CLHIA-ACCAP

1. Introduction With almost 90 per cent, or $540 billion of their $615 billion Canadian assets, held in long-term investments, life and health insurers are one of the largest long-term institutional investors in Canada. In operation since Confederation, Canadian life and health insurers also have a long, well-established history of providing long-term financial security to Canadians. This has typically meant providing benefits to Canadians in the case of death or disability. The industry also provides important savings products to meet the needs of older Canadians, including their retirement objectives. Access to such long-term assets is increasingly important for individual Canadians saving for retirement given the trend away from defined benefit pension plans, particularly in the private sector. The nature of the products of the Canadian life and health insurance industry results in predictable long-term liabilities. This inherent and structural advantage of the industry enables it to be an important and stable investor in long-term assets. The industry's investments often support longer-term capital investments, including infrastructure investments, which are critical to creating economic growth. Moreover, the industry's stable demand for long-term assets means that it is an important counter-cyclical investor that helps temper the swings in the market over business cycles as was evidenced by the industry's role in providing stability during the 2008 financial crisis. While insurers' demand for long-term assets is principally driven by its core business, government policy can also have an important influence on the industry's investment decisions. This paper explains the industry's contribution and the role that public policy plays in supporting long-term investment. It is important that policy and regulation in Canada be set with a clear understanding of how it impacts the long-term investment market in general and the unique characteristics of life insurers in particular. 2. The Nature of the Insurance Business Insurance Business Model Supports Long-term Investment In 2012, Canada's life and health insurers held almost $540 billion, or roughly 90 per cent of their total domestic assets, in long-term asset classes. Life insurance and pension products often result in several decades -- up to 50 years or more in some cases -- where the insurer is receiving premiums prior to paying related claims. The long-term and predictable nature of life insurers' liabilities means that they are naturally-aligned, significant investors in long-term assets through the capital markets. 1

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