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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 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 insurers 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 insurers size and its extent of diversification.Â

Suggested Citation

  • Patty Duijm & Ilke Van Beveren, 2020. "Product diversification as a performance boosting strategy? Drivers and impact of diversification strategies in the property-liability insurance industry," Working Papers 677, DNB.
    • Handle: RePEc:dnb:dnbwpp:677
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    References listed on IDEAS

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    More about this item

    Keywords

    insurance companies; diversification; risk; performanceÂ;
    All these keywords.

    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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