International GAAP is Closer Than You Think

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

2. IP-34 International GAAP, 2011 is closer than you think June 19, 2008 Micheline Dionne

3. Agenda Actuarial Standards Board IFRS Working Group Process Timeline Practice Council 2008 Annual Meeting Assemblée annuelle 2008 ASB and PC Update

4. ASB Working Group Mandate Ensure that appropriate standards for actuarial work exist (or are developped or modified) that are in harmony with IFRS/IAS, in all areas where the latter is applicable More specifically: Responsible for steering the ASB process Coordinate efforts with PC to insure proper guidance Focus on Phase 1 Organized into 4 working groups (Life, P&C, Pensions, Regulatory liaison) 2008 Annual Meeting Assemblée annuelle 2008 ASB Update

5. ASB Subgroups responsibilities Liaise with CIA committees in their respective domain Identify the need for new or modified standards Identify or propose creation of appropriate designated groups for the drafting Promote parallel development of standards and guidance, whenever applicable Add non-ASB members to their roster when needed, most likely after the summer Track revisions of existing or exposure of new IFRS/IAS standards Communicate with membership 2008 Annual Meeting Assemblée annuelle 2008 ASB Update

6. ASB Working Group Nick Bauer, Chairperson Mark Cambell (Pensions) Micheline Dionne (Life) Richard Gauthier (Property & Casualty) Charles McLeod (Chair of ASB) Jacques Tremblay (Chair of PC) 2008 Annual Meeting Assemblée annuelle 2008 ASB Update

7. Timing All Notices of Intent by March 2009 All Exposure Drafts by June 2009 – to allow discussion at the Annual CIA meeting Final standards and guidance by late fall 2009 (November 1st ?) 2008 Annual Meeting Assemblée annuelle 2008 ASB Update

8. Action taken to date Met with AMF on May 23rd to solicit their views and expectations Conference call with OSFI insurance actuaries on May 27th Started planning a regular process of communication to the membership First memo for June 2008 Review of existing standards to tentatively identify standards requiring changes – target date: end of July 2008 2008 Annual Meeting Assemblée annuelle 2008 ASB Update

9. Global review of the standards General Standards Insurance (Life and P&C) Insurance Contracts Financial Instruments Service Contracts Pensions and other employee benefits Public Personal Injury Compensation Plans (PPICPs) could be greatly impacted doubt exists as to whether they will be subject to IFRS Accounting Standards Board has determined that IFRS will apply to “publicly accountable” companies OSFI and AMF have extended its application to all insurance companies (whether publicly accountable or not) under their jurisdiction 2008 Annual Meeting Assemblée annuelle 2008 ASB Update

10. Rules vs. No Rule No rule argument In line with banks for Investment products More in line with other countries – why disadvantage ourselves AcSB could say that elimination of options is contrary to International GAAP spirit Disclosure will induce convergence anyway Rule argument Reduction of the range of practice Lower the risk of non-intended mis-behavior Our current SOP and guidance has made the Canadian reputation of professionalism 2008 Annual Meeting Assemblée annuelle 2008 ASB Update

11. Preliminary Toughts Definitions of Insurance vs. Investment vs. Service Contracts Already lots of examples and guidance in IFRS and IAS litterature – do we need more, do we need to regroup them ? How to value Investment Contracts Definition of Fair Value Insurance = CALM (Ins. + Inv) – FV (Inv.) ? Probably not, as contrary to IFRS spirit Reinsurance Not a negative liability anymore but an asset – How would CALM work? 2008 Annual Meeting Assemblée annuelle 2008 ASB Update

12. Preliminary Toughts Is CALM = Adequacy testing? Do we need a statement to that effect ? Is the P&C approach equivalent to adequacy testing ? Discounted tax provision – not acceptable under IFRS but part of CALM Standards on Disclosure – needed soon! Definition of Embedded derivatives Clarification of ‘accepted actuarial practice’ Review of the Joint Policy Statement 2008 Annual Meeting Assemblée annuelle 2008 ASB Update

13. Suggested reading First time adoption and implementation : IFRS 1 Insurance Contracts: IFRS 4 Service Contracts: IAS 18 Investment Contracts: IAS 39 2008 Annual Meeting Assemblée annuelle 2008 ASB Update

14. 2011 timetable is tight Coordination is key CIA (ASB, PC, Practice committees) CICA Regulatory (OSFI, AMF, …) Phase 1 Local statutory and regulatory requirements continue to apply Need to confirm limited changes to Ed. Notes, Research Papers and Regulatory Capital Formula Related Guidelines Need to insure all required work is assigned to the appropriate group 2008 Annual Meeting Assemblée annuelle 2008 PC Update (June 4th message on Phase 1)

15. Phase 1 Progress to completion in timely fashion – useful, reliable, timely guidance Review membership of CIA Committees, possible establishment of Task Force Identify practice specific Standards requiring modifications + Ed. Notes Identify committees needing additional ressources Educate members – special seminar 2008 Annual Meeting Assemblée annuelle 2008 PC Update (June 4th message on Phase 1)

16. Phase 1 - Potential guidance Disclosure for YE08 (Qualitative) and YE09 (quantitative) Treatment of reinsurance (IFRS 4) Triage of contracts – Is this a CIA or a CICA matter ? AA role for capital certification – DCAT Least possible changes in comment guidance 2008 Annual Meeting Assemblée annuelle 2008 PC Update (June 4th message on Phase 1)