1. PD 17 IMPLICATIONS OF SECTION 3855
CIA General Meeting
Mike Lombardi
October 19, 2006
Chicago

2. 2006 Developments
Town Hall (April, 2006)
CIA Annual Meeting (June, 2006)
CLIFR Educational Note
OSFI
Guideline D-10
MCCSR Changes
CLHIA Tax Proposal
AA Seminar (September, 2006)
CIA General Meeting (October, 2006)

3. Panelists
Mike Lombardi
Gianni Fiacco
Igor Afanassiev
Ty Faulds

4. Accounting changes
3 new accounting standards effective January 1,2007
S.3855 Financial Instruments – Recognition and Measurement
S.3865 Hedges
S.1530 Comprehensive Income
Amendments
S.4211 Replaces S.4210 – Life Insurance Enterprises
AcG9 Financial Reporting by Life Insurance Enterprises
Applies to all entities but affects the life insurance industry in a unique way due to linkage between asset and liability measurement
Will significantly change the measurement of financial instruments and the presentation and disclosure of the financial statements

5. Accounting changes (cont’d)
All financial instruments must be classified
Held To Maturity
Held For Trading
Available For Sale
Loans and receivables
Once and for all designation at inception based on management’s intention
No restatement of prior periods
Restate the opening balance sheet
to recognize assets/liabilities at fair value
to write-off previously deferred gains/losses
to adjust opening surplus as a result of the above

6. Issues
Available for Sale anomaly
Portfolio tainting rules
OSFI restrictions on Fair Value options
CALM implications
MCCSR impact
Tax impact
Transition and implementation issues
Impact on financial reporting and disclosure

7. Current MCCSR Requirements
Assets are valued at amortized cost or moving average market on the balance sheet
Assets supporting surplus are recognized at market (net of taxes) for Capital Available purposes
55% of unrealized unamortized gains recognized in Tier 2C

8. Guideline D-10
OSFI has issued criteria for the use of the Fair Value Option
Requirements
Use must eliminate or significantly reduce mismatch, or
A group of financial assets, financial liabilities or both is managed and performance is evaluated on a fair value basis, in accordance with a documented risk management strategy

9. MCCSR Rules