The Canadian Life and Health Insurance Association (CLHIA) is proposing that the federal government issue ultra-long bonds—bonds that have a maturity of 40 years or more.
In a response to a consultation paper by the Department of Finance and the Bank of Canada, the organization says there would be demand for ultra-long bonds by Canada’s life and health insurance industry.
“Indeed, almost 90%, or $540 billion of the industry’s $615 billion Canadian assets, are held in longer-term investments, making the industry one of the largest long-term institutional investors in Canada,” says the CLHIA’s response.
The organization adds that a challenge for the industry is finding investments with safe and stable yields that match the duration of its very long-dated obligations.
“In the absence of an appropriate duration-matching asset, such as ultra-long bonds, insurers face additional asset-liability management challenges and reinvestment risks.”