Insurer’s Risk-Taking Behavior in India: Does the Board matter?

Barkha Goyal and Rachita Gulati

International Journal of the Economics of Business, 2024, vol. 31, issue 2, 131-173

Abstract: This study investigates the board’s role in shaping insurers’ risk-taking using data of 49 Indian insurance firms from 2014 to 2021. We captured the insurer’s risk using four proxy measures: underwriting, investment, insolvency and total risks. To address potential endogeneity concerns in the relationship with board attributes, we employ a two-step Generalized Method of Moments (GMM) approach. Robustness checks are conducted using the panel quantile estimation approach. The empirical analysis reveals that life insurers face greater underwriting risk than non-life insurers. A larger board with duality appears to mitigate insurers’ risk, particularly in the case of life insurers. The presence of independent directors on insurer boards, along with an optimal frequency of board meetings, effectively mitigates risk among Indian insurers. The study concludes that dual regulations erode regulatory discipline among public insurers, leading to an inadequate governance structure.

Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:taf:ijecbs:v:31:y:2024:i:2:p:131-173

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DOI: 10.1080/13571516.2024.2320455

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