This article originally appeared in the CIA (e)Bulletin.
By Conrad Ferguson, FCIA
I thought it may be of interest to the membership to get a further appreciation of the responsibilities and activities of the Actuarial Standards Board (ASB) over the course of a year. I will also highlight three initiatives identified in our strategic plan that are currently underway.
As stated in my previous article, the mission of the ASB is to support informed economic decision-making by actuarial report users. The ASB serves the public interest by developing, establishing, and maintaining high-quality standards of practice for actuarial reporting in Canada.
The ASB’s Mission
In delivering on its mission, the ASB must adhere to Terms of Reference approved by the Actuarial Standards Oversight Council (ASOC).
The ASB has the following responsibilities:
- To develop and maintain a policy on due process.
- To formally adopt changes to existing standards or new standards.
- To determine what needs to be mandatory, best practice, or is education guidance.
- To appoint designated groups, working groups or other groups, as it may deem necessary or convenient, to assist in the development of standards of practice, or to perform other duties as the ASB may prescribe.
- To remain current on all practice-related material developed through the Standards and Guidance Council.
- To participate in meetings with regulatory authorities or other interested parties.
- To advise ASOC and the CIA on required resources.
Due Process Review
We have recently completed a review of our due process. To that end, we examined the due processes of the actuarial profession in other countries and for another profession in Canada. This exercise did not identify gaps in our due process. In fact, our due process provides more details than most other groups we reviewed. However, certain clarifications were deemed necessary to improve on the existing document. The revisions were approved by ASOC. Our revised Policy on Due Process can be found on our website.
Standards of Practice Review
Items 2 to 4 in our list of responsibilities all relate to the work involved in developing our standards of practice. Typically, we aim to conduct a review of each of our standards every five years. External factors, such as new developments in regulations or in the international community, may cause us to review a standard earlier than planned. We report regularly via our website where members can find a summary of activities and the minutes for each of our meetings.
We typically establish working groups to explore certain issues or to review our policies. For example, we established a working group last year to review the elements that should be included in our review of the pension standards. We currently have a working group made up of ASB members conducting a review of our Policy on Designated Groups (DG). A DG is composed of volunteers and is tasked to conduct the review of a standard of practice based on a mandate defined by the ASB and to make recommendations to the ASB. This is an area where ASB members felt there was room for improvements related to the clarity on the role of DGs, the clarity of mandates, and the expectations in relation to timelines to complete the work. This process is underway and the results should be presented to ASOC for approval later this year.
Pension Standards Review
The review of the pension standards is one area that will require attention over the coming 18 to 24 months. Many things have changed in the Canadian pension landscape in recent years, not the least of which is the introduction of new types of target benefit pension plans and movement away from solvency funding.
The ASB felt that the task of completing such a review was too much to ask a single DG to undertake. As a result, we have approved three separate mandates for this review. One DG will focus on a review of the existing standard as it relates to going concern valuations and the general wording in the current standard. That DG will also have to incorporate the annuity purchase guidance in our standards of practice. A second DG will determine if a new basis to measure benefit security should replace the current “solvency or hypothetical wind-up basis” we have in our pension standards. It will also have to explore the legal aspects and the stakeholder’s perception of actuaries’ responsibilities pertaining to their role. Finally, a third DG will look at the possibility of introducing certain stress tests as part of our reporting to clients and regulatory authorities. The Standards and Guidance Council (SGC) is currently actively recruiting for the three DGs.
It should come as no surprise that a lot of effort is devoted to revising our insurance standards to adapt to the new financial reporting requirements under IFRS 17. This is a massive effort on the part of the ASB, SGC, and CIA to make sure that all our efforts are coordinated and that all the important questions are addressed before this standard comes into effect in 2022. We also need to be consider the implications of international actuarial standards and their application in Canada.
Items 5 to 7 are ongoing activities and we meet with various regulatory groups or agencies annually, along with other CIA groups to ensure we keep them informed and respond to any inquiries they may have. These meetings are very valuable to the profession.
As you can see there are many activities conducted by members of the ASB. We are fortunate that as a profession we are able to count on dedicated professionals to ensure that the ASB can deliver on its mission. We are also indebted to all of those members, industry associations, regulators, and individuals who provide input on our various documents on standards. We need this valuable input to ensure we consider a broad range of views and develop high-quality standards of practice.
I take this occasion to thank my colleagues on the ASB, all of our DG members (we have more than 50 volunteers involved with DGs at any point in time), and all of the members and our broader publics for their valuable input into the development of our standards of practice.
Conrad Ferguson, FCIA, is Chair of the Actuarial Standards Board.
This article reflects the opinion of the author and does not represent an official statement of the CIA.