1. 2008 Annual Meeting ● Assemblée annuelle 2008 Québec
Canadian
Institute of
Actuaries
L’Institut canadien
des
actuaires
2008 Annual Meeting ● Assemblée annuelle 2008
Québec

2. Commuted Value Standards
Assemblée annuelle 2008
2008 Annual Meeting
Geoff Guy
Chair, Actuarial Standards Board
Rob Smithen
Project Manager
June 19, 2008

3. 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?

4. History 1986 First CV Standard for pensions 1993
Current Marriage Breakdown Standard adopted
2005
Current Pension CV Standard Adopted (with 2008 expiry)
2004
CV Task Force formed
2008
Pension CV Standard extended to 2009
ASB states that it wants to develop new standards for pensions and MB before the end of the year.
Task Force publishes report

5. The ASB’s Role
Develop standards taking into account public interest (and other criteria)
Manage the process
Hear opinions
Make decisions

6. 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

7. What’s been happening? Input from: Pension Practitioners
Marriage Breakdown Practitioners
2004Task force
……………….and others

8. And……….. The ASB has considered the representations
Discussed possible approaches
Approved release of two exposure drafts

9. 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 b.p.)
Inflation: difference between non-indexed and RRR bonds minus 25 b.p
Time Lag: 2 months
Rounding: 0.1 %

10. - Why 75 – 100 b.p.? (spread over Gov of Canada)
Credit Risk
Investment Expenses
Liquidity
Independent study suggested bps
Current standard calls for 50 bps
Will need to decide specific addition by October

11. 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 %

12. Most things have changed
= some change from current standards
Pensions MB
MB=Pension
Mortality
Yes
Interest No
Inflation
Time Lag
Rounding

13. 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)

14. Comments welcomed Possible topics!!
The b.p addition to Gov of Canada bonds (pensions)
The 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