Canadian life insurance companies (“lifecos”) have significant exposure to various macroeconomic factors including interest rates, equity markets and corporate credit. Interest rates typically have the biggest impact on the sector as lifeco reserves and earnings have historically had a high degree of economic sensitivity to changes in interest rates. This is the result of a duration mismatch between a lifeco’s insurance liabilities and its invested assets. Most life insurance products result in a long duration liability for the insurer that writes the policy. This occurs since buyers of life insurance policies are often in their early 40s and are therefore expected to live for several decades. A lifeco’s invested assets, on the other hand, typically have a shorter duration profile. This mismatch means that lifecos are generally helped by rising interest rates and hurt by declining interest rates.