CLHIA-ACCAP

Investing in Canada's Health and Prosperity 2 SUPPORTING LONG‐TERM INVESTMENT INTRODUCTION Long‐term investment is critical to economic stability and growth. In order for Canada to reach its economic potential there must be a framework that supports a vibrant long‐term investment market. INSURERS ARE IMPORTANT LONG‐TERM INVESTORS The Canadian life and health insurance industry is an integral part of Canada's long‐term investment market. The nature of Canada's life and health insurance industry's business ‐ providing financial security to millions of Canadians through contracts that can last up to some 50 years ‐ results in the industry having a natural and strong demand for long‐term investments. In 2013, Canada's life and health insurers held over $570 billion, or roughly 90 per cent of their total domestic assets, in investments held for the long‐term. The industry also plays an important countercyclical role in stabilizing the economy. Even during periods of economic stress the industry continues to receive regular premium payments that need to be invested. As a result, the industry continues to purchase assets even in economic downturns, a time when many other stakeholders are often retrenching. LONG‐TERM INVESTMENT SUPPORTS BUSINESSES, GOVERNMENTS AND CANADIANS The industry supports businesses and governments through a strong supply of long‐term investment that helps them meet their objectives. Canadian companies raise capital in order to invest in profitable growth opportunities, to bring new products to market or to execute on a significant strategic expansion. Governments use funds raised through debt issuance to supplement their tax revenues for a wide range of activities such as infrastructure investments, capital investments (hospitals, schools, etc.) as well as other government programs. All of these activities are critical to drive growth and raise living standards for Canadians and are ideally financed with patient, long‐term investments. The industry plays a significant role in this regard. In 2013, the industry held: $105.4 billion in government bonds which account for 5.6 percent of all federal bonds, 11.2 percent of all provincial bonds and 15.9% of all municipal bonds outstanding; $109.7 billion in Canadian corporate bonds (13.1% of all Canadian corporate bonds); and $84.6 billion in Canadian corporate equity (3.6% of all Canadian corporate equity). THE ROLE OF GOVERNMENT POLICY AND REGULATION There are a number of areas where government policies contribute to supporting long‐term investment. Public‐private partnerships (P3s) are an attractive funding mechanism for long‐term infrastructure projects such as hospitals, airports, roads, bridges, water supply and waste water treatment. Reform is required, however, to encourage P3 investments in Canada ‐ particularly for smaller infrastructure projects. In particular, we recommend that the Government lower the Building Canada Fund P3 screening threshold to $20 million and lead a program to standardize P3 documentation for P3 projects under $50 million. The CLHIA commends the Government on its recent successful issuances of 50‐year Government of Canada bonds, totaling $2.5 billion in 2014. As issuers of long‐term products, the life insurance industry has a strong appetite to invest in ultra‐long bonds. Accordingly, we recommend that the Government build on its recent 50‐year bond issuances and make a sustained commitment to increase the supply of 50‐year bonds to a benchmark level over the next five years. We believe achieving a benchmark level over this period is important to meet market demand and to develop a robust secondary trading market in these bonds in Canada.

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