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2008 Annual Meeting ● Assemblée annuelle 2008 Québec PowerPoint PPT Presentation


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Canadian Institute of Actuaries. L’Institut canadien des actuaires. 2008 Annual Meeting ● Assemblée annuelle 2008 Québec. Geoff Guy Chair, Actuarial Standards Board Rob Smithen Project Manager June 19, 2008. 2008 Annual Meeting Assemblée annuelle 2008.

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2008 Annual Meeting ● Assemblée annuelle 2008 Québec

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Canadian

Institute

of

Actuaries

L’Institut canadien

des

actuaires

2008 Annual Meeting ●Assemblée annuelle 2008

Québec


Geoff Guy

Chair, Actuarial Standards Board

Rob Smithen

Project Manager

June 19, 2008

2008 Annual Meeting

Assemblée annuelle 2008

Commuted Value Standards


Today’s agenda

  • A bit of history

  • The ASB’s role

  • The March 08 Notice of Intent (NOI)

  • What’s happened since March?

  • Exposure drafts June 08

  • What’s next?


History


The ASB’s Role

  • Develop standards taking into account public interest (and other criteria)

  • Manage the process

  • Hear opinions

  • Make decisions


Notice of Intent – March 08

  • Key points:

    • Will publish two exposure drafts in June 2008

    • Changes expected in:

      • Mortality

      • Long Term Interest and Inflation

    • Should there be a common standard between Pension and MB?

    • Hope to make decision by Oct 2008


What’s been happening?

Input from:

Pension Practitioners

Marriage Breakdown Practitioners

2004Task force

……………….and others


And………..

  • The ASB has considered the representations

  • Discussed possible approaches

  • Approved release of two exposure drafts


Exposure Draft: Pensions

  • Market Based Approach

    • Mortality: UPI 1994 projected to 2025

    • Interest Rate:

      • 2 tier structure: First 10 years, after ten years (Govt of Canada bonds plus 75 -100 b.p.)

    • Inflation: difference between non-indexed and RRR bonds minus 25 b.p

    • Time Lag: 2 months

    • Rounding: 0.1 %


- Why 75 – 100 b.p.?(spread over Gov of Canada)

  • Credit Risk

  • Investment Expenses

  • Liquidity

    • Independent study suggested 75-120 bps

    • Current standard calls for 50 bps

    • Will need to decide specific addition by October


Exposure Draft: MB

  • Replacement Value Approach

    • Mortality: UPI 1994 projected to 2025

    • Interest Rate:

      • 3 tiers: first 5 yrs, next 15 or 20 years, (using Govt of Canada bonds plus 50 – 75 b.p.), 6% thereafter

    • Inflation: difference between non-indexed and RRR bonds minus 25 b.p.

    • Time Lag: 2 months

    • Rounding: 0.1 %


Most things have changed

= some change from current standards


What’s next?

  • Exposure drafts by June 30

  • MB meeting with ASB in July

  • Comment period to August 29

  • ASB decision in September or October 2008

  • Effective date of new standards February 2009 (with some opportunities for early implementation)


Comments welcomedPossible topics!!

  • The 75-100 b.p addition to Gov of Canada bonds (pensions)

  • The 50-75 b.p. addition to Gov of Canada bonds (MB)

  • 20 or 25 yrs for MB variable rate?

  • Improvements in mortality – generational tables coming?

  • The 25 b.p adjustment to inflation

  • MB practitioners have significant reservations

  • A common basis? Rationale for any differences

  • Values too high/too low

  • ………………….etc


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