Whereas it is generally implied in the literature that financial markets are global markets in every respect at the beginning of the twenty-first century, a different picture emerges upon closer examination of the insurance industry. Attempts by insurance companies to offer services abroad from their home base or to establish branches and subsidiaries in a foreign country face quite a few regulatory barriers. Most of these barriers originate from national prudential regulation, the main purpose of which is to protect safety and soundness, that is to limit the risk-taking of insurance companies, to guarantee the stability of national markets and to provide a safety net for domestic policyholders. The protectionist effects of prudential regulation result not only from the challenges of compliance with requirements that differ significantly from one country to another but also from the fact that international activities of insurance companies have been treated by national regulators with reservations if not outright hostility as they represent the biggest challenge to the control of domestic insurance markets.

In particular the cross-border supply of insurance services is severely restricted. However, the delivery of insurance services by a foreign company operating in the home country of foreign customers is also complicated by numerous regulatory obstacles. Attempts at establishing a commercial presence abroad face restrictions on foreign equity ownership, the number of foreign service providers, the type of legal entity required (for example branches or subsidiaries) and needs tests, among others.