Insurers Allowed to Invest in Infrastructure

Summary#

This order makes sections 342 to 348 of the Budget Implementation Act, 2018, No. 1 come into force on the day the order was made — September 25, 2023 (published in the Canada Gazette on October 11, 2023). Those sections let federally regulated life and health insurers invest in a new type of entity called a “permitted infrastructure entity,” under rules set by new regulations.

What it does#

• Brings into force the parts of the Budget Implementation Act, 2018, No. 1 that:
  • create a new permission for federally regulated life and health insurers to acquire substantial or controlling equity stakes in “permitted infrastructure entities” (PIEs);
  • add a statutory definition of a “permitted infrastructure entity (PIE)” as an entity that invests only in infrastructure assets or other prescribed activities;
  • add a statutory definition of “infrastructure asset” as a prescribed physical asset that supports public services;
  • give the government new regulation-making powers to define which physical assets and PIE activities are allowed and what conditions apply to these investments.
• The Investments in Permitted Infrastructure Entities Regulations come into force at the same time to set the detailed terms and conditions for these investments.

Who's affected#

• Federally incorporated life and health insurers, including federally regulated life insurance companies, fraternal benefit societies, and insurance holding companies (entities governed by the Insurance Companies Act).
• The prudential regulator, the Office of the Superintendent of Financial Institutions (OSFI), which will oversee compliance.
• Life and health insurers incorporated under provincial law are not affected; they follow provincial rules instead.
• Indirectly, public infrastructure projects and private investors could see more institutional capital available.
• The Canadian Life and Health Insurance Association participated in consultation and supported the move.

Why it matters#

• The change lets federally regulated insurers make long-term equity investments in infrastructure that typically offer steady, long-term returns. That can help insurers match the long-term timing of their payouts (asset-liability management) and strengthen their financial resilience.
• It could increase private funding for infrastructure projects in Canada, which the government and industry say is needed to help close the country’s infrastructure gap.
• The new rules are limited to federally regulated insurers and include conditions set by regulation, so the scope of allowable investments and safeguards will depend on those regulations.