Corporate Governance and Risk Appetite in Insurance Firms: A Strategic Management Perspective

Abstract

The insurance industry operates in a risk-intensive environment, making effective corporate governance and clearly defined risk appetite frameworks central to organizational success. This paper investigates the intersection of governance structures and risk appetite in insurance firms, using strategic management theory to analyze their co-evolution and impact on long-term organizational resilience.

Utilizing a mixed-methods approach, the study combines quantitative data from publicly listed European insurance companies with qualitative interviews of board members and chief risk officers. It finds that firms with well-integrated governance models—where risk committees operate independently and communicate with strategic planning divisions—demonstrate higher solvency margins and more consistent performance in volatile markets. Moreover, a clearly articulated risk appetite statement, aligned with the company’s mission and strategic goals, fosters better capital allocation and enhances regulatory compliance.

However, the research also uncovers gaps in the practical application of risk appetite frameworks, particularly in mid-sized insurers where strategic oversight is often siloed. The paper proposes a governance-risk alignment model that integrates enterprise risk management (ERM) with board-level decision-making processes, emphasizing dynamic risk reporting and scenario-based planning.

Ultimately, this study contributes to both the strategic management and insurance literature by advocating for a paradigm where governance and risk appetite are not merely compliance tools but central pillars of competitive strategy and sustainability.