Exploring the understanding, motivation, design, challenges and performance of Enterprise Risk Management in the insurance industry : an empirical study on four major European re/insurers

Abstract

The objective of this research is to explore the extent to which insurance companies manage risks holistically.  The objective is achieved through a naturalistic investigation of the understanding, motivation, design, challenges and performance of Enterprise Risk Management (ERM) in the insurance industry.  The research begins by describing the broad context of risk management from an interdisciplinary perspective and the literature is used to develop a theoretical framework of ERM. Then the ERM initiatives of four major European re/insurers were empirically investigated.  These are used to develop a practical framework of ERM.  Theoretical and practical frameworks were compared and contrasted and propositions developed and discussed.  These provide a substantive theory of ERM.  In the literature review it was found that most research on ERM in the insurance sector is developed from financial and economic perspective, precluding the strategic aspects of risk particularly those involving aspects of organisational behaviour.  The thesis argues that risk needs to be considered from a broader perspective beyond disciplinary silos.  The research concludes that: there exists an uneven understanding of ERM across the insurance industry and the main reason is that risk is conceptualized in different disciplinary silos.  Leadership of CEO and regulations turned out to be the key driving forces of ERM.  The design of ERM in insurance companies was found to be similar across the industry.  However, implementation of ERM varies extensively depending upon the organisation’s business model, market, expertise, and culture.  ERM was not found to be a new phenomenon, rather a natural evolution of risk management.  The forces leading to the development of ERM include increased sophistication of market and business and the increased awareness of risk.

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