In Measuring the Value Creation by Enterprise Risk Management for Insurance Companies: Does ESG (eco

In Measuring the Value Creation by Enterprise Risk Management for Insurance Companies: Does ESG (eco

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The implementation of Enterprise Risk Management (ERM) in the financial sector, insurance . in particular, has gained increasing attention in recent years. However, the majority of studies used financial data and overlooked the non-performance of the company while evaluating the performance of ERM. Considering the role of insurance industry to protect the environmental, social and governance (ESG) challenges of the business it is important to evaluate its own ESG performance. This primary aim of this study is to investigate the determinants which drive the implementation of the ERM in the insurance companies, which also include Environmental, Social, and Governance (ESG) factors that are neglected by the existing studies. The secondary aim is to examine whether the ERM system can add value to the firm once implemented. Based on the data of world-leading insurers with market capitalisation over one billion pounds, the multivariate linear regression analysis and the multiple logistic regression analysis are performed. The results suggest that the firms should engage in the ERM program as it has positive relationship with the firm value, as measured by Tobin's Q. Besides, the factors which lead to positive changes in level of ERM implementation are company size, ROA, gross premiums written, social disclosure score, and credit ratings. We conclude that in addition to financial factors, the non-financial factors influence insurers ERM performance.

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