Enterprise Risk Management in Financial Crisis

The IUP Journal of Risk & Insurance, Vol. VIII, No. 3, pp. 7-21, July 2011

Posted: 17 May 2012

See all articles by Jifeng Yu

Jifeng Yu

University of Nebraska-Lincoln

Heng Yik Seik

University of Nebraska-Lincoln

Jared Li

Deloitte & Touche Omaha

Date Written: May 17, 2012

Abstract

There is an ongoing debate on the value of Enterprise Risk Management (ERM), a new comprehensive method of handling risk. This paper seeks to address this issue by examining whether ERM helps property and casualty insurers withstand financial crisis. An investigation of a sample of publicly traded US insurance companies during the recent financial turmoil reveals that not all ERM programs are beneficial. While insurers with well-designed ERM programs outperformed the market, ineffective programs resulted in below-market performance. It was also found that quality ERM insurers had lower stock volatility and higher profitability as compared to those of their non-ERM or weak ERM peers. The worst overall operating ratio was reported by companies with weak ERM programs.

Suggested Citation

Yu, Jifeng and Seik, Heng Yik and Li, Jared, Enterprise Risk Management in Financial Crisis (May 17, 2012). The IUP Journal of Risk & Insurance, Vol. VIII, No. 3, pp. 7-21, July 2011, Available at SSRN: https://ssrn.com/abstract=2061531

Jifeng Yu (Contact Author)

University of Nebraska-Lincoln ( email )

United States

Heng Yik Seik

University of Nebraska-Lincoln ( email )

United States

Jared Li

Deloitte & Touche Omaha ( email )

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