Canadian Underwriter

Insurance industry in Toronto had ‘below average’ growth over 10 years

November 20, 2013   by Canadian Underwriter

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The number of people working for companies categorized as property and casualty insurance carriers in the Toronto area has dropped 5.7% over 10 years, while total employment in the insurance industry in the area increased 11.3% over the same time, according to a report released Wednesday by the Conference Board of Canada.

The report, titled Ensuring the Future: Understanding the Importance of Toronto’s Financial Services Sector, discusses the importance of the entire financial services industry to the economy of the Toronto area and to the Canadian economy.

The report does not refer only to the area within Toronto’s city limits, but to the Census Metropolitan Area (CMA) as defined by Statistics Canada, which relates more to commuting patterns than to municipal boundaries. Toronto’s CMA includes, but is not limited to: Mississauga, Brampton, Oakville and Milton to the west; the Regional Municipality of York to the north; and the cities of Pickering and Ajax to the east. It does not include Burlington or Hamilton.

In total, financial services accounted for 13.8% of Toronto’s gross domestic product in 2011 and 7.6% of its total employment in 2012. That year, Toronto’s financial services sector “directly employed” 229,380 people in 2012, up 24.8% from 183,680 in 2002.

P&C carriers employed 23,585 in 2012, down 5.7% from 25,009 in 2002. The Conference Board broke down financial services into banking, credit unions, insurance, asset management, securities, exchanges and back-office operations.

Banks employed a total of 117,650 in the Toronto CMA in 2012, up from 87,053 in 2002. The Conference Board included the caveat that the “distinctions between” the seven financial industries covered in the report “have blurred over time.” So for example, employees of a firm with most of its revenues from banking “would generally be recorded as banking industry employees, even if the services they provide might be better classified under a different industry.”

The report defines insurance as North American Industry Classification System (NAICS) code 524. “Where possible,” the report further subdivides the industry into life and health and reinsurance (NAICS 52411, 524131, 524132);

P&C insurance and reinsurance (NAICS 52412, 524133, 524134, 524135, 524139); and other insurance activities (NAICS 5242).

Insurance is the second-largest industry within Toronto’s broader financial services sector, employing 54,280 people in Toronto in 2012, or 23.7% of the total financial sector employment.

“However, among the industries within the financial services sector, it had one of the lowest degrees of concentration in Toronto, with only 21.6 per cent of Canada’s insurance employment located in the metro area,” according to the report. “What is more, the insurance industry in Toronto has been experiencing below-average growth.”

Within insurance, the Conference Board categorized firms as P&C carriers, life and health insurers and “other” insurance. “Others” included agencies and brokerages, independent claims adjusters, and related services, such as claims processing and investigation.

While employment among P&C carriers dropped an average of 0.6% per year from 2002 until 2012, employment among companies in the “other insurance” category increased an average of 4.6% per year. In 2012, “other insurance” firms employed 20,650 in the Toronto CMA, up 57.5% from 13,110 in 2002.

“According to Statistics Canada’s business registry, 119 property and casualty insurance firms were operating in Toronto at the end of 201,” the Conference Board reported. “As was the case with life and health insurers, the industry was concentrated among large employers, with 14.3 per cent of firms having more than 200 employees.”

But when measured by employment, “insurance became less important relative to other segments of Toronto’s financial services sector, and Toronto’s share of Canada’s insurance industry shrank,” according to the Conference Board. “This may reflect the fact that several of Canada’s largest insurance companies-such as Great-West Life, London Life Insurance, The Insurance Corporation of British Columbia, and The Co-operators Group-are headquartered outside of Toronto.”

The authors added that over the past 10 years, Toronto’s share of Ontario’s financial services sector employment did not increase.

“Kitchener-Waterloo ranked second to Toronto in 2012 among Canadian metro areas in terms of the financial services sector’s share of total employment,” according to the report. “This is largely due to the significant presence of Manulife Financial and Sun Life Financial in the region. London is another secondary financial centre, where TD Canada Trust and London Life Insurance are major employers. Over the past decade, financial services employment in Kitchener-Waterloo has risen by an average of 5.6 per cent per year, while the sector averaged growth of 2.2 per cent in London.”

The report noted that in 2011, Toronto’s total gross domestic product was $238.8 billion (in 2002 dollars), and nearly $33 billion of that, or 13.8%, was from financial services. Included was a pie chart depicting the proportion of GDP contributed by different sectors, such as manufacturing (15.3%), public sector (13.6%) and professional services (6.6%). It also reported the breakdown in employment in 2012 by sector, which was different from the breakdown of GDP. In  2012, total employment in the Toronto CMA was three million, of which 7.6% (229,380) was in financial services. By contrast, the 613,310 public sector workers accounted for 20.4% of total employment, while manufacturing (343,150) accounted for 11.4%. Both professional services and retail trade each had 10.9% of employment in Toronto in 2012. 

The report was written by Michael Burt, Kristelle Audet and Greg Sutherland. Funding and support was provided by the The Toronto Financial Services Alliance (TFSA), whose objectives include improving the competitiveness of Toronto region’s financial sector as an “attractive business environment and location for talent.”

TFSA’s directors include executives from the financial sector as well as from George Brown College and the York University Schulich School of Business, plus civil servants with the City of Toronto and the Ontario Ministry of Economic Development and Innovation.

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