The Emergence of Cross-Border Insurance Groups within Europe with Centralised Risk Management

This paper analyses the degree of internationalisation of insurance business. Using a novel data set of 25 large EU insurance groups, we find that the insurance industry has a strong international orientation. About 55 percent of the business of these large insurance groups is conducted abroad. The cross-border activities are predominantly within Europe (30-35 percent) and less so in the rest of the world (20-25 percent). Next, this paper examines the impact of internationalisation on the organisational structure. We find a clear trend towards centralising risk and capital management activities within large insurance groups, though insurance remains at the same time a local business. Applying the hub and spoke model, we identify which functions are executed at the centre (hub) and which functions are performed at the level of the local business units (spokes). © 2008 The International Association for the Study of Insurance Economics.