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Product diversification as a performance boosting strategy? Drivers and impact of diversification strategies in the property‐liability insurance industry

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  • Patty Duijm
  • Ilke Van Beveren

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 control for endogeneity by employing 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. We find that the impact of diversification is twofold, as it reduces an insurer's risk but is also associated with lower returns. Our results suggest that the relation between diversification and performance is not straightforward, but is influenced by the size of an insurance undertaking. Specifically, only smaller companies' performance is significantly impacted by diversification.

Suggested Citation

  • Patty Duijm & Ilke Van Beveren, 2022. "Product diversification as a performance boosting strategy? Drivers and impact of diversification strategies in the property‐liability insurance industry," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 25(3), pages 303-328, September.
    • Handle: RePEc:bla:rmgtin:v:25:y:2022:i:3:p:303-328
    DOI: 10.1111/rmir.12219
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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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