The Separation of Banking from Insurance: Evidence from Europe

Posted: 2 Jun 2006 Last revised: 9 Apr 2008

See all articles by Mohamed Nurullah

Mohamed Nurullah

Glasgow Caledonian University

Sotiris K. Staikouras

City University - Cass Business School; ALBA Graduate Business School

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The European market of banks and insurance companies has traditionally no exact boundaries between insurance and banking activities. Such business arena poses distinctive challenges to both banking and insurance industries. The paper statistically evaluates the feasibility of a hybrid portfolio integrating banking and insurance services. It examines the risk-return effects of European banks' diversification into life and non-life insurance underwriting, as well as into insurance broking businesses. More specifically, it focuses on financial data and analyzes changes in profitability, return volatility and creditworthiness of those financial institutions. The empirical results indicate that diversification by European banks into life and non-life insurance underwriting activities increases banks' risk. Unlike the non-life insurance sector, the return on life assurance underwriting increases significantly. On the other hand, insurance broking returns increase as well, while volatility and possible bankruptcy remain insignificant. This suggests that the interface of banks and insurance broking activities could be further explored.

Keywords: Bancassurance, Financial institutions, Bank diversification, Insurance activities, Risk-return analysis

JEL Classification: G21, G22, G28, G34

Suggested Citation

Nurullah, Mohamed and Staikouras, Sotiris, The Separation of Banking from Insurance: Evidence from Europe. Multinational Finance Journal, Vol. 12, pp.157-184, 2008, Available at SSRN:

Mohamed Nurullah (Contact Author)

Glasgow Caledonian University ( email )

City Campus
Cowcaddens Road
Glasgow G4 0BA, Scotland
United Kingdom

Sotiris Staikouras

City University - Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

ALBA Graduate Business School ( email )

Athinas Ave. & 2A Areos Str.
Vouliagmeni 166 71, Athens

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