The P&C Actuary's Role in Solvency Monitoring - Property and ...

PACICC – The P&C Actuary’s Role in Solvency Monitoring Page 8
Initially, the requirement for a DCAT report did not apply to all insurance companies, instead it
was noted that such a report may be required for a particular company by the regulator. The
changes implemented in the 1990s to the ICA continue to exist in large part today, with the
extension of the requirement for DCAT reports to all federally regulated insurers.
The 2000s
There were several significant initiatives in the 2000s. Until 2003, OSFI directed that the
valuation of policy liabilities should not reflect the time value of money. 16 Effective January 1,
2003, federally regulated P&C insurers started including discounted policy liabilities in their
financial statements. OSFI implemented the minimum capital test (MCT) at year-end 2003 and
mandated external review of AA reports starting with the 2003 actuarial reports.
There were important accounting changes effective for annual and interim accounting periods in
fiscal years beginning on or after October 1, 2006. The Accounting Standards Board (AcSB)
introduced new standards to address when an entity would recognize a financial instrument on its
balance sheet and how the financial instrument would be measured once recognized. The new
standards included the following sections in the CICA Standards and Guidance Collection:
― CICA 3855, Financial Instruments – Recognition and Measurement
― CICA 1530, Comprehensive Income
While insurance contracts were excluded from the scope of the new accounting standards, and
thus not directly affected, the use by actuaries of a portfolio-based discount rate in the
determination of the actuarial present value of the policy liabilities resulted in an indirect effect.
16 P&C Loss Reserve Discounting Canadian Perspective, Claudette Cantin, CIA Spring Meeting, June 18,
2008.