The Implementation of ERM in Non-Life Insurance Companies in Albania

Abstract

Enterprise risk management (ERM) has emerged a significant change starting from the way firms manage their complex portfolio of risks. Particularly, the insurance companies that use ERM have shown propensity of success during their daily operation and have been capable to diminish the collective risk of their output. This study draws attention to the performance, firm value and capital allocation effects of ERM adoption in emerging economies using the case of non- life insurance companies in Albania. The objective of the paper is to examine the effects trigged by ERM implementation on their firm value and the factors that caused it based on a structural and institutional theoretical framework. The sample is the population itself including all the non-life insurance companies which have implemented ERM from 2015 and on. The methodology includes explanatory field study through semi-structured interviews with the key actors of risk management departments of these companies. This study distinguishes the impact of institutional and managerial pressures in adapting ERM in non-life insurance companies, based on empirical evidence and field study. The aim is to contribute in a better understanding of all the forces driving ERM adoption and implementation and the change in risk management practices and capital allocation within non-life insurance companies in Albania. The findings identify the nature of internal and external factors which can be useful in creating new policies in relation of improving risk management systems and corporate governance.