The Canadian Life and Health Insurance Association (CLHIA) is calling on the federal government to help facilitate long-term infrastructure investment.
In its submission to the Standing Committee on Finance as part of the consultations leading up to the next federal budget, CLHIA highlights measures that it says the federal government can take to “increase the supply and attractiveness of infrastructure assets for large institutional investors” with long-term investment needs, such as insurance companies.
CLHIA says that the industry currently has about $6 billion invested in infrastructure assets. “This only represents about 1% of our total investments, and we have a strong desire to do more,” it says. And, it notes that the infrastructure deficit in Canada is estimated at between $350 billion and $400 billion.
To facilitate long-term investment, and help close the infrastructure deficit, CLHIA says that government action is needed. To start, it says that governments need to ensure that “infrastructure projects are brought to market in a timely and predictable manner. Undue delays and uncertainty around decisions regarding whether a project will proceed, hinder the private sector’s ability to play a strong partnership role in helping to finance infrastructure projects.”
It also says that governments can support the use of public-private partnerships (P3s) to fund infrastructure projects. For instance it says that Canada should aim to standardize P3 documentation to help facilitate smaller P3 projects (under $50 million). It also recommends that smaller projects could be bundled together to gain greater scale, which becomes easier once P3 documentation has been standardized. “We recommend that P3 Canada seek innovative ways to develop sufficiently large pools of smaller infrastructure projects, where appropriate, to attract institutional long-term investors,” it says.
Finally, CHLIA suggests that P3 Canada’s Building Canada Fund P3 screening threshold should be reduced to $20 million from $100 million “in order to provide a positive incentive for smaller deals to consider the P3 model and for the market to actively innovate so that P3 becomes more viable for smaller projects.”