The merger merry-go-round of recent years is failing to produce the desired economies of scale for new superinsurers, a pan-European survey of the insurance market reveals.

Management consultancy AT Kearney finds that, contrary to all the merger hype, no correlation exists between the size of insurance companies and the levels of growth, profitability or shareholders returns.

The survey, entitled Big versus small in insurance: does size matter?, is the result of 11 years of monitoring the industry.

It finds that 20% of business was held by three mega-sized insurance companies, while 40% of the market was held by small and medium-sized insurers.

But while several larger insurers turned in a below-average performance, 20 small to medium-sized companies have shown industry-leading growth and profitability.

"The size and performance correlation is generally supported by basic economies-of-scale arguments, but no hard data has

been presented to support it," said Leonard Koningswijk, consultant at AT Kearney.

"In the case of comparable lines, we found that different growth rates characterise each group, but all grow at the expense of profitability ."

Koningswijk says there are several reasons why large insurers fail to deliver value. For example, many operations are still managed on a country-by-country basis due to market differences.

Cross-border co-ordination is mostly limited to target-setting and reporting, IT knowledge exchange, some branding and the development of common value systems.

The ongoing problems they face include increased head-office costs and unresolved post-merger integration issues mainly stemming from legacy systems integration.