Insurable Interest Canadian Insurance Blog

Kelsey Rolfe | June 15, 2020 While 72 per cent of Canadian employers said they’ll make minimal or no changes to their benefits coverage in 2021, 21 per cent are planning some plan design changes around health coverage, according to a new survey by Arther J. Gallagher & Co. Eight per cent said they’re looking at plan design and contribution structure changes, while just four per cent said they expect to make major strategic changes to their benefits offerings. Employers also said they expect to expand their well-being offerings, with 19 per cent saying they’ll increase their program offerings to help employees with their overall well-being and 37 per cent saying they’ll include new resources and tools for overall well-being. As well, 37 per cent said they plan to include additional support for emotional well-being, 19 per cent said they’ll up their financial well-being support, 10 per cent plan will increase community/social support and six per cent said they’ll offer additional physical support. Meanwhile, 40 per cent said they’re not implementing any changes to their well-being program. Read: Should plan sponsors shift their benefits plan spend during coronavirus? “We might see some specific changes being contemplated instead of the benefits program through extending psychology benefits, introducing...

By Matthew Daly While the COVID-19 pandemic will likely impact the claims side of the insurance industry, it is also affecting another component: insurance company investment portfolios. Many insurers invest most of their customers’ premium dollars in investment-grade securities (those rated AAA through BBB, which carry NAIC 1 or 2 designations). Insurers have a long history of investing in safer investments such as AAA-rated U.S. Treasuries, but the past decade’s historically low interest rates led insurers further into generally higher yielding assets, including IG corporate bonds. However, Conning believes that the economic damage caused by social-distancing measures and business closures to slow the spread of COVID-19 has in turn damaged U.S. corporate credit profiles. Conning currently expects corporate earnings to be dramatically impacted by higher unemployment, reduced consumer spending and weak business investment. Companies are also aggressively drawing on credit facilities and raising cash via record bond issuance, ensuring they have adequate financial flexibility to survive a potentially deep reces­sion. Advertisement This increased debt, combined with expected lower earnings, should contribute to weaker credit metrics and a general deterioration of corporate credit profiles. This is of special concern for insurers, who face increased risk-based capital charges if securities in their...

Given longer-than-ever life expectancies, Canadians face a greater-than-ever risk of outliving their retirement savings. This is compounded by the fact that, in the case of RRIFs, they’re required to withdraw a minimum amount of taxable income starting on the year they turn 71. A new type of annuity can offset that risk – but there are limitations that retirees must keep in mind. As noted by Lydia Roseman and Michelle Fong of McLennan Ross LLP, the advanced life deferred annuity (ALDA) allows individuals who do not need to draw down their registered funds at age 71 to continue holding some of their funds tax-free until they’re 85 years old. “The ALDA is also a great tool for longevity planning,” Roseman and Fong wrote in a blog post. “By purchasing an ALDA, you ensure that there are funds available to support you in your (much) later years.” As drafted, the legislation implementing the ALDA indicates that it came into effect on January 1, 2020, though it has yet to be enacted. Under the legislation, an ALDA can be purchased under several types of plans, including an RRSP, a RRIF, and a deferred profit sharing plan, among others. It’s also regarded as...

Staff | June 12, 2020 The market value of assets in Canadian employer-sponsored pension plans rose to $2.09 trillion in the fourth quarter of 2019, up 2.3 per cent from the previous quarter, according to new data from Statistics Canada. All investment categories saw growth, led by real estate (4.9 per cent) and public equities (4.5 per cent), with mortgages (three per cent), other assets (two per cent) and short-term investments (0.7 per cent) posting smaller increases. Bonds saw modest value growth of 0.1 per cent. “The onset of COVID-19 in March has affected the market value of assets held by Canadian trusteed pension funds,” noted Statistics Canada. “The data in this release will serve as a benchmark to help evaluate the impact of COVID-19 on the investments of trusteed pension funds in Canada.” Read: Market value of Canada’s trusteed pensions continues to grow: Stats Can During the quarter, domestic assets hit more than $1.3 trillion, an increase of 1.1 per cent from the third quarter and 13.7 per cent year-over-year. While the value of domestic mortgages (10.7 per cent), real estate (seven per cent), miscellaneous assets (2.1 per cent) and bonds (0.2 per cent) increased, short-term investments dropped by 0.5 per cent, equities...

Staff | June 12, 2020 Desjardins Insurance is joining Obesity Canada’s partnership program, which leverages resources from Canadian organizations to fund obesity research, education and advocacy initiatives. Marc Bertossini, director of marketing for group and business insurance at Desjardins, said in a press release the partnership is another way the organization can support Canadians and help them improve their health. “Over the years, Desjardins Insurance has developed numerous tools and this partnership will enhance Obesity Canada’s services to the benefit of people who live with obesity.” Read: Supporting employees with obesity starts with recognizing it’s a chronic disease Obesity is a progressive chronic disease, characterized by abnormal or excessive fat accumulation that impairs health. Beyond its effects on overall health and well-being, deeply ingrained weight bias and stigma can increase morbidity and mortality, often translating into significant inequities in employment, health care and education. “[Desjardins has] demonstrated a commitment to improving employee health through innovative programs developed for plan sponsors and we look forward to learning from and collaborating with Desjardins to ensure obesity care becomes a top priority in the workplace,” said Arya Sharma, scientific director for Obesity Canada. He also noted the organization is preparing to roll out new clinical practice guidelines...

Martha Porado | June 12, 2020 In seeking to better serve its plan members, the Ontario Teachers’ Pension Plan has been on a journey to change its strategic thinking to access a more meaningful picture of who its members are and what challenges they have in using the plan as it stands. That journey starts by asking what a member is trying to achieve at a certain point in their life cycle and career, said Charley Butler, senior managing director of member services at the Ontario Teachers’, during a webinar hosted by Common Wealth on Thursday. The plan has implemented its so-called voice of the member approach to shake up its perspective and gain new and valuable insights. One key tenet of the approach is curiosity, she said. “[It’s] asking more, what the problems are, not worrying about how we’ve always done things.” Read: Using creativity to engage employees with pensions The approach also involves bringing together different areas of expertise, with frontline services, the data and insight team, the technology team and senior leadership all collaborating. “It’s a small cross-sectional group of people who get together and look at insights from the frontline, data from our membership and we have a huge amount of analysis on what our...

Staff | June 12, 2020 Vestcor Investment Management Corp. returned 11.76 per cent in 2019, with total assets under management rising to $18.5 billion, according to its 2019 annual report. The organization, which manages the investment and administration for several of New Brunswick’s public sector pension plans, said the long-term annualized gross pension fund return since it began its business continues to beat both client return and risk management funding requirements of 7.21 per cent. “Our clients depend on us to provide well-diversified portfolio strategies that meet their specific funding objectives in a risk-controlled fashion,” said John Sinclair, Vestcor’s president and chief executive officer, in a press release. “We also recognize that 2020 has been a much more challenging investment environment and we look forward to these strategies continuing to help our clients meet their long-term investment goals during more volatile market conditions.” Read: New corporation being formed by N.B. pension plans Vestcor’s fixed income portfolio performed well in 2019, noted the report, with nominal bonds returning 6.87 per cent, followed by corporate bonds (8.03 per cent), real return bonds (8.31 per cent), long-term bonds (10.46 per cent) and international high yield (14.52 per cent). “Although corporate bonds trailed their benchmark due to the requirement to maintain...

Jennifer Paterson | June 12, 2020 A new paper is evaluating how global retirement systems are faring in the wake of the coronavirus pandemic and what reforms will be required to facilitate the retirements of future generations. The paper, ‘Building better retirement systems in the wake of the global pandemic,’ by Olivia Mitchell, a professor and executive director of the pension research council at the University of Pennsylvania’s Wharton Business School, offered an assessment of the status quo prior to the spread of the coronavirus, examined insurance and financial market products that may render retirement systems more resilient for the world’s aging population and evaluated potential roles for policy-makers. “It appears certain that low interest rates, low fertility rates and population aging are going to be with us for a long time,” says Mitchell. “In this light, there are few ‘automatic’ stabilizers which will remedy the worlds’ retirement systems without some serious reforms. That is, we cannot simply hope that the capital market will pay high returns, we can’t assume that a growing number of younger workers will be around to keep unfunded pensions afloat and rising longevity will inflict increased demands on retirement systems. So now is the time to move forward to reforms.”...

Staff | June 12, 2020 The Investment Management Corp. of Ontario has sold its interest in Spanish electricity provider Viesgo to funds managed by Macquarie Infrastructure and Real Assets. Prior the sale, the IMCO and MIRA collectively owned 60 per cent of Viesgo, while Wren House Infrastructure Management Ltd. owned the remaining 40 per cent. The initial investment in Viesgo was part of legacy client strategies before the IMCO’s inception and was made alongside MIRA through one of its investment vehicles. As part of the new deal, MIRA-managed funds are acquiring the IMCO’s portion of the shared stake as well as Wren House’s total stake. Read: IMCO adding to investment in European bandwidth infrastructure company “The investment made in 2015 alongside MIRA has generated a strong return due to the successful implementation of a number of strategic initiatives,” said Tim Formuziewich, managing director and global head of infrastructure at the IMCO, in a press release. “We would like to thank Viesgo’s management team and MIRA, who have done a tremendous job at driving value in this investment.” IMCO Infrastructure has been shedding certain energy and utility holdings over the past few months, noted the release. “The infrastructure team is building an investment portfolio that is appropriate for a multi-client environment versus individual...

Despite holding diversified fixed-income assets, Canadian life insurers’ portfolios are in danger of degradation as slowed-down economic activity and extreme market volatility heighten credit risks, according to DBRS Morningstar. In a new commentary, the ratings firm noted that insurance companies generally have highly diversified fixed-income portfolios, with exposures spread across asset classes, industry sectors, geographies, and credit ratings. Public and private investment-grade bonds, as well as commercial loans, frequently make up a large percentage of their portfolios, the firm added. Citing data from MSA Research, the report said that within Canadian Life and Health Insurers’ investment portfolios totalling $832 billion, 68% are held in bonds. As of 2019, they had a reported $93 billion in private placements, $244 billion in publicly listed corporate bonds, and $228 billion in bond securities issued by government and related entities. But the coronavirus pandemic’s chilling effect on global economic activity, as well as turbulence in financial markets, has increased risks in credit markets. The considerably wide spreads in investment-grade and high-yield corporate bonds that erupted toward the end of Q1 have not fully recovered, with significant variation still present across industries and countries. “Market dislocations and lack of information due to suppressed business activity...