Finance & Insurance Sector
Companies in this industry engage in financial transactions and create, liquidate, purchase, and sell financial assets such as securities, bonds, and insurance. Major finance and insurance companies include AIG, Bank of America, Citigroup, Fidelity, Goldman Sachs, JPMorgan Chase, MetLife, and Wells Fargo (all based in the US), as well as Allianz (Germany), AXA (France), BNP Paribas (France), and Industrial and Commercial Bank of China.
Major global financial hubs include London, New York, Hong Kong, Singapore, Tokyo, Seoul, and Zurich. Demand for sophisticated financial services is expected to grow in Asia, particularly in China, India, and Indonesia. Britain's pending exit from the European Union (aka Brexit) is expected to cause a portion of the UK financial services industry to migrate to the euro zone, putting London's future status as a global financial hub in doubt.
The US finance and insurance sector consists of about 475,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $4.5 trillion.
Demand is driven by business activity, returns on investments, and consumer income. The profitability of individual companies depends on marketing, efficient operations, and investment expertise. Large companies often have advantages in access to cheaper capital, participation in large-scale transactions, and name recognition. Small companies can compete effectively through customer service, knowledge of the local market, innovation, and specialization. The sector in the US is fragmented: the largest 50 companies account for nearly 50% of sales.
The finance and insurance sector is undergoing rapid and significant change driven by advances in digital technology, connectivity, and competition from startups and other nontraditional industry players. New entrants and business models are reshaping the way financial services are structured, provided, and consumed, impacting the long-term structure of the financial services and insurance industries, according to a report by the World Economic Forum. Other forces for change in the sector include globalization and the growth of international trade, which has encouraged some US financial and insurance firms to expand into foreign markets. Foreign firms also are entering the US market. US fund managers often participate in foreign securities markets and some specialize in foreign investments.
In the aftermath of the late-2000s financial crisis, regulators enacted comprehensive financial regulatory reform measures, notably the Wall Street Reform and Consumer Protection Act (aka the Dodd-Frank Act), to rein in banks. Measures include heightened capital and liquidity requirements and prohibiting banking entities from engaging in certain proprietary trading activities, among other actions. While Dodd-Frank stopped short of breaking up the nation's biggest financial firms, increased capital requirements and compliance costs, as well as indirect pressure from regulators, have been factors behind the breakup of some financial firms. However, the industry is anticipating significant relief from regulation under the Trump administration, which has vowed to dismantle Dodd-Frank. Regulations under review by the new administration include rules setting bank capital levels, as well as government designation of nonbanks, such as insurers, as "systemically important financial institutions."
The traditional lines between business segments within the finance and insurance sector were blurred by the Gramm-Leach-Bliley Act of 1999, which permitted commercial banks to sell securities and insurance and enabled insurance firms to sell financial products. Deregulation led to the creation of gigantic financial services firms covering multiple industries and wide geographical areas, dramatically changing the landscape of the industry.
Products, Operations & Technology
Major financial and insurance products and services include loans, financial services, investment advice, insurance products, transactions processing,
Sales & Marketing
Finance & Regulation
Regional & International Issues
Also includes the following chapters:
Quarterly Industry Update
Trends and Opportunities
Call Preparation Questions
Glossary of Acronyms