Product Diversification as a Performance Boosting Strategy? Drivers and Impact of Diversification Strategies in the Property-Liability Insurance Industry

42 Pages Posted: 16 Apr 2020

See all articles by Patty Duijm

Patty Duijm

De Nederlandsche Bank

Ilke Van Beveren

affiliation not provided to SSRN

Date Written: March 23, 2020

Abstract

We investigate the relationship between product diversification and performance in the Dutch property-liability (P&L) insurance industry for the period 2007-2018. We employ a two-step approach: we first investigate the drivers of diversification and, as a second step, we investigate the impact of diversification on risk and return. Our results suggest that the impact of diversification can be beneficial, as it reduces an insurer’s risk. Diversification is however also associated with lower returns, while it is not significantly related to risk-adjusted returns. Furthermore, the impact of diversification on performance is contingent upon an insurer’s size and its extent of diversification.

Keywords: insurance companies, diversification, risk, performance

JEL Classification: G22, G32, L25

Suggested Citation

Duijm, Patty and Beveren, Ilke Van, Product Diversification as a Performance Boosting Strategy? Drivers and Impact of Diversification Strategies in the Property-Liability Insurance Industry (March 23, 2020). De Nederlandsche Bank Working Paper No. 677, Available at SSRN: https://ssrn.com/abstract=3576593 or http://dx.doi.org/10.2139/ssrn.3576593

Patty Duijm (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Ilke Van Beveren

affiliation not provided to SSRN

No Address Available

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