Impact of Enterprise Risk Management Drivers on Firm Performance: A Study on the Indian Insurance Industry

Abstract

This study examines the impact of enterprise risk management (ERM) determinants on firm performance in the Indian insurance industry. Specifically, the research investigates how corporate governance mechanisms, namely the board of directors, audit committee and risk management committees influence key performance indicators such as return on equity, solvency ratio, expense ratio and combined ratio. Using panel data from life and non-life insurance companies covering the period 2016–2017 to 2020–2021, the study employs a two-stage regression model. In the first stage, ERM determinants are used to construct an ERM score that captures the extent of ERM implementation. In the second stage, the relationship between ERM determinants, ERM score and firm performance is analysed. The results indicate that governance structures play an important role in strengthening ERM practices and improving performance outcomes. In particular, board characteristics and independent director representation are associated with improvements in return on equity and expense management, while audit and risk management committees contribute to solvency and operational efficiency. The findings provide important insights for regulators and practitioners in strengthening governance mechanisms and advancing ERM adoption in the Indian insurance sector.