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Construction in downtown Toronto. For roughly two decades the life insurers have been reducing their commercial mortgage books while banks and credit unions have been bolstering theirs.

Moe Doiron/The Globe and Mail

Life insurers are no longer the biggest players in Canada's commercial mortgage market.

For roughly two decades the life insurers have been reducing their commercial mortgage books while banks and credit unions have been bolstering theirs.

The trend has now reached the point at which the banks and credit unions' commercial mortgage holdings have surpassed those of the life insurers, according to a new report.

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The report, by the Real Property Association of Canada (REALpac), says that the share of the market that is held by life insurers has slipped from 23 per cent two years ago to 19 per cent this year.

During the same period the banks' market share has risen from 22 per cent to 26 per cent while the credit unions' share of the market has grown from 19 per cent to 21 per cent. (Mortgages are also held by players such as pension funds and trust companies, and in the form of mortgage-backed securities).

Life insurers held 63 per cent of the commercial mortgage market in 1985, and their share grew to 72 per cent by 1992. But in the 21 years since then, while banks have seen their commercial mortgage holdings grow by 284 per cent and credit unions have seen their grow by a whopping 878 per cent, life insurers have seen theirs fall by 17 per cent.

"Life insurance company holdings peaked in 1992 and have been essentially flat or declining since then," the report states. "In contrast, the early 1990s began a long and sustained increase in the volume of commercial mortgage holdings by both chartered banks and credit unions."

Toronto-based insurer Sun Life Financial Inc. said this month that it has just recently agreed to the biggest conventional mortgage deal in its history, lending $140-million to the developer behind the new Highstreet Shopping Centre in Abbotsford, B.C.

The REALpac report estimates that the total size of the Canadian institutional mortgage market this year is about $139.5-billion, up from $126.7-billion in 2011, representing an annual growth rate of 4.9 per cent.

It notes that there are some "deficiencies" in the data that it used to arrive at its estimate. Because of these deficiencies its number excludes mortgages that financial institutions hold on multi-residential properties, and it estimates the proportion of commercial mortgages that are held by pension funds.

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