Implementation of Enterprise Risk Management: Evidence from the German Property-Liability Insurance Industry

Implementing a properly functioning Enterprise Risk Management (ERM) program has become increasingly important for insurance companies. Unlike traditional risk management where individual risks are managed in separate silos, ERM is based on the concept of managing all relevant risks in an integrated, holistic fashion. Despite the heightened interest in ERM by insurance managers and actuaries, there is only limited empirical evidence on how insurance companies actually implement the ERM approach. The goal of our research is to examine the implementation of the ERM components by insurers. Therefore, we surveyed all German property-liability insurance companies with premiums written in excess of 40 million Euros. There are 113 such insurers and 95 of them participated in our survey, leading to a response rate of 84%. The questionnaire covers a comprehensive set of dimensions of an ERM system. In addition to detailed questions about specific ERM activities, the questionnaire assesses when these ERM activities were initiated. The results document significant increases in the extent to which ERM is being implemented by these firms and details the factors affecting implementation of this evolving risk management process.