Backgrounder: 2024 Memorandum to the Appointed Actuary
Backgrounder -
Reasons we issue a Memorandum to the Appointed Actuary
The Memorandum to the Appointed Actuary (Memo) communicates our expectations regarding the content of the appointed actuary's report (AAR) on actuarial and other policy liabilities for federally regulated insurers (insurers).
The AAR is a report prepared by the appointed actuary (AA) describing the valuation of the liabilities that we require to be filed along with the annual return for each insurer. The Memo describes minimum standards regarding subjects that should be disclosed and discussed in the AAR. For example, the memo describes our expectations of what the AA should include in the AAR, such as significant assumptions and methods used in the measurement of the insurer's actuarial liabilities.
We have a mandate to protect the interests of insurers' policyholders and creditors. The AAR contributes to our fulfillment of that mandate by providing us insight into how the insurer determines its liabilities.
The role of the AA
Guideline E-15 describes the role of the AA for insurers and sets out some of our expectations with respect to that role. For example, in accordance with the Insurance Companies Act (ICA), each insurer must appoint an actuary who is a Fellow of the Canadian Institute of Actuaries and notify the superintendent of financial institutions in writing of the appointment. Further, the ICA requires the AA to be qualified to hold that position. The superintendent may disqualify or remove an AA if it is determined that they are not suitable for the position.
Our expectations of the AA
The ICA requires the AA to report on the valuation of the liabilities to the shareholders and policyholders at least three weeks before the annual meeting. The AA must state whether, in their opinion, the annual statement presents fairly the results of the valuation. We expect the AA to file the AAR with the insurer's annual return. We also expect the work of the AA to be peer reviewed. We believe that regular peer review of the AA's work contributes to the safety and soundness of insurers and provides a significant benefit to us and the company's stakeholders.
Differences between the 2024 version from previous years
We recently undertook a thorough review of the memoranda to the AA for both life and property and casualty (P&C) insurers. Our objective was to replace technical language and a detailed prescription of form and content with simpler, easier to understand statements of principle. This simplification permitted us to replace separate life and P&C memoranda with a single document.
Memo comes into effect
We posted the final 2024 Memo to our website on August 22, 2024. This Memo provides advice to the AA for the 2024 AAR.