When Do International Operations Lead to Improved Performance? An Analysis of Property‐Liability Insurers

In recent decades, insurers have been increasing their exposure to international markets. This article seeks to investigate the relationship between property‐liability insurers' international operations and their risk‐adjusted returns using cross‐section and time‐series data for the years 1992 through 2000. Our findings indicate that the relationship between international operations and performance is contingent upon the degree of product diversification. Insurance companies with focused operations in terms of product lines achieve higher risk‐adjusted performance as they increase their exposures to international markets. However, insurers who are highly diversified across product lines face declining returns with greater exposure to international markets.