Government needs to step up its investment of longer-term projects if it wants to stay competitive, says the Canadian Life and Health Insurance Association.
Increasing private domestic investment into long-term efforts like infrastructure and renewable energy projects is necessary if Canada is to remain competitive in the global economy, states a CLHIA report, The important role of Canada's life and health insurers as long-term institutional investors.
“It is extremely important that governments continue to focus on the long game,” says Frank Swedlove, president of the CLHIA, “and seek every opportunity to collaborate with the industries that can support and bring innovative approaches to Canada's long-term objectives.”
With almost 90 per cent, or $540 billion of its Canadian assets held in long-term investments, life and health insurers are one of the largest long-term institutional investors in Canada.
Long-term investment is critical to economic stability and growth, says Swedlove, and the Canadian life and health insurance industry's business model results in strong demand for long-term investments such as government and corporate bonds, infrastructure and green energy. (continued.)
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In 2012, the industry's holdings of government and corporate bonds in Canada accounted for about 40 per cent of their long-term investments. Moreover, about 50 per cent of bond holdings had terms of 10 years or more. The life and health insurance industry is also a significant investor in mutual funds (almost $140 billion), equities (almost $93 billion), mortgages (about $42 billion) and real estate ($18.5 billion).
The report notes that the industry also plays an important counter-cyclical role in stabilizing the economy during periods of economic stress. Its underlying business model results in a stable demand for long-term assets over the entire business cycle. This helps to temper the swings in the market as was evidenced by the industry role in providing stability during the 2008 financial crisis.
