Progress stalled for women in insurance, new regulation could help: DBRS

Women remain “extremely underrepresented” in CEO roles within Canada’s insurance industry, although the gap is narrowing for women in board and chief financial officer roles, a new Morningstar DBRS commentary finds. 

The ratings agency warns improvements in gender diversity are unlikely anytime soon because a lack of new candidates entering the industry is drying up the succession pipeline.

However, newly proposed regulations by the Office of the Superintendent of Financial Institutions, which oversees federally-licensed insurers, could alter the course of gender diversity among senior ranks.

 

The insurance roles women hold

Progress for women in insurance remains muted in some roles.

“The percentage of women holding chief financial officer (CFO) roles is reasonably larger than that of CEO roles, although the actual numbers remain small,” Morningstar DBRS authors write. “On the contrary, the gender gap has narrowed at the board level.”

In 2023, women made up only 13% of CEO positions, 33% of CFO positions, and 41.3% of board positions in the insurance, banking and pensions sector, the ratings agency says, citing data from the Journal of Risk and Insurance (JRI), an empirical research outlet. 

No women were CEOs in the 13 Canadian insurance companies that Morningstar DBRS rates.

Within Canada’s insurance industry, women hold a larger portion of entry-level positions, underwriting positions, and positions elsewhere in the corporate chain, says the ratings agency.

“While a majority of the roles held by women in insurance are in human resources and legal services, women also hold 73% of the roles in underwriting divisions,” the authors of the study observe. “Within Canada’s insurance sector, there is a larger representation of women in entry-level positions, with declining ratios as we consider more senior and executive positions.” 

Despite the scarcity of female CEOs in the industry, recent advancements of women in the chief financial officer and board director positions show “change is taking place and may soon work its way up the leadership ladder,” Morningstar DBRS says. 

However, Morningstar DBRS does not project any near-term improvement in gender diversity in Canada, citing withering talent pipelines.

 

Could insurance regulation enable gender diversity? 

Canadian companies with diversity, equity and inclusion policies promoting the advancement of women and underrepresented employees “have been under public scrutiny” by stakeholders, regulators and investors nationwide, as Morningstar DBRS notes. The ratings agency does not specify the nature of this scrutiny.

However, new regulations announced by Canada’s federal government will compel banks, insurance companies and other financial firms in Canada to annually disclose to shareholders the number of women and minorities on their boards and in senior management positions. 

The proposed regulation aims to promote the hiring of women, visible minorities, Indigenous people, and individuals with disabilities to senior ranks. 

“Diversity is fundamental to creating a thriving and successful financial sector that reflects Canadian values and achieves its potential,” reads a Feb. statement from Canada’s Department of Finance, which regulates insurers. “However, federal legislation does not currently require federally regulated financial institutions (FRFIs) to disclose diversity information to their owners (e.g. shareholders).” 

Since 2014, most provincial securities regulators in Canada have required publicly-listed companies to disclose information about diversity on their boards and executive teams. The broader scope of the new regulation could boost the representation of women among senior ranks by 10% and 4% for executive officers between 2016 and 2022, the statement says.

The Office of the Superintendent of Financial Institutions (OSFI) would be responsible for enforcing the proposed regulations among insurance companies. A 30-day consultation is underway until Mar. 17. 

Though Morningstar DBRS did not explicitly cite the proposed regulation in its commentary, the authors called for “more comprehensive, consistent, and standardized disclosure across industries, allowing trend tracking and comparison by stakeholders.” 

 

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