2
number of critical asset classes in the economy and therefore plays a key role in supporting economic
growth.
3
FIGURE 1: 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 …
Corporate bonds
Government
bonds
Corporate
equity
$83.3 B in 2012
14% of all Canadian
Corporate bonds
10% of all
Canadian
Government
bonds
4% of all
Canadian
Corporate
equity
… who also
transfer risk to
reinsurers
Residential
Mortgages
Commercial
Mortgages
Mutual
Funds
1% of all Canadian
Residential
Mortgages
28% of all
Canadian Non-
residential
mortgages
16% of all
Mutual
funds
Source: CLHIA
In periods of market stress with significant market volatility, insurers receive a continual and steady flow
of premiums (see Figure 2). This, together with predictable liability outflows, enables insurers to hold
and continue to buy assets that are temporarily undervalued during a downturn and to sell or avoid
assets that are temporarily overvalued during a boom. Insurers' stable demand for long-term assets,
along with their long-term, conservative investment approach, plays an important counter-cyclical role
in times of market stress. This 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.
3
For a more fulsome discussion of the industry's role as a long-term investor, see the CLHIA report "The important
role of Canada's life and health insurers as long-term institutional investors" at www.clhia.ca
