Custodian of wealth: an assessment of insurers’ risk management practices

Abstract

Unlike the banking industry, the insurers’ risk management framework (RMF) is not governed internationally. For this reason, their risk management (RM) practices are not comparable. We surveyed insurance personnel regarding understanding risk and risk management (URRM), risk identification (RI), risk assessment and analysis (RAA), risk monitoring (RMON), and risk management practices (RMP). These insurance personnel were working at various hierarchical levels in life and non-life insurance. These insurers were operating in developed and emerging insurance market. We took USA and UK insurers as a proxy for developed insurance market. Meanwhile, Chinese, and Pakistani insurers were substituted for emerging insurance market. We analyzed the data through descriptive statistics and an ordered logit model. Our results showed that insurers’ RM is stronger, but large differences exist at the hierarchical, insurer type and country levels. Apart from policy implications, our findings suggest that to achieve sustained competitive advantage insurers should minimize these differences.