The increasing importance of institutional investors in the provision of private and public long-term credit has focused the attention of economists on the activities of these investors in the saving-investment process in the economy. Institutions have become crucial factors in the determination of the nature and the extent of the expansion that takes place in industry and business, and of the nature and extent of credit supplied, including the relationship between equity and debt in the capital structure of corporations. In addition, they are important suppliers of public credit, particularly in time of heavy government borrowing, as in wartime. Also, from the point of view of government policy, they are important in determining the nature and types of credit controls needed in inflation and deflation.
The life insurance companies merit particular attention not only because of the size but also because of the nature of the funds under their administration. Their funds, amounting to some $6 billion, represent almost 50 per cent of institutional funds, excluding those administered by the banks. The assets of these funds comprise approximately 20 per cent of the total long-term public and private debt, including mortgages, in Canada. In contrast to other institutions, life companies acquire their funds as the result of contractual saving on the part of millions of policyholders. Thus their funds exhibit, and will continue to exhibit, a sustained growth. Since they are the result of personal saving, the income arising from their investment is important to a large segment of the economy, and the way in which they are invested is important for the nation as a whole.