The cash flow method for valuing liabilities in Canada

Abstract

A number of the questions which have arisen at this conference have been answered by many Canadian actuaries. The answers we have arrived at are not quite the same answers that you might have expected to hear if you were just working in the USA. For example, we have had to ask ourselves the question ‘If you have a demand liability, perhaps a cash value, is it acceptable to value the liability of a policy as anything less than the amount of this possible demand?” We have come to the conclusion that the answer is ‘yes.’.

Comment: This paper was not presented at the conference nor was it even submitted in response to the Society of Actuaries Call for Papers. The topic was raised at the meeting and since it is a method, transparent in its logic and actually in use, it seems appropriate for it to be described in this volume. The method may very well not be useful in the US environment because there tend to be more options in the US than Canadian Life Insurance Contracts. — Ed.