An Arbitrary Lagrangian-Eulerian (ALE) formulation based on the unstructured finite volume method is proposed for solving moving boundary problems with large displacements and rotations. The numerical method is based on the side-centered arrangement of the primitive variables that does not require any ad-hoc modifications in order to enhance pressure coupling. The continuity equation is satisfied within each element at machine precision and the summation of the continuity equations can be exactly reduced to the domain boundary, which is important for the global mass conservation. A special attention is given to construct an ALE algorithm obeying the discrete geometric conservation law (DGCL). The mesh deformation algorithm is based on the indirect Radial Basis Function (RBF) algorithm at each time level while avoiding remeshing in order to enhance numerical robustness. For the parallel solution of resulting large-scale algebraic equations in a fully coupled form, a matrix factorization is introduced similar to that of the projection method for the whole system and the parallel algebraic multigrid solver BoomerAMG is used for the scaled discrete Laplacian provided by the HYPRE library which we access through the PETSc library. The present numerical algorithm is initially validated for the decaying Taylor-Green vortex flow, the flow past an oscillating circular cylinder in a channel and the flow induced by an oscillating sphere in a cubic cavity. Then the numerical algorithm is applied to the numerical simulation of flow field around a pair of flapping Drosophila wings in hover flight. The time variation of the Eulerian coherent structures in the near wake is shown along with the aerodynamic loads. (C) 2013 Elsevier Inc. All rights reserved.