EFFECTS OF THE EUROPEAN MONETARY UNION ON INSURANCE BUSINESS IN THE EUROPEAN UNION

Abstract: The European Monetary Union is intended to bring about a number of positive consequences, such as more effectiveness and lower cost in foreign trade, economic growth and – not least – an internationally competitive currency. In the short run, two of these effects are of particular interest, namely reduction of exchange rate risk and transaction cost. The paper first describes the scope of these problems, analyzing bid-ask spreads for EU-currencies and selected transaction costs. The particular prospects of insurance companies in EMU-countries depend mainly on their activities in foreign markets. We will therefore look into present foreign business in insurance and the relevance of the single currency for acquisition of production factors and capital investment decisions.