CLHIA-ACCAP

Canadian Life and Health Insurance Facts, 2014 Edition

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23 Annuity liabilities represent 62.9 per cent of the total actuarial liabilities in Canada; life insurance, 29.7 per cent; and health insurance, 7.4 per cent (see chart on page 22). This compares with the 2003 picture, when actuarial liabilities totalled $246.7 billion with annuities comprising 60.6 per cent of the total; life insurance 30.1 per cent; and health insurance 9.3 per cent. All insurance companies in Canada are required to maintain capital and surplus in excess of levels established by regulatory authorities. These levels are calculated using formulae for measuring possible adverse experience with respect to asset default, mortality and morbidity costs, and losses from changes in interest rates that exceed provisions in the actuarial liabilities. (See Consumer Protection/Government Regulation, page 27.) Segregated funds Since 1961, life insurers have been permitted to establish segregated funds on behalf of their policyholders. The assets in each fund are segregated and managed separately from the general fund and other assets. Segregated fund contracts provide consumers with the growth potential of investment funds combined with unique guarantee features that provide downside risk protection. Historically, common stocks have constituted the largest asset category. However, since 1999, investments in mutual funds have surpassed direct stock holdings and are now in top place with about two-thirds of total segregated fund assets. Segregated funds are used for the investment of contributions to group pension plans and to a wide range of variable annuity contracts for individual policyholders. Under variable annuity contracts, the benefits are not fixed but vary with the market value of the assets in the fund. However, individual variable contracts guarantee to return on death of the policyholder or maturity of the contract at least 75 per cent of premiums that have been paid. By the end of 2013, segregated fund assets of life insurers and fraternals in Canada totalled $246.9 billion, up 14.8 per cent over the previous year's level and more than double the level of 10 years ago. Over the past decade, segregated fund assets for group annuity products have been slowly gaining ground to account for 59 per cent of the total, up from a 56 per cent share in 2003. By the end of 2013, segregated fund assets for group products totalled nearly $145.2 billion. Premium allocations to segregated funds in Canada rose 1.8 per cent to a new record high of $31.5 billion in 2013. Group contracts, totalling over $21.4 billion or 68 per cent of the 2013 total, have accounted for more than half the market since 2001. Over the past decade, contributions to group products have grown at an average annual rate of 9 per cent while individual products have increased at 5.5 per cent. Segregated Fund Assets Held in Canada (millions) End of Bonds Stocks Mutual Mortgage Real Cash Other Total Year Funds Loans Estate Assets 1961 $ 1 $ * $ – $ – $ – $ * $ * $ 2 1970 153 251 – 109 – 15 12 540 1980 2,309 2,961 – 1,174 38 337 145 6,964 1990 6,939 6,261 – 1,365 1,359 572 508 17,004 2000 13,179 27,701 37,444 2,110 1,619 6,719 1,287 90,059 2005 18,126 34,957 68,578 3,055 3,139 5,488 468 133,811 2006 17,838 35,541 85,171 3,471 4,127 5,888 506 152,542 2007 17,672 35,017 94,787 3,364 5,359 6,309 1,373 163,881 2008 16,334 24,957 82,569 3,296 5,870 6,480 827 140,333 2009 18,532 31,201 109,645 2,972 5,478 5,853 820 174,501 2010 20,539 31,677 129,048 3,214 5,226 5,765 961 196,430 2011 23,006 29,402 127,290 3,486 5,490 6,274 1,042 195,990 2012 26,026 32,105 139,896 3,555 6,712 5,632 1,185 215,111 2013 26,369 37,471 164,560 3,761 7,201 6,050 1,516 246,928 Sources: OSFI, CLHIA Segregated fund assets are included in the table on page 20 Figures since 2000 have been restated to include assets of life insurance companies, fraternal benefit societies, and not-for-profit health care benefit providers such as provincial Blue Cross organizations. Earlier years include data for life insurance companies only *Less than $500,000

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