The Standardization of Actuarial Standards

David CongramJune 18, 2009

2

Agenda

Underlying Trends

Framework

International position

The challenge ?

Underlying trends

GlobalizationInternational Standards developing International Financial Reporting

Standards – IFRS

International Actuarial Standards

Fixed deadlines for IFRS implementation

Convergence plans

US-GAAP - Convergence intended

No intent to converge with IFRS

Source KPMG

5

IAA Insurance Actuarial Practice Guidelines IASP 2 Actuarial Practice IASP 3 Classification of Contracts IASP 4 Measurement IASP 5 Current Estimates IASP 6 Liability Adequacy Testing IASP 7 Discretionary Participation Features IASP 8 Changes in Accounting Policies

Introduced 2005

• IASP 9 Accounting for Reinsurance Contracts • IASP 10 Embedded Derivatives and Derivatives

•IASP 11 Business Combinations•IASP 12 Disclosure of Information about Insurance Contracts

Introduced 2008

Introduced 2007

•Introduced an Insurance Standard (December 2005)

APS2 - The Prudential Supervision of Long-Term Insurance Business

•Became a full member of the IAA (December 2008)• Code of Professional conduct • Minimum set of educational requirements• Disciplinary procedure

CAIR/CARTAC/WORLD BANK

CAIR/CARTAC/WORLD BANK

8

Capital & Liability FrameworkTotal AssetsAvailable

Liabilities and Capital

Best Estimate Insurance Obligations

Liabilities

Risk Margins

Min ReqCapital

TargetRequired CapitalSolvency

Buffer

AvailableCapital

Assets R

equired for Liabilities

Assets R

equired for Total B

alance S

heet

Insurance Supervisor

CAIR/CARTAC/WORLD BANK

10

T&T Current Environment

Different Regulatory Valuation Reporting Methods

All companies reporting under IFRS.Application of IFRS 4 for insurance - continuing

the existing company accounting policy.A common International Insurance accounting

approach will not be implemented until Phase II. Likely not until 2013.

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Current valuation methodsValn Method Valn Method No of Co’s usingNo of Co’s using

Net Premium Net Premium 66

CRVM (US Method) CRVM (US Method) 11

Gross Premium Method Gross Premium Method 44 Fund Value Fund Value 

44 PV of Annuities PV of Annuities  22 CALM / PPM CALM / PPM

44

Valn Method Valn Method % Liabilities% Liabilities

CRVMCRVM 2.2 2.2 ZillmerZillmer 18.6 18.6 FPTFPT .9 .9 NLP NLP 1.8 1.8 Fund BalanceFund Balance 9.0 9.0 PPMPPM 55.2 55.2 CALMCALM 9.8 9.8 OtherOther 1.7 1.7 GroupGroup 1.0 1.0

TotalTotal 100.0100.0

Technical provisions of an insurer have to be adequate, reliable and objective to allow comparison across insurers..

A necessary precondition of a meaningful capital adequacy framework is a consistent method for valuation of long-term term liabilities.

It is proposed insurance must be valued in accordance with a basis prescribed by or acceptable to the Central Bank.

Recognise local or international standards as they emerge, enable it to narrow the range of actuarial practices that currently exists and facilitate the adoption of financial reporting by insurers in accordance with International Financial Reporting Standards.

CAIR/CARTAC/WORLD BANK

Actuarial Function requirements1. Who can perform the role

1. Fit and Proper2. Absence of conflicts of interest

2. What reporting are we considering3. What should the expectations be of the

report

QualificationsProfessional proficiencyPractical experienceKnowledge of developmentsMembership in professional bodies

Need to rely on professional bodies that set and enforce standards of professional conduct

CAIR/CARTAC/WORLD BANK

We do not want to restrict access of qualified actuaries to enter our market

Clarity regarding on what is the Actuary legally obligated to report

Actuarial reports for Financial Position Actuarial reports for Financial Condition Fairness opinion on allocations Whistle blowing

Under which professional standards will the work be performed?

Actuary would be expected to conduct his work on the basis of standards that apply to actuarial practice and the applicable financial reporting framework

CAIR/CARTAC/WORLD BANK

We want to standardize and narrow the range

Identify the actuary and qualificationIdentify scope of the workFinancial report to which it relatesActuary’s relationship to the entityDisclose the professional standards the work has been performedActuary’s findings and opinion

CAIR/CARTAC/WORLD BANK

Regulation

Not as flexiable

National requirements

Actuarial Standards

Easier to change

Caribbean

National

CAIR/CARTAC/WORLD BANK