The Combined Effect of Enterprise Risk Management and Diversification on Property and Casualty Insurer Performance

31 Pages Posted: 5 Jun 2018

See all articles by Jing Ai

Jing Ai

University of Hawaii at Manoa - Shidler College of Business

Vickie L. Bajtelsmit

Colorado State University, Fort Collins

Tianyang Wang

Colorado State University - Department of Finance & Real Estate

Date Written: June 2018

Abstract

In a well‐designed enterprise risk management (ERM) program, the firm integrates risk management into the strategic planning process, addressing strategic, financial, operational, and hazard risks under a single overarching process. This is particularly important to large financial firms, such as property and casualty (P&C) insurers, which face a diverse set of risks. Using a sample of P&C insurers with S&P ERM quality ratings from 2006 to 2013, we find that the quality of a firm's ERM is a significant determinant of P&C insurer performance and that, for firms with high‐quality ERM programs, product line diversification has a significant positive effect on performance.

Suggested Citation

Ai, Jing and Bajtelsmit, Vickie L. and Wang, Tianyang, The Combined Effect of Enterprise Risk Management and Diversification on Property and Casualty Insurer Performance (June 2018). Journal of Risk and Insurance, Vol. 85, Issue 2, pp. 513-543, 2018, Available at SSRN: https://ssrn.com/abstract=3189172 or http://dx.doi.org/10.1111/jori.12166

Jing Ai (Contact Author)

University of Hawaii at Manoa - Shidler College of Business ( email )

2404 Maile Way
Honolulu, HI 96822
United States

Vickie L. Bajtelsmit

Colorado State University, Fort Collins ( email )

Fort Collins, CO 80523-1771
United States

Tianyang Wang

Colorado State University - Department of Finance & Real Estate ( email )

Finance and Real Estate Department
1272 Campus Delivery
Fort Collins, CO 80523
United States

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