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

Jing Ai, Vickie Bajtelsmit and Tianyang Wang ()

Journal of Risk & Insurance, 2018, vol. 85, issue 2, 513-543

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.

Date: 2018
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