2007 annual meeting assembl e annuelle 2007 vancouver
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2007 Annual Meeting ● Assemblée annuelle 2007 Vancouver PowerPoint PPT Presentation


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Canadian Institute of Actuaries. L’Institut canadien des actuaires. 2007 Annual Meeting ● Assemblée annuelle 2007 Vancouver. Goal: Propose mortality improvement basis for annuity and life insurance valuation Sub-Committee Members:

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2007 annual meeting assembl e annuelle 2007 vancouver

Canadian

Institute

of

Actuaries

L’Institut canadien

des

actuaires

2007 Annual Meeting ●Assemblée annuelle 2007

Vancouver


Update on mortality improvement sub committee

Goal: Propose mortality improvement basis for annuity and life insurance valuation

Sub-Committee Members:

Marc-Andre Belzil, Jacques Boudreau, Edward Gibson, Claude Normand, Helene Pouliot, Les Rehbeli, Mario Robitaille

2007 Annual Meeting

Assemblée annuelle 2007

Update on Mortality Improvement Sub-committee


Update on mortality improvement sub committee1

Current draft of proposal:

Best estimate improvement scales would be the same for life insurance and for annuity business

Mortality Improvement assumption would have its own MfAD (insurance and annuity MfADs would be in opposite directions, special consideration for death supported insurance policies)

Mortality improvement rates based on Hardy’s paper (Data from 1921 to 2002)

2007 Annual Meeting

Assemblée annuelle 2007

Update on Mortality Improvement Sub-committee


2007 annual meeting assembl e annuelle 2007 vancouver

2007 Annual Meeting

Assemblée annuelle 2007

Historical Mortality Improvement Rates: Hardy Study Population Data (1921-2002)


Draft proposal for mortality improvement

Population data over maximum duration better source than insurance or annuity study data (which are less reliable and have more influences, such as underwriting improvements over time)

Rates will be the same for males and females (more on this shortly)

Improvement rates for first 25 years only, then set to 0%

Introduce concept of “hedge” credit for companies with blends of insurance and annuity business

2007 Annual Meeting

Assemblée annuelle 2007

Draft Proposal for Mortality Improvement


Draft proposal for mortality improvement1

Why unisex rates?

Menard/Wade Report released in May 2007

Uses population data

Shows mortality improvement rates over various time periods

For longer durations (e.g. 70 years) female rates higher than male rates; for shorter durations (e.g. 10 years) the converse is true

2007 Annual Meeting

Assemblée annuelle 2007

Draft Proposal for Mortality Improvement


2007 annual meeting assembl e annuelle 2007 vancouver

2007 Annual Meeting

Assemblée annuelle 2007

Historical Mortality Improvement- Males*

* Source: Menard/Wade Report


2007 annual meeting assembl e annuelle 2007 vancouver

2007 Annual Meeting

Assemblée annuelle 2007

Historical Mortality Improvement- Females*

* Source: Menard/Wade Report


2007 annual meeting assembl e annuelle 2007 vancouver

2007 Annual Meeting

Assemblée annuelle 2007

Historical Mortality Improvement Rates: Hardy Study (1921-2002) vs Proposed Best Estimate


2007 annual meeting assembl e annuelle 2007 vancouver

2007 Annual Meeting

Assemblée annuelle 2007

Mortality Improvement, Menard/Wade 1931-2001 vs Proposed Best Estimate


2007 annual meeting assembl e annuelle 2007 vancouver

2007 Annual Meeting

Assemblée annuelle 2007

Mortality Improvement, Menard/Wade 1966-2001 vs Proposed Best Estimate


2007 annual meeting assembl e annuelle 2007 vancouver

2007 Annual Meeting

Assemblée annuelle 2007

Mortality Improvement, Menard/Wade 1991-2001 vs Proposed Best Estimate


Draft proposal for valuation

Life Insurance mortality improvement:

Maximum improvement rates are equal to 50% of best estimate rates (effectively a 50% MfAD on the improvement rate)

Maximum duration of improvements is 25 years

Special consideration for death supported policies

Annuities mortality improvement

Minimum improvement rates are 150% of best estimate rates

Minimum duration is 25 years

2007 Annual Meeting

Assemblée annuelle 2007

Draft Proposal for Valuation


2007 annual meeting assembl e annuelle 2007 vancouver

2007 Annual Meeting

Assemblée annuelle 2007

Mortality Improvement Rates


2007 annual meeting assembl e annuelle 2007 vancouver

2007 Annual Meeting

Assemblée annuelle 2007

Annuity Valuation Mortality Improvement Rates


Final comments

Proposed change for life insurance business would require a change in the Standards of Practice

currently 100% of mortality improvement must be in MfADs

Proposed change for annuities would be simpler but sub-committee feels it is better to implement both at the same time, as they are inter-related

therefore unlikely to have any changes for 2007 valuation

2007 Annual Meeting

Assemblée annuelle 2007

Final Comments


Final comments1

Proposed change has had limited review from CLIFR, but has not yet been endorsed and is still in early draft stage

Comments from the industry are very welcome

Limited testing (2 to 3 companies) indicates material increases to annuity reserves (3% to 5%) and material decreases to life insurance reserves (1% to 2%, but highly dependent on business mix)

We invite CIA members to conduct further testing and to send us your results

2007 Annual Meeting

Assemblée annuelle 2007

Final Comments


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