CLHIA-ACCAP

FIGURE 3: INSURERS' INVESTMENTS SUPPORT WIDER ECONOMY Policyholders pay premiums … … to insurers $540B in long-term investments in 2012 … who then invest in the wider economy via … Government bonds Corporate equity 10% of all Canadian Government bonds 4% of all Canadian Corporate equity Residential Mortgages Commercial Mortgages Mutual Funds 1% of all Canadian Residential Mortgages 28% of all Canadian Nonresidential mortgages 16% of all Mutual funds Corporate bonds 14% of all Canadian Corporate bonds $83.3 B in 2012 … who also transfer risk to reinsurers Source: CLHIA The Industry's Investments in Infrastructure Infrastructure investments are a particularly attractive asset class for insurers. The industry's infrastructure investments support, for example, hospitals, airports, toll roads, energy projects and government facilities. The long-term nature of infrastructure assets and the predictable long-term cash flows provided by infrastructure assets are highly suitable for matching insurers' long-term liability cash flows, particularly in markets where issuance of long-term bonds is limited. In addition, infrastructure investments also provide portfolio diversification benefits. The industry gets exposure to infrastructure projects either in the form of debt capital or equity capital. Both can be accessed through the public market (e.g., in the form of infrastructure bonds and infrastructure funds) or through private placements (e.g., direct loans and direct investment in infrastructure). While estimates vary on the need for infrastructure investments in Canada, the conclusion is the same -- significant investment is required. For example, the Federation of Canadian Municipalities estimated the infrastructure deficit was $123 billion to maintain existing municipal infrastructure and a further $115 billion to fund new municipal infrastructure needs. When federal and provincial needs are included, the Canadian infrastructure deficit could be 8

• Cover