This study examines the impact of organizational structure and board composition on risk taking in the U.S. property casualty insurance industry, addressing different risk‐taking behaviors from different perspectives. The risk‐taking measures include total risk, underwriting risk, investment risk, and leverage risk. The evidence shows that mutual insurers have lower total risk, underwriting risk, and investment risk than stock insurers. In terms of board composition variables, we find that some board composition variables not only have impact on risk‐taking behaviors but also affect different risk measures differently. Thus, using different risk measures is better than using one risk measure to assess risk‐taking behavior. Finally, we conclude that an insurer can control its total risk through management of underwriting, investment, and leverage risks that determine an insurer's risk profile.

This study examines the relation between corporate governance and the efficiency of the U.S. property-liability insurance industry during the period from 2000 to 2007. We find a significant relation between efficiency and corporate governance (board size, proportion of independent directors on the audit committee, proportion of financial experts on the audit committee, director tenure, proportion of block shareholding, average number of directorships, proportion of insiders on the board, and auditor dependence). We also find property-liability insurers have complied with the Sarbanes-Oxley Act (SOX) to a large extent. Although SOX achieved the goal of greater auditor independence and might have prevented Enron-like scandals, it had some unexpected effects. For example, insurers became less efficient when they had more independent auditors because the insurers were unable to recoup the benefits of auditor independence.

This study examines the impact of organizational structure on firm performance, incentive problems, and financial decisions in the Japanese nonlife (property-casualty) insurance industry. Stock companies that belong to one of six horizontal keiretsu groups have lower expenses and lower levels of free cash flow than independent stock and mutual insurance companies. Keiretsu insurers also have higher profitability and higher loss ratios than independent insurers. With a limited sample size, there is some evidence that mutual insurers have higher levels of free cash flows, higher investment incomes, and lower financial leverage than their stock counterparts. Overall, empirical evidence suggests that each structure has its own comparative advantage. Copyright The Journal of Risk and Insurance.

No abstract

This article uses the nonparametric frontier method to examine differences in efficiency for three unique organizational forms in the Japanese nonlife insurance industry-keiretsu firms, nonspecialized independent firms (NSIFs), and specialized independent firms (SIFs). It is not possible to reject the null hypothesis that efficiencies are equal, with one exception. Keiretsu firms seem to be more cost-efficient than NSIFs. The results have important implications for the stakeholders of the NSIFs. An examination of the productivity changes across the different organizational forms reveals deteriorating efficiency for all three types of firms throughout the 1985-1994 sample period. Finally, the evidence also suggests that the value-added approach and the financial intermediary approach provide different but complementary results. Copyright The Journal of Risk and Insurance.