US Finance and Insurance Sector
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 479,320 establishments in the finance and insurance sector engage in the creation, liquidation, and transfer of financial assets and/or support financial transactions. The sector connects savers and investors with borrowers and includes financial intermediaries, which use the funds of savers to make loans or investments. Firms may also act as agents and invest on behalf of others. The infrastructure of financial markets includes systems that provide information, payment, clearing, and settlement services that support and facilitate transactions.
Balancing Risk and Reward
Risk is an integral part of financial markets, and investments can lose some to even all of their value under certain types of conditions.
Government Regulation
Industries in the finance and insurance sector are subject to extensive government regulation at varying levels.
Industry size & Structure
The finance and insurance sector is comprised of 479,320 establishments that employ 6.7 million workers and generate $5.7 trillion in annual revenue, according to government sources.
- The finance and insurance sector represents 8.9% of the nation's Gross Domestic Product (GDP) and employs 5% of the country's workers.
- The sector is somewhat concentrated at the top with the 20 largest firms representing 29% of revenue, but it is fragmented at the bottom.
- In addition to employer establishments, the finance and insurance sector has 755,000 owner-operated establishments with no employees. The subsector with the highest numbers of nonemployer establishments is agencies, brokerages, and other insurance-related activities (54%). The owners of nonemployer establishments typically perform the work and may outsource support functions like marketing and accounting.
- The finance and insurance sector shed about 90,000 establishments in 2021, which equals about 16% of existing establishments, according to the Bureau of Labor Statistics. However, the sector added about 119,000 new establishments, which is equivalent to 21% of existing establishments. As a result, the sector had a growth rate of 5.1%.
- The finance and insurance sector is forecast to grow its employment base by 4.4% overall in 2021-2031, which is lower than the national average of 5.3% for all jobs, according to the Bureau of Labor Statistics.
Industry Forecast
US Finance and Insurance Sector Industry Growth
Recent Developments
Jul 16, 2024 - Personal Income Increases
- Personal income, an indicator of demand for finance and insurance sector services, increased 4.69% year over year and 0.51% month over month in March, according to the Bureau of Economic Analysis.US finance and insurance sector employment increased slightly during the first six months of 2024, according to the US Bureau of Labor Statistics. Corporate profits for financial firms decreased 4.55% year over year but increased 1.3% quarter over quarter during the fourth quarter of 2023, according to the US Bureau of Economic Analysis (BEA).
- Financial services stocks and cash are currently popular with US retail investors, according to trading and investing platform eToro. About 54% of investors said they were holding financial services stocks, with technology close behind at 49%. Energy stocks (39%) and communications (36%) followed. Regional banking contagion in 2023, driven by the collapse of Silicon Valley Bank, has left financial-sector stocks such as Charles Schwab, U.S. Bancorp, and PNC Financial Services trading below their pre-crisis levels, enticing value investors. Technology stocks are in demand after the surge in generative artificial intelligence (AI) stocks, led by chipmaker Nvidia. eToro's report indicates, however, that some investors may fear that they have missed the boat, with 76% of US investors reporting holding cash but 22% saying that they would up their bets in technology.
- Cyber insurance premiums flattened or decreased in 2023 even as the number of ransomware attacks increased, according to insurance services firm WTW. Premium stabilization is expected to continue in 2024. Experts note, however, that cyber exposure is difficult to manage. “Unlike traditional insurance lines, cyber risk is constantly changing, requiring continuous adaptation and improvement of controls and risk management strategies,” said Michelle Chia, Chief Underwriting Officer for Cyber in the Americas, AXA XL. Premiums increased 50% in 2022, according to Bloomberg.
- More banks will have to sign on to instant payment services like The Clearing House’s RTP Network and the Federal Reserve’s FedNow Service to enable faster payments, and services must be interoperable to accelerate growth of instant payment systems, according to Cory Barnes, senior product manager at payment technology platform provider Form3. Payments initiated on one system today must travel and settle within that system. A payment or remittance can’t travel from a bank on one system and land with a bank on another system. Barnes likened the situation to the mobile phone landscape a few decades ago, where Verizon subscribers could not call someone on the AT&T network. That changed over time, Barnes says, and we’re headed to the same flexibility with instant payments. Increased participation and interoperable systems will in turn will spur a “network effect” and growth in the number of endpoints. “The expectation with instant payments is that they are frictionless,” Barnes said. “It’s all about the end user.”
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