In January 2021, The Canadian Institute of Actuaries (“CIA”) retained the services of Fiera Capital Corporation (“Fiera Capital”) to produce, on a monthly basis, the Fiera Capital’s CIA IFRS 17 Market Curves and Reference Curves.
Fiera Capital’s CIA IFRS 17 Market Curves and Reference Curves
A complete description of the methodology used to develop the IFRS 17 reference curves, as well as the rationale used to establish this methodology, can be found in the CIA’s Draft Educational Note IFRS 17 Discount Rates for Life and Health Insurance Contracts, published by the Committee on Life Insurance Financial Reporting in June 2020. The material provided by the CIA also includes an Excel spreadsheet that builds the IFRS 17 references curves. The Draft Educational Note IFRS 17 Discount Rates and Cash Flow Considerations for Property and Casualty Insurance Contracts published by the Committee on Property and Casualty Insurance Financial Reporting (PCFRC) also provides guidance on the topic of Discount rates and refers to the IFRS 17 reference curves. The IFRS 17 reference curves apply to both Property and Casualty, and Life and Health Insurance Contracts. An Update to CLIFR and PCFRC draft educational notes on discount rates was also published in June 2021 and contains the updated guidance on the parameters to be used to set the reference curves. Actuaries would refer to the CIA draft educational notes for guidance related to the application of the reference curves.
It should be noted that the reference curve parameters described in the June 2020 CLIFR draft educational note have been used for the reference curves up to December 31, 2019. The reference curve parameters described in the Update to the CLIFR and PCFRC draft educational notes have been used for the reference curves beyond December 31, 2019.
Some of the key inputs used in the establishment of the IFRS 17 reference curves for insurance companies in Canada are the observables market rates on the Canadian bond market. This includes a Government of Canada (i.e. “risk-free”) market curve, a provincial bond market curve and a corporate bond market curve. The Implementation Note in the Methodology section (below) describes how these market curves are developed by Fiera Capital, and how these curves are then used to establish the IFRS 17 reference curves.
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The Fiera Capital’s CIA IFRS 17 market curves and reference curves, and certain content of the related implementation note, have been created using data from, unless otherwise specified, the FTSE Canada Fixed Income Indexes which are used with permission from FTSE Russel. FTSE Russel is licensing the FTSE Canada Fixed Income Indexes “as is,” makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the FTSE Canada Fixed Income Indexes or any data included in, related to, or derived therefrom, assumes no liability in connection with their use, and does not sponsor, endorse, or recommend Fiera Capital, or any of its products or services.
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