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1 1.0 Introduction The willingness of investors to commit funds for the long-term allows businesses and governments to engage in large infrastructure or other capital projects that take many years to complete. A robust long- term investment market, therefore, is critical to economic stability and growth. Policies to enhance the long-term investment market are increasingly a focus for governments at all levels in Canada as well as internationally. For example, in 2013, G20 Leaders endorsed an OECD initiative to encourage the flow of institutional investment towards longer-term assets, such as infrastructure, in order to strengthen the global economy. 1 Canada's life and health insurers are one of the largest investors in long-term assets in Canada. The fundamental nature of the life and health insurance industry's business results in the industry having a natural and strong demand for long-term investments – including in a number of key asset classes that are critical for economic growth, such as infrastructure. This paper sets out a number of specific, actionable recommendations to enhance Canada's long-term investment market. The paper places particular emphasis on measures to improve the Public-Private Partnership (P3) 2 infrastructure market and the benefits to governments and the industry of a sustained commitment by all levels of government to issue more longer-term - including 50-year - debt. Finally, the paper highlights the importance of sound public policy, particularly in the areas of accounting policy and prudential regulation. Each area strongly influences the industry's ability and willingness to provide long-term insurance solutions to customers, which in turn drives insurers' appetite for longer-term assets. 2.0 Role of Insurers as Long-Term Investors 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. In exchange for premiums, the industry promises to compensate policyholders through a range of products. Insurers must invest the premiums they collect from policyholders to pay claims and benefits on their policies and to cover their operating and capital costs. An insurer's investment strategy is heavily influenced by the profile of its liabilities. To the greatest extent possible, insurers seek to match the term of their liability with their assets. As a result, the industry has a strong demand for very long-term investments. In 2012, Canada's life and health insurers held almost $540 billion, or roughly 90 per cent of their total domestic assets, for the long-term. The industry's investments often support longer-term capital investments, including infrastructure investments, which are critical to creating economic growth. As outlined in Figure 1 below, in addition to roughly $6 billion in direct infrastructure investments, the industry is one of the largest investors in a 1 http://www.oecd.org/g20/meetings/saint-petersburg/leaders-endorse-new-g20oecd-principles-on-long-term- investment-financing.htm 2 P3s are a long-term performance-based approach to procuring public infrastructure where the private sector assumes a major share of the risks in terms of financing and construction and ensuring effective performance of the infrastructure, from design and planning, to long-term maintenance.