Issue link: http://clhia.uberflip.com/i/220638
The net result of the industry's overall investments is that the industry is one of the largest investors in a number of critical asset classes in the economy and therefore plays a key role in supporting economic growth. 3. How the Industry Helps Canadians Save through Long-term Investing Insurers' long-term investment strategy benefits Canadians in a number of ways. As set out below, this is accomplished through: • • • • Higher returns from access to long-term investments; Investment expertise; Lower investment costs; and Access to innovative product design. Higher Returns from Access to Long-term Investments Given the nature of their liabilities, insurers have the ability to hold assets over the long-term, allowing for diversification of risks across time as well as across asset categories. In addition, insurers' long-term, patient investment perspective allows them to have great flexibility over timing of asset sales and avoiding "forced sales" during periods of price volatility. Insurers, therefore, have "structural" investment advantages from which their policyholders can benefit. Investing long-term gives policyholders access to the risk premium and implicitly to the higher yields embedded in a wide range of investments, which compensate for the risk of holding assets with longer maturities. Investment Expertise Insurers have investment expertise and access to information services that individual investors cannot feasibly have themselves. For example, insurers are unique in that they can offer products with guarantees associated with them, something that requires a high degree of sophistication, in terms of risk identification and asset liability management. This means that individuals can improve their investment decisions by "outsourcing" them to insurers. The insurer will then take responsibility for carefully-researched investment decisions and for managing the trade-off between risk and return. Insurers' investment activities are guided by a strong risk management framework and governance, with Board approved risk appetite levels. 4