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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 assembl e annuelle 2008 qu bec l.jpg

Canadian

Institute

of

Actuaries

L’Institut canadien

des

actuaires

2008 Annual Meeting ●Assemblée annuelle 2008

Québec


Commuted value standards l.jpg

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 l.jpg
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?



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The ASB’s Role

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

  • Manage the process

  • Hear opinions

  • Make decisions


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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


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What’s been happening?

Input from:

Pension Practitioners

Marriage Breakdown Practitioners

2004Task force

……………….and others


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And………..

  • The ASB has considered the representations

  • Discussed possible approaches

  • Approved release of two exposure drafts


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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 %


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- 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


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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 %


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Most things have changed

= some change from current standards


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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)


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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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