1. 2008 General Meeting Assemblée générale 2008 Toronto, Ontario
Canadian
Institute of
Actuaries
L’Institut canadien
des
actuaires
2008 General Meeting
Assemblée générale 2008
Toronto, Ontario

2. Agenda
Process
Details of Revised Exposure Draft
Next Steps

3. Process Policy on Due Process
Policy on Due Process for Adoption of Standards of Practice:
Advance the public interest
Provide for the appropriate application of professional judgment within a reasonable range
Ensure that compliance with the Standards is practical for actuaries with relevant training
Be clear, concise and written in a consistent style

4. Notice of Intent (NOI) was issued in March
Process Stages to Date
Notice of Intent (NOI) was issued in March
Announcing proposal to make changes to both the CV Standard and the MB Standard
Exposure Drafts were issued in June
A large number of submissions were received
Members of the ASB also met with various stakeholders in various forums
Designated Group met in early October
Full ASB meeting was held in mid October

5. Process Future Expected Progress
Due process requires the Designated Group to decide whether the changes are substantial enough to necessitate re-exposure
Revised Exposure Draft was issued in October
One month comment period
Hope to issue a final Standard in December
Effective date of April 1, 2009
Assuming that the final Standard is approved in December

6. Details of Revised Exposure Draft Considerations
Mortality
Interest rates for non-indexed pensions
Inflation rate / interest rates for indexed pensions
Time lag
Rounding
Effective date

7. Details of Revised Exposure Draft Mortality
Current Assumption:
UP94 Table projected to 2015 using Scale AA
Exposure Draft:
UP94 Table projected to 2025 using Scale AA
Revised Exposure Draft:
UP94 Table projected to 2020 using Scale AA
Effective January 1, 2011, UP94 Table projected generationally using Scale AA
Hope is that a new Canadian Table / projection scale will be available by 2011

8. Details of Revised Exposure Draft Mortality
ASB strongly believes that a full generational approach is preferable
We have sympathy with plan administrators and the time required to make changes to administration systems
With the short period remaining for use of the static projection table it was decided that a shorter projection period was appropriate

9. Revised Exposure Draft:
Details of Revised Exposure Draft Interest Rate for Non-Indexed Pensions
Current Assumption:
Two tier rate structure
One rate for 10 years (based on 7 year GoC bond yields)
Second rate therafter (based on 7 year and very long-term GoC bond yields)
50 bps adjustment made to GoC bond yields
Exposure Draft:
Current structure but with an adjustment of 75 – 100 bps
Revised Exposure Draft:
Current structure but with an adjustment of 90 bps

10. Details of Revised Exposure Draft Interest Rate for Non-Indexed Pensions
Many submissions were received – most focusing on the liquidity argument
Some rejected the liquidity argument
Some agreed with the liquidity argument but said that it was impossible to determine the appropriate adjustment
Liquidity and credit risk are intertwined
The ASB recommends that further research be done on the size of the liquidity adjustment
However, given the information available to us, we are comfortable that 90 bps is appropriate

11. The number of submissions advocating this approach was small
Details of Revised Exposure Draft Interest Rate for Non-Indexed Pensions
Comments were also received with respect to the concept of “reversion to the mean”
The number of submissions advocating this approach was small
But their opinions were quite strong
The ASB considered these arguments:
We felt there was nothing new
We continue to support the market approach
We believe that projecting the yield curve is preferable to mean reversion

12. Revised Exposure Draft
Details of Revised Exposure Draft Inflation Rate / Rates for Indexed Pensions
Current Assumption:
Similar to rates for non-indexed pensions, but based on yields of real return bonds
Adjustment of 50 bps over GoC bond yields
Exposure Draft:
Current rate structure plus 100 – 125 bps
(also communicated as 25 bps higher than non-indexed rates)
Revised Exposure Draft
Current rate structure plus 90 bps

13. ASB spent considerable time on this issue
Details of Revised Exposure Draft Inflation Rate / Rates for Indexed Pensions
ASB spent considerable time on this issue
We feel that the Break Even Inflation Rate (BEIR) is the best indicator of the price that the market is willing to pay for inflation protection
This is in contrast to a predictor of long-term inflation
Examples sited which indicate that it has not adequately predicted inflation are suspect as the time periods are not comparable
No concrete evidence to deviate from the BEIR

14. Details of Revised Exposure Draft Time Lag
Current Assumption:
1 – 2 month delay
Exposure Draft:
Maintain current time lag
Revised Exposure Draft:
Maintain current time lag until January 1, 2011
Decrease time lag to 0 – 1 month effective Jan 1, 2011
ASB prefers the shorter time lag
Delay in implementation will allow plan sponsors / administrators time to modify practices / systems

15. Details of Revised Exposure Draft Rounding
Current Assumption:
Round to nearest 25 bps
Exposure Draft:
Round to nearest 10 bps
Revised Exposure Draft:
There was very little comment on this issue

16. Details of Revised Exposure Draft Effective Date
By re-exposing the changes to the Standard, it is not practical to have an effective date of February 1, 2009
Revised effective date of April 1, 2009
Assuming the final Standard is approved in December
Early implementation will be permitted for solvency valuations
In appropriate circumstances; and
If permitted under applicable regulation / legislation
Measures will be taken to extend the sunset clause for the current Standard
From January 31, 2009 to March 31, 2009

17. Next Steps Comments
Deadline for submissions is November 28
ASB will be meeting in early December to (hopefully) adopt a revised Standard

18. Questions ?