Assets and Investments
The Canadian life and health insurance sector is a major component of Canada's financial services industry. The strength and soundness of the sector has received accolades from international bodies like the World Economic Forum (WEF) as well as from our own and foreign governments - this, in spite of the recent global financial crisis. Much of the credit for Canada's success throughout the crisis lies in the industry's prudent management of financial assets and in an effective risk- and principles-based regulatory system. Underpinning the industry's robust financial position are a range of assets and other investments. These secure financial holdings and investments ensure that Canadian life and health insurers' obligations to policyholders will continue to be met. In that regard, the following outlines the industry's financial holdings and investments:
Assets: The life and health insurance sector currently holds almost $571 billion in assets on behalf of Canadian policyholders and annuitants. It manages these assets through prudent investment strategies and a diligent underwriting process. This pool of capital provides one of the country's most important sources of long-term investment capital. Further, at the end of 2011, Canadian life and health insurers held a surplus of over $57 billion in Canada, which represents assets above and beyond what is required to pay expected claims.
Investments:Canadian life and health insurers have a long history of financial strength. The financial condition and capital adequacy of life insurers are subject to stringent regulatory supervision that requires that investments are more than sufficient to cover their obligations to policyholders, such as death claims, annuities and health care and disability income benefits.
The industry's performance over the years clearly demonstrates a prudent and long-term approach to investments, which best serves policyholders. Specifically, Canadian life and health insurers invest in:
Bonds (Government and Corporate) - this type of investment vehicle accounts for 51 per cent of the industry's general fund assets. At the end of 2011, life insurers held corporate bonds in excess of $96 billion and more than $94 billion in government bonds in their general funds. More than 95 per cent of total bond holdings were considered "investment grade" in that they are among the highest rated bonds on the market.
Mortgages - in recent years, life and health insurers have reduced the relative size of their mortgage holdings. At the end of 2011, they held over $43 billion in mortgage loans accounting for almost 7 per cent of their total assets. Of that amount commercial mortgages were valued at almost $28 billion and residential mortgages amounted to over $15 billion.
Real estate - these holdings were valued at more than $15 billion at the end of 2011 and represent about 3 per cent of the total.
Stocks and Mutual Funds - Life and health insurers’ general fund holdings of publicly traded stocks totaled $53 billion or 14 per cent of all general fund assets. The industry's mutual fund holdings, which were valued at more than $127 billion at the end of 2011, are in segregated funds, which are held and managed separately from the general fund assets and support investment-oriented products such as variable life and variable annuities.
Cash and Cash Equivalents: Any remaining amounts are accounted for in cash or other deposits.
Assets and Investments