Bigger doesn't mean better, according to the latest research by IBM's general insurance division.

Speaking at IBM's global insurance executive conference Bill Pieroni, IBM's head of general insurance, said: "There is no relation between scale and operational costs."

IBM surveyed over 10,000 life and non-life insurance companies worldwide, looking at financial performance over the past five years.

Pieroni said: "There is no particular relation between the size of a carrier and loss cost." He added that size had no impact on underwriting expense and that being bigger did not mean improved predictability of buying leverage for, say, reinsurance.

"Some small players are more effective at buying than some larger carriers. While some larger carriers are quite good. There is no predictability," said Pieroni.

Being big doesn't even guarantee cheaper costs for borrowing. "Rather that economies of scale driving improved capital costs, the survey found diseconomies of scale. Large companies had a higher cost of capital," warned Pieroni.

The survey also found that the cost of capital was cheaper for regional rather than global insurance companies. "The average cost of capital for regional insurers was 5.1% compared to 6.3% for the 24 global insurers we surveyed," said Pieroni.

' For full analysis of the IBM research see next week's issue of Insurance Times