Thank you very much, Mr. Chairman.
Thank you for the invitation to appear before this committee. First of all, I want to congratulate you for undertaking this review of Canada's service sector.
The service industries in Canada are a huge employer. The total service sector employment in Canada now ranks at about 78.6% of total employment. But oddly enough, the services sector in general in Canada contributes only 69.7% of Canada's GDP. What does that mean? It means Canada's service sector is not as productive as other parts of the economy. Mr. Chairman, I think the challenge of this committee, and indeed of this Parliament, is to take all necessary measures to ensure that productivity in the services sector in general, and particularly the financial services sector, can be improved.
I imagine that very few of you know that there are 215 property and casualty insurers in Canada.
There are 215 licensed property and casualty insurers in Canada. I'm very proud to represent this sector. We have a premium volume of almost $36 billion currently. The industry is healthy, with a return on equity last year of about 17%, but it's always the future you have to be looking out for.
We are a very large employer in Canada, employing almost 108,000 people. That employment is spread across the country in both large businesses and small. We invest about $80 billion in government and high-grade corporate bonds across the country, and we are a huge contributor to the public fiscal health.
The property and casualty insurance industry alone contributed $6.5 billion in 2006 to the federal and provincial governments across Canada. So it's a healthy industry, and it's also an industry that you want to keep healthy if you want to have those tax revenues maintained at that level.
Having said that, I think there are a few things I'd want to bring to your attention, Mr. Chairman. There are, if I can put it this way, two really critical challenges moving forward in the years ahead.
One is that Canada's regulatory system for its financial institutions, particularly its property and casualty insurers, has to keep pace with that of other major insurance markets. We are not doing so currently. Canada is ranked 11 out of 80 countries in terms of the highest effective tax rate on capital, according to the C.D. Howe Institute.
The United States, which was long a laggard in good regulation of financial institutions, has over the last decade, one might argue, catapulted above Canada in terms of having a more efficient regulatory system. We have more regulation of insurance prices and insurance products in Canada than any other major OECD country. I think it's something that governments and regulators across the country have to pay some attention to.
I also want to bring your attention, Mr. Chairman, and that of this committee to a very serious issue. We have seen more discussion of it in the media over the last couple of days, but I can tell you it won't be the last of the discussion. That is the critical need in this country to invest in very basic infrastructure, in particular our water and sewage systems. There is, probably with the exception of the new subdivisions in Calgary, no city in this country that does not have a decaying water and sewage system. These systems were designed to take rain loads that were planned back in the 1930s and 1940s. I can tell you that today, whatever your view happens to be on the causes of climate change, the fact of the matter is that climate change is with us. The damages associated with climate change will grow more severe as the years pass.
There is no such thing, in my opinion and in the opinion of our industry, as a sound climate change policy that does not have a robust plan for adapting to climate change. The greatest challenge we face is to adapt to climate change. The reality, Mr. Chairman, is that if we were to decommission every coal-fired plant tomorrow, if we were to delay indefinitely the development of the tar sands in Alberta, if we were to reduce the vehicle population of this planet by 50%, there would still be enough CO2 in the atmosphere, according to the Intergovernmental Panel on Climate Change of the United Nations, to move the forces of climate change for the next 50 years at least.
What does that mean? We are all going to be facing a lot more frequent severe weather, while we have water and sewage infrastructure systems that were built for a very different time. There is therefore an immediate necessity for governments to cooperate and to engage in public-private partnerships that are innovative and that allow cities and municipalities across this country to rebuild what will become one of our most critical infrastructures—our water and sewage systems—in the years to come.
I say that because without those kinds of investments, the strain on Canada's property and casualty insurance system will be severe.
I prefer to work with you to improve the infrastructure systems in Canada. I believe we must try to achieve cooperation between the private sector and the public sector, and I encourage this committee to recommend that in its report.
Thank you.