– Considerations for Amounts on Deposit and Claims
Provisions under AcSB Section 3855 Financial Instruments
– Implication of AcSB Section 3855 Financial Instruments on
Future Income and Alternative Taxes
– Appendices
• AA scale modification
• example of scenario assumptions – interest rates
• example of equity returns for emerging markets
2007 CLIFR Fall Letter
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
• Insurance mortality
– Guidance on the level of mortality
improvement
– None yet available
– Working Group established to review
and recommend guidance to CLIFR
• lead by Edward Gibson
• monthly review with CLIFR
– Update of this committee’s research by
Marc-André Belzil
2007 CLIFR Fall Letter
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
• Annuity mortality
– Guidance on the level of mortality
improvement for annuity
– Alternative to the AA scale
– Also under review by the working
group
– Reviewing new Individual Annuitant
Mortality table and plan to provide
guidance on its use
2007 CLIFR Fall Letter
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
• Scenario Assumptions – Interest Rates
– Guidance on the interpretation of the new
SoP’s 2320 and 2330
– CLIFR concerned by the wide range of
practice re lack of calibration criteria on
stochastic testing
• working group established lead by Wally Bridel
• monthly review by CLIFR
– Constrain the use of stochastic testing
• parameters appropriate to Canadian life insurance
financial reporting
• encompass the nine prescribed scenarios
• review parameters if tVx lower than CTE 80%
• tVx ≥ prescribed scenario #9
– Ed Note targeted for 2008 release
2007 CLIFR Fall Letter
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
• Lapse Study – Universal Life
– 2003 UL Level COI lapse study
• appropriate for the first 5 policy durations,
but
• lack of UL-specific drivers
– Similarity with stand-alone T-100
– Expect updated experience study to be
released shortly and will reflect in
updated guidance
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
2007 CLIFR Fall Letter
• Valuation of Seg Funds (quick
review of last yr – come to
tomorrow’s session)
– Acquisition Expenses
– Liability Related to Seg Fund
Guarantees
– Hedging
– Session tomorrow
– Ed Note in progress
2007 CLIFR Fall Letter
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
• Currency Risks
– CLIFR recommendation
• Planning to eliminate the reference to
integrated multi-currency interest-rate
models
• Use of currency forwards
– if not available
» use of interest rate differentials
• MfAD ranges from 5% to 50%
• Expected Ed Note soon
2007 CLIFR Fall Letter
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
• Long-Term Equity Return
– Canadian market
• historical period – Begins in 1956
– Other mature markets
• historical period – consistent with
recommendation for Canadian market
– Less stable or emerging markets
• limit the risk premiums (net of MAD) to the
assumed Canadian equities
– Process for an Ed Note has begun
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
2007 CLIFR Fall Letter
• Value of Minimum Interest
Guarantees and Embedded Options
– Low current economic environment
– Not captured by deterministic
scenarios
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
2007 CLIFR Fall Letter
• Considerations for Amounts on
Deposit and Claims Provisions
under AcSB Section 3855 Financial
Instruments
– Concerns if liability valued without
interest adjustment
– Guidance on presentation in financial
statements
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
2007 CLIFR Fall Letter
• Implication of AcSB Section 3855
Financial Instruments on Future
Income and Alternative Taxes
– Guidance on the new tax timing
differences from finance proposal
– Included in a Supplement to last years
fall letter
2007 CLIFR Fall Letter
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
• New Issues for 2007 Fall Letter
– Tax implications of 3855 will be
continued
– Anything else?
2007 General Meeting
PD 15 CLIFR 1
Assemblée générale 2007
Fall Letter and Published
Educational Notes
• Section 1220 of the Standards
– .01 The actuary should be familiar
with relevant educational notes and
other designated educational
material.
– .03 A practice which the notes describe
for a situation is not necessarily the
only accepted practice for that situation
and is not necessarily accepted
actuarial practice for a different
situation.
• Available on CLIFR Website