Enterprise risk management and performance of the South African insurers: the moderating role of corporate governance

Abstract

This study contributes to the literature by examining the effect of enterprise risk management (ERM) on insurers’ performance (underwriting performance and Return on Assets) and investigating how corporate governance characteristics such as board size, board independence and gender diversity moderate the ERM-performance relationship. The study employs the generalised method of moments on a sample of 63 insurers in South Africa, covering 2015–2019. The study’s findings agree with the literature that a positive relationship exists between ERM and insurers’ performance. This was consistent with both performance indicators. Again, we find that board size, board independence, and gender diversity interact with ERM in affecting insurers’ performance, and the relationship was significantly positive. This implies that corporate governance plays a significant role in promoting ERM effectiveness in affecting performance. Therefore, insurers interested in ensuring a robust ERM system should leverage these governance factors to appreciate the overall impact of ERM on performance.