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Enterprise risk management and solvency: The case of the listed EU insurers

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  • Nguyen, Duc Khuong
  • Vo, Dinh-Tri
Abstract
We investigate the relationship between Enterprise Risk Management (ERM) adoption and solvency for publicly listed insurers in the European Union. Our results, which control for endogeneity problem, show that ERM-adoption insurers experience a decrease in their solvency level, which may trigger their financial vulnerability in the case of unexpected shocks. Firm-specific characteristics such as leverage, ROA, combined-ratio and business type are also found to significantly increase the EU insurers’ solvency, whereas the impact of firm size and age is insignificant. Moreover, insurers that have adopted the ERM share the common characteristics of higher performance, higher leverage, bigger size, and more diversified businesses. Finally, the demand of the market is an important factor of ERM adoption and insurance solvency.

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  • Nguyen, Duc Khuong & Vo, Dinh-Tri, 2020. "Enterprise risk management and solvency: The case of the listed EU insurers," Journal of Business Research, Elsevier, vol. 113(C), pages 360-369.
    • Handle: RePEc:eee:jbrese:v:113:y:2020:i:c:p:360-369
    DOI: 10.1016/j.jbusres.2019.09.034
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    More about this item

    Keywords

    Risk management; ERM; Insurance; Solvency;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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