LOOKING BACK…focused on the future CIA Annual Meeting LOOKING BACK…focused on the future

MCCSR / TAAM certification by Denis Ricard Session 2603 CIA Risk and Capital Committee - Updates on Current Initiatives MCCSR / TAAM certification by Denis Ricard

Background information MCCSR/TAAM has evolved => more interpretation or technical calculations OSFI Looking for increased certification Has asked the CIA to look at a formal certification Support by: CIA Board AA committee Committee on Risk Management and Capital Lead to increase in role of AA

Committee on Risk Management and Capital Set up a working group The group has recommended a MCCSR certification model Four components: 1. Annual enhanced Opinion 2. MCCSR memorandum 3. CSOP Standards 4. Educational note

1. Opinion Actual opinion: "I confirm that I have read the relevant guideline and annual return reporting instructions issued by the Office of the Superintendent of Financial Institutions and that this form is completed in accordance with them" Annual opinion: must be signed by the AA and one officer Quarterly: requires signature of a company officer

1. Opinion New additional annual opinion by the actuary: "I have reviewed the calculation of the MCCSR ratio [TAAM] of XYZ Inc. as at December 31, XXX, including the determination of the required and available capital. These calculations were carried out in accordance with the OSFI MCCSR Guidelines [TAAM]. In my opinion, components of the required and available capital requiring calculations have been determined appropriately, and guidelines requiring judgement are appropriately interpreted relative to the circumstances of the company."

The AA is not opining on appropriateness of the formulas/factors 1. Opinion The AA is not opining on appropriateness of the formulas/factors

2. MCCSR memorandum Support of the Opinion Areas where the AA has applied material judgement or performed technical calculations Outline specific issues, explain the interpretation and the underlying rationale Not intended to be long and detailed (high level) Prepared as a file note for the appointed actuary (included in the AA report)

3. CSOP standards New section in Practice-specific standards for insurers short (2 pages) Various steps the actuary should follow in providing the certification Scope / Method / Opinion

4. Educational note Provide guidance: Appropriate practice Documentation in memorandum How to interpret the guidelines

4. Educational note Examples of areas of interpretation: risk pass-through participating insurance index-linked products seg fund guarantees new mortality risk formula reinsurance Tier 1 and Tier 2 classification

Next steps Is currently being circulated at various committees Discussion at this meeting Circulate to membership in July Comments end of August Finalise document Proposal at AA seminar Hopefully effective year end 2005

Questions ?