Insurable Interest Canadian Insurance Blog

In order to address a concerning gap in life-insurance coverage, insurers have to address the factors affecting demand for the product – and that means re-examining traditional assumptions. In a commissioned survey of 7,000 customers across seven mature insurance markets around the world, the Geneva Association, an international think tank representing the insurance industry, found that the percentage of those who currently own a life insurance product – including whole life, term life, critical illness, and annuities, among others – fell between just 6% and 16%. One reason behind that, according to the association’s study published earlier this year, was a “striking lack of insurance awareness.” It found that between one third (34%) and six tenths (60%) of responding customers were not aware of different life-insurance related products including whole life, term life, critical illness, annuity/retirement, and endowment/unit-linked products. Aside from lack of knowledge, it suggested that behavioural biases and economic constraints or considerations are holding consumers back. The paper identified eight behavioural factors that skewed people’s behaviour, including hyperbolic discounting (an exaggerated bias toward having a certain amount of money now over having a larger amount in the future); anchoring (assigning undue importance to irrelevant information); and loss aversion...

Staff | September 4, 2020 The Canada Pension Plan Investment Board is taking part in the launch of the GLP Japan income fund, a private Japanese open-ended logistics fund. The deal is the latest in the pension fund’s partnership with Global Logistics Properties Ltd., which kicked off in 2011 when the two parties formed a 50-50 joint venture. While the venture has been expanded multiple times over the years, the CPPIB exited at the end of August 2020, receiving about $590 million in new proceeds. As part of the current deal, the CPPIB is recommitting $307 million of those proceeds to the new fund. At inception, the fund held $3.4 billion under management. Read: CPPIB invests in Japan “The transaction marks a significant milestone for CPP Investments’ real estate investment program in Japan,” said Jimmy Phua, managing director and head of real estate investments for Asia at the CPPIB, in a press release. “The strong fundamentals in the Japanese logistics market continue to make this a compelling investment opportunity for long-term investors. We are pleased to continue our strategic relationship with GLP, one of our key global real estate partners, while recycling capital for other compelling investment opportunities.” Read the full article at BenefitsCanada.com

Canadian Academy of Distinguished Neutrals unveils national database, provincial chapter sites Toronto, ON (Sept. 3, 2020) – The Canadian Academy of Distinguished Neutrals (CADN) is a new national association whose membership consists of mediators and arbitrators distinguished by their hands-on experience in the field of civil and commercial conflict resolution. Membership to the Academy is by invitation only, with a strict peer-nomination vote and extensive client-interview vetting procedure to ensure that only the top 5-10% of qualifying ADR practitioners in any province are invited to join the “ADR All-Stars” roster. Over a six-month period, over 600 litigation lawyers across Canada were interviewed by CADN’s paralegals as to preferred local mediators and arbitrators. This invaluable data allowed the Academy to identify the most widely-acceptable neutrals in each province. An Executive Committee of 20 respected Canadian ADR professionals then cast peer votes, assisting the Academy’s executive staff in narrowing the candidate pool further. The Academy’s newly launched national database at mediators.ca allows litigators and support staff access to a free roster of over 160 experienced ADR professionals, charging no referral or administration fees. The Academy is funded entirely by member dues, providing our database to the legal community at no charge. In...

Staff | September 4, 2020 Close to half of global institutional investors are planning to increase their allocations to alternatives amid coronavirus-related volatility, according to a new survey by CoreData Research Ltd. The survey, which polled more than 450 investors, found 26 per cent of respondents’ portfolios are made up of alternative assets, up slightly from 24 per cent in 2019. North American investors saw the biggest increase, from 23 per cent in 2019 to 27 per cent this year. Diversification, cited by 90 per cent of respondents, was the top reason for allocating to alternatives, followed by the prospect of higher long-term returns (44 per cent), risk management (43 per cent) and the illiquidity premium (43 per cent). Read: How coronavirus will affect real estate investing long term “Our findings indicate that institutional investors have looked to weather the COVID-19 storm by seeking shelter in alternatives, which can enhance diversification and risk-adjusted returns,” said Andrew Inwood, founder and principal of CoreData, in a press release. As for specific asset classes, 52 per cent of survey respondents said they intend to increase their allocations to private debt over the next three to five years, followed by private equity (50 per cent). However, 37 per cent...

Martha Porado | September 4, 2020 Defined contribution plan members are contending with volatile equity markets, ultra-low interest rates and the threat of inflation as the country’s economy begins its tentative recovery. In the first half of 2020, equities took an almost round trip, dropping significantly in the first quarter and recovering to the point that most markets are in neutral or positive territory today, said Mazen Shakeel, partner and practice leader for asset risk management at Morneau Shepell Ltd., during a session at Benefits Canada and the Canadian Investment Review‘s 2020 Plan Sponsor Week mid-August. Nevertheless, he noted, equities continue to feel riskier as uncertainty contributes to unusually high volatility. As well, historically low interest rates are boosting the value of fixed income in DC plan member portfolios. However, for those members closing in on retirement, the higher value of fixed income will make purchasing an income product more expensive. Read: Has coronavirus derailed progress of DC decumulation strategies? Finally, concerns are rising about the potential inflationary side-effects of the federal government’s fiscal stimulus throughout the coronavirus pandemic, said Shakeel. While March and April saw an unusual bout of deflation, DC plan members may see their purchasing power eroded by higher than typical inflation in the years to come. Looking...

Kelsey Rolfe | September 4, 2020 Retirement and savings programs should motivate plan members to think about how they want to spend their time in retirement as well as their money. “If we focus in just on the financial part of the equation and then [plan members] get to that point where [they’re] retiring, not only might they not have enough money to do the things they decide they want to do, but also they haven’t really figured it out,” said Laura Pratt, national practice leader of organizational health at Canada Life Assurance Co., during a session at Benefits Canada and the Canadian Investment Review’s 2020 Plan Sponsor Week in mid-August. “I think the worst thing is going into that stage of your life without a bit of a plan or an expectation of how you want that to look.” Read: Financial wellness programs should stress capability, not just literacy: webinar Pratt suggested plan sponsors connect members with free resources that encourage them to plan how they’ll spend retirement, including who they hope to spend it with, whether they want to give back to their communities, what activities would give them a sense of purpose and enjoyment and routines they hope to develop or continue. “If we’re lucky, our retirement years may represent up to a third of...

Jennifer Paterson | September 4, 2020 In considering changes to its retirement savings programs, Rogers Communications Inc. is generally focused on three main internal and external factors: regulatory changes, employee feedback and demographics. “As we see the millennial and gen Z workforce grow quite a bit, we’re really trying to understand what that’s going to do to our plans in terms of what people want and taking that holistic financial well-being approach to what we’re offering our people,” said Jason Traetto, the communications company’s director of benefits, wealth and recognition programs, during a session at Benefits Canada and the Canadian Investment Review‘s 2020 Plan Sponsor Week in mid-August. The organization has four defined benefit plans, four defined contribution plans, a registered retirement savings plan, a tax-free savings account and an employee share plan. According to Mureth Rhone, senior manager of benefits and wealth programs, the combined assets in these programs is currently about $3 billion and close to 80 per cent of its 25,000-strong workforce is enrolled in one or more plans. Read: Could solvency reform in Canada lead to a DB pension revival? In 2016, Rogers Communications closed its DB plans to new entrants. “I think every initiative in [human resources] starts with that tap on...

Yaelle Gang, the Canadian Investment Review | September 4, 2020 The Healthcare of Ontario Pension Plan is well-known for its liability-driven investing strategy, which helped it successfully weather the 2008 financial crisis. During the coronavirus fallout, in an era of historically low interest rates, the HOOPP is working on developing LDI 2.0. “We’re very focused on liabilities, but what you do when interest rates are at really extreme lows, in our view, is different than what we did in the past,” said Jeff Wendling, the plan’s president and chief executive officer, during Benefits Canada and the Canadian Investment Review‘s 2020 Plan Sponsor Week in mid-August. In 2006 and 2007, the HOOPP had very large fixed income holdings, he said. “We’ve ridden those fixed income positions all the way down to these lows [in yields] here now and that’s worked out very well for the fund. But at this point, we think fixed income assets provide minimal returns going forward. So that’s a big challenge for us.” Read: HOOPP names veteran Jeff Wendling new president and CEO For instance, he noted, fixed income assets don’t hedge the plan’s liabilities as well as they did when yields were higher nor do they provide the same kind of...

Yaelle Gang, the Canadian Investment Review | September 4, 2020 The Halifax Port ILA/HEA found a way to provide its defined contribution pension plan members with a defined benefit upon retirement — and it’s been doing so successfully for 35 years. As a private sector multi-employer plan, the pension has about 450 active members, 300 retirees and about $210 million in assets. The DB plan was closed to current service in 1984. Also in the ‘80s, the plan was capped at 25 years of service, whereas many members were working for much longer than that, said Blair Richards, the Halifax Port ILA/HEA’s chief investment officer. “They effectively could work half of their career without accumulating any higher pension. It was a real problem,” he said during a session at Benefits Canada and the Canadian Investment Review’s 2020 Plan Sponsor Week in mid-August. Read: Blair Richards moves to CIO of Halifax Port ILA/HEA pension plan After capping out their available DB service, plan members could take advantage of the DC plan, which was introduced in 1985. However, as is the case with DC plans, members didn’t know what retirement income they’d receive from the DC benefit, said Richards. “From early on, we were [determined] to try...

Yaelle Gang, the Canadian Investment Review | September 4, 2020 While rising government deficits and debt are concerning for many bond owners, they should actually be more concerned that deficits aren’t big enough, said David Bezic, an independent economic consultant, during a session at Benefits Canada and the Canadian Investment Review’s 2020 Plan Sponsor Week in mid-August. Many of the concerns around debt and deficits are founded on misconceptions, he noted. “These misconceptions arise because it’s a natural tendency to apply our personal experience to our analysis. And, when we look out at the world, we apply our own budget constraints, our own financial situation to other entities when it might not be entirely relevant. Then also, some of these misconceptions just result from a misunderstanding of the way the money system actually works at an operational level.” Read: Will social bonds’ popularity grow with coronavirus recovery? As an example, Bezic noted the idea that a government defaulting on debt or being downgraded will impact bond yields is based on a misconception that puts currency issuers into the same bucket as the people who use the currency. Currency issuers include countries with their own currency that also have debt denominated in that currency, such as Canada...