Issue link: http://clhia.uberflip.com/i/333350
11 Therefore, the CLHIA recommends that: • The Government of Canada make a sustained commitment to issue 50-year bonds in sufficient volume to achieve a benchmark level over the coming 5-year period. 4.2 Increasing the Supply of 50-year Provincial Debt There is clearly a paucity of supply of provincial government ultra-long-term debt relative to the demand for such assets by investors. Based on the industry's experience, recent ultra-long-term bonds issues by Canadian provinces carry a yield that is lower than the corresponding 30-year benchmark issue by up to 0.5 basis points for each year past year 30. As outlined in section 4.1, we believe that the historically low long-term interest rates in Canada present a unique opportunity for issuers to secure long-term funding for their planned long-term infrastructure expenditures and that governments should be taking advantage of this situation. Therefore, the CLHIA recommends that: • All provincial governments make a commitment to reallocate from short-term issuance towards long-term (20 and 30 year) bonds, and • All provincial governments make a sustained commitment to issue 50-year bonds in sufficient volume to achieve a benchmark level over the coming 5-year period. 5.0 Impact of Government Policy on Long-term Investment Market A significant driver of the life and health insurance industry's willingness and ability to invest in long- term assets is the overall public policy environment that it operates within. Governments control a variety of levers, such as setting overall macroeconomic policy, prudential regulation, accounting rules and taxation policy, each of which can have important implications for the long-term investing market in Canada. Globally, the trend in government policy has resulted in a more short-term bias for financial institutions, including insurers. The general shift to a short-term bias has important and potentially negative impacts on the willingness of insurers to continue to offer long-term products to Canadians with a commensurate reduction in the industry's appetite for long-term assets. It is important, therefore, that policy choices in these areas are made with an understanding of their impacts on the long-term investment market. 5.1 Accounting Standards Accounting standards play an important role in ensuring businesses (insurers) faithfully represent their financial position and operating earnings to facilitate decision-making. The measurement and presentation principles of these standards can significantly influence capital flows to an industry, which in turn would drive the types, cost and availability of insurance products in the marketplace. As outlined above, insurers strive to match the expected duration of their liabilities to the term of the assets that support those liabilities; this is a key tool in reducing the investment risk of offering long- term insurance products. Therefore, it is important that accounting standards recognize the vital connection that exists in the overall asset-liability management strategy and practices of insurers. If this